The continuous decline in Foreign Direct Investment (FDI) in Bangladesh is a pressing issue that demands immediate attention.
A report published in this newspaper yesterday indicated a staggering 22.33 per cent drop in foreign investments in Export Processing Zones (EPZs) during the first half of the fiscal year 2024-25, alongside an overall decline in net FDI from $1.609 billion in FY23 to $1.468 billion in FY24.
This downward trend is alarming, particularly given the potential of Bangladesh as a burgeoning market.
Economists attribute this crisis to a combination of political instability and economic challenges.
The prevailing political uncertainty has made investors hesitant, while the government’s reliance on borrowing has led to a liquidity crisis, further deterring investment.
Dr. Zahid Hussain, a former Lead Economist at the World Bank, emphasises the need for a more investment-friendly budget to restore investor confidence. Without significant reforms, the current situation is unlikely to improve.
Moreover, the banking sector’s woes, characterised by rampant default loans and mismanagement, have compounded the problem.
Professor Muinul Islam highlights the urgent need for measures to rehabilitate the banking system, which is crucial for facilitating private sector investment.
The recent formation of a committee by Bangladesh Bank to address default loans is a step in the right direction, but it must be part of a broader strategy to restore trust in the financial system.
Despite these challenges, it is noteworthy that exports from EPZs have risen by 22.41 per cent during the same period, indicating that while foreign investment may be faltering, local production capabilities are thriving.
This dichotomy underscores the need for the government to streamline investment processes and enhance services for foreign investors.
The introduction of One-Stop-Shop (OSS) services is a commendable initiative, yet these services must evolve to meet investor expectations fully.
To attract foreign capital, Bangladesh must tackle persistent obstacles such as bureaucratic inefficiencies, a shortage of skilled labour, inadequate infrastructure, and complications in land acquisition and capital repatriation.
The World Bank and other institutions have consistently highlighted these barriers, and the government must take proactive measures to address them.
Certainly, the path to revitalising FDI in Bangladesh lies in creating a stable, transparent, and investor-friendly environment.
Only through concerted efforts to reform economic policies and enhance the investment climate can Bangladesh hope to reclaim its position as an attractive destination for foreign investors.
