Investors have lost confidence in investing in Bangladesh due to ongoing political instability, widespread demonstrations by various professional groups to press home their demands, and growing dissatisfaction among workers in industrial units and factories.
As a result, both domestic and foreign investments have plunged to their lowest levels in the past 14 years. Industrial production has declined, business activity is slowing down, and unemployment is rising amid stagnant job creation.
High inflation, import restrictions, a dollar crisis, political uncertainty, and a deteriorating law and order situation have pushed existing businesses into recession. Consequently, fresh investment-both local and foreign-has largely stalled, according to sources.
Data from Bangladesh Bank shows that Foreign Direct Investment (FDI) declined sharply in the fiscal year 2024-25. FDI stood at $910 million from July to April, down from $12.7 billion during the same period in the previous fiscal year (July-April). Total foreign investment in 2023-24 was $1.4154 billion, compared to $1.6054 billion in 2022-23 and $1.71 billion in 2021-22. During the COVID-19 period, foreign investment stood at $1.3276 billion in 2020-21 and $1.20 billion in 2019-20. Before the pandemic, FDI reached $3.48 billion in 2018-19. The current fiscal year's foreign investment is the lowest since 2011-12, when it stood at $1.20 billion. No fiscal year since then recorded a lower figure.
It has been reported that due to a decline in foreign investment and reinvestment, Bangladesh received 28 per cent less investment in South Asia compared to the same period in the previous year. Political turmoil following the mass uprising in July last year led to a severe decline in investor confidence. In the first quarter of the last fiscal year, FDI hit $104.3 million.
FDI in the first six months of the last fiscal year totaled $210 million, compared to $330 million in the same period the year before-a 37 per cent decline. Interestingly, reinvestment by foreign companies exceeded new FDI in the last fiscal year, with approximately $400 million reinvested during the first six months.
A report by the International Finance Corporation (IFC), a private sector arm of the World Bank, identified five key obstacles to investment in Bangladesh: the power and energy crisis, limited access to finance, corruption, the dominance of the informal sector, and high tax rates.
High interest rates on loans have become another barrier to new investment. Currently, interest rates hover between 16 and 17 percent, discouraging new ventures. Since investment is a major driver of employment, a decrease in investment directly hampers job creation. Both domestic and foreign investments are vital to sustaining employment growth in Bangladesh.
In terms of Gross Domestic Product (GDP), private sector investment in the 2023-24 fiscal year accounted for 23.51 per cent of GDP, down from 24.18 per cent in the previous fiscal year. The figure for 2024-25 has not yet been finalised. However, other investment-related indicators-including industrial equipment imports, raw material imports, and loan disbursement-have reflected a negative trend.
Bangladesh Bank data reveals that in the first 10 months of the 2024-25 fiscal year (July-April), Letters of Credit (LCs) for capital equipment imports dropped by 27 per cent compared to the same period the year before.
Similarly, LC settlements for these imports decreased by 22 per cent. High interest rates have also discouraged private sector borrowing. Between July and May, private sector credit growth was only 6.95 per cent-well below the 10 per cent-plus growth seen in previous periods-further indicating a slowdown in investment.
Statistics from the Bangladesh Investment Development Authority (BIDA) show that $12.85 billion was invested in the country in 2010-11, generating employment for 503,662 people. Since then, investment volumes have fluctuated. In 2020-21, investment totaled $7.99 billion, with employment for 180,786 people. Although the July Uprising had initially raised hopes for a surge in investment and job creation, actual outcomes have fallen short, with investment remaining at historically low levels.
Commenting on the declining trend, Rupali Chowdhury, former president of the Foreign Investors' Chamber of Commerce and Industry (FICCI), said, "Overall investment in the country has declined. Not only foreign investment but domestic investment has also fallen. The country is undergoing a kind of transformation, and in this situation, policy uncertainty is frequently emerging. This discourages both domestic and foreign investors. Amidst such uncertainty, investors are reluctant to take risks. Instead of making new commitments, they are choosing to observe the situation and adopt a wait-and-see strategy."
