FDI slides 18% in Q4 2025 on policy, infrastructure hurdles

Bangladesh saw a significant decline in foreign investment in the last quarter of 2025, with net foreign direct investment (FDI) falling by 18.42% compared to the same period last year. 

Infograph: TBS

According to Bangladesh Bank data, net FDI inflows for the October-December 2025 quarter amounted to $108 million, down from $132.81 million in the October-December 2024 quarter.

Economists attribute the slowdown to multiple factors, particularly the overall political situation and election-related uncertainty.

Zahid Hussain, former lead economist at the World Bank's Dhaka office, said, "There was no conducive environment for investment because there was uncertainty over the political settlement. At that time, it was unrealistic to expect foreign capital to flow into the country." 

He noted that interim government initiatives to attract foreign investment faced resistance, further discouraging potential investors. "At that time, investors knew the interim government would not last, and there was no clear roadmap for elections. This uncertainty naturally reduced investment."

Decline in reinvested earnings

Bangladesh Bank data also shows that reinvested earnings, a key component of FDI, have decreased sharply. Over the past year, reinvested earnings dropped by 35.31%, falling to $210.74 million in the October-December 2025 quarter from $325.75 million in the same period of 2024. 

Reinvested earnings refer to profits generated by foreign subsidiaries or associates that are retained and reinvested in the host country rather than repatriated as dividends. While reinvested profits create the appearance of rising investment, true FDI growth depends on new equity investment, which has remained weak.

Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), said, "Considering the state of the economy and political environment, foreign firms have reduced reinvested earnings. At the time, there was uncertainty over whether elections would be held. Although elections were held in February, concerns remained during this quarter."

Policy and infrastructural hurdles

Economists say that, beyond political uncertainty, structural and policy-related factors have significantly hindered foreign investment in Bangladesh. Policy inconsistencies, inefficiencies in transport and logistics, and limited port cargo and container-handling capacity discourage investors, leaving the country behind its South Asian peers.

Mustafizur Rahman of the Centre for Policy Dialogue noted, "Challenges such as the single window system and high cost of doing business continue to block FDI inflows. Even if the political environment improves, investment will remain difficult unless these barriers are addressed. Investors evaluate facilities and opportunities, not just which government is in power."

A senior Bangladesh Bank official observed that private-sector investment has also slowed, signalling hesitation among local entrepreneurs alongside foreign investors. "Unless policy challenges are resolved, attracting foreign investment will remain extremely difficult," he said.

According to Bangladesh Bank data, total foreign investment – including equity, reinvested earnings, and intra-company loans – stood at $363.82 million in October-December 2025, down from $490.40 million a year earlier, underscoring persistent structural and political constraints.