How can Bangladesh rebuild its investment story?

For years, Bangladesh's pitch to investors has been simple. Come here, hire workers at some of the lowest wages in Asia, and sell into Europe without paying duty. It was a good story, and it worked. The garment industry grew on the back of it, millions of women entered paid work for the first time, and Bangladesh became one of the world's largest apparel exporters.

That story is now running out of pages. Whether or not the UN grants the three-year extension Dhaka requested earlier this year, the destination has not changed. Duty-free access under LDC rules will end, and the only real question is when. The WTO has estimated that Bangladesh could lose up to 14 % of its exports once preferences are fully withdrawn. Wages will not stay low forever either, and nobody should want them to.

Therefore, what does Bangladesh offer next? The next investment story has to rest on three things: goods that move quickly, rules that stay put, and workers who can do more. None of these ideas is new. What has changed is that they are no longer optional.

It helps to start with what investors are actually doing. According to Bangladesh Bank, net foreign direct investment rose to USD 1.77 billion in 2025, up nearly 40% from the previous year. That is partly encouraging, but fresh equity, the clearest sign of new investment, barely moved. Most of the growth came from reinvested earnings and intra-company loans.

Put simply, firms already here are staying and expanding. New investors are not yet arriving in meaningful numbers. Existing firms have learnt how to work around the system, and their decision to stay is a vote of confidence in their own ability to cope. It tells us much less about whether the system itself works for a newcomer.

The first pillar is logistics. When an investor compares Bangladesh with Vietnam or Cambodia, the wage gap is only one line in the spreadsheet. Another line, often a bigger one, is time. How long does it take for raw material to land, clear customs and reach the factory? How long before the finished order is on a ship?

Chattogram port is where that question gets answered, and the answer is not flattering. As reported by the World Bank, the average container import dwell time at the port rose from 7.8 days in 2023 to 8.3 days in 2024. This happened even as customs rolled out a series of digital systems. For a garment exporter working to tight fashion cycles, every extra day at the port costs money. For an electronics or pharmaceutical company that depends on imported inputs arriving on time, slow port clearance can be reason enough to invest elsewhere.

Under LDC preferences, a European buyer could tolerate some of this delay because the duty saving made up for it. Once that cushion disappears, a slow port becomes a direct tax on every shipment. Speed becomes part of the price.

The good news is that ports are easier to fix than tariffs or wage trends, because they are largely within the government's own control. Bringing in a foreign operator at the Patenga Container Terminal showed that the government is open to new operating models. New capacity, such as the planned Bay Terminal, will also help. But much of the delay lies in how the system works together. Customs, the port authority, shipping agents and banks each handle a part of the process, often on their own timelines. Until they work to a single clock, containers will keep waiting. A port moves only as fast as its slowest signature. 

The second pillar, predictability, is probably the cheapest reform on the list. Investors can live with high costs if they can plan for them. What they cannot price is surprise. A tax rule that changes mid-year, an incentive that depends on who is in office, or a licence that sometimes takes three weeks and sometimes three months will quietly push an investor towards another country.

The new Invest Bangladesh Authority, which brings BIDA, BEZA and PPPA under one roof, is a sensible step. Investors, however, will judge it by what happens at the counter, not by the organogram. Does one application now replace five? Are processing times published, and are they met? Is there someone to call when a file gets stuck? If the answers are yes, the authority could become the most persuasive part of the country's pitch. If not, it risks becoming a new signboard over old problems.

Predictability is not only about rules, but it is also about energy. Gas shortages have repeatedly forced factories to cut production, and few investors will commit to a capital-heavy plant without confidence that power and gas will be available. Policy reforms will struggle to convince investors until supply is reliable. Energy policy, in other words, is investment policy.  

The third pillar is people, and it is the upgrade that takes the longest. Bangladesh's workforce is young and large, and that remains a real strength. But the advantage is shifting from how many workers the country has to what those workers can do. Firms moving into man-made fibres, technical textiles, light engineering or pharmaceuticals need machine technicians, quality controllers, maintenance engineers and capable mid-level managers. Too often these roles go to foreign nationals because employers cannot find local candidates with the right skills.

This is where investment and education policy need to meet, and too often they do not. Vocational training still carries little prestige, and courses rarely keep pace with what factories need. Employer-designed apprenticeships, training centres near industrial clusters and a clear route into decent jobs would do more for the investment climate than any new tax holiday. A factory takes two years to build. A skilled workforce takes much longer, which is why the work has to start now.

None of this means cost no longer matters. Cost still matters, and it will continue to matter. But being marginally cheaper than its neighbours will not be enough to carry Bangladesh through the next decade. What can set it apart is being easier to do business with, which means goods that move on time, rules that stay stable, and workers who can grow alongside the firms that hire them.

The debate over deferring graduation has dominated much of the past two years, but it is worth asking what the extra time is actually for. The UN Committee for Development Policy, which backed Bangladesh's request, made clear that it expects real progress on domestic reforms in return, and an extension spent waiting would only bring the country to the same cliff edge a few years later. Trade preferences wrote the old investment story. Performance will have to write the new one, and most of that is within our own control.

Zubayer Hossen, Programme Director, SANEM. Email: zubayer.hossen@sanemnet.org 

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views and opinions of The Business Standard.