The declining trend of foreign direct investment (FDI) in Bangladesh in recent years is quite concerning, especially amid high inflation, rising unemployment, and increasing financial liabilities. According to central bank data, Bangladesh received 71 percent less FDI during the first quarter of FY2025 compared to the same period in the previous fiscal year. Moreover, 55 percent of the FDI consisted of intercompany loans and reinvestments, not new investments that can create jobs and drive business activity.

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What’s discouraging our foreign investors?

Experts cited political instability, economic uncertainty, bureaucratic inefficiencies, inconsistent policies, high inflation, currency volatility, and inter-agency misalignment as key reasons behind the decline in FDI. Even low labour costs have failed to attract foreign investors, as a combination of these factors—along with rising corruption and nepotism in more than 15 years of Awami League's rule—ultimately pushed up the cost of doing business in Bangladesh. The situation turned worse last year amid month-long protests and the Awami League's violently oppressive actions to suppress the uprising, which halted production, disrupted the supply chain, and negatively impacted foreign trade. The deterioration of law and order after August 5 further compounded the issue.

The most urgent issue to be addressed is the volatile law and order situation. Foreign investors seek not only low labour costs, but also a safe environment for doing business and a stable political regime for long-term investments. The interim government, together with political parties and other stakeholders, must recognise this and take decisive action to restore stability and attract FDI.

It took months for the situation to stabilise, but even now, occasional protests by various groups continue to disrupt businesses. With a non-political government in power, and tasked with initiating reforms and conducting fair elections, new and long-term projects are also not currently on the table. These factors have not helped local and foreign investors regain their confidence, and as a result, they remain in a "wait and see" mode, which is hindering economic recovery.

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We must remove barriers to investment flow

Currently, FDI constitutes only 0.5 percent of our GDP. To stimulate economic activities and drive growth, this share must increase. Simply having foreign investor-friendly policies on paper is not enough. The government should take concrete steps to review existing policies, identify inconsistencies, and make necessary adjustments. A focus should be placed on developing robust promotional campaigns for domestic industries and initiating bilateral discussions that encourage investment. However, the most urgent issue to be addressed is the volatile law and order situation. Foreign investors seek not only low labour costs, but also a safe environment for doing business and a stable political regime for long-term investments. The interim government, together with political parties and other stakeholders, must recognise this and take decisive action to restore stability and attract FDI.