What’s drawing investors to Bangladesh?

After nearly a year marred by macroeconomic turbulence and political uncertainty, the interim government has rolled up its sleeves and begun addressing the economy's deep-rooted ailments with an urgency rarely seen in recent times. The signs, though still early, are promising enough to stir optimism among investors and economic observers alike.

Take the banking sector for instance – the beating heart of any economy – which was left battered and bleeding from years of unchecked lending, political favouritism, and regulatory inertia. Under the previous administration, state mechanisms often abetted a handful of well-connected borrowers in syphoning off depositors' money. But things appear to be changing.

At the helm of the central bank now is Ahsan H Mansur, a man more comfortable with uncomfortable truths than with convenient silence. His bold efforts to restore governance and introduce global best practices – though painful in the short run – are sending ripples of confidence through the system. While a few banks remain precarious, the stronger ones are beginning to regain footing, and the foreign exchange market is showing signs of newfound stability.

And confidence, once lost, is slowly returning.

But what perhaps truly sets Bangladesh apart is not just the policy correction – it's the promise of the market itself.

An often-overlooked fact is the size of its middle and affluent class – now estimated at over 35 million people. That is more than three times the population of Portugal and about half that of Germany. This domestic consumer base alone is reason enough for foreign companies to take note.

Add to that a demographic edge – nearly two-thirds of the population is under 35 – and a strategic location at the crossroads of South and Southeast Asia. It is a compelling narrative: a resilient economy in transition, an underserved market hungry for quality goods and services, and a leadership that, at least for now, appears determined to clean the slate.

"The tremendous growth and resilience story of the economy itself is a testament to Bangladesh," Syed Ershad Ahmed, president of the American Chamber of Commerce (AmCham) in Bangladesh, told The Business Standard.

According to him, the geographic position is advantageous due to the maritime links with ASEAN, Japan, China, the Middle East and the West. "Bangladesh only needs a deep sea port and the automated customs for making export-imports cost-effective and prompt."

Availability of workers

The big army of friendly workers offering value for money is the key attraction of manufacturing companies.

Ershad, having a long career in multinational companies, found that Bangladeshi workers own their company without having any equity share. With quick learning they demonstrate a much higher productivity than the workers in a large number of African and Asian countries.

Also, the output against the low wage paid to them is higher compared to most other manufacturing hubs.

Very importantly, the long-term track record of foreign companies' return generation here is a big positive about Bangladesh, he said, stressing more communication of the success stories.

TIM Nurul Kabir, executive director of the Foreign Investors' Chamber of Commerce and Industry (FICCI), said his chamber includes over 200 companies from 35 countries operating in 21 sectors in Bangladesh. Many more are successfully doing business here and yet to be a member of the chamber.

"Investors know well that the business opportunity here is enormous, the government just needs to enhance the ease of doing business," he said.

"For years, we were pushing to make investors' lives easier. Now the interim government seems to be meaning it by appointing the right professionals for the right tasks," said Muallem A Choudhury, chief executive officer of Brummer and Partners (Bangladesh), which manages several hundred million dollars in foreign equity investments.

Scores of success stories

"The country has hundreds of success stories in foreign companies exporting from Bangladeshi plants. With ease of doing business it should boost," he believes.

For instance, South Korean multinational Youngone Corporation pioneered apparel exports from Bangladesh with a Chattogram factory in 1980, it moved to a rented factory in the Chittagong Export Processing Zone eight years later.

And now its 11 factories in Bangladesh contribute to 70%-80% of the group's global apparel exports. With over a billion dollars in annual exports, the company stands as one of the top ten apparel exporters in the country. It has plans to invest $500 million in Bangladesh by 2030 for automation, renewable energy, and research and development for smart textiles as the country becomes an unmatched primary hub for its apparel business.

The domestic market is the lowest hanging fruit for foreign companies as demand for better products and services is growing faster here, said Choudhury.

Many sectors still untapped

Many sectors are untapped here. Introducing international brands will be a lucrative business here.

For instance, he mentioned domestic tourism and healthcare services.

"People in holidays are spending a lot within the country and modernising the industry with the introduction of international standards, brands can be a good business for foreign firms."

The domestic market of 17 crore people lacks international fashion brands. Bangladeshi textiles are catering to the world's demand due to their superior quality. International brands have a chance to enter and grab the opportunity here, Choudhury said.

More than a decade ago, his funds were invested in Agora, the oldest supermarket chain in Bangladesh. The industry was facing a discriminatory 5% VAT that hindered its growth and the interim government rationalised it in February.

Agora took more than two decades to have 31 stores and now it aims to raise it to 110 in the next two years.

AmCham President Syed Ershad said with rising income people are having an appetite for different food products. Agro-processing for the home market will emerge as a big business, on top of export opportunities to other markets.

Lots of rational decision-making is taking place in Bangladesh under the interim government, VEON Chief Executive Officer Kaan Terzioğlu told TBS in an exclusive interview earlier this year and he is optimistic that this will allow international companies to replicate their other market success stories in Bangladesh too.

With increasing technology adoption Bangladesh is having an increasing number of successful startups, while an expanding base of computer science graduates, IT freelancers, and the ICT industry is also growing with potential for foreign investments both in hardware manufacturing, software and services.

Seeing the fast recovery in exports, surging remittance, returning to current account surplus and taming down inflation Hong Kong-based Asia Frontier Capital earlier this year announced their optimistic call for investing in Bangladesh.

MNCs performing well

Despite a decade-long bearish trend in the stock market, multinational companies (MNCs) generated huge returns for their investors.

According to the Investment Calculator of Shanta Securities' website, compound annual return from the MNC stocks over the last 20 years was 18.4% for British American Tobacco, 21.4% for Unilever Consumer Care, 20.5% for Reckitt Benckiser, 19.9% for Berger Paints, 15.4% for Marico, 12.9% for Linde Bangladesh, 9.3% for Heidelberg, 7.2% for Grameenphone.

"This is because of their tremendous success in respective industries as they do not have to struggle much to win customers preferring quality and reliability even at some higher prices, Besides, their proper strategy also ensures higher return on invested capital," said SM Galibur Rahman, head of Investment Strategy at the top tier brokerage firm.

The chartered financial analyst said Bangladesh is a great market for consumer businesses due to the high growth of middle and affluent-class consumers and the high density. The two factors together ensure a high growth revenue and low distribution cost and most of the multinational companies took the benefits of it which is reflected in their return on equity and return on investment.

Most of the MNCs that secured a strong market position earlier stood so firm in their industries that potential competitors have to face a strong entry barrier here, he observes.

Entering the market in 1999 and already reaching almost 90% of households with its locally made personal care and edible oil products, Marico Bangladesh saw a compound annual sales growth of nearly 9% in the 2021-24 period, with a 14% growth in net profits while most businesses were struggling to stay afloat amid the inflationary cycle.

The company listed on the Dhaka Stock Exchange achieved a profit margin of nearly 32% in 2024 with a 56% return on equity, which was around 15% and 39% for its Mumbai-based parent.

Demographic advantages

Chief Adviser's Special Envoy on International Affairs LutfeySiddiqi in a recent speech at the World Economic Forum highlighted the world's economic problems with the aging population and called for investments in Bangladesh where the median age is only 27.

Bangladeshis on average are a decade younger than the Thai people and two decades younger than Germans, he said.