Political turmoil a deal-breaker for FDI, say foreign investors at Dhaka summit

At the Foreign Investors Summit 2025 organised by BRAC EPL Stock Brokerage Ltd in Dhaka, Takao Hirose, managing director of Contextual Investment LLC, delivered a candid message to Bangladesh: political stability and inclusivity are non-negotiable if the country hopes to attract long-term foreign capital.

Speaking before an audience of policymakers, financiers, and corporate leaders at the Sheraton Dhaka today (13 August), Hirose recounted his impressions after flying in to observe the country's political transition. "I started asking people — hotel staff, cab drivers, restaurant workers — what they thought of the recent political change," he said.

"Their answers were generally positive but guarded. Then I learned this was the first revolution in the world instigated by Gen Z, demanding better governance, accountability, and transparency. I thought — this is interesting, I believe in you."

Hirose praised Bangladesh's economic growth, crediting much of its early momentum to microfinance pioneers like BRAC and Grameen Bank, whose grassroots financing empowered small businesses, especially women. 

That foundation, he said, helped propel the ready-made garment industry and other sectors. But for the next stage, Bangladesh needs more long-term equity capital — and that requires robust governance.

The fast money dilemma

Hirose was direct about the nature of global investors. "We are fast money, we are greedy money, and we are aggressive — but we are capricious," he warned.

"The moment we see you going out of control, we will go back to Japan. No violence, please. Differences of opinion are fine, but work them out. You are being watched by international investors — do not scare them off," he said.

He cautioned that foreign investment can act as a "turbocharger" for growth but can also be "a tremendously disruptive negative force" if instability takes root. "When foreigners come into your market, be careful what you wish for," he said, underscoring that stability is the price of retaining investor confidence.

Call for inclusive growth

Hirose stressed that market growth must be inclusive, ensuring broad participation in wealth creation. He drew parallels with the US in the 1990s, when deregulation and the introduction of 401(k) retirement plans expanded stock ownership to millions of small investors.

"Technology is key," he said. "You cannot democratise investment if you are still trading on stacks of paper. Develop stock trading apps. Deregulate wealth creation so that many people benefit."

He cautioned against overreliance on foreign capital without a strong domestic investor base, likening it to a "Faustian bargain" — accelerated growth in exchange for diminished control over capital markets. "You need a sound and robust domestic investor base. The depth of your market must be deeper," he said.

Lessons from Sri Lanka

Ruchir Desai, fund manager at Asia Frontier Investments Limited, echoed the importance of stability, drawing comparisons between Bangladesh and Sri Lanka. Desai noted that Bangladesh's foreign investor confidence began waning around the 2018–19 fiscal year due to regulatory overhangs, interest rate caps, and stock market shutdowns.

He described how Sri Lanka's economic turmoil — including a constitutional crisis, terrorist attacks, the pandemic, and political protests — culminated in a collapse. Yet by late 2022, with inflation falling, interest rates stabilising, and successful elections restoring confidence, the country staged a strong recovery.

"Confidence is critical," Desai said. "You can have great companies and demographics, but without stability, the economy will not take off."

For Bangladesh, he sees positive signs: inflation easing, exports rebounding, remittances strong, and valuations low. "The platform has been set. If you can build a stable political and policy environment, nothing should stop Bangladesh from meeting its potential over the next five to six years," he said.

What local leaders said

In many countries, a change of government through mass uprisings or movements triggers severe economic crises. Bangladesh, however, has proven to be an exception, said Anisuzzaman Chowdhury, the chief adviser's special assistant for economic affairs.

"In the context of the global economy, the recent performance of Bangladesh's capital market shows that our economy is stable," he said as the chief guest at the summit.

He added that since the interim government assumed office, it has been working to build a stronger and better-governed capital market, aligned with the vision of Three Zeros — zero poverty, zero unemployment, and zero carbon emissions.

Calling on investors, Anisuzzaman said, "Now is a good time to invest in Bangladesh. Our capital market is ready for long-term investments. This is a message not only for foreign investors but also for domestic ones."

BNP Standing Committee Member Amir Khasru Mahmud Chowdhury said that news of the upcoming election has spread everywhere, both at home and abroad.

As a guest of honour at the summit, he said, "Everyone is waiting for the election. With the election timeframe announced, domestic and foreign entrepreneurs are gearing up for investment. We are seeing the results today — a major delegation from Japan has come to Bangladesh to invest."

He further said, "To attract investments, we must be more open and move toward deregulation."

Emphasising the role of the capital market, Amir Khasru said, "We cannot boost investment without utilising the capital market, as it is essential for long-term financing. Our economy is currently dependent on the money market, meaning bank loans, but banks take short-term deposits and cannot lend long-term. This mismatch creates inefficiencies in the economy — and only a strong capital market can resolve it."

He added that after 1971 independence, the private sector was given the opportunity to participate in the country's economic recovery, which provided a lifeline for the economy.

"Much of the current state of the economy has been made possible because of the private sector. To further enhance the role of the private sector, we must open up the market, ensuring equal opportunities and facilities for all," said the BNP leader.

If voted to power, the BNP will steer Bangladesh toward an investment-driven economy, said Khasru.

At the summit, M Masrur Reaz, chairman and CEO of Policy Exchange Bangladesh, delivered a keynote presentation to foreign investors highlighting the economic indicators in which Bangladesh has made notable progress.

Dhaka Stock Exchange (DSE) Chairman Mominul Islam said the government has shown a strong commitment to capital market development. In line with this, the budget has widened the corporate tax gap between listed and non-listed companies, reduced turnover tax, and increased the capital gains tax ceiling. 

Additionally, the country's macroeconomic situation has improved, inflation has eased, and foreign exchange reserves have stabilised — all of which are expected to boost corporate earnings and improve capital market performance in the coming days, he said.

Mominul said that the main challenge now is increasing supply to match market demand, as no new IPOs have been issued in over a year. Efforts are ongoing to list quality companies. 

Another key priority, he said, is ensuring the regulator's complete independence. "Unlike before, regulators no longer intervene in the daily operations of the market. Legal reforms have been designed accordingly, addressing complaints that were especially common among foreign investors," he added.

The Bangladesh Securities and Exchange Commission (BSEC) commissioners, Mohsin Chowdhury and Saifuddin, also gave speeches at the event.