What keeps investors away from Bangladesh

Bangladesh has a money problem. Not the kind where the government cannot pay its bills, but the kind where there is simply not enough capital flowing into the country to fuel real growth.

Like most developing nations, Bangladesh cannot generate all the investment it needs domestically. Foreign money should be filling that gap. Instead, it is heading elsewhere, leaving Bangladesh watching from the sidelines as countries such as Vietnam and India attract billions in foreign direct investment.

The numbers are stark. Foreign investment dropped 26 percent this year, falling from $1.164 billion to just $861 million in the first nine months of fiscal year 2024-25. Private sector lending has almost ground to a halt at 6.4 percent, the weakest performance in memory. These are not just statistics in a government report. They represent factories that did not get built, jobs that were not created, and families that could not improve their lives.

Many point to the 2024 political upheaval as the main culprit, and they are not wrong. When governments change suddenly and policies shift without warning, investors get spooked. It is basic human nature. Nobody wants to risk their money if they are unsure it will still be safe a year later.

Anyone who has tried to start a business in Bangladesh knows the bureaucratic nightmare that awaits. Getting basic permits can take months. Navigating the maze of regulations requires connections, patience, and often unofficial payments to speed things along.

Foreign investors do not have time for that. They have alternatives. When a multinational company chooses between Bangladesh and, say, Thailand, and Thailand can approve a factory in six weeks while Bangladesh takes six months, the choice is obvious.

Infrastructure adds to the challenge. Running a modern factory is difficult when the power goes out regularly and gas supplies are unreliable. High interest rates make borrowing expensive, assuming banks are willing to lend at all.

Corruption makes matters worse. When investors cannot trust that contracts will be honoured or regulations applied fairly, they go elsewhere. This is not about moral judgments; it is about risk management.

Other countries grasped this decades ago. Vietnam opened up in the 1980s and methodically addressed barriers to foreign investment. It streamlined bureaucracy, built reliable infrastructure, and created transparent legal frameworks. Today, Vietnam attracts more foreign investment in a single quarter than Bangladesh receives in an entire year.

China, Mexico and India followed similar playbooks. They understood that foreign investors think in decades, not quarters. Companies want to build factories, train workers, and grow their operations long term. For that, they need predictability. Political stability matters too. The coming February elections may help, but investors will be watching closely to see if the new government maintains reforms or shifts course.

More importantly, Bangladesh must confront its structural problems. This means cutting through bureaucratic red tape, fixing the power grid, and building institutions that actually work. The recent Foreign Investors Summit highlighted the same concerns: good governance is not just a lofty ideal, it is a business necessity.

Even small details matter. Clean streets, respectful treatment of foreign visitors, and the basic rule of law all influence how investors see a country. When executives decide where to put company money, such impressions play a role.

Bangladesh does have advantages. A growing middle class with rising purchasing power is exactly what consumer goods firms look for. The workforce is large and, with proper training, capable. Its location offers access to major markets.

But advantages are irrelevant if nobody wants to invest. Bangladesh competes with countries that have spent decades making themselves attractive to foreign money.

The path forward is not mysterious. Others have shown it can be done. But it requires sustained commitment to reform, not just during election campaigns but year after year. Building investor confidence takes time, especially after repeated disappointment.

The question is not whether Bangladesh needs foreign investment. It clearly does. The question is whether the country is finally ready to do what is necessary to secure it.

The writer is an economic analyst and chairman of Financial Excellence Ltd