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The Bangladesh Investment Development Authority (BIDA) has launched a groundbreaking FDI Heatmap, a strategic tool designed to attract foreign direct investment (FDI) across 19 key sectors, including renewable energy, pharmaceuticals, advanced textiles, and agro-processing.
Despite FDI accounting for only 0.3% of GDP in the 2023-2024 fiscal year, the initiative reflects the critical importance of FDI for sustaining economic growth and boosting industrial development. The heatmap was unveiled on January 15 at a seminar hosted by the Economic Reporters’ Forum (ERF) in Dhaka, with a focus on identifying Bangladesh’s competitive advantages and unlocking growth potential in priority sectors.
Bangladesh’s robust economic growth over recent decades has not translated into proportional job creation, highlighting a critical structural challenge. Traditionally, as economies evolve, labor transitions from agriculture to manufacturing and eventually to services. In Bangladesh, however, this trajectory has been disrupted.
The share of manufacturing employment has declined from 20.4% in 2017 to 17.02% in 2022, even as GDP has grown steadily. This disconnect between economic growth and employment generation underscores the need for targeted interventions to foster labor-intensive industries.
While this structural imbalance poses challenges, it also presents significant opportunities. With a young and growing workforce, Bangladesh has the potential to capitalize on labor-intensive sectors, provided the right policies and investments are in place. Drawing inspiration from case studies in countries like Vietnam, South Korea, and India, where strategic partnerships with global investors have created millions of jobs, Bangladesh is prioritizing key manufacturing industries.
These include agro-processing, renewable energy, leather, healthcare, and consumer durables such as semiconductors. By focusing on these areas, the country aims to position itself as a competitive player in the global manufacturing landscape.
BIDA Executive Chairman Chowdhury Ashik Mahmud Bin Harun emphasized the dynamic nature of the FDI Heatmap, which will be regularly updated in consultation with experts and stakeholders, particularly from significant FDI source countries. This iterative approach is intended to ensure the heatmap remains aligned with global trends and investor expectations while spotlighting areas where Bangladesh has a clear competitive edge.
While the FDI Heatmap has been praised as a forward-looking initiative, addressing existing challenges is critical to its success. Abdullah Hil Rakib, Managing Director of Team Group, lauded the effort but pointed to several barriers that could deter potential investors. Law and order challenges in industrial areas, escalating energy costs, and proposed wage hikes were identified as pressing concerns. Rakib cautioned that rising production expenses could undermine Bangladesh’s competitiveness in the global market, making it essential to create an investment-friendly environment.
The urgency of these reforms is underscored by declining FDI inflows in recent years. FDI fell from $1.7 billion in 2021-2022 (0.5% of GDP) to $1.5 billion in 2023-2024 (0.3% of GDP). Moreover, only 45% of these inflows constitute direct investment, with the remainder comprising intercompany loans or reinvested earnings. These figures highlight the need for a collaborative effort between government agencies and industry leaders to reverse the trend and attract sustainable, long-term investments.
With the introduction of the FDI Heatmap, Bangladesh is taking a bold step toward reshaping its investment landscape. By fostering collaboration between policymakers, industry leaders, and international investors, the country has the opportunity to address its structural challenges and unlock its full economic potential. Strategic investments in labor-intensive industries, coupled with efforts to improve the investment climate, can drive economic growth, create jobs, and position Bangladesh as a key global manufacturing hub in the years to come.
This article was originally published on The Business Standard website.
To read the full, unabridged version, click here.
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