Foreign Investment in Bangladesh: Between Promise and Proof

Ahmed Humayun Murshed :

Bangladesh stands at a turning point in its investment story. For years, the country has been known as a place of promise, with a young population, a growing middle class, and an abundance of affordable labour. But for foreign investors, the story has never been that simple.

There is no denying the appeal. Around 200 million people live, work, and shop in a small geographic area. Compared to larger, more diverse markets, this cultural and behavioural homogeneity greatly simplifies product testing, distribution network construction, and operation scaling.

The consumer from Bangladesh, however, acts differently. Here, people are cautious and pragmatic, prioritising value and functionality over luxury or branding. A thorough grasp of what customers truly need, affordability, and consistency are more important for success than glitz.

This dichotomy of optimism and hesitancy was reflected in the recent Bangladesh Investment Summit. Talks about new incentives, economic zones, and digital reforms filled the halls with hope. There were two types of foreign investors who has shown interest.

The first type wants to target the local market and the second type wants to set up their operation here abd export elsewhere. Amidst the cheers, there was a subdued suspicion.

Promises have been made to investors before. These days, they want proof of delivery, consistency, and predictability.

Here in this land of opportunities, starting a business is often more difficult than it needs to be. Although the Bangladesh Investment Development Authority’s one-stop service is a positive move, obtaining licenses and approvals still requires navigating several agencies.

It frequently takes months to find a way through the labyrinth of so many different departments of the Government. Clarity, speed, and fairness are usually more important to foreign investors than incentives.

The nation’s greatest resource is still labour, which used to be considered “cheaper”by many investors.Rising inflation is causing the minimum wages to increase year by year (it will not remain “cheaper” for long) without bringing real qualitative changes in workers’ lives which is a concern of many consumers in developed countries.

Furthermore, with the technilogical advancement and globalization, there is a growing shortage of skilled workers and it is not so low anymore.

The lack of technicians, engineers, or mid-level managers capable of operating contemporary machinery or production systems or fluent communication is more of a problem than the lack of workers. Businesses have expanded more quickly than the educational and training establishments that sustain them.

To ensure quality, foreign supervisors are still needed in many factories. Bangladesh has people, but it needs to turn them into skilled professionals. This disparity in skills is not new.

In the past, imports of heavy machinery were a manifestation of industrial optimism. It appeared to be a wave of industrialisation on paper.

In actuality, a large portion of it was exaggerated through excessive billing and occasionally even used to transfer funds overseas. Many of those machines were never there really.

The outcome was expected, productivity hardly changed while capital flew out. Bangladesh has experienced a number of false starts where plans were rushed into action without producing real results because the number were not reliable.

Once a representation of the nation’s economic growth, the banking industry has also experienced instability. It was weakened by years of careless lending, poor leadership, and politically swayed choices. As banks tighten their hold, businesses are now facing working capital shortages.

Changes have started. Digital reporting, stricter regulations, and better oversight are slowly restoring discipline. But trust takes time to rebuild. For a foreign investor, financial stability is just as critical as infrastructure or tax benefits.

Every industrial discussion revolves around energy. Although Bangladesh has significantly increased its power generation, dependability is still inconsistent.

While some regions continue to experience load shedding and low gas pressure, others enjoy a consistent supply. Diesel generators are used in many factories, which increases expenses and unpredictability.

Variations in voltage can harm equipment even when electricity is flowing. A reliable, reasonably priced, and environmentally friendly power source is essential, it is not a luxury. Even the best investment strategy will not work without it.

A smooth supply of natural gas has always been an issue which is also complained by our local entrepreneurs.
Investor perceptions of Bangladesh are also influenced by law and order. Although there are still minor problems, the nation is much safer now than it was twenty, thirty years ago.

Supply chains and port operations are occasionally disrupted by local conflicts, strikes, and bureaucratic meddling. Contract enforcement and property protection are uneven, leaving foreign firms wary.

For a global investor, predictability is not just about policy, it is about daily operations running without surprises. However, the recent cases of fires in major industrial areas and airport are not helping.

Uncertainty has increased due to currency fluctuations. Both foreign partners and local businesses were concerned about the recent depreciation of the taka.

Long-term planning became more challenging, profit repatriation became uncertain, and import costs increased. Since then, the central bank has taken steps to reduce the gap between the official and informal markets and stabilise the exchange rate.

Remittances and exports are increasing dollar inflows, raising the prospect of stability. A weaker currency is acceptable to investors, and preferred because it gives them more purchasing power after bringing the investment.

However, an unpredictable one is not. Plus, banks usually approve the credit limit is local currency and if the USD value increase, the working capital of any business will decrease as many items needs to be imported. This has been the case for many businesses in the post Covid era, when the Russia-Ukraine War had started.

Bangladesh is not always an inexpensive place to do business, despite its benefits. Ports are crowded, logistics are slow, and customs processes are still difficult.

The direct and indirect taxes are higher than many competitor countries. Inland goods transportation is expensive and time-consuming. Many businesses depend on costly backup systems, such as generators, private security, and imported parts.

By the time all these hidden costs are added, Bangladesh’s total operating cost can be comparable to that of countries like Vietnam or Indonesia. With the upcoming LDC graduation and recent Trump Tariffs, our policy makers have a lot to think about.

Profits can be slow to leave the country, even when everything is going well. Documentation and central bank approval are necessary for repatriating dividends or selling investments, but bureaucracy frequently delays these processes.

For greater tax efficiency and legal protection, many foreign investors choose to route their money through holding companies in Singapore or Dubai. They can rest easy knowing they have choices in case things get complicated.
Another layer of caution is added by politics.

Investors wait to see what happens after national elections, which frequently cause pauses in decision-making. More important than the government’s name is policy continuity. Maintaining policy consistency outside of election cycles is essential to Bangladesh’s ambition of becoming a regional centre for manufacturing.

But despite its shortcomings, hope endures because the fundamentals, a young and ambitious population, steady remittance inflows, growing exports, and rapid digitization, remain strong. Special economic zones are emerging, infrastructure is steadily improving, and policymakers are becoming more aware of what foreign investors desire.

The country has already adapted to and weathered global shocks. Although the country has come very close in the past but failed because other nations advanced much more quickly.It seems that this time the stakes are high as the entire world is changing.

Bangladesh needs three things in order to go from potential to performance, skill, simplicity, and dependability. Stable power, honest regulation, and the rule of law are all components of reliability.

There are fewer surprises and quicker approvals when things are simple. Investing in skill means hiring people who can convert ideas, capital, and machinery into output. These are the cornerstones of investor confidence, not catchphrases.

What the country needs now is to turn that potential into performance. If the country can deliver stability, consistency, and trust, investors won’t just come, they’ll stay. We understand progress takes time, but we must also be quick enough to catch the wave, because progress, when slower than others, loses its meaning. Something worth thinking about.