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The world we live in has undergone a profound transformation over the past decade, marked by tectonic shifts in the political landscape of Western economies. The rise of right-wing populist leaders has gradually moved the policy narrative towards more inward-looking and closed economic systems.
The United Kingdom’s exit from the European Union in 2016, Donald Trump’s election as US president, and the growing prominence of right-wing political parties in Germany, France and the Netherlands have all pushed the trade discourse towards deglobalization. The international flows of trade, investment and migration are increasingly being discouraged through restrictive policies.
The wars in Russia-Ukraine and the Middle East have further fragmented the global system, ushering the advent of a multipolar world in which US dominance is being actively challenged by an economically and technologically advanced China. Over the coming decade, the relationship between the United States and China will play a defining role in shaping the future of globalization and trade relations between developed and emerging economies.
The Chinese economy is rapidly evolving into a sophisticated, innovation-driven economy, gradually moving away from basic manufacturing and focusing instead on higher-value products and solutions powered by AI and advanced technologies. China’s emergence as an innovation leader has caused considerable consternation in the United States and across the European Union. China’s technological and manufacturing prowess is already visible in electric vehicles and robotics, while Chinese technology companies are rapidly closing the gap in AI-led innovation.
The question, however, is how manufacturers of textiles, basic electronics and other labor-intensive products will respond to rising labour costs in China and an increasingly hostile tariff regime in the US and European markets. Capital flight from China to other emerging economic has been a visible change over the last few years.
Capitalizing on the relocation of investments and manufacturing capacity from China represents a once-in-a-generation opportunity for Bangladesh. Yet the country finds itself caught between a rock and a hard place, as the economy continues to navigate a difficult stagflationary phase.
Emerging supply-side challenges, including the latest energy shock, have hit production hard and adversely affected investor confidence. Bangladesh’s continued dependence on imported LNG and on only two floating storage and regasification units is a systemic vulnerability affecting the country’s long-term energy security.
Although the government plans to establish three additional FSRUs by 2029, uncertain deep-sea weather conditions and recurring supply-chain disruptions caused by wars and trade blockades may prolong this uncertainty. Greater investment in domestic natural gas exploration, including offshore blocks, alongside a gradual transition towards renewable energy, could help mitigate these risks.
The government’s ability to undertake swift and credible reforms in the energy sector will be critical to attracting new investment and improving the reliability and predictability of power and energy supplies.
Both local and foreign investments have remained sluggish over the past few years. Private-sector credit growth declined from 6.5% in June 2025 to 4.5% in June 2026. This deceleration has been driven primarily by weak domestic demand, energy shortages, high interest rates, growing non-performing loans, declining confidence in the banking system and broader geopolitical uncertainty.
Although Bangladesh Bank has reduced the repo rate by 0.5 percentage points, lending rates remain prohibitively high for many businesses. Reducing borrowing costs remains an important policy priority, but persistent inflation continues to constrain the government’s ability to pursue a loose monetary policy.
Tepid foreign direct investment has long been a major concern for policymakers. Even after including reinvested earnings, Bangladesh’s FDI inflows remain poor, with net FDI standing at USD 1.27 billion in 2024 and USD 1.77 billion in 2025. Vietnam, an economy of broadly comparable size, attracted USD 20.17 billion and USD 38 billion in FDI during the same two years.
To attract fresh investment, it is imperative that Bangladesh first improves the experience of its existing international investors. A satisfied investor, one who encounters fewer bureaucratic hurdles, receives consistent policy support and earns an adequate capital return, can become the country’s most credible ambassador to prospective investors.
Through my interactions with existing and potential foreign investors, I have found that Bangladesh continues to be viewed as an interesting market. Its large and growing consumer base, competitive wage structure and trade benefits as a least developed country remain important attractions. However, weak infrastructure, bureaucratic red tape, corruption and policy uncertainty continue to be cited as the principal barriers to investment. The country’s upcoming LDC graduation, tentatively in 2029, will likely lead to a loss of preferential trade benefits across developed markets. Proactive measures are expected from the government to initiative bilateral trade negotiation and secure favorable trade terms.
The government’s recent decision to maintain corporate tax rates for a five-year period should provide companies with greater predictability when making long-term investment decisions. The consolidation of BEZA, BEPZA, the Bangladesh Hi-Tech Park Authority, PPPA and BSCIC under BIDA may also help reduce bureaucratic fragmentation. However, the effective implementation of a genuinely functional one-stop service will be essential to simplifying and accelerating market entry for foreign investors.
Bangladesh’s economic revival is contingent upon its ability to facilitate investment. Higher investment will not only create new employment opportunities but also generate direct and indirect tax revenues, strengthen domestic supply chains and support export diversification.
Foreign direct investment brings more than capital. It also facilitates the transfer of technology, expertise, management practices and access to international markets. If Bangladesh can improve policy predictability, resolve its energy constraints and address the everyday difficulties faced by investors, it can still position itself as a credible destination for businesses seeking to diversify their operations beyond China.
The opportunity remains within reach, but the window will not remain open indefinitely.
This article was authored by Zahedul Amin, Co-founder and Managing Director at LightCastle Partners. For further clarification, please contact: [email protected]
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