FDI hits 5-year high, but lags regional rivals

Bangladesh recorded its strongest foreign direct investment (FDI) performance in five years in 2025, according to the UNCTAD World Investment Report 2026. 
However, the recovery was not enough to close the gap with larger regional competitors amid intensifying global competition.
FDI inflows into Bangladesh rose 45% to $1.78 billion in 2025, up from $1.23 billion the previous year, ending a two-year decline. 
This rebound placed Bangladesh as the third-largest FDI recipient in South Asia, behind India and Pakistan.
Data from Bangladesh Bank mirrored the UN report, showing a 45.5% increase to $1.79 billion. The central bank noted that this growth was primarily driven by existing foreign investors reinvesting their earnings.
Despite the improvement, Bangladesh continued to trail regional peers. India remained South Asia’s largest investment destination, attracting $38.9 billion in FDI in 2025, while Pakistan received $1.85 billion, narrowly ahead of Bangladesh.
UNCTAD said global FDI rose 6% to $1.6 trillion in 2025 after two years of decline, although the recovery remained “fragile and uneven” amid geopolitical tensions, policy uncertainty and slowing economic growth.
Developing Asia retained its position as the world’s largest investment destination, attracting $644 billion, while South Asia recorded one of the strongest regional performances, with inflows increasing to $46.1 billion from $34.1 billion a year earlier.
The report said Bangladesh remained one of the leading destinations for greenfield investment projects among least developed countries (LDCs), reflecting sustained investor interest in new manufacturing and industrial facilities.
UNCTAD also noted that Bangladesh introduced several investment-friendly reforms in 2025, including easing foreign exchange restrictions to facilitate investment. 
It highlighted the country’s reciprocal trade agreement with the United States, under which Bangladesh agreed to consider establishing an investment screening mechanism and strengthen cooperation on economic security and inbound investment.
However, the report pointed to emerging challenges. Bangladesh was among seven LDCs that faced new investor-state dispute settlement (ISDS) cases filed by foreign investors during 2025.
Bangladesh’s cumulative inward FDI stock continued its long-term growth, reaching about $19.63 billion in 2025, up from $2.16 billion in 2000. Outward investment remained modest, with the country’s overseas FDI stock standing at $314 million.
A senior official of the Bangladesh Investment Development Authority (BIDA) attributed the rebound to reforms aimed at improving investment facilitation and streamlining approval procedures.
“A series of measures to improve investment facilitation and bring greater discipline to the approval process contributed to last year’s rebound,” he said.
He said all three components of FDI—equity investment, reinvested earnings and intra-company loans—recorded positive growth despite a global slowdown in equity investment.
“Bangladesh registered around 8% growth in equity inflows, which is encouraging given the country’s political transition. Continuous engagement with both existing and prospective investors also helped restore investor confidence,” he said.
The official, however, acknowledged that current FDI inflows remain well below Bangladesh’s investment needs.
He said BIDA currently has an investment pipeline worth about $1.5 billion, which could materialise over the next 18 to 24 months.
UNCTAD said the global investment landscape is increasingly shifting towards semiconductors, artificial intelligence, digital infrastructure, advanced manufacturing and clean energy technologies. 
While many Asian economies have strong manufacturing ecosystems and integrated supply chains, the report warned that competition for international capital is becoming increasingly intense.
“Success in attracting investment is becoming harder to take for granted,” the report said, noting that governments worldwide are deploying more aggressive industrial policies and investment incentives as investors become increasingly selective about where they commit long-term capital.