Govt misleading on foreign investment, investor confidence hinges on credible polls: Experts

Business leaders and economic analysts have slammed the government for what they described as misleading claims about foreign investment inflows, warning that investor confidence will not return until an elected government is formed through credible elections.

"Mainly, remittance inflow has increased under the interim government, as remitters think it has no political affiliation. But the government is misrepresenting it [as foreign investment]," said former Dhaka Chamber of Commerce and Industry (DCCI) president Rizwan-ur-Rahman while speaking at the Monthly Macroeconomic Insights seminar held at the Policy Research Institute of Bangladesh (PRI) office in the capital's Banani today.

Presenting the keynote paper, PRI Executive Director Ashikur Rahman also said private sector investment in Bangladesh continues to lose momentum as political uncertainty dampens confidence and stalls new commitments. He warned that investment decisions are increasingly being postponed until after the political transition.

He said the slowdown in investment comes at a time when GDP growth has already slipped to 3.87% in FY25, the weakest in years.

PRI and Australia's Department of Foreign Affairs and Trade (DFAT) jointly organised the event, with former Bangladesh Bank governor Mohammed Farashuddin attending as the chief guest.

Former DCCI president Rizwan painted a bleak picture of the investment climate. He said private sector investment remains weak, with investors unnerved by mob violence, unchecked money laundering and political uncertainty. "Our economy was in bad shape in recent years, and I do not think it has improved significantly," he said.

Rizwan also expressed strong reservations about the proposed merger of five Islamic banks, which authorities claim will create a more stable financial institution.

"I do not support the five-bank merger. It may put further pressure on taxpayers," he cautioned.

On the question of central bank autonomy, Rizwan argued that independence of institutions cannot rest solely on rules but depends on leadership integrity.

"Even if independence is ensured on paper, a corrupt governor can ruin it," he said, adding that investor confidence hinges on credible governance.

Turning to the capital market, Rizwan was sharply critical. He described Bangladesh as "the only country where the capital market has no role in capital raising", blaming both previous and current regulators for failing to understand or enforce the law.

"No fundamental company will come to the market under such conditions," Rizwan added.

Economists at the event argued that while cautious monetary and fiscal policies have preserved stability, a combination of political uncertainty, weak investor sentiment, and institutional bottlenecks is holding back dynamism.

Former governor Farashuddin said, "To maintain public trust in banks, the seizure of bank accounts should be used very sparingly. Account seizure should be limited to 10-15 oligarchs involved in money laundering."

He said the fusion of political and economic power gives rise to oligarchs, adding that the interim government has identified 10 to 15 such individuals.

"Aside from these 10-15 oligarchs, seizing the bank accounts of their family members who are not dependent on them is not a good practice," he said.

"The government has experience in tracing money launderers, and the Bangladesh Bank, the National Board of Revenue and the Civil Aviation Authority can carry out these actions within their capacities," said the former BB governor.

Farashuddin also criticised a 1992 decision to allow scheduled banks to provide long-term loans, calling it a "suicidal decision". He said the capital market cannot develop as long as this policy remains in place.

On bank governance, he said bank directors are meant to formulate policies, yet Bangladesh is the only country where bank board members are directly involved in loan disbursement.

"We need to separate management from ownership in banks," Farashuddin added.

He further said, "Our fiscal year should be based on the calendar year. Currently, the fiscal year runs from July to June, which means most ADP work takes place between April and June. This period coincides with the monsoon season, and much of the development work gets submerged in water, leading to significant wastage.

"We need to improve our tax-to-GDP ratio. The country's economy has grown substantially, but only 40 lakh people pay taxes each year. This should be at least 1 crore. We need a plan to increase the number of taxpayers by 20 lakh each year."

Clinton Pobke, deputy head of Mission at the Australian High Commission in Bangladesh, said that while inflation and foreign exchange pressures are gradually easing, GDP growth has slowed due to weaker fiscal impulse, global uncertainties, and election-related concerns. 

He highlighted a persistent decline in real wages, with inflation outpacing nominal wage growth, raising risks for welfare, inequality, and even social and political stability.

Pobke also noted progress on governance reforms, including bank resolution, tax policy separation, and judicial independence ordinances. Their long-term impact, however, will depend on whether the next elected government sustains and enacts them through parliament.

Kamran T Rahman, president of the Metropolitan Chamber of Commerce and Industry (MCCI), said high inflation has eroded purchasing power and complicated investment planning, while private investment has fallen to 22.5% of GDP in 2025 due to infrastructure bottlenecks, energy shortages, and regulatory unpredictability.

He stressed that inaction in energy exploration has left industries paying a heavy price. Kamran warned of underemployment, graduate unemployment, and the inability to generate sufficient jobs for 20-25 lakh new entrants to the labour market annually.

The MCCI president urged upskilling workers for overseas jobs and emphasised that Bangladesh's demographic dividend is not guaranteed without greater investment in education, skills, and training.

In the keynote paper, PRI Executive Director Ashiqur Rahman highlighted that the consequences are evident: private credit growth remains slow, imports of capital machinery have contracted by 12% in July-August, and the construction sector – an engine of jobs and investment – has been stalled.

Energy indicators mirror this slowdown. Average daily electricity generation stood at 14,690MW in July-August FY26, only 6.1% higher year-on-year but down 1.3% from the previous month. Electricity imports fell by 4.6% over the same period, driven largely by lower supply from Adani Power. Analysts say the stagnation in power demand reflects a subdued industrial climate, he said.

While the external sector has shown resilience, with exports and remittances strengthening foreign exchange reserves to $26 billion in August, sustaining momentum will depend on reviving domestic investment, said Ashikur Rahman.

The World Bank-IMF Debt Sustainability Analysis (August 2025) projects GDP growth could rebound to 5.4% in FY26, but only if productivity, investment, and institutional reforms are accelerated ahead of Bangladesh's LDC graduation.

Speakers at the event said that the key part of this reform agenda lies in the financial sector. The proposed merger of five Islamic banks – expected to create the country's largest bank by assets – is seen as a watershed. Yet its success will rest on addressing systemic weaknesses such as insider lending, governance failures, and political interference.

Economists stress that ensuring the independence of economic institutions, particularly the Bangladesh Bank, will be critical to safeguarding financial stability and restoring investor trust.