Despite steady economic growth in the country over the past decade, foreign direct investment (FDI) has been comparatively low in Bangladesh compared to regional peers. As compared with USD 2.9 billion FDI inflow in Bangladesh in 2022, FDI inflows amounted to USD 141.2 billion in China, USD 50.6 billion in India, USD 23.9 billion in Indonesia and USD 16.1 billion in Vietnam. The rate of FDI inflow in Bangladesh is only around 1 percent of GDP, one of the lowest in Asia. While even during the pandemic (2020), FDI flows to developing countries in Asia increased by 4 percent to USD 535 billion, according to figures from the UN Conference on Trade and Development (UNCTAD), Bangladesh could not achieve the expected FDI. In 2022, foreign investors invested around USD 17 billion in Vietnam, USD 64 billion in India, approximately USD 18.58 billion in Indonesia, whereas Bangladesh received USD 2.56 billion and of the amount, USD 1.6 billion accounted for reinvested earnings by the already existing foreign companies in the country.
Financial experts have referred to capital flight and lack of good governance and absence of ease of doing business as the major reasons behind the downtrend of foreign direct investment (FDI) in Bangladesh.
Government agencies in Bangladesh often claim that they are sincere and very keen on promoting investment. They have taken various liberal policies and implemented a number of policy reforms and incentives designed to promote a competitive climate for FDI, and also pursued various promotional activities such as investment summits, road shows etcetera for promoting investment. However, government claims do not often reflect ground reality. A foreign investor generally evaluates a country based on its ease of doing business ranking and overall economic climate. Although Bangladesh advanced eight notches in the World Bank's ease of doing business 2020 ranking to 168 out of 190 countries, there are still significant bottlenecks in doing business. For instance, transferring a property title in Bangladesh takes an average of 271 days, almost six times longer than the global average of 47 days.
According to World Bank, to get electricity connection in Bangladesh, a new business needs 150.2 days, whereas in Vietnam it takes 31 days, in Singapore 30 days, in Malaysia 24 days and in neighbouring India 55 days. Existing foreign investors often complain about bureaucratic tangles in Bangladesh that stand in the way of business operations and obtaining various licenses. Then there are hidden costs in matters related to procedure, policy, law and infrastructure that seriously weigh upon the cost of doing business.