Urgent reforms needed as Bangladesh nears LDC graduation: UNCTAD

A new report by the United Nations Conference on Trade and Development (UNCTAD) has highlighted that while Bangladesh has made notable progress in improving its investment climate, urgent structural reforms remain critical as the country prepares for its scheduled graduation from Least Developed Country (LDC) status in November 2026.

The report evaluates the implementation of the 2013 Investment Policy Review (IPR) and presents a complex yet gradually recovering investment landscape shaped by both domestic reforms and global economic pressures.

The United Nations Development Programme (UNDP), in partnership with UNCTAD and the Bangladesh Investment Development Authority (BIDA), on Monday launched the UNCTAD Investment Policy Review (IPR) Implementation Report for Bangladesh in the capital.

The high-level dialogue brought together senior government officials, private sector representatives, and development partners to discuss the country's investment framework as it prepares for LDC graduation.

According to the report, Foreign Direct Investment (FDI) inflows into Bangladesh declined after peaking at over $1.8 billion in 2019, falling by nearly one-third by 2024 due to macroeconomic challenges and global disruptions.

However, early indicators from 2025 suggest a rebound in FDI, supported by increased reinvested earnings and intracompany loans as economic conditions begin to stabilise.

The textiles, financial services, and power sectors continue to dominate investment activity, collectively accounting for 58% of total inward FDI stock by the end of 2024.

At the same time, the digital economy is gaining traction, with telecommunications and IT services attracting growing investor interest through joint ventures and hardware manufacturing initiatives.

The report notes that while major macroeconomic and regulatory reforms have recently been undertaken, these efforts need to be sustained.

It emphasises that longer-term structural improvements are still required to ensure a smooth transition following LDC graduation.

Several persistent bottlenecks were identified, including land scarcity, weak infrastructure integration, a complex tax regime, and institutional fragmentation, all of which continue to constrain investment potential.

At the report launch, Chowdhury Ashik Mahmud Bin Harun, executive chairman of BIDA, underscored the importance of attracting sustainable and quality investment to support economic transformation, diversification, technology transfer, and employment generation in the post-LDC period.

He emphasised the need for coordinated reforms and stronger institutions aligned with national priorities.

Sonali Dayaratne, deputy resident representative of UNDP Bangladesh, said that coherent investment policies and strong institutional capacity are essential to ensure responsible and impactful investment that creates decent jobs, supports innovation, and promotes inclusive and sustainable growth, particularly as Bangladesh approaches LDC graduation.

The 2026 IPR Implementation Report, prepared by UNCTAD at the request of BIDA, assesses progress made against the recommendations of the 2013 Investment Policy Review.

Key achievements include the establishment of BIDA as the lead investment facilitation agency and the expansion of digital investment services.

The report also outlines priority reforms needed to modernise Bangladesh's investment framework, including the adoption of a unified national investment policy, a consolidated investment law, and the completion of digital procedures to enhance competitiveness ahead of LDC graduation.

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The launch featured a video message from Nan Li Collins, director of investment and enterprise at UNCTAD, followed by a keynote presentation by Kiyoshi Adachi, legal officer (investment and enterprise) at UNCTAD.

A high-level panel discussion, moderated by Owais Parray, country economic adviser at UNDP Bangladesh, explored practical pathways for implementing the report's recommendations.

Among the speakers were Dr M Masrur Reaz, chairman of Policy Exchange Bangladesh; Md Ariful Hoque, former director general of BIDA; Ferdaus Ara Begum, CEO of BUILD; and Md Hafizur Rahman, trade policy and facilitation expert. The session was chaired by Md Humayun Kabir, executive member of BIDA.

The dialogue was convened under the Transformative Economic Policy Programme (TEPP), implemented by UNDP Bangladesh with support from the UK Government. Through TEPP, UNDP provides policy advisory and capacity development support to strengthen economic governance and facilitate evidence-based reforms.

The report launch marks a significant step in supporting Bangladesh's efforts to attract quality investment that contributes to sustainable development and long-term economic resilience.