What foreign investors want to see in Bangladesh

Bangladesh stands at a critical juncture in its economic trajectory. With sustained gross domestic product (GDP) growth, a large domestic market, and a favorable demographic profile, the country possesses the structural fundamentals required to attract significantly higher levels of Foreign Direct Investment (FDI). However, actual inflows remain below potential.

The gap does not reflect a shortage of opportunities. Rather, it indicates persistent system-level inefficiencies that increase transactional costs, delay project implementation, and elevate perceived investment risk.

In an increasingly competitive global environment, investment decisions are influenced not only by cost advantages, but by predictability, execution speed, and institutional reliability. In this context, Bangladesh is not competing with economies offering higher incentives; it is competing with those offering more efficient and dependable systems.

A recurring pattern across sectors indicates that while investment approvals are often secured, project implementation is delayed. Time overruns in land acquisition, infrastructure readiness, regulatory clearances, and utility connections significantly alter project economics.

Industrial and energy projects frequently face prolonged delays at the land acquisition stage due to fragmented ownership structures and legal complexities. Subsequent delays in site preparation, utility connections, and approvals further extend timelines, increasing financing costs and eroding expected returns.

These constraints are not isolated. They represent systemic friction across multiple, interlinked domains.

Policy uncertainty remains a primary concern. Although regulatory frameworks are in place, inconsistent interpretation across institutions reduces predictability over the investment lifecycle.

Administrative complexity persists despite reform efforts. The One Stop Service under the Bangladesh Investment Development Authority (BIDA) has improved coordination, but investors continue to engage with multiple agencies, often facing duplication of procedures and unclear timelines.

Foreign exchange management presents additional challenges. While repatriation of profits is legally permitted, operational delays and access constraints create uncertainty regarding capital mobility.

Land acquisition remains a structural bottleneck. The absence of readily available, dispute-free, and serviced industrial land delays project initiation.

Infrastructure constraints, though gradually improving, continue to affect reliability. Port congestion, energy supply inconsistencies, and incomplete last-mile connectivity increase operational risk and cost.

Legal enforcement mechanisms further contribute to perceived risk. Contract enforcement and dispute resolution processes remain time-consuming, reducing the practical effectiveness of legal protections.

Taxation adds complexity through multiple instruments, frequent adjustments, and delays in refund mechanisms, increasing compliance burden.

Governance and transparency challenges also persist. Limited visibility into approval processes and decision timelines reduces investor confidence.

The financial ecosystem remains relatively shallow, with limited availability of long-term financing instruments and underdeveloped capital markets.

Finally, while Bangladesh benefits from an abundant labour force, there is a shortage of mid- and high-level technical and managerial skills required for modern industrial operations.

Taken together, these factors create a system where investment becomes slower, riskier, and more expensive than in competing economies.

Addressing these constraints requires a shift from incremental reform to redesigning of system.

The objective should be to establish a plug-and-play investment framework, where policy, approvals, land, infrastructure, finance, and skills are aligned and delivered in a coordinated manner.

Policy certainty is the starting point. A unified investment framework, supported by legally enforceable stability provisions and advance ruling mechanisms, can reduce ambiguity and enhance predictability.

Administrative processes must be streamlined. The One Stop Service should evolve into a fully empowered single-window authority, enabling parallel processing of approvals within defined timelines. Time-bound service delivery should be enforced to ensure accountability.

Foreign exchange management should move toward a rules-based framework. A dedicated FDI window, combined with guaranteed repatriation timelines, can strengthen investor confidence.

The most significant reform opportunity, however, lies in land.

Bangladesh should transition from investor-led land acquisition to a government-led industrial land delivery system. A National Industrial Land Bank can be developed, where land is acquired, legally cleared, and fully serviced in advance, including internal roads, utilities, and drainage.

Investors would then receive ready-to-build plots, allowing construction to commence within a defined timeframe—ideally within 30 to 45 days.

Infrastructure development should be integrated with industrial planning. Industrial corridors linking land, logistics, energy, and ports—particularly facilities such as Chattogram Port—can enhance efficiency and reduce cost.

Legal reforms should focus on enforceability. The establishment of specialised commercial courts and time-bound dispute resolution mechanisms can improve contract reliability.

Tax administration must be simplified. A unified tax framework, combined with stability agreements and automated refund systems, can reduce uncertainty and compliance burden.

Governance systems should become more transparent through digital platforms that enable real-time tracking of applications and decisions.

Financial sector reform should focus not only on expanding capital availability, but on improving its structure.

In addition to project finance facilities, infrastructure bonds, and blended finance models, Bangladesh should introduce a hybrid capital framework aligned with project expenditure.

Under this approach, foreign capital would primarily finance imported equipment and technology, while domestic capital could be mobilised for local expenditure components such as civil works and services.

Local participation should remain optional, based on investor preference, and capped at no more than 50 per cent of total project financing. This ensures flexibility while maintaining investor confidence.

This model offers several advantages. It reduces pressure on foreign exchange reserves, lowers financing costs, and accelerates financial closure.

At the same time, it allows broader participation of domestic investors. Institutional investors—and, importantly, individual investors—can participate through structured and regulated instruments such as infrastructure bonds, Sukuk, mutual funds, and listed securities.

Retail participation should be channelled through such instruments to ensure appropriate risk management, transparency, and investor protection.

Workforce development must be aligned with industry requirements. Sector-specific training programs, apprenticeship models, and continuous skill development initiatives are essential to address gaps at the mid- and high-skill levels.

The effectiveness of these reforms depends on their integration into a coherent system.

An efficient investment ecosystem is one in which an investor can obtain approvals within a predictable timeframe, access ready-to-use land, connect to infrastructure without delay, secure financing efficiently, and recruit a skilled workforce.

Under such conditions, project implementation timelines can be significantly reduced.

The potential impact of such reforms is substantial. FDI inflows could increase significantly over the medium term. Reduced project timelines would lower financing costs and improve project viability. Industrial output would expand, supporting export growth and employment generation.

More importantly, Bangladesh would reposition itself as a reliable and execution-efficient investment destination.

In the current global investment landscape, countries compete not only on cost, but on system performance.

Bangladesh has the necessary fundamentals. The challenge now is to ensure that its systems enable, rather than delay, investment.

The country does not need to rely on additional incentives. It needs to ensure that its institutional and operational frameworks function efficiently and predictably.

If Bangladesh improves its systems, investment inflows will increase naturally—without the need for extraordinary incentives.

Maj (Retd.) Mohd. Akhtaruzzaman is Former Member of Parliament (1991–1996 and 1996–2001). rtlbddhaka@yahoo.com