When narrative outpaces reform in Bangladesh’s investment strategy

In emerging markets, optimism is a currency. It can stabilise sentiment, attract delegations and, occasionally, buy time. But optimism is not a substitute for institutional reform.

Bangladesh's investment leadership in 2025 has leaned heavily on narrative — projecting a confident, manufacturing-led future and positioning the country as a bridge between South and Southeast Asia. The messaging has been energetic, internationally oriented and forward-looking.

The challenge is that investors measure progress not in speeches, but in systems.

A fragile recovery

Foreign direct investment flows over the past three years suggest volatility rather than durable momentum. After softening in 2023, inflows declined again in 2024 amid political and economic uncertainty. While early 2025 data indicated a rebound, subsequent quarters moderated, raising questions about sustainability.

More telling than headline figures is the composition of investment. Fresh equity capital — the component that reflects new, long-term commitments — has weakened. That signals caution among new entrants rather than confidence.

Forward indicators are equally concerning. Registered private investment proposals reportedly contracted sharply year-on-year, suggesting that firms are adopting a wait-and-see posture — or redirecting capital elsewhere.

Domestic signals matter most

Private-sector credit growth has slowed to multi-year lows, falling well below policy targets. This is often overlooked in public debate, yet it may be the most important indicator of all.

Domestic entrepreneurs possess the best understanding of regulatory consistency, energy reliability and bureaucratic friction. When local businesses slow their expansion, foreign investors rarely accelerate.

In most emerging markets, foreign capital follows domestic confidence — it does not lead it.

Reform: Partial digitisation, persistent friction

The government's flagship administrative reform — a One Stop Service platform intended to streamline investor approvals — remains incomplete. Only a limited share of required services are fully digitised, while many processes still require in-person engagement across multiple ministries.

Digital interfaces alone do not eliminate administrative complexity. For international investors accustomed to integrated regulatory portals, fragmentation reduces predictability and raises transaction costs.

Reform, to be credible, must move beyond presentation-layer upgrades and address structural coordination.

The trade architecture gap

Bangladesh's competitive position is also constrained by its limited integration into preferential trade agreements. Regional competitors have secured extensive market access arrangements, reducing tariffs for exporters and enhancing supply chain attractiveness.

In contrast, Bangladeshi manufacturers continue to face tariff exposure in key markets, increasing relative cost structures. Geography alone does not guarantee integration; trade diplomacy does.

Investors conduct comparative analysis. When Vietnam or Cambodia offers zero-tariff access and streamlined logistics, capital allocation becomes straightforward.

Energy and infrastructure constraints

Reliable access to gas and electricity remains a foundational requirement for manufacturing-led growth. Uncertainty in energy supply or pricing complicates long-term investment decisions. Without stability in these fundamentals, even well-designed incentives struggle to offset operational risk.

Similarly, high-profile infrastructure initiatives require transparent execution and durable consensus. When large projects stall or face resistance, investor perceptions of policy continuity are affected.

The credibility question

Bangladesh retains structural advantages: a young workforce, strategic geography and a growing consumer base. The potential remains significant.

But potential must be converted into institutional credibility.

Economic leadership is ultimately judged not by the ambition of its projections but by the consistency of its delivery. Investors seek clarity in process, stability in policy and integration in trade frameworks. They are less concerned with rhetorical confidence than with measurable improvement in approval timelines, tariff structures and energy reliability.

The country does not lack vision. It risks, however, allowing narrative to advance faster than reform.

For Bangladesh to emerge as a genuine regional manufacturing hub, the priority must shift from summit-stage positioning to system-level execution. Capital flows toward environments where procedures are predictable and comparative advantages are institutionalised.

Optimism can open doors. Only reform keeps them open.

Nagad MD Tanvir A Mishuk. Sketch: TBS

Tanvir A Mishuk is the Founder of Nagad.

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