Investment follows confidence, not incentives

Bangladesh is investing heavily in its future. Economic zones are taking shape; highways, bridges and expressways are improving connectivity; and ports are expanding. The third terminal of Hazrat Shahjalal International Airport is poised to transform international travel and air cargo.

Through the Bangladesh Investment Development Authority (BIDA), investor services have been digitised and regulations simplified. The government has intensified investment diplomacy by organising and participating in international summits, promoting the "Bangladesh First" policy, and engaging foreign partners to position Bangladesh as a competitive investment destination. Recent high-level overseas engagements have reinforced hopes for stronger bilateral investment and trade.

These are important achievements. They show that Bangladesh understands what modern investors expect. But they also raise a more fundamental question: What truly determines where investment flows?

For the past four decades, Bangladesh's answer was simple: affordable labour.

That advantage transformed the country into the world's second-largest exporter of ready-made garments. Today, the sector employs around four million workers and accounts for over 80% of the country's merchandise export earnings. It proved that Bangladesh could compete successfully in the global marketplace.

Yet success has also created a perception that now deserves reconsideration.

Internationally, Bangladesh is still seen mainly as a low-cost manufacturing destination. That reputation helped attract export-oriented industries but risks limiting the country's ambitions. Investors increasingly associate Bangladesh with low-cost production rather than with innovation, productivity, or sophisticated manufacturing.

Low wages are becoming less decisive in global investment decisions. Many countries in Asia, Africa, and Latin America now offer comparable labour costs. According to UNCTAD and the World Bank's Business Ready framework, investors assess countries using a broader lens: institutional quality, regulatory certainty, logistics, infrastructure, human capital, environmental sustainability, and ease of doing business.

Recognising this shift, the government has invested in infrastructure, digital public services and industrial zones to strengthen competitiveness. These reforms address many of the barriers investors have long identified. Yet the figures suggest Bangladesh's investment story remains unfinished.

Bangladesh attracted about $1.4 billion in foreign direct investment during FY2024-25. Vietnam attracted more than $25 billion in the same period. Bangladesh's annual FDI inflows have remained below 1% of GDP, while several Asian competitors attract multiple times that level.

This gap cannot be explained by market size alone. With nearly 175 million people, one of Asia's youngest workforces, and a strategic location linking South and Southeast Asia, Bangladesh has many of the fundamentals investors seek.

The missing ingredient is not opportunity. It is confidence.

That challenge will become even more significant as Bangladesh prepares for LDC graduation. Whether it occurs in 2029 or is deferred, the direction is clear: preferential trade advantages will gradually diminish, making productivity, innovation, institutional quality, and policy predictability increasingly important.

Confidence—not cost—will determine Bangladesh's ability to attract higher-value investment.

This became especially clear to me during a recent visit to Singapore.

Singapore never had abundant land, natural resources, or cheap labour. Yet it consistently ranks among the world's leading investment destinations because it deliberately built confidence.

Long before its skyline became globally recognised, Singapore invested in clean streets, reliable public transport, transparent institutions, efficient public services, and green spaces. The famous "Garden City" vision was not just an environmental initiative but an economic strategy. Nature became infrastructure. Urban planning became economic policy. Institutional efficiency became a competitive advantage, and cleanliness became part of Singapore's national brand. Together, these investments reduced uncertainty and strengthened trust.

Investment decisions, after all, are made by people before corporations make them. Before committing millions of dollars, executives visit a country. They travel from the airport into the city, observe transport systems, assess utilities and public services, meet regulators and business leaders, and consider whether their employees could build productive and comfortable lives there.

The investment climate is therefore experienced long before it is measured.

Investors also speak to one another. A positive experience with one multinational often attracts another, while regulatory uncertainty or operational frustrations spread just as quickly across international business networks. Reputation compounds over time, making trust one of the most valuable economic assets a country can build.

Investors notice whether roads function efficiently, ports clear cargo quickly, airports operate smoothly, contracts are enforced, regulations remain predictable, and government institutions solve problems rather than create them. A reliable energy supply—including uninterrupted electricity and adequate gas—is equally critical. These everyday experiences shape confidence just as much as tax holidays or fiscal incentives.

Bangladesh has made progress in digital finance, financial inclusion, mobile connectivity, and transport infrastructure. Yet many cities still struggle with congestion, poor air quality, shrinking green spaces, weak waste management, and inconsistent urban planning. The World Bank estimates that traffic congestion alone costs Bangladesh billions annually in lost productivity and higher transport costs. These are not just urban challenges but competitiveness challenges.

Similarly, civic behaviour matters. Cities where citizens respect traffic laws, protect public property and value cleanliness project institutional maturity. Good governance encourages responsible citizenship, and responsible citizenship reinforces good governance. Together, they create the trust that long-term investors seek.

Bangladesh's next phase of investment strategy must therefore extend beyond industrial parks and fiscal incentives. Efficient municipal services, cleaner rivers, greener cities, reliable energy, better public transport, faster resolution of commercial disputes, transparent regulation, and consistent policymaking should complement economic zones. Preserving trees, restoring wetlands, and improving urban liveability are not environmental luxuries; they are economic investments.

Bangladesh should no longer compete primarily on the basis of being one of the cheapest places to manufacture. It should compete because it is one of the most dependable places to invest.

Infrastructure opens the door. Incentives invite investors in. Confidence persuades them to stay.

Economic zones may attract investors to Bangladesh. Only trusted institutions, efficient public services, reliable infrastructure, liveable cities and consistent governance will persuade them to stay, expand and invest again. That is how Bangladesh will move beyond competing on low costs and begin competing on confidence.

In the global race for capital, confidence—not incentives—is Bangladesh's greatest competitive advantage.

Shafiq R Bhuiyan is a storyteller who examines the intersection of social progress, effective communication, cultural development, and corporate social responsibility while sharing insights to inspire change. 

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.