Ease of doing business is still in poor shape

Foreign Direct Investment (FDI) is a prime way to foster the economic growth of a country. Consistently, Bangladesh has been getting low FDI over the years despite handsome GDP growth. In South Asia, not only global economic giants like India, but even small economies, such as the Maldives and Sri Lanka, are ahead of Bangladesh in terms of FDI attraction.

According to Bangladesh Bank data, from 2017 to 2022, Bangladesh received an annual average of $2.92 billion in FDI. The net FDI inflow fell to $3 billion in 2023, a decrease of 14 percent from $3.5 billion in 2022. Further, the country's net foreign direct investment (FDI) inflow fell by 8.8% in FY24 compared to the previous fiscal year. Moreover, outstanding FDI from the USA dropped by $2.92 billion in the last six months.

In a publication titled "Catalyzing Greater FDI for Vision 2041," the Foreign Investors Chamber of Commerce and Industry (FICCI) said that trade logistics and infrastructure, investment policy and business regulations, including investor aftercare, productivity, and lack of depth in the financial market and tax environment had been hindering FDI in Bangladesh.

According to experts, Bangladesh has the intention to attract FDI, but the proper environment is yet to be created for that. For instance, policy and regulatory uncertainties, bureaucratic hurdles, the port for handling cargoes and containers, and transport and logistics facilities are not up to the mark.

In addition, in 2024, the election year, economic volatility, including currency devaluation, will lead investors to adopt a 'wait and see' approach. The downgrading of the country's credit rating and July-August Revolution have negatively impacted Bangladesh's investment appetite, making it less attractive to foreign investors.

Officials of multinational companies think that the main problem is the delicate handling of government officials, who seek bribes in many forms. Local politicians also extort the businesses. But a foreign company could not pay anything as a bribe.

Further, tax policies play a significant role in FDI decisions. The investment climate in Bangladesh faces several tax-related challenges. For a long time, foreign investors operating in Bangladesh have been demanding consistent and predictable tax rules against the backdrop of regular changes in the tax rules.

To attract higher levels of FDI, countries must focus on making the business atmosphere easier for investors by simplifying business processes, cutting down bureaucratic red tape, and setting up investor-friendly policies. Moreover, governments must prioritize infrastructure and logistics, transportation systems, and digital connectivity to foster a conducive business environment. To work out these challenges, strong collaboration between public and private sectors is required. Countries must also keep up with global economic trends to stay competitive.