FDI surges: Still a long way to go

Bangladesh’s position in World Investment Report (WIR) 2026, which was released recently by the UN Conference on Trade and Development (UNCTAD), evokes a mixed reaction. Bangladesh witnessed a strong rebound in FDI inflow in 2025, ending two consecutive years of decline. According to the WIR, FDI inflows into Bangladesh rose 45 per cent to $1.78 billion in 2025 from $1.23 billion a year earlier. The country remained the third-largest recipient of FDI in South Asia after India and Pakistan. This is certainly a cause for optimism. On deeper analysis, however, the picture appears less encouraging. Despite being South Asia’s second-largest economy with over half a trillion-dollar GDP, Bangladesh lags far behind much smaller African countries such as Uganda, Ghana and Democratic Republic of Congo (DRC) in FDI inflows. Uganda attracted $3.4 billion in FDI in 2025, while Ghana and the DRC each received $1.9 billion.

The UNCTAD report highlights another worrying trend: a decline in announced greenfield projects — investments in which foreign companies establish entirely new factories or operational facilities. This suggests that while existing foreign investors may be expanding their operations through reinvested earnings, Bangladesh is struggling to attract new foreign investment. Such a trend raises serious questions about the country’s investment climate and its competitiveness as an FDI destination. Equally concerning is the fact that FDI accounts for only 1.4 per cent of Bangladesh’s Gross Fixed Capital Formation (GFCF), indicating that the country’s industrial expansion remains overwhelmingly reliant on domestic sources of finance. Excessive dependence on local financing leaves the economy vulnerable to banking sector weaknesses, liquidity shortages and credit constraints, while limiting access to foreign capital, advanced technology and managerial expertise that are essential for sustaining long-term economic growth.

The success of Uganda, Ghana and the DRC demonstrates that a surge in FDI inflows is not accidental; rather, it is the outcome of meaningful and sustained reforms. As the UNCTAD report highlights, Ghana aggressively overhauled its tax regime, strengthened its foreign exchange reserves and lowered entry barriers for foreign investors. Uganda transformed its investment authority into a fully automated one-stop service centre while offering targeted incentives in industrial parks. The DRC attracted large-scale foreign capital by liberalising its energy sector and opening infrastructure projects to private participation. The lesson is clear: investors respond to reforms that create a business-friendly environment.

Of late, the Bangladesh government has announced several initiatives to improve the investment climate. It has introduced an FDI Incentive Scheme under which individuals who facilitate foreign investment into the country will receive 1.5 per cent of the investment amount as a consultancy fee or commission. The government has also pledged to simplify business licensing through a one-stop service, shorten company registration timeframe and speed up visa processing for foreign investors. All these are positive steps, but Bangladesh still has a long way to go in improving its business climate. The countries that enjoy robust FDI inflows have succeeded not merely by offering incentives, but by building strong industrial ecosystems that enable investors to thrive.

Over the past decade, successive governments have organised gala investment summits and roadshows, promising sweeping reforms. However, these promises have rarely been translated into action. It is therefore time to build institutions that deliver. The one-stop service must become genuinely effective. Successful reforms require clearly defined timelines, effective inter-agency coordination and accountability.

After all, FDI is not merely an inflow of foreign capital; it is a vote of confidence in a country’s governance, policy consistency, legal framework and institutional capacity. Investors are attracted not simply by incentives but by political stability, predictability and trust. They want assurance that contracts will be honoured, policies will remain consistent, profits can be repatriated without difficulty and business operations will not be disrupted by bureaucratic delays, shortages of foreign exchange or energy shortages. Bangladesh must strive to address the gaps in building greater investor confidence.

Source: https://thefinancialexpress.com.bd/opinions/fdi-surges-still-a-long-way-to-go