One year into the rule of the interim government, Bangladesh has yet to secure any new foreign direct investment (FDI) agreements from development country-based firms – a stark contrast to expectations.

While some previously promised investments have begun materialiasing, no major fresh commitments have been secured since the interim government assumed office on 8 August 2024.

This has raised concerns among economists and business leaders alike, as Bangladesh’s economy grapples with instability, policy uncertainty, and diminished investor confidence.

Promise without delivery

The Bangladesh Investment Development Authority (BIDA) hosted “Bangladesh Investment Summit 2025” in April, which drew 415 foreign delegates from over 50 countries. During the summit, ShopUp, a local digital commerce platform, secured a $110 million investment, while Chinese RMG giant Handa signed a $150 million agreement. These deals, however, were tied to negotiations initiated under the previous government.

More recently, on 29 July, Hong Kong-based Handa Industries Co. announced an increased investment of $250 million in Bangladesh. The company plans to set up three major textile and garment manufacturing facilities – two processing plants and a knitting and dyeing unit – expected to generate 25,000 new jobs.

“We decided to increase our investment as we got confidence after talks with the officials of the government agencies including BIDA, BEZA, and BEPZA,” said Han Chun, chairman of Handa Industries.

A day later, Handa (Bangladesh) Garments Co. Ltd. signed a separate $41.33 million agreement with BEPZA to invest in the Mirsarai-based BEPZA Economic Zone in Chattogram.

Surging FDI on paper, but concerns remain

Bangladesh saw a robust 114% year-on-year increase in FDI inflows in the first quarter of 2025, with net inflows reaching $865 million – more than double the $403 million received in the first three months of 2024. Much of the rise was driven by intra-company loans and equity investments, which together suggest growing financial activity within existing foreign firms.

Equity investment surged to $304 million, while intra-company loans shot up to $629 million. However, reinvested earnings – a measure of companies’ long-term confidence – fell 24% to $194.71 million, signaling caution among current investors.

Despite an increase in outflows to $711 million in January-March 2025, the net FDI position remained positive.

Still, experts warn that this surge may not reflect a truly favourable investment climate.

Political and economic uncertainty clouds outlook

According to Dr Mustafa K Mujeri, former chief economist of the Bangladesh Bank and executive director of the Institute for Inclusive Finance and Development (InM), Bangladesh is currently failing to provide the stable political and economic environment that foreign investors typically require.

“Over the past year, Bangladesh has failed to provide such stability. Political uncertainty, policy inconsistencies, and economic volatility have raised serious concerns among potential investors,” Mujeri told the Daily Sun. “Even domestic investors are holding back.”

The looming question of whether national elections will take place – along with concerns over their fairness and transparency – continues to cast a long shadow over the investment climate.

One senior BIDA official, speaking anonymously, acknowledged investor worries, saying, “Investors voiced concerns about hurdles such as bureaucratic inefficiency, policy inconsistency, and corruption. But we have assured them of our support and facilitation.”

Sectoral trends: winners and watchers

While political challenges persist, certain sectors have continued to attract investment. In the first quarter of 2025, the Netherlands invested $427.42 million in the food products sector – the highest for the period – while China directed $86.71 million toward the power sector.

In 2024, Bangladesh recorded $1.2 billion in total FDI. The UK led with $235 million in banking, followed by South Korea’s $133.5 million in textiles.

Government’s response: incentives under review

In an effort to boost investor confidence, the government formed a high-level committee in May 2025 to draft new incentive mechanisms. Chaired by Finance Adviser Dr Salehuddin Ahmed, the five-member team is expected to deliver actionable proposals aimed at attracting FDI in a competitive global environment.

BIDA Executive Chairman Ashik Chowdhury stated on Facebook that increased coordination and faster approvals helped push FDI inflows to approximately Tk10,500 crore in the first quarter of 2025 – though he admitted BIDA’s direct role in originating investment was limited.

Looking ahead: more talk, less action?

While some headline deals like Handa Industries’ $250 million expansion project offer optimism, many in the business community remain skeptical. The lack of fresh investment agreements with development-country firms and the absence of detailed breakdowns from BIDA have only deepened concerns.

Until the interim government can establish a clearer political roadmap, implement investor-friendly reforms, and ensure regulatory predictability, Bangladesh’s FDI potential may remain largely untapped.

“Bangladesh’s challenge is no longer about attracting attention – it’s about converting interest into investment. That will only happen if stability and governance are restored,” Dr Mujeri concluded.