Originally posted in The Daily Star on 22 April 2025
FDI slipped to five-year low in 2024
Net foreign direct investment (FDI) in Bangladesh plunged to a five-year low in 2024, according to provisional figures released by Bangladesh Bank, raising concerns over investor confidence amid growing economic headwinds and policy uncertainties.
The country received $1,270.39 million in net FDI in 2024, a 13.25 percent drop from $1,464.13 million in 2023.
This is in continuation of a downward trend that began after the 2021 post-pandemic peak of $1,572.16 million, when investor optimism surged with the revival of global supply chains.
A breakdown of the 2024 figures shows that equity inflows declined by 7 percent to $544.63 million, suggesting a reduction in new investment commitments.
Reinvested earnings took the biggest hit, falling 19 percent to $621.95 million—indicating lower retained profits or increased repatriation. Intra-company loans dipped slightly by 2 percent to $103.8 million.
Economists and investment analysts warn the declining trend reflects deeper structural issues—including regulatory delays, rising operational costs, energy shortages, and currency volatility—that may be deterring both new and existing foreign investors.
The global trade and investment scenario has been evolving fast in recent times with new challenges arising such as geopolitical fractures and trade protectionism, said M Masrur Reaz, chairman and chief executive officer of Policy Exchange of Bangladesh.
Weaknesses in Bangladesh’s own investment climate have further exacerbated the slowdown. “We must prioritise improving the business environment to regain momentum,” he said.
The decline in FDI comes at a critical juncture, as the country prepares for its graduation from least developed country (LDC) status, diversification of export, economic sectors, and markets, undertakes large-scale infrastructure and industrial projects.
The government has identified foreign investment as a key driver of job creation and technology transfer. However, the downward trend in FDI places additional pressure on policymakers to respond swiftly.
According to Reaz, the shrinking FDI figures serve as a wake-up call to address longstanding bottlenecks.
These include the need to modernise policy and regulatory framework for investments, improve regulatory service delivery and transparency to minimise red tape, deploy automated government-to-business engagements and ensure a reliable energy supply.
It also necessitates establishing a transparent and predictable tax regime and ensuring timely policy responses.
“Without tackling these issues, Bangladesh risks losing its competitive edge in a region that is becoming increasingly attractive to international investors, as well as the once-in-a-generation opportunity to position as a regional/global supply chain hub,” he warned.
“Despite the overall dip, sectors such as pharmaceuticals, IT-enabled services, and light manufacturing continue to show strong growth potential, and has potential to leverage further FDI,” he added.
Khandoker Azizul Islam, executive member (international investment promotion), Bangladesh Investment Development Authority (Bida), said the inflow of FDI had slowed during the last two quarters in 2024 due to various on-the-ground realities after the political changeover.
However, the situation is now improving, and investor confidence is gradually returning as conditions become more favourable for business, he said.
“Just after the investment summit held earlier this month, three to four foreign investors visited me to explore potential investment opportunities in Bangladesh,” he said.
“They expressed keen interest and sought detailed information on sectors and policies to proceed with their plans,” he added.
The Bida executive member said several large projects were in the pipeline and efforts were underway to improve the overall investment climate.
Despite three decades of progress, much of Bangladesh’s industrial potential has eroded due to persistent weaknesses, said Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue.
“What remains now are a few festival-like initiatives, rather than a robust, thriving ecosystem,” he told The Daily Star.
Moazzem pointed to deep-rooted structural challenges, especially for small entrepreneurs aiming to scale gradually.
“They lack access to timely market information essential for managing diverse supply chains—from paint factories to over 160 product lines,” he said.
Foreign investors rely heavily on such data. “Sadly, we’ve yet to ensure that, making our market appear too risky for first-time investors,” he said.
Without a clear, consistent message for current and future investors, confidence will falter. “You won’t see presidents visiting or global companies committing unless we prepare this market properly,” he said.
Moazzem emphasised that an “investment environment” means a stable, uninterrupted policy framework.
“If countries like China or India can ensure this, why can’t we?” he asked, warning that short-term incentives would not sustain long-term growth.
“We must build a complete ecosystem—or risk damaging our future,” he said.
Moazzem identified multiple causes for the FDI slump, including ongoing political instability in the latter half of 2024, an unpredictable energy supply, and persistent issues with gas and electricity availability and pricing.
These factors, he said, have emerged as major deterrents for fresh equity investment.
He further noted that older investors who already have land or utility connections in Bangladesh can navigate these challenges more easily.
In contrast, new investors are hesitant due to a lack of guaranteed infrastructure support and slow implementation of the so-called “One-Stop Service” of Bida.
“Concerns over foreign exchange reserves and delays in profit repatriation are adding to investor anxiety,” he added.
Moazzem also criticised the lack of accountability in tax collection and rising corruption.
Unless these structural problems are addressed, Bangladesh may continue to struggle in attracting sustainable foreign investments, he warned.