Political instability, uncertain business environment, and infrastructural weaknesses have stalled the dream of investment in economic zones. The grand vision of creating employment for millions and industrialization is fading. According to the latest data from Bangladesh Bank, an unexpected picture has emerged—foreign direct investment (FDI) in economic zones amounted to just $100,000 in the last March quarter, a 93.46% decrease compared to the same period last year. Alongside the drop in new investments, there is also a rising trend of investors withdrawing their funds.
Economists say the long shadow of distrust and uncertainty threatens the future of the country’s growth and employment.
FDI in Economic Zones Also Negative:
The country’s investment environment is currently suffering from a crisis of confidence, which has directly impacted foreign direct investment in economic zones. According to the latest data from Bangladesh Bank, in the last March quarter, FDI in economic zones was only $100,000, a 93.46% decrease compared to the October-December quarter of the previous year. Moreover, the investment also dropped by 83.11% in the second quarter compared to the first quarter of last year.
Worryingly, many investors are reportedly pulling out their investments as well.
Economists and business people point to prevailing political uncertainty, deteriorating business environment, high interest rates and tax burdens, and lack of supportive infrastructure as the direct reasons discouraging foreign investment. This is severely disrupting the process of generating new production and employment.
Political Uncertainty and Crisis of Confidence:
Economists stress that without new investments, production will not grow, nor will employment be created—this is the reality. They say Bangladesh’s investment situation is currently suffering from a deep crisis of confidence.
Dr. Mustafa K. Mujeri, former Director General of Bangladesh Institute of Development Studies (BIDS) and former Chief Economist of Bangladesh Bank, told Kaler Kantho, “Investment is in a negative state. The current situation is not investment-friendly. The social and political environment is unstable. Under these circumstances, investors should not be encouraged, and indeed, they are not.”
He added that the growth in capital machinery and private sector loans has reached a historic low, with this negative trend evident in Export Processing Zones (EPZs) and special economic zones as well.
Dr. Mujeri believes, “Until a political or elected government takes responsibility, the investment situation will not improve. The upcoming election in February is expected to bring an elected government through a participatory and acceptable process, which could improve the investment climate.”
Masrur Riaz, Chairman of Policy Exchange, said, “Political uncertainty is increasing, and its effects are directly impacting investment. Stability is essential for investment.”
Dr. Mahfuz Kabir, Research Director of Bangladesh Institute of International and Strategic Studies (BIISS), also believes that political instability and the absence of a political government are undermining investors’ confidence.
Currently, Development in Only Five EPZs:
The previous government planned to establish 100 economic zones (EZs) nationwide, both public and private. However, due to inadequate facilities in most economic zones, Bangladesh Economic Zones Authority (BEZA) currently aims to develop only five government-owned EZs.
Chaudhury Ashik Mahmud, Executive Chairman of the Investment Development Authority (BIDA) and BEZA, recently stated, “At this moment, there is no need for 100 economic zones in the country. Developing 10 zones over the next 10 years would be sufficient for Bangladesh. Initially, more priority will be given to developing five EZs. BEZA will not work beyond these in the next two years.”
Unprepared Plots and Infrastructure Weaknesses:
Business leaders complain that roads, gas, utilities, and other necessary supporting infrastructure have not been expanded in economic zones. These infrastructural weaknesses discourage investors.
Dr. Mahfuz Kabir said, “The main reason for lack of investment in economic zones is that the plots are still not ready. The model followed here was flawed. In other countries, plots are provided ready-to-use, and investors only set up machinery and start production. But in Bangladesh, the opposite is true. In some zones, disputes with locals over land have also arisen.”
He cited the example of the largest economic zone, Mirsharai, where entrepreneurs are not receiving utilities as demanded and water supply has not yet been assured. Without water, gas, or electricity, how can investment occur? Investors have waited long and are now withdrawing their investments.
He further said many want to invest in Bangladesh but after facing mismanagement, they transfer their investments to other countries. This is happening in economic zones. For example, setting up a garment factory requires 60-70 approvals, taking a long time, unlike in countries like Vietnam or other competitors.
Decline in EPZ Investment:
Alongside economic zones, the Export Processing Zones (EPZs) are also showing a disappointing picture. FDI in EPZs decreased by 19.59% in the last March quarter. After the July movement, during the six months from July to December 2024-25 fiscal year, FDI in EPZs dropped by 22.33%, according to Bangladesh Export Processing Zones Authority (BEPZA). However, despite the decline in investment, exports from EPZs increased by 22.41%, while non-EPZ exports grew by 12.84%.
Major General Abul Kalam Mohammad Ziaur Rahman, Executive Chairman of BEPZA, said that due to global and domestic factors, investment in EPZs declined by about 22% in the last six months. However, despite the decline, exports increased. He hopes potential investors are responding positively and that investment levels will rise.
Government Strategy Change:
Chaudhury Ashik Mahmud Bin Harun said, “We have talked big about economic zones. The government has a certain capacity. If projects beyond that capacity are taken up and cannot be implemented, the implementation time gets extended. Then how will investment in economic zones increase? We still have a long way to go.” He admitted that this change is time-consuming.
Ways to Increase Investment:
Economists have given several recommendations to improve the country’s investment situation, including:
• Ensuring political stability
• Creating an investment-friendly environment
• Bringing tax and interest rates to reasonable levels
• Ensuring uninterrupted energy supply to boost industrial production
• Reforming infrastructure and policy support systems
They say foreign investment is the main driving force for economic growth, but currently, Bangladesh’s investment climate suffers from a crisis of confidence. Without political stability, neutral economic policies, and an investment-friendly environment, this crisis cannot be overcome. It is time to take constructive steps to restore investors’ confidence.
Economists also advise creating a conducive environment for domestic investors, not just foreign ones. They note there is no demand for private sector loans currently, a stagnation unseen in the last 20-22 years. Business people are not getting the business-supportive environment they need. Opportunities in special economic zones should be increased, and private sector participation should be further encouraged and supported.
Toufiqul Islam Khan, Senior Research Fellow at Center for Policy Dialogue (CPD), said, “For several years, foreign investment has been stagnant. The macroeconomic environment was not favorable for investment. The interim government’s reforms improved some indicators, creating opportunities for investment. Due to U.S. tariff wars, some Chinese investors might come to Bangladesh and acquire local weak factories. If energy problems are solved, investment-supportive infrastructure is developed, and red tape is reduced, Bangladesh has huge potential for increased investment. Skilled workforce development and political stability are crucial.”
He added that economic zones must provide an investment-friendly environment. Problems in economic zones should be targeted and solved. Simultaneously, efforts should be made to increase opportunities and facilities for entrepreneurs there.
Investment Crisis Amid Uncertainty in Bangladesh
