Bangladesh’s investment climate is hindered by weak institutions, unpredictable policies and macroeconomic uncertainty. Credibility and stability are essential for both domestic and foreign investors.
In an interview with Ariful Islam Mithu of TIMES of Bangladesh, Zahid Hussain, former Lead Economist at the World Bank’s Dhaka Office, urged full autonomy for Bangladesh Bank, improved port efficiency, and concrete reforms in the tax, banking and energy sectors to build investor confidence.
He emphasised that the upcoming budget must include specific reform commitments, such as functional one-stop services, streamlined investment promotion agencies, and the completion of banking resolutions within a defined timeframe.
Tax holidays alone are insufficient without reliable infrastructure, energy supply and law-and-order stability.
What do you see as the main obstacles to investment in Bangladesh?
The main obstacles, whether for foreign direct investment (FDI) or domestic investment, are the weaknesses of institutions responsible for investment facilitation and the policy framework governing investments. Conceptually, there are three dimensions. One is macroeconomic stability — do I have confidence in it? Foreign investors worry about profit. Domestic investors also need macro stability. For foreign investors, it becomes a particular risk.
What does stability mean for investors?
Stability refers to longevity. Can I rely on it? Investment policies here change over time. Investors want to know what triggers change. Is it predictable?
Based on predictability, investors calculate profits, costs and benefits. Sudden circulars from the National Board of Revenue, Bangladesh Bank or Finance Division are unpredictable, creating uncertainty.
How important is credibility?
Credibility comes from stability and predictability together. If these are not convincing, investors hesitate.
Does individual influence matter for attracting investment?
Previously, some thought individuals like Professor Muhammad Yunus could attract investments. That is incorrect. Investors come for institutional strength, not individuals. Individuals may help but cannot secure the investments Bangladesh needs.
What is the path forward to attract investment?
Bangladesh Bank must be fully autonomous to operate independently. Improving port efficiency will reduce container delays. A credible, globally reputed port operator would demonstrate this. Credibility comes from action, not words.
How can reforms build investor confidence?
Reforms at NBR, ports, Bangladesh Bank, and the banking sector, along with energy management, build credibility and investor confidence.
Bangladesh Bank has started some measures. Implementing them will strengthen trust.
Does political unrest affect investor confidence?
Yes. During mass uprisings, factories were sometimes set on fire. Frequent, unaccountable incidents discourage investors. Last February, some American investors delayed projects over law-and-order concerns in Dhaka and Chattogram.
What measures in the budget would help FDI?
Budget speeches should include specific institutional reform commitments. For instance, the government should announce that the one-stop service will be fully functional next fiscal year, or that the investment promotion agencies will be streamlined within a certain period, or that banking resolution will be completed before then.
We are hearing about deregulation, but it lacks specific information or a roadmap. Those should be clearly announced to investors.
A clear reform roadmap in the budget will help increase credibility.
Do tax holidays attract investors?
Investors do not come only for tax holidays. Profits matter. Tax holidays help if profit is possible. Without reliable gas, electricity or port access, tax holidays do not solve the problem.
Is environmental pollution a barrier?
Pollution can be managed in the sector’s interest. Fundamental issues are energy uncertainty, regulatory uncertainty and law and order. Secondary problems are somewhat manageable.
Is the shortage of skilled labour a problem in Bangladesh?
Yes. We export manpower but import skills. People exist but lack expertise, so skilled labour is imported. Education quality is low. Technical and vocational institutes are misaligned with market needs. The equipment used to train students is often obsolete.
Skills required are not being provided, creating a significant gap.
