Are policymakers understanding the warning from investment?

Bangladesh's sluggish investment has now become a major concern for growth and employment. According to a report published in The Business Standard on 25 September, data from Chattogram Customs House show that imports of capital machinery, medical equipment, vehicles and heavy machinery-related products fell by 45.1% between FY2021-22 and FY2024-25, from 22.6 lakh tonnes to 12.4 lakh tonnes.

Although imports increased by 13.7% in FY2025-26, they still remained below the previous level. Looking at the broader 15-year picture, the combined import volume of these products declined from 24.1 lakh tonnes in FY2009-10 to 14.1 lakh tonnes in FY2025-26 - a fall of 41.5%. During the same period, industrial growth also slowed significantly. These figures do not establish a direct cause-and-effect relationship, but taken together, they provide a strong warning about the pace of investment.

Stagnation has been evident in the country's investment climate for a long time, creating considerable uncertainty about future growth and employment. Alongside economic factors, several non-economic factors are also playing a role - political instability, mob culture, uncertainty over government and policy continuity, the law and order situation, administrative complexity, bureaucratic obstacles, weak governance and institutions, social instability and labour-related conditions. Taken together, these factors are influencing private investment decisions. Therefore, policymakers need to take a number of exceptional initiatives to bring about rapid and sustainable improvement in the situation.

One of the immediate challenges is uncertainty. Investors may be able to manage a single risk, but it is difficult to cope with the combined pressure of high borrowing costs, foreign currency shortages, difficulties in opening letters of credit, policy uncertainty and unreliable infrastructure. When there are doubts about policy continuity, entrepreneurs may postpone new projects, hold on to cash or limit investment to maintaining existing operations. This can slow the expansion of future production capacity.

The rise in fuel prices is making the situation even more difficult. Higher fuel costs increase transportation, production, irrigation, supply chain and operating costs. At the same time, they add to inflationary pressure, creating the risk that interest rates will remain high for a prolonged period. In the case of new factories or expansion of production capacity, higher operating costs reduce expected profits and make long-term investment less attractive. Therefore, fuel prices matter not only for consumers but also for the investment climate.

The main objective of policy should be to restore predictability. If the macroeconomic situation allows, borrowing costs need to be reduced. At the same time, the process of accessing foreign currency and opening letters of credit needs to be made transparent and rules-based. Energy supplies to industrial zones must become more reliable, while the quality of services and accountability must be ensured.

The government should simplify approval processes, reduce unnecessary regulatory layers, digitise administrative procedures and make tax and trade policies more predictable. Political and institutional stability cannot be ensured through financial incentives alone; investors need confidence that contracts, property rights, regulations and government services will remain consistently effective.

Targeted investment incentives can be helpful, but they must be time-bound, transparent, performance-based and independently evaluable. Priority could be given to projects that increase production capacity, employment, exports or technological capabilities.

Bangladesh cannot sustain long-term growth by relying on existing factories and consumption-driven activity. Without an increase in new private investment, productivity, industrial capacity and employment will remain under pressure. There is no single solution; rather, it requires a coordinated effort to reduce uncertainty, strengthen institutions, ensure reliable energy and financing, and make investment economically viable.