Bangladesh Risks Losing the Global Investment Race

Global capital is racing towards the industries of tomorrow, but Bangladesh is struggling to attract the investment it urgently needs today. 

As foreign investors increasingly favour technology-driven economies, fresh equity falters and capital outflows mount, Prime Minister Tarique Rahman's new government faces a critical test: can it restore investor confidence before Bangladesh loses further ground in the global investment race?

The warning is unmistakable. 

The world is not running short of investment; it is becoming increasingly selective about where capital flows. More than 80% of global foreign direct investment (FDI) in 2025 went to just 20 host economies. 

Meanwhile, the share of greenfield investment directed towards strategic sectors�"including artificial intelligence (AI), semiconductors, clean energy and critical minerals�"surged from 16% in 2020 to 44% in 2025.

According to UN Trade and Development (UNCTAD), global FDI recovered by 6% to an estimated $1.6 trillion in 2025, ending two consecutive years of decline. But the recovery was highly uneven, with developed economies capturing much of the momentum while developing economies recorded only modest growth.

According to UNCTAD's World Investment Report, global economic growth is projected to reach 3.4% in 2027. AI-related investments continue to capture a massive share of cross-border greenfield and expansion value (over 40% of U.S. greenfield value), driven by heavy hardware and data center infrastructure demand centered heavily in North America and select Asian hubs (such as Taiwan and South Korea).

Major economies like the U.S., Brazil, and parts of Europe continue to show shifting quarterly flows shaped by high interest rates, energy market volatility, and supply chain adjustments.

For Bangladesh, the contrast is increasingly uncomfortable. According to UNCTAD, Bangladesh Investment Development Authority (BIDA) aiming for an ambitious FDI target of USD 10 billion by 2027.

After a strong recovery in calendar 2025, when net FDI reached $1.77 billion, the investment outlook weakened. Bangladesh Bank data show that net FDI declined 13% to $1.47 billion in FY2025�"26 from $1.69 billion in the previous fiscal year, reversing the growth recorded in FY25.

The pressure intensified during the April�"June quarter of 2026, when net FDI fell to $346.94 million, down 22.44% from the preceding quarter. For the first half of calendar 2026, net inflows declined 28.06% year-on-year to $794.25 million.

Although the latest quarter recorded year-on-year growth, the improvement was driven largely by reinvested earnings from existing foreign companies rather than a significant recovery in fresh equity investment. 

This distinction matters: reinvesting existing profits signals continued operations, but it cannot substitute for new investors bringing fresh capital, technology and business opportunities into Bangladesh.

More alarming is the widening gap between gross investment and the money retained in the economy. Gross FDI inflows remained broadly stable during April�"June, but outflows climbed to $766.27 million, leaving only $346.94 million as net investment.

A breakdown reveals the underlying weakness. Net reinvested earnings fell to $260.91 million, while net intra-company loans plunged to just $8.61 million. Fresh equity capital also remained subdued at $77.42 million.

The figures expose a troubling reality: Bangladesh is struggling to attract new foreign equity while substantial financial outflows erode the benefits of existing investment. Headline gross inflows alone cannot provide an accurate picture of the country's investment performance.

For Prime Minister Tarique Rahman's administration, this is an important early economic test. 

The government has inherited an investment climate burdened by banking-sector vulnerabilities, energy shortages, foreign-exchange pressures, regulatory bottlenecks and uncertainty over policy implementation. Reversing these weaknesses will be essential to attracting investors looking for predictable returns and long-term business security.

Bangladesh Bank Executive Director and spokesperson Arief Hossain Khan has attributed the subdued investment trend partly to foreign investors adopting a wait-and-see approach while the government undertakes reforms in banking, fiscal policy and other areas. 

Energy shortages and broader economic uncertainty are also weighing on investment decisions.

Invest Bangladesh has acknowledged the difficulty of attracting fresh equity amid geopolitical tensions, higher energy costs and cautious international investors. Its member Nahian Rahman Rochi says the agency is focusing on improving the fundamentals of the investment climate to secure stronger and more sustainable FDI.

There are opportunities to reverse the trend. The Chinese Economic and Industrial Zone, now under development after more than a decade of delay, has a 2028 target and approximately $500 million in prospective investment.

At the ninth World Investment Forum in Doha, Bangladesh also highlighted plans to promote private-sector-led renewable energy, digitise business licensing and modernise ports through international operators. These initiatives could strengthen the country's investment proposition, but their credibility will ultimately depend on implementation.

The global investment landscape is changing rapidly. The new government must therefore move beyond investment conferences, incentive announcements and ambitious targets. Investors need predictable policies, faster approvals, reliable electricity and gas, efficient ports, currency stability, banking-sector discipline and protection of legitimate business interests.