The investment incentive package proposed in the national budget for fiscal year 2026-27 sends a generally positive signal to both domestic and foreign investors, according to Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM).
Raihan said the government’s decision to maintain corportimesate tax rates could help reduce policy uncertainty at a time when private investment remains subdued, financing costs are high, external sector pressures persist, and business confidence is fragile.
He welcomed the proposed reduction in withholding taxes on foreign loan interest payments and machinery leases, describing it as a prudent measure that could lower the cost of capital for industrial firms and make foreign-funded investments more attractive.
Raihan also highlighted incentives for Free Trade Zones, increased foreign ownership in off-docks and inland container depots (ICDs), and new frameworks for private sector participation in ports, terminals, and air cargo facilities.
“These measures reflect a growing recognition of the importance of trade logistics,” he said, noting that efficient customs services, warehousing, ports, and logistics would be essential for export diversification and integration into global value chains following Bangladesh’s graduation from the Least Developed Country (LDC) category.
He described sector-specific incentives for renewable energy, electric vehicles, batteries, semiconductors, electronics, digital devices, startups, freelancing, and content creation as ambitious steps toward a greener and technology-driven growth model.
However, Raihan cautioned that fiscal incentives alone would not create globally competitive industries. He said sectors such as solar energy, electric vehicles, semiconductors, and advanced electronics require reliable energy, skilled human resources, testing facilities, intellectual property protection, predictable regulations, access to finance, and strong supplier networks.
“Bangladesh has often provided fiscal incentives without establishing the necessary institutional and technological foundations for long-term competitiveness,” Raihan said, warning that some incentives could merely encourage import-dependent assembly rather than genuine industrial upgrading. He specifically urged caution on semiconductor incentives, noting the need for a realistic strategy covering chip design, testing, packaging, and related components.
The economist also expressed concern over the fiscal impact of wide-ranging tax exemptions and incentives at a time when Bangladesh continues to face challenges in raising its tax-to-GDP ratio. He stressed that incentives should be time-bound, transparent, performance-based, and subject to regular review, with measurable targets on investment, employment, exports, technology transfer, and energy efficiency.
Raihan welcomed the proposed accelerated depreciation facility for investments outside Dhaka and Chattogram, noting that its success will depend on improvements in logistics, utilities, land access, skills development, and local administration in other regions.
Overall, he said the budget’s investment strategy moves in the right direction by aiming to reduce investment costs, attract foreign direct investment, support green and technology-based industries, and address logistics bottlenecks. “The success of these measures will depend largely on effective implementation, regulatory consistency, and the government’s ability to align incentives with a broader industrial development strategy,” he added.
