BANGLADESH has tried to attract foreign direct investment for decades through investment summits, road shows, economic zones, tax incentives and repeated assurances that the country is ‘open for business.’ Yet a basic question remains: why does a country with a market of around 170 million people, a large labour force, an expanding manufacturing base and an advantageous geographical position continue to attract relatively modest levels of FDI?

The problem is not lack of potential. Capital moves where potential is reinforced by predictability, institutional credibility and security. Recent assessments underline this concern. UN Trade and Development reports that FDI inflows into Bangladesh declined substantially over the six years preceding 2025, while inward FDI stock remained broadly stagnant at around $18 billion. Although early 2025 showed some recovery, much of it reflected reinvested earnings and intra-company lending rather than a major wave of new greenfield investment. Foreign-exchange constraints, currency depreciation, energy problems, political developments and macroeconomic pressures have all affected investor confidence.

Bangladesh, therefore, needs to reconsider how it approaches investment. The central question is not simply how to attract investors, but why an investor should choose Bangladesh over Vietnam, Indonesia, India, Malaysia or another competing location.

Serious investors look beyond incentives and promotional campaigns. Before committing capital for 10 or 20 years, they assess regulatory risk, policy continuity, currency convertibility, profit repatriation, contract enforceability, infrastructure reliability, taxation, customs administration, labour productivity and political stability. Incentives matter, but manageable risk matters more.

The World Bank’s 2026 Country Private Sector Diagnostic makes this clear. Fifty-two per cent of surveyed foreign investors identified bureaucracy and bureaucratic delays as a major regulatory constraint. Frequent changes in FDI laws, governance problems, opaque regulation, weak institutional coordination and difficulties surrounding land were also identified as major impediments. Bangladesh’s FDI challenge is therefore not simply a marketing problem; it is an institutional transaction-cost problem.

An investor can calculate a known tax rate, the price of labour or the cost of electricity. What is harder to price is regulatory uncertainty: how long an approval will take, whether rules will unexpectedly change, whether agencies will issue contradictory instructions or whether unofficial payments will become necessary. Uncertainty creates a risk premium. The higher the perceived institutional and political risk, the greater the return investors demand or the more likely they are to go elsewhere.

Bangladesh consequently needs to move from investment promotion towards investment facilitation and investor retention. Promotion persuades firms to consider Bangladesh; facilitation enables them to establish operations; retention encourages them to reinvest and recommend the country to others.

Foreign missions should play a stronger role in this process. Embassies and high commissions should function not only as diplomatic and consular institutions but also as instruments of commercial and investment diplomacy. Major missions should have professionally staffed investment and economic diplomacy desks, with diplomats trained in corporate engagement, sectoral analysis, global value chains, investor targeting and aftercare.

Their task should be to identify firms considering relocation or supply-chain diversification and approach them with sector-specific propositions. Instead of merely repeating that Bangladesh offers cheap labour, missions should be able to present concrete information on market size, export opportunities, industrial locations, incentives, approval timelines and designated government contacts. Their performance should also be measured by outcomes: investor leads generated, firms engaged, projects advanced and investment ultimately realised.

However, diplomacy cannot compensate for a dysfunctional domestic investment environment. Bangladesh needs a genuine single-window investment regime, not merely a digital portal. Investors should not have to navigate multiple ministries and agencies separately for registration, land, utilities, environmental clearance, taxation, customs, work permits and capital repatriation.

Each major foreign investment project should have a designated account manager within BIDA or an equivalent empowered institution. That officer should coordinate across government so that the investor deals principally with one interface. Administrative decisions should also be time-bound. Applications should either be approved, rejected with reasons or returned with clearly specified requests for additional information within a defined period.

UNCTAD acknowledges Bangladesh’s progress in creating BIDA, expanding digitalisation and reforming regulatory processes, but also recommends a consolidated national investment policy and investment law, stronger institutional capacity, fuller digitalisation, better infrastructure planning and more effective investor targeting.

Legal certainty is equally important. Commercial disputes should not take years to resolve. Bangladesh needs stronger specialised commercial adjudication, arbitration and alternative dispute-resolution mechanisms. Currency convertibility and profit repatriation also require attention. Multinational firms will hesitate to commit substantial long-term capital if they are uncertain whether legitimate profits can be converted and repatriated.

The World Bank similarly points to subdued private investment, banking-sector vulnerabilities, weak revenue mobilisation, regulatory costs and unreliable infrastructure, and calls for smarter deregulation, competition reform, streamlined trade policies and improved electricity reliability.

Policy continuity is another essential condition. Sudden changes in tax concessions, regulations or investment rules may produce short-term fiscal gains but cause lasting reputational damage. Investors make calculations over long time horizons, so Bangladesh needs a credible medium- to long-term investment framework that survives political cycles.

Corruption and informal transaction costs are equally damaging. Investors can accommodate transparent costs; they struggle with unknowable ones. A published tax can be calculated, while unofficial payments and discretionary decisions cannot. Reducing bureaucratic discretion is therefore central to lowering investment risk.

Bangladesh must also become more strategic about the FDI it seeks. The objective should not simply be to maximise aggregate inflows, but to attract quality FDI that creates employment, transfers technology and managerial knowledge, strengthens domestic suppliers, raises productivity and integrates the country into higher-value global production networks. Priority sectors should include pharmaceuticals, medical devices, electronics, agro-processing, renewable energy, information technology, logistics, shipbuilding, light engineering and advanced manufacturing alongside the established apparel sector.

FDI is more than a financial flow. It is a vote of confidence in a country’s institutional future. When a multinational builds a factory, transfers technology, employs workers and commits capital that cannot easily be withdrawn, it is making a long-term judgement about the credibility of the host state.

Bangladesh therefore needs fewer declarations that it is investment-friendly and more institutional evidence that it actually is. Summits, road shows and tax incentives have a role, but they cannot substitute for predictable regulation, efficient administration, enforceable contracts, macroeconomic stability, reliable infrastructure and policy continuity.

The most effective investment ambassador may not be a minister, bureaucrat or diplomat, but an existing foreign investor who can tell another company that the rules are understandable, commitments are honoured, capital is secure and problems are resolved. One satisfied investor can be worth more than a hundred road shows. When Bangladesh reaches that point, it will no longer need to chase investment so aggressively; investment will begin to seek Bangladesh.

Dr AKM Ahsan Ullah is professor of international relations, security and migration at Universiti Brunei Darussalam, Brunei.