BANGLADESH: A rising investment destination on its path from LDC to DC

Bangladesh stands at the threshold of transformation, recognized globally as a story of resilience and dynamic progress. Rising from the ashes of 1971, it has developed a vibrant and diversified economy, led by the world-renowned ready-made garment sector. As Bangladesh prepares to graduate from the United Nations' Least Developed Countries (LDCs) category to Developing Country (DC) status by 2026, it is poised to become a leading investment destination in South Asia. The interim government is committed to creating a thriving, investor-friendly environment as part of its vision to achieve high-income status by 2041. Central to this vision is the promotion of both foreign and domestic investments, which will power the next phase of Bangladesh's growth.

Foreign direct investment (FDI) in Bangladesh is on the rise, reflecting growing international confidence in the country's future. After years of steady progress, FDI peaked at USD 3.88 billion in FY 2018-19, a testament to Bangladesh's emergence as a compelling investment destination. Though the pandemic years presented challenges, the swift rebound in 2025, with FDI increasing by 114 percent in the first quarter compared to the previous year, signals robust investor interest and faith in Bangladesh's stability. The interim government recognizes the need to increase the investment-to-GDP ratio further and is actively working to make the business environment more predictable, transparent, and efficient. These reforms are designed to attract the world's leading investors and ensure Bangladesh's continued ascent.

The government has been proactive in encouraging investment. The Bangladesh Export Processing Zones Authority (BEPZA) pioneered secure business enclaves in the 1980s, offering tax holidays and duty exemptions to investors. The creation of the Bangladesh Economic Zones Authority (BEZA) in 2010 marked a new chapter, with plans to establish 20 economic zones, each featuring state-of-the-art infrastructure and streamlined regulations. These zones are attracting industries in textiles, ICT, and pharmaceuticals, reinforcing Bangladesh's reputation as a hub for global manufacturing and innovation.

The Bangladesh Investment Development Authority (BIDA), established in 2016, is central to the interim government's vision of a seamless investment journey. Its one-stop service is rapidly expanding through digitalization, reducing bureaucratic delays and making it easier for investors to start and grow their businesses. High-level diplomatic engagements ranging from China's interest in relocating manufacturing bases to the European Investment Bank's green finance commitments underscore Bangladesh's rising importance in the global investment.

High-profile contract disputes in recent years gave rise to doubts on transparency and the effectiveness of contract enforcement. Investors consistently seek greater certainty, transparency, and security for their investments. The sharp decline in FDI in 2024 was more than a statistical anomaly. It signalled how quickly investor confidence can erode if reform momentum is lost.

Bangladesh's forthcoming graduation from LDC status is a proud achievement and a clear signal of its readiness to compete globally. The interim government is focused on turning the loss of certain trade privileges into an opportunity for greater competitiveness. Investment in productivity, diversification, and innovation, particularly in sectors such as ICT, renewable energy, agribusiness, and pharmaceuticals, will position Bangladesh as a future-ready economy. Foreign and domestic investment will be pivotal in this journey, driving sustainable growth and job creation.

The interim government's mission is clear: to make Bangladesh a leading destination for global investment. Policy stability is being prioritized, with a commitment to predictable and transparent tax, incentive, and trade policies. Digitalization and cross-agency cooperation continue to progress, ensuring that the investment process is smooth and efficient. These forward-looking reforms are designed to close the gap between potential and performance, positioning Bangladesh as a preferred choice for international investors.

On the infrastructure and energy front, ongoing projects such as the Matarbari deep-sea port, and the Dhaka-Chattogram expressway are set to bolster connectivity and logistics. Yet, the next crucial step is to ensure affordable and reliable energy, particularly by scaling up renewable sources to meet growing industrial demand. In terms of global integration, Bangladesh can offset the loss of LDC trade privileges by pursuing new bilateral and regional trade agreements. Tapping into markets like China or ASEAN will be vital for sustaining growth and diversifying export opportunities.

Finally, strengthening legal certainty is essential. By enhancing contract enforcement and dispute resolution mechanisms, Bangladesh can send a clear message to global investors that it is committed to a rule-based economy where business interests are protected. These strategic measures, taken together, will be instrumental in reshaping the investment landscape and supporting the country's ambitions for long-term growth.

Bangladesh's fundamentals are compelling for investors. With a workforce of over 70 million, predominantly young and skilled, the country offers a significant labour advantage. The garment sector remains a global powerhouse, accounting for more than 80 per cent of exports. Since 2005, Bangladesh's economy has grown sixfold, with GDP surging from USD 57 billion to USD 420 billion by 2023. Per capita income has risen sharply, and Bangladesh's strategic location between South and Southeast Asia gives it access to a market of over three billion consumers. The government's Vision 2041 encapsulates this ambition: to achieve high-income status, raise per capita income to USD 16,000, and attract cumulative FDI above USD 150 billion.

Leaving LDC status is both an honor and a pivotal turning point for Bangladesh. It is a testament to the nation's resilience and progress, but it also signals the end of certain privileges that have long supported key industries. As Bangladesh transitions to developing country status, it must rise to the challenge by boosting competitiveness, fostering innovation, and deepening global integration. Navigating this transition successfully will depend on a robust combination of foreign and domestic investment. Without it, economic growth could stagnate, and job creation may falter. Strategic investment will empower Bangladesh to diversify its economy, expanding into sectors like ICT, renewable energy, agribusiness, and pharmaceuticals, and build a more balanced and resilient economic future.

In summary, Bangladesh's investment climate is rife with promise. The transition from LDC to DC status marks not just a symbolic achievement but a turning point that will define the nation's future. The interim government's vision and mission are clear: to foster a climate of stability, innovation, and inclusivity, making Bangladesh the next powerhouse for foreign investment in Asia.

Recent FDI recovery offers a glimmer of hope, underscoring the strength and determination of the Bangladeshi people. As reforms deepen, improvements in governance and renewed investor confidence suggest that Bangladesh is well-positioned not only to meet the challenges of LDC graduation but also to move purposefully toward its goal of becoming a developed nation.

Major General (Retd) Md. Nazrul Islam is currently serving as an Executive Member of Bangladesh Economic Zones Authority (BEZA). azrul.13081967@gmail.com.