Why Bangladesh needs an integrated investment ecosystem, now

The government's recent decision to integrate investment promotion agencies marks a timely and much-needed reform in Bangladesh's investment facilitation landscape. 

Bringing together institutions such as the Bangladesh Investment Development Authority (BIDA), Bangladesh Economic Zones Authority (BEZA), Bangladesh Export Processing Zones Authority (BEPZA), Bangladesh Hi-Tech Park Authority (BHTPA), Bangladesh Small and Cottage Industries Corporation (BSCIC), and the Public-Private Partnership Authority (PPPA) under a unified framework signals a clear intent to reduce overlap, improve coordination, and present a single interface to investors. This is an important step forward.

However, experience—both domestic and international—suggests that institutional integration alone does not unlock capital. What ultimately shapes investment decisions is confidence, and confidence is built through predictable, coordinated, and delivery-oriented systems that perform consistently over time.

Bangladesh today stands at a defining moment. The country's fundamentals remain solid: a domestic market of more than 170 million people, a young and trainable workforce, competitive production costs, and a strategic location connecting South and Southeast Asia. These strengths are frequently acknowledged in discussions with investors. The challenge lies not in creating potential, but in converting this potential into sustained investment flows.

The data underline this gap. In FY 2024–25, Bangladesh's net foreign direct investment (FDI) rose by around 19% to approximately $1.7 billion. While encouraging, this still places FDI below 1% of GDP. By contrast, economies that have successfully transformed their industrial base typically attract 2.5–3 %of GDP in FDI. Analysts estimate that Bangladesh needs $7–8 billion annually to raise long-term GDP growth by even one additional percentage point.

Equally important is the composition of inflows. Much of the recent increase has come from reinvested earnings and intra-company loans, rather than new greenfield investments. Quarterly volatility suggests cautious investor sentiment—capital is present, but not fully committed.

This hesitation does not arise from a lack of opportunity. Global supply chains are being reconfigured, production costs are rising in traditional manufacturing hubs, and geopolitical shifts are pushing firms to diversify locations. 

Bangladesh is well-positioned to benefit, particularly in export diversification beyond garments, pharmaceuticals, agro-processing, ICT and electronics, logistics, and green manufacturing.

Where investors pause is execution. Foreign investors are generally not unsettled by political change itself; democratic transitions are expected. What concerns them is uncertainty. Investment decisions are long-term, often spanning 15 to 30 years. 

When policies, incentives, tax interpretations, or regulatory practices appear vulnerable to administrative change, decisions slow. Even perceived midstream risk can redirect capital elsewhere.

Local investors face a more immediate constraint. Many who have committed capital in Economic Zones, Export Processing Zones, hi-tech parks, and industrial estates encounter delays in electricity, gas, water, wastewater treatment, and access roads—basic operational requirements. Land allocation without assured utility timelines results in idle capital, rising costs, and erosion of confidence.

These challenges are rarely due to inaction by a single institution. While agencies such as BEZA, BEPZA, BHTPA, BSCIC, and BIDA work within their respective mandates to facilitate investors, utilities, environmental clearances, land administration, and local infrastructure remain under different authorities. The outcome is not the absence of effort, but the fragmentation of responsibility.

At this point, Vietnam's experience offers a sobering lesson. In the early 2000s, Vietnam faced challenges similar to Bangladesh today—strong labour advantage and rising investor interest, but institutional fragmentation. Instead of relying mainly on incentives, Vietnam focused on systemic integration. 

Industrial zones were developed with pre-guaranteed utilities, synchronised approvals, and clear land titles. Investment policies were anchored beyond political cycles, and the coordination authority was empowered at the centre.

The results are striking. Vietnam now attracts $35–40 billion in FDI annually, exceeding 6% of GDP, with a large share coming as new greenfield investment in high-value manufacturing. Investors consistently cite predictability, speed, and system reliability—not incentives—as decisive factors.

The lesson for Bangladesh is not replication, but principle: capital responds to systems, not slogans.

Bangladesh's aspiration to become a high-income country by 2041 cannot be achieved in fragments. Capital today is cautious, mobile, and highly selective. When investment hesitates, growth waits—and opportunity moves elsewhere.

The integration of investment promotion agencies is therefore a necessary first step, not the destination. What must follow is deeper systemic integration across regulation, utilities, finance, and decision-making. When institutions align with the same clarity and resolve that underpin national aspirations, investor confidence will deepen—laying the foundation for sustained growth and long-term prosperity.

Md Nazrul Islam is a retired Major General of the Bangladesh Army and currently serves as Executive Member (Planning & Development) at the Bangladesh Economic Zones Authority (BEZA). He previously served as Executive Chairman of BEPZA and held senior corporate leadership roles. His work focuses on investment facilitation, industrial policy, and economic zone–led development.

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.