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FDI sees a modest uptick, but fresh investment still lags behind

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  Published in Stocks and Investing on Sunday, October 12th 2025 at 15:01 GMT by The Daily Star
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Bangladesh’s Foreign Direct Investment: A Modest Rise Amid Persistent Challenges

Bangladesh’s latest foreign direct investment (FDI) figures, released by the Bangladesh Investment Development Board (BIDB), point to a modest uptick in inflows, yet they reveal that fresh investment still lags behind the nation’s ambitious targets. The country’s economy has long relied on external capital to fuel industrial expansion, upgrade infrastructure, and create employment. However, the data indicate that while progress is being made, a combination of regulatory bottlenecks, infrastructural deficits, and global economic headwinds continue to temper investor confidence.

Key Figures

• Year‑on‑year growth: FDI inflows rose by 4.3 % in the first quarter of 2024, a slight increase from the 3.9 % recorded in the same period last year.
• Cumulative volume: The cumulative FDI for the year to date reached BDT 2.1 trillion (US$ 15.7 billion), up from BDT 2.0 trillion (US$ 15.0 billion) in 2023.
• Sectoral distribution: Manufacturing, especially textiles and ready‑made garments, remained the dominant recipient (≈ 55 % of total inflows). Energy, logistics, and information technology also registered significant inflows, reflecting diversification efforts.

Despite the uptick, the total amount remains below the mid‑2025 target of BDT 3.0 trillion (US$ 22.5 billion) set by the government as part of its “Vision 2041” strategy to deepen economic development.

Drivers of the Increment

1. Government Incentives: The Ministry of Commerce recently announced an expanded tax holiday for FDI projects in the high‑value manufacturing and renewable‑energy sectors, aiming to lure larger capital commitments.
2. Infrastructure Improvements: The completion of the Khulna‑Kushal Shahjahanpur highway has reduced logistics costs for investors in the southwestern corridor, prompting a modest increase in project approvals.
3. Regulatory Reforms: The newly enacted Foreign Investment Promotion Act (FIPA), implemented in 2023, streamlines the approval process by allowing single‑window clearance and digitized licensing.

These policy measures, while positive, have not yet compensated for several persistent obstacles.

Ongoing Challenges

• Bureaucratic Delays: Investors still face protracted clearance times, especially in sectors requiring multiple ministries’ approvals. The average turnaround for a full FDI clearance remains 12 weeks—double the target set in the 2023 FDI Action Plan.
• Land Acquisition: The land acquisition process, often tied to local council approvals, continues to be a bottleneck. In many regions, disputes over compensation or use of land have stalled projects for years.
• Infrastructure Gaps: While highway improvements have helped, the country’s power supply reliability remains a concern. Power outages and high tariffs disproportionately affect manufacturing operations, prompting investors to consider alternative power sources, increasing costs.
• Skill Shortages: Despite a young labor force, there is a mismatch between the skills required by high‑tech sectors and the local workforce’s capabilities, deterring foreign firms that rely on highly skilled labor.

Contextual Insights from Related Coverage

The Daily Star’s recent in‑depth pieces on the Investment Development Board and the Bangladesh Development Bank highlight how macro‑economic stability has been a key factor in maintaining investor confidence. In a related article, “FDI policy review: What worked, what didn’t,” the author cites that the removal of the “Foreign Investment Registration Fee” in 2021 led to a 6 % surge in early‑year inflows. However, the same piece underscores that the lingering “Land Acquisition Law” still presents a risk premium that keeps many investors cautious.

Furthermore, a linked report on the Bangladesh Export Processing Zone Authority (BEPZA) underscores how zone‑specific incentives—such as 100 % import duty exemption on capital goods—have attracted firms in the electronics assembly sector. Yet, the article notes that BEPZA’s “expansion timeline” has been postponed twice due to funding shortfalls, underscoring the need for consistent policy implementation.

Government’s Forward Strategy

In the 2024-25 fiscal budget, the Finance Minister highlighted a three‑pronged approach:

1. Accelerated Land Release: Targeting a 20 % reduction in land clearance time by simplifying the “Land Acquisition Regulation”.
2. Digitalization of Processes: Launching a unified FDI portal to provide real‑time updates on application status and reduce bureaucratic layers.
3. Infrastructure Investment: Allocating BDT 250 billion for power grid upgrades in key industrial zones and BDT 150 billion for port modernization to facilitate smoother import/export flows.

These measures, if fully implemented, could push FDI inflows closer to the government’s mid‑term goals.

Takeaway

Bangladesh’s foreign direct investment landscape shows signs of healthy, incremental growth, largely driven by targeted incentives and infrastructure improvements. However, the magnitude of the uptick remains modest in the face of deep‑rooted systemic challenges. The government’s continued commitment to simplifying land acquisition, enhancing digital governance, and bolstering power and logistics infrastructure will be critical in translating policy intent into robust, sustained investment flows.

For investors and policymakers alike, the current data underscores that while policy signals are positive, the true test will be in the execution of reforms and the reduction of operational friction that presently hinders the full realization of Bangladesh’s investment potential.