Bangladesh’s FDI reality check: Reform must move from promise to execution
Bangladesh has no shortage of investment plans or reform commitments. The real test lies in execution, as persistent structural bottlenecks, economic instability and weak implementation continue to limit foreign direct investment.
Recently I met Telecom Minister and opened up a dialogue re: possible full or majority stake divestment of the state-owned mobile telecom service provider. Though he was focusing more on public-private partnership but good part is he was not totally against the idea.
When I reminded the Civil Aviation Minister that a large country like India doesn't have any national airlines, she conceded and hinted towards possible stake-sharing with a global player at a given point in time. Commerce Minister was simply glowing when he heard that foreign stake is possible even for the national tea industry.
Foreign direct investment (FDI) is often described as a vote of confidence in a country's economic future. It reflects not only capital inflow, but also investor trust in governance, predictability, and institutional capability. By that measure, Bangladesh's current position should concern us deeply.
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The latest UNCTAD Investment Policy Review Implementation Report offers a sobering reminder: Bangladesh remains significantly behind its regional peers in attracting foreign investment. In 2024, Bangladesh's FDI stock stood at around $18.3 billion. Compare that with Vietnam's $249 billion, Indonesia's $305 billion, or even Cambodia's $52 billion. These are not just statistical gaps; they are indicators of lost opportunities, weaker industrial diversification, and slower employment generation.
The uncomfortable truth is that Bangladesh has not meaningfully transformed its investment climate over the past decade. Since 2013, despite policy discussions, investment summits, and repeated reform pledges, FDI performance relative to GDP has remained stagnant. We continue to produce excellent reports, formulate attractive plans, and publicly endorse reform recommendations-but implementation remains our weakest link.
This is where Bangladesh's challenge truly lies.
Investment decisions are rarely based on incentives alone. Investors seek certainty. They need assurance that policies will remain stable, contracts will be honoured, foreign exchange will be available, and operational bottlenecks will not undermine profitability. Unfortunately, recent years have presented the opposite picture.
The depreciation of the taka by nearly 36 percent since 2021, persistent foreign exchange shortages, delays in import settlements, and energy supply disruptions have all raised investor anxiety. For global businesses, uncertainty is often more damaging than cost itself. When investors cannot reliably forecast input costs, repatriate profits, or secure energy supply, they naturally redirect capital elsewhere.
Political and social stability also matters. Labour unrest in the garments sector, factory closures, and broader institutional uncertainty during 2023–24 have amplified concerns. Investors evaluate not only balance sheets, but also operational continuity. Bangladesh's reputation as a resilient manufacturing destination cannot be sustained without stronger governance and smoother industrial relations.
Meanwhile, the macroeconomic picture has also weakened. GDP growth slowing from 8 percent to 4 percent, alongside inflation approaching double digits, sends troubling signals. Slower growth reduces market optimism; higher inflation erodes business confidence.
Yet this is not a story of inevitable decline.
There are early signs of recovery in 2025, with reinvested earnings and intra-company loans showing renewed movement. Inflationary pressures may be easing, and growth could stabilise. But recovery alone is not enough. Bangladesh now needs what may be called "second-generation reform."
First, reform must shift from aspiration to execution. Investors no longer need more policy speeches; they need visible institutional performance. One-stop services must actually function as one-stop services. Regulatory coordination must move beyond paperwork. Transparency should become operational, not rhetorical.
Second, state capacity matters as much as policy design. Bangladesh often underestimates the importance of implementation architecture. Reform requires capable institutions, measurable timelines, inter-agency coordination, and accountability. Without these, even the best investment frameworks remain decorative documents.
Third, FDI policy must align with broader economic transformation. Attracting capital should not be an isolated objective. Bangladesh should strategically target sectors that generate technology transfer, supply-chain sophistication, export diversification, and skilled employment. Vietnam did not outperform Bangladesh merely by offering incentives; it created a coordinated industrial ecosystem.
Bangladesh still possesses compelling strengths: a large domestic market, strategic geographic location, competitive labour force, and proven export resilience. But these advantages alone are no longer sufficient in an intensely competitive region.
The global investment race is not waiting for Bangladesh to prepare indefinitely.
Our challenge is no longer about diagnosing the problem. The diagnosis is clear. The challenge is execution.
If Bangladesh can convert reform intent into credible action, the country can still reposition itself as a serious investment destination. But if implementation continues to lag behind ambition, we risk remaining a nation of potential rather than performance.
Mamun Rashid is an economic analyst and Chairman at Financial Excellence Limited.
Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.
