Like many other emerging economies, Bangladesh is capital-hungry—whether it’s in the form of equity or debt. As in many peer countries, foreign capital or investment helps fill the gap left by limited domestic capital. However, both domestic and foreign investment are crucial for the country’s economic growth and development. And for that, political stability is essential.
When political uncertainty prevails, investors become anxious and hesitant. They cannot be sure how secure their investments will be or whether there will be sudden shifts in government policy. Political violence or fears of regime change can severely undermine a country’s business-friendly environment. Investors typically seek stability and policy consistency, which allow them to make long-term plans and execute projects. Therefore, it is the responsibility of any government to establish a credible, transparent, and impartial administrative and legal framework where businesses can operate in a secure environment.
Following the 2024 political upheaval, the country’s political landscape remains unstable, and a lack of trust continues to prevail. People from various professions and social groups are taking to the streets to press their demands. Labour unrest has grown in the garment sector, and the country’s law and order situation is not yet fully under control. Mob violence is contributing to increased social instability, further eroding investor confidence. Domestic investment is also struggling, resulting in declining industrial output. Business activity has slowed, and while employment creation is weak, unemployment is rising.
To recover from this situation, restoring investor’s confidence is crucial. Many hope that with an elected and responsive government in power, long-term policies and political stability will return, encouraging entrepreneurs to focus on investment once again.
There is, however, a positive trend: in today’s Bangladesh, not just politicians but people across the board are prioritising the economy. Despite the ongoing crisis, the economy has an inherent resilience. To attract foreign investment, political stability must be accompanied by good governance, transparency, and accountability at the institutional level. These points were also emphasised by speakers at the recently held Foreign Investors’ Summit.
According to data from Bangladesh Bank, the net inflow of Foreign Direct Investment (FDI) in the first nine months (July–March) of the 2024–25 fiscal year stood at $861 million. In the same period of the 2023–24 fiscal year, the net FDI inflow was $1.164 billion. This means that net FDI declined by 26 per cent compared to the previous year.
Meanwhile, under the contractionary monetary policy for FY 2024–25, the target for private sector credit growth was set at 9.8 per cent. However, even this single-digit target was not met due to stagnation in investment. By the end of the fiscal year, private sector credit growth reached only 6.40 per cent—a slowdown not seen in recent history. In response, the newly announced monetary policy has lowered the target to 7.2 per cent for the sector through December, with a longer-term target of 8 per cent by June 2026.
Due to worsening law and order, among other factors, expected levels of investment have long failed to materialise. Electricity and gas shortages persist, and high interest rates are further deterring private sector investment. Altogether, this has contributed to a decline in private sector credit growth.
Despite various challenges, Bangladesh still holds promise as an attractive market for foreign investment, thanks to increasing per capita purchasing power. Yet the main barriers to large-scale investment are domestic in nature—including lack of discipline in the financial sector, political instability, frequent shifts in investment policies, limited capacity among investment-related agencies, and widespread bureaucratic red tape.
Furthermore, initiatives taken to attract foreign investment have yet to show meaningful impact. FDI has played a crucial role in the economic transformation of many developing countries. Since the 1980s, countries like Vietnam, China, Mexico, and India have seen significant economic expansion driven by FDI, especially in manufacturing—creating new employment, enabling technology transfer, and helping stabilise foreign currency reserves.
Even after so many years of independence, Bangladesh has yet to create a fully investment-friendly environment. If the country wants to attract more foreign investment, it must address these fundamental issues—including eliminating corruption, resolving bureaucratic inefficiencies, and ensuring coordination for foreign investors.
If FDI increases in Bangladesh, there is no doubt the country’s socioeconomic conditions will improve further. The country’s image is a key factor in attracting multinational companies. A clean and orderly environment, wide roads, respectful behaviour toward foreign nationals, stable political conditions, sound law and order, strong connectivity, natural resources, skilled or trainable workforce, and reduced bureaucratic hurdles—all of these help create a positive perception and encourage foreign investment.
On the other hand, polluted environments, poor governance, and unruly public behaviour contribute to a negative image of a country.
To increase FDI in Bangladesh, the country must understand and prioritise the key factors that attract foreign investors. This requires strategic planning and effective implementation.
Many have said—and continue to say—that foreign investment depends on many factors. Given that Bangladesh has not been able to show significant success in attracting foreign investment over all these years, it is unrealistic to expect rapid or overnight change. There is still a considerable amount of work that needs to be done. The same issues that are holding back domestic investment also apply to foreign investment.
Currently, the country is going through a phase of political uncertainty. Although the government has announced that the next national election will be held in February next year, investors will be closely observing whether the reform programmes currently underway will be upheld by the next government, and whether there will be any policy changes.
Unlike domestic investors, foreign investors usually have long-term plans. Therefore, they will want to be assured that their investments will remain safe and unaffected by future political or policy shifts.
