Bangladesh Sees Alarming 43% Slump in Fresh Foreign Investment Over Five Years

Bangladesh is grappling with a significant downturn in fresh foreign direct investment (FDI), which has decreased by nearly 43% over the past five years, according to data from Bangladesh Bank. This decline signals underlying structural weaknesses that continue to deter new global investors from entering the market.

Equity capital, considered a crucial indicator of genuinely new foreign investment, saw a sharp drop from $973.43 million in 2021 to $554.63 million in 2025. While total net FDI inflows did experience a rise of 39.36% to $1.77 billion in 2025, this growth was largely fueled by reinvested earnings, which surged to $781.67 million, and intra-company loans amounting to $434.11 million. This trend suggests that existing foreign firms are opting to reinvest their profits within Bangladesh, but few new investors are committing fresh capital to the country.

Economists are vocal about the emerging risks. Dr. Zahid Hussain, former lead economist at the World Bank’s Dhaka office, emphasized that persistent issues such as inefficient ports, protracted licensing processes, and unreliable utility supplies are significant deterrents for foreign investors. He warned that without addressing these fundamental problems, the country risks losing out on vital new investment. The country’s FDI-to-GDP ratio stands at a mere 0.3%, a figure economists deem negligible for an economy aspiring to achieve upper-middle-income status and far below the estimated $8 billion in annual FDI required for sustained long-term growth.

Beyond operational inefficiencies, political uncertainty and bureaucratic delays have also been cited as factors contributing to investor caution. The combined effects of a foreign exchange crisis, currency depreciation, energy import delays, supply chain shortages, and political and social uncertainty have created long-term instability in Bangladesh’s macroeconomic environment, weakening investor confidence and leading to more cautious decision-making regarding new investments.

The current scenario highlights a critical challenge for Bangladesh: transforming its economy to attract high levels of productive investment in sectors like manufacturing, infrastructure, and high-value industries. The reliance on reinvested earnings rather than new equity inflows underscores the urgent need for policy reforms and improvements in the business environment to attract fresh global players.