Attractive Sectors for Foreign Direct Investment (FDI) in Bangladesh

Md. Joynal Abdin
Founder & Chief Executive Officer, Trade & Investment Bangladesh (T&IB)
Executive Director, Online Training Academy (OTA)
Secretary General, Brazil Bangladesh Chamber of Commerce & Industry (BBCCI)

Bangladesh has emerged as one of South Asia’s fastest-growing economies, averaging over 6% annual GDP growth from 2010 to 2024[1]. Its population (about 170 million) is young (median age ~26) and rapidly urbanizing, creating a buoyant domestic market. By 2030 Bangladesh is projected to be the 9th-largest consumer market in the world[2]. These demographics – together with a growing middle class and expanding infrastructure – have piqued investor interest. Still, FDI inflows have been modest. In 2024 Bangladesh attracted only about $1.3–1.5 billion in new FDI, down from about $1.6 billion a year earlier[3]. (According to UNCTAD, inflows fell by 13.2% to ~$1.27 billion in calendar 2024[4].) Total FDI stock is about $18–20 billion[5], roughly 12% of GDP. By international standards this is still low for a large, fast-growing economy[6]. Nevertheless, the country’s solid macro fundamentals and reform initiatives suggest it remains a promising investment destination, provided key obstacles are addressed.

Figure: The skyline of Dhaka is rapidly changing as investment flows into high-rise real estate and infrastructure projects (photo: Amran Hossain). Bangladesh’s booming urban development reflects its economic growth and investor interest[7].

Current State of FDI in Bangladesh

After several years of lackluster inflows, Bangladesh saw a pick-up in FDI in the latest fiscal year. For July 2024–June 2025, Bangladesh Bank reports net FDI (equity + reinvested earnings + intercompany loans) of about $1.686 billion, a 19% increase over FY2023–24[8]. This was the second-highest annual figure on record (just below the FY2021–22 peak of $1.710 billion)[9]. In the first half of 2025 alone, net FDI jumped 61% year-on-year to $1.091 billion[10]. However, much of this recent rise came from reinvested earnings and intra-company financing rather than new equity – foreign firms retained profits onshore or lent to affiliates because profit repatriation had been difficult[11][12]. Indeed, equity capital flows remained weak (only $81.3 million in Q4 FY25[11]), signaling that few new greenfield projects are coming. Reflecting these trends, UNCTAD notes FDI into Bangladesh has fallen steadily since 2021[4]. Overall, Bangladesh remains a top LDC FDI recipient but at much lower levels than regional peers (by comparison, India attracted $27.6 billion in FDI in 2024)[13].

According to Bangladesh Bank data (via UNCTAD), FDI inflows by year were roughly $1.5–1.6 billion annually during 2020–2023, dipping to about $1.3 billion in 2024[14]. The total stock of FDI (cumulative flows) is now on the order of $18–20 billion[5]. Although Bangladesh’s export-oriented textile sector and rising domestic demand offer strong pull factors, inflows remain constrained by policy and structural issues (see below). In sum, the current state is one of modest FDI growth: recent inflows have rebounded slightly[8], but Bangladesh continues to attract mostly reinvestment from existing firms rather than new foreign players[11][4].

Top FDI-Receiving Sectors

FDI in Bangladesh is highly concentrated in a few industries. Historically, the textile and ready-made garment (RMG) sector has been the largest foreign investment magnet, reflecting its export prowess. At mid-2024, textiles & wearing apparel alone accounted for 22.6% of total FDI stock[15]. In FY2023–24, new FDI equity flows into textiles were about $435.8 million (roughly one-quarter of total equity FDI)[16]. Other leading sectors, with their share of total FDI stock (June 2024) or recent inflows, include:

Banking & Financial Services (~16.0% of FDI stock) – foreign banks and financial institutions have invested in private banks and insurance.
Power & Energy (~14.5%) – including generation and distribution projects, from private power plants to the national grid.
Telecommunications & ICT (~7.2%) – major telecom operators (below) have attracted foreign capital, and the fast-growing IT/outsourcing industry is emerging.
Gas & Petroleum (~6.1%) – investment in natural gas exploration and distribution (petrochemicals, LNG).
Food & Agro-processing (~4.7%) – companies in packaged foods, beverages, and agribusiness (e.g. dairy, edible oil, fisheries) have raised FDI.
Chemicals & Pharmaceuticals (~2.6%) – local drug manufacturers and chemical plants have benefited from foreign partners/technology.
Agriculture & Fishing (~1.8%) – mainly in agribusiness ventures like cold storage and processing plants.
Leather & Footwear (~2.3%) – Bangladesh’s leather industry and shoe factories draw some foreign capital and expertise.
Trading & Retail (~3.4%) – including trading houses, distribution and retail ventures in consumer goods.
Infrastructure & Construction – large-scale projects (highways, bridges, ports, special economic zones) are gearing up and have high potential, although foreign equity here is just ramping up.

Together these major sectors account for over 80% of FDI flows[16][15]. (Calculations from Bangladesh Bank/Lloyds Bank Trade data.) Smaller amounts go into other manufacturing and services (education, healthcare, logistics), but the above ten dominate investment. Going forward, analysts expect continued foreign interest especially in garments/textiles, energy (including renewables), information technology, pharmaceuticals, and infrastructure – reflecting policy priorities and market needs.

Major Investor Countries

The source countries of Bangladesh’s FDI are diverse, but a few nations dominate. By far the largest contributor to cumulative FDI stock is the United Kingdom, accounting for about 17% of the total[15]. Singapore (10%), South Korea (9%), China (8%), Netherlands (7.3%), and Hong Kong (7.2%) are also major shareholders of Bangladesh’s FDI stock[15]. The United States (5.8%), India (4.6%), Malaysia (4.5%) and Australia (3.5%) round out the top ten[15]. Much of the U.S. investment comes through multinational corporates (often through financial channels), while UK and Singapore stakes are partly legacy (e.g. historical trading connections) and partly modern FDI. Other notable investor countries include Japan, Germany and Middle Eastern nations, often via joint ventures. In recent years, the Netherlands saw an anomalous surge (mainly due to a delayed payment by Japan Tobacco)[17], but typically flows from Europe, Asia and North America remain fairly steady. In sum, Western Europe and East/Southeast Asia collectively account for the bulk of FDI stock, reflecting Bangladesh’s trade linkages and foreign partnerships[15].

Top FDI Companies in Bangladesh

Some of the largest foreign-owned or partnered enterprises in Bangladesh illustrate the investment landscape. Notable examples include:

Chevron Bangladesh (USA, Energy) Chevron is the largest U.S. investor in Bangladesh, having invested over $4.1 billion in gas exploration and infrastructure over 30 years[18].
Grameenphone Ltd. (Telecommunications) Bangladesh’s biggest mobile operator is majority-owned by Norway’s Telenor (55.8% share)[19], making it a premier Norwegian investment.
Robi Axiata Ltd. (Telecommunications) – A joint venture of Malaysia’s Axiata and India’s Bharti Airtel, Robi is the country’s second-largest mobile network.
British American Tobacco Bangladesh (Tobacco) – A subsidiary of the UK tobacco giant, BAT Bangladesh dominates the local cigarette market.
Unilever Bangladesh Ltd. (FMCG) – Part of the Anglo-Dutch Unilever group, this major consumer goods company has large local operations in food, hygiene and personal care products.
Nestlé Bangladesh Ltd. (Food & Beverage) – The Swiss food conglomerate’s local subsidiary produces dairy, beverages and chocolates.
Reckitt Benckiser Bangladesh Ltd. (Household products) – UK-owned maker of Dettol, Mortein and other consumer brands.
Toyota (Bangladesh) Ltd. (Automotive) – Local assembler of Toyota vehicles in partnership with Japan’s Toyota Motor.
ACI Motors Ltd. (Automotive) – A subsidiary of the local ACI Group, assembling motorcycles and vehicles (originally partnered with Honda/Toyota).
Bata Shoe (Bangladesh) Ltd. (Footwear) – The Swiss Bata corporation’s local unit, one of the largest shoe manufacturers in the country.

These companies (along with subsidiaries of Samsung, GlaxoSmithKline, Nestlé, etc.) represent some of the largest foreign-capital enterprises in Bangladesh. Many are in energy, telecommunications, consumer goods, and automotive sectors – reflecting both the top sectors above and stable revenue opportunities. For example, Chevron (US) alone accounts for a significant portion of total U.S. investment in Bangladesh[18]. (Nearly 97% of Chevron’s Bangladeshi workforce is local, underscoring long-term commitments[20].) Likewise, telecom MNCs like Grameenphone and Robi have each invested hundreds of millions of dollars, illustrating how critical these companies are to Bangladesh’s FDI base.

Future Prospects of FDI in Bangladesh

Looking ahead, Bangladesh’s FDI prospects remain significant but hinge on reforms and emerging industries. The country’s large labor pool and strategic location (between South and Southeast Asia) are enduring advantages. Its economy is diversifying beyond garments – for instance, Bangladesh aims to expand its IT and digital economy, targeting ~$2.1 billion in IT/ITeS exports by 2025[21]. The information technology sector already employs ~650,000 freelancers and is expected to grow rapidly. Likewise, the government has set ambitious renewable energy goals (e.g. 7% of power from solar/wind by 2030)[22], creating opportunities for foreign investors in green energy projects. Infrastructure spending is also rising: authorities are building dozens of new power plants, highways (like the Padma Bridge), ports and industrial zones.

Demographics further underlie FDI potential. The young median age (~26)[1] and expanding middle-income class translate into surging consumer demand – Bangladesh’s domestic food and beverage market already exceeds $7 billion and is growing at ~13% per year[23]. As incomes rise, sectors like retail, banking, healthcare and education may see more foreign entry.

In policy terms, continued liberalization could unlock new flows. For example, recent measures (see below) to ease currency controls, offer tax holidays and streamline zones have laid groundwork for growth[24][25]. If implemented fully, these and other reforms should improve investor confidence. Analysts generally view Bangladesh’s long-term outlook as positive – the country’s growth and market size are large, so even modest improvements in the business climate could yield major new projects. In short, Bangladesh is poised to attract more FDI if it can sustain macro stability and deepen structural reforms.

Government Initiatives to Attract FDI

The Bangladesh government recognizes FDI as a development catalyst and has launched multiple initiatives to make the country more investment-friendly. Key measures in recent years include:

Financial liberalization: In June 2023, the central bank allowed foreign investors to retain offshore currency in local accounts for up to one year (instead of 90 days)[26]. In February 2025, a circular permitted foreign-owned firms to remit service payments to parent companies abroad without prior approval[27], greatly easing foreign exchange hurdles. An Offshore Banking Act (March 2024) now lets non-resident foreign entities open local bank accounts[28]. These steps signal more flexible forex rules.

Tax and investment incentives: The government offers tax holidays and incentives under industrial policies. For instance, an amendment in late 2024 introduced a 10-year tax exemption for renewable energy power projects (effective July 2025)[29]. Special Economic Zones (SEZs) and Export Processing Zones (EPZs) provide duty-free import of capital goods and other benefits. In 2020-21, the One-Stop Service Act of 2018 was implemented (via BIDA) to fast-track approvals and licenses[30].

Promotion agencies: In 2016 the government merged agencies to form the Bangladesh Investment Development Authority (BIDA), an umbrella promotion body for both foreign and domestic investors. BIDA now coordinates with BEPZA (EPZ Authority), BEZA (Economic Zones Authority) and BHTPA (Hi-Tech Park Authority) to attract FDI. These agencies organize roadshows, investment summits and sector-specific promotion. For example, BIDA has struck partnerships (e.g. with BRAC Bank in 2023) to offer one-stop banking and eased import financing for foreign investors[31]. Economic zone regulations were updated in 2023 to allow faster establishment of zones by foreign governments or companies[32].

Improving infrastructure: The government is investing heavily in power, roads, railways and ports – core prerequisites for FDI. The recent construction of power plants (gas, coal, LNG terminals, renewables) and new road networks (like the Dhaka-Chattogram highway, and metro rail lines) are intended to alleviate chronic bottlenecks. Authorities have also launched a Land Bank program to supply land parcels ready for industrial parks. While implementation remains work-in-progress, these infrastructure efforts aim to make Bangladesh more attractive to capital.

Overall, these initiatives demonstrate an active push to enhance Bangladesh’s investment climate[30][24]. The government publicly underscores its commitment to FDI – for example, high-level delegations (including the BIDA chairman) have traveled to the US, UK, China and other countries to court investors. New regulations (on currency, banking, SEZs, etc.) have been announced to address known obstacles. If these reforms are fully carried out, they should gradually reduce the “red tape” that has historically deterred foreign firms.

Figure: The Bangladesh Investment Development Authority (BIDA) building in Dhaka. BIDA and related authorities (BEPZA, BEZA, etc.) are the government’s focal points for facilitating FDI[30].

Barriers to FDI

Despite reforms, Bangladesh still faces significant barriers that limit FDI. Analysts and business groups consistently cite the following challenges:

Bureaucracy and red tape: Investment projects often require multiple licenses and approvals from different ministries. The permitting process can be opaque and time-consuming. “Bureaucratic inefficiencies… overlapping procedures and lack of transparency” are known to “frustrate investors”[33]. Frequent reshuffling of officials can further delay decisions[33].

Corruption and rent-seeking: Corruption at various levels is widely perceived as endemic. Companies report unofficial payments and extortion by individuals claiming political connections[34]. Land deals and construction permits are particularly vulnerable to bribery. A U.S. State Department report bluntly stated that “corruption was a major obstacle” to foreign investment[35][36]. Fraud in land titles (where claimants extort compensation) has also deterred investors[34].

Infrastructure gaps: Bangladesh’s power generation has grown, but transmission and distribution remain unreliable. Frequent load-shedding (especially in rural areas) raises costs for businesses. Road and port congestion are chronic; trucks can be stranded at ports and supply-chain efficiency lags peers. The rail network is underdeveloped for cargo. A lack of high-quality industrial parks (outside Dhaka/Chittagong) also limits expansion. In short, inadequate infrastructure from electricity to transport to logistics – heightens project risks[37][38].

Land and utility issues: Acquiring land for factories is difficult and slow. There are widespread land disputes and unclear property rights[39]. Even when power is available, grid stability can be poor. Water, sewerage and waste management systems are under strain in urban zones. These problems make site selection challenging.

Regulatory and market restrictions: Certain key sectors still have limits on foreign participation. Four areas (defense equipment, forestry and logging, nuclear energy, and security printing) are closed to private FDI[40]. In telecom the foreign ownership cap is 60% (70% for tower companies)[41]. Banking, aviation, coal mining, mineral exploration and other fields require special government permission for operation[41]. Such restrictions (and a general perception that policy can change) add uncertainty.

Financial system and forex: Local capital markets are shallow, so equity financing is limited. Outward profit repatriation has become cumbersome – companies frequently face delays in transferring dividends or royalty payments abroad[42]. The central bank’s fear of capital flight has led to tighter controls historically, though some easing is underway. Meanwhile, dollar shortages (accentuated in 2022-23) spooked investors.

Political and social risks: Bangladesh has experienced recurrent political unrest (strikes/blockades) and has a history of governance volatility. Transportation “blockades” called by parties can grind economic activity to a halt[34]. Security threats in certain regions occasionally arise. While the country has been stable overall, the risk of civil disturbance or abrupt policy shifts makes some investors cautious.

These barriers help explain why Bangladesh’s FDI has lagged expectations despite economic growth. For example, a major insurance broker noted that Bangladesh is “ranked poorly in ease-of-doing-business” and that “weak infrastructure, bureaucratic burdens, high corruption, and lax rule of law” are the main obstacles[43]. In short, without further progress on transparency, infrastructure, and regulatory consistency, foreign companies remain hesitant to invest at scale.

Why Foreign Companies Remain Reluctant

Closely related to the barriers above are investor perceptions that deter new foreign entrants. Many international firms perceive Bangladesh as having a “negative image” – as a poor, disaster-prone, and politically unsettled market[6]. Global risk analysts often flag issues like corruption, legal uncertainty, and government interference as worries. Specific complaints include the tax regime frequent audits of past returns by the revenue authority (NBR) have led to sudden demands and hold-ups of business licenses[44]. Delays in customs clearance and inconsistent enforcement of contracts also create friction.

Another factor is the economy’s narrow export base (heavily reliant on garments) and limited import capacity in sectors like high-tech manufacturing. Some foreign investors have also cited concerns over currency convertibility and inflation. A World Bank study noted that Bangladesh “lacks certain financing instruments” and struggles with implementing labor and environmental regulations[38]. In short, risk-averse multinationals see Bangladesh as riskier or less rewarding compared to other emerging markets, unless conditions improve.

It’s telling that even as FDI rebounded in FY2024–25, analysts observed that the rise was driven by existing investors reinvesting profits “new or greenfield investments” were scarce[45][11]. This suggests foreign companies are still cautious about committing fresh capital. Until Bangladesh convincingly tackles issues like anti-corruption enforcement, contract sanctity, and political stability, many potential investors will remain on the sidelines.

Business Support Services (BSS)

Policy Recommendations for Government

To significantly boost FDI, government action must address the above constraints. Experts and investors recommend several steps:

Speed up reforms and enforcement. The government should fully implement the investment-friendly policies it has announced. This includes simplifying licensing procedures, reducing overlapping regulations, and making approvals through the One-Stop service truly quick. Strengthening anti-corruption agencies and punishing extortion would send a positive signal. (For example, the U.S. report noted Bangladesh has made policy promises but “implementation has yet to materialize”[46].)

Improve infrastructure reliability. Continued investment in power distribution, roads, ports and internet connectivity is crucial. Policymakers should prioritize completing ongoing transport projects and industrial parks on schedule. As one analyst noted, Bangladesh’s expansion of electricity capacity is commendable, but “transmission and distribution systems need additional work” to be reliable[47].

Facilitate land and utility access. Streamlining land acquisition and digitizing land records can help solve the dispute problem. Guaranteeing land titles or offering state assistance in resolving claims would reassure investors. Simplifying connections to utilities (power, water, telecom) for factories, perhaps through standard concessionary schemes, would also reduce obstacles.

Liberalize the financial regime. While recent currency liberalizations have helped, authorities could go further. For instance, reducing bureaucratic hurdles to profit repatriation and currency exchange (as in the Feb 2025 circular[27]) should continue. The government could also allow greater foreign participation in banking and capital markets to improve financing options. A stable, market-based exchange rate policy and prudent macro management will keep FDI confidence from being undermined by currency or inflation shocks.

Enhance investment protection. Ensuring the independence of the judiciary in commercial cases would build trust. Fully honoring arbitration awards and not retroactively altering tax or labor laws after investment decisions are made would improve perceptions. Bangladesh already has investment treaties with many countries enforcing those provisions (fair treatment, free transfer) in practice is key.

Promote diversification. The government should actively steer FDI into emerging sectors where Bangladesh has potential (ICT, pharmaceuticals, shipbuilding, renewable energy, and light manufacturing beyond textiles). This may involve targeted incentives or cluster development. For example, offering additional tax breaks or land in Hi-Tech parks for electronics and biotech could help. Public-private dialogues to identify sector-specific investor concerns can also guide policy tweaks.

In short, the government needs to follow through on reforms and visibly improve the ease and reliability of doing business. For example, the BIDA chairman himself warned that FDI tends to dip around election periods[48] – consistent and transparent governance (even during transitions) is therefore crucial to maintain investor confidence. Many of these suggestions echo longstanding calls: a 2022 State Department report urged better infrastructure, clarified rules, and fight against corruption – exactly the areas Bangladesh must tackle[38][35].

Strategies for Local Entrepreneurs and Firms

Local businesses and entrepreneurs also play a role in attracting foreign partners. Bangladeshi companies can take proactive steps:

Raise standards and transparency. By adopting international best practices in corporate governance, accounting, and labor standards, local firms become more attractive to global partners. Demonstrating clean financials and good management mitigates foreign investors’ fears.

Engage diaspora and overseas networks. Expats are a vital source of both investment capital and market knowledge. Participating in platforms like the NRB Global Convention (which in 2025 drew about 1,000 overseas Bangladeshis) can connect local entrepreneurs with expatriate investors[49]. Indeed, many expatriate businesspeople have expressed willingness to invest in Bangladesh if the business environment is made truly transparent and friendly[49]. Local firms should therefore liaise with chambers of commerce (e.g. America-Bangladesh, Australia-Bangladesh chambers) and trade associations to highlight opportunities.

Pursue joint ventures and partnerships. Rather than seeking 100% foreign ownership, local companies can offer joint venture structures that align interests. For example, partnering with a foreign technology or capital partner in a new venture (with clear exit options) can be easier to sell to multinationals. Likewise, acquiring foreign stakes in domestic startups (and vice versa) can create cross-border linkages.

Leverage success stories. Bangladesh’s export hubs (garments, IT BPO, leather) have global brand connections. Local suppliers or manufacturers that already serve multinational brands can use those relationships to attract investment. Showcasing success e.g. that local garment makers comply with global buyers’ standards can build confidence among new investors in similar industries.

Use government facilitation. Bangladesh Investment Development Authority (BIDA) and similar agencies offer matchmaking services, roadshows and information. Entrepreneurs should tap these resources, provide them with credible project proposals, and request assistance in reaching target partners overseas.

In essence, by presenting bankable projects and aligning with global expectations, Bangladeshi entrepreneurs can draw in foreign capital. The message from business leaders is clear: increased FDI will follow if firms demonstrate viable opportunities and if authorities back them with supportive policies and transparency[49][46].

Buyers–Sellers Matchmaking Services of T&IB

Conclusion

Bangladesh stands at a crossroads with great potential. Its strong growth, strategic location and expanding market make it an inherently attractive destination for foreign investors. The top sectors especially textiles, energy, finance, telecoms and consumer goods align well with global opportunities. However, to unlock this potential fully, Bangladesh must improve its business climate. This means easing bureaucratic hurdles, ensuring reliable infrastructure, and enforcing the rule of law. The government has launched commendable reforms (currency liberalization, tax incentives, one-stop services[24][31]) and should vigorously implement them. At the same time, local companies and the diaspora must actively seek partnerships and uphold international standards, building confidence among foreign investors.

In sum, while Bangladesh’s share of global FDI remains modest, the country’s fundamentals are promising. With continued economic growth and the right mix of policy support and corporate initiative, Bangladesh can attract significantly more foreign investment in the coming years. For both local and international investors as well as policy-makers in Dhaka – the task is clear: capitalize on the country’s strengths while working together to address its challenges. In doing so, Bangladesh can transition from being an “investment frontier” to a mainstream destination in the global economy.

Sources: Official data and analysis from Bangladesh Bank, UNCTAD, Lloyds Bank trade portal, The Financial Express, Bangladesh news media, and government publications[5][8][11][33][35][24][49]. (Figures and quotes are drawn from these linked references.)

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