Incentive strategy considered to boost foreign investment

The government has taken fresh initiatives to accelerate foreign direct investment (FDI) in Bangladesh. As part of this effort, a five-member convening committee has been formed to assess the feasibility of offering incentives as a strategy to attract greater FDI.

A circular to this effect was issued from the Office of the Chief Adviser on 29 May. The committee is headed by Economic Adviser Dr Salehuddin Ahmed.

Other members of the committee include Bangladesh Bank Governor Ahsan H. Mansur, National Board of Revenue Chairman Md Abdur Rahman Khan, Finance Secretary Md Khairuzzaman Mozumder, and Executive Chairman of the Bangladesh Investment Development Authority (BIDA) Chowdhury Ashiq Mahmud Bin Harun, who will serve as the member secretary.

According to the circular, the committee has been tasked with analysing whether incentives would be effective in increasing FDI, and what types of incentives could be offered. The committee is expected to submit its recommendations within one month.

As per the official definition, foreign companies establishing factories, investing in new projects, or purchasing shares in local companies in Bangladesh are counted as contributing to FDI. Through such investments, capital flows into the country's economy.

However, investors are also entitled to repatriate profits or capital gains from share sales, a process known as FDI outflow. Net FDI is calculated by subtracting these outflows from total FDI and represents the real contribution to the domestic economy.

According to the latest Bangladesh Bank report, net FDI in the 2023–24 fiscal year stood at USD 1.27 billion. The banking sector attracted the highest investment, with USD 416.3 million.

During the same fiscal year, total FDI inflows amounted to USD 4.27 billion. However, approximately USD 3 billion was repatriated by foreign investors as profits or capital, resulting in net FDI of USD 1.27 billion—down USD 190 million from the USD 1.46 billion received in 2022–23. This marks a decline of over 13 percent year-on-year.

In the first nine months (July to March) of the current 2024–25 fiscal year, net FDI has dropped further, reaching only USD 860 million compared to USD 1.16 billion during the same period last year—a decrease of 26 percent.

The government remains hopeful that a well-structured incentive framework will rekindle interest among foreign investors and deliver sustainable, positive outcomes for the national economy.