FDI Declines 18.42% in Final Quarter Amid Political Uncertainty and Structural Weaknesses

❐ Staff Reporter

Foreign direct investment (FDI) inflows into the country have once again shown signs of slowing down. Net FDI declined by 18.42 percent in the last quarter (October-December) of 2025 due to political uncertainty and a weak investment climate, raising fresh concerns about the country’s investment climate.

According to the latest data from Bangladesh Bank, net FDI inflows into the country during the period under review were $108 million, while in the same period in 2024, it was $132.81 million. This means that there has been a visible contraction in investment flows in the space of one year.

Economists are blaming the political situation as the immediate reason behind the decline in foreign investment. Zahid Hossain said, “There was no environment for investment. Because at that time, there was no certainty about which direction the political agreement would go. So it is unrealistic to think that foreign loans would come to the country at that time.”

He further said, “The interim government took some initiatives to bring in foreign investment. However, these initiatives faced obstacles. Given the situation in the country at that time, it was not natural for any foreign investor to invest here. Because they knew that the interim government would not be permanent.”

At the same time, there has been a significant decline in reinvested profits. According to Bangladesh Bank, reinvested earnings have fallen by 35.31 percent in a year. In the October-December quarter, this sector received $217.4 million, compared to $325.75 million in the same period last year. This indicates that foreign companies operating in the country are also losing interest in reinvesting profits.

Mostafizur Rahman, a distinguished fellow at the Center for Policy Dialogue, said, “Foreign institutions have reduced reinvested earnings considering the overall economic and political environment of the country. Because there was uncertainty about whether there would be an election at that time. Although the election was held in February, there was apprehension about it in that quarter.”

But economists say the problem is not limited to political uncertainty; long-standing structural constraints are equally to blame. Policy complexity, high business costs, and infrastructure deficiencies are discouraging foreign investment. Port management constraints, transportation and logistics costs, and a lack of cargo handling capacity are holding Bangladesh back compared to its South Asian competitors.

Mostafizur Rahman said, “Foreign investment is not coming to the country due to the single window system and the cost of doing business. If these problems are not resolved, it will be difficult to bring in investment even if the political environment improves. I don’t think that foreign investment will increase just by having an elected government. Investors first evaluate the opportunities.”

A senior central bank official said that investment in the country’s private sector has also declined, reflecting the overall lack of confidence. When domestic entrepreneurs are cautious about new investments, the possibility of increasing foreign investment flows is also limited. He also noted that this trend will be difficult to change without resolving policy problems.

According to Bangladesh Bank data, total FDI inflows, including equity investment, reinvested profits, and inter-institutional loans, stood at $363.82 million, compared to $494 million in the same period in 2024. This means that there is a contraction in all three main sources of investment.

The overall picture is clear—this slowdown in FDI inflows is not a temporary blip; rather, it is a manifestation of the lingering distrust, policy weakness, and implementation deficits within the economy. Without political stability, structural reforms, and effective policy implementation, it will be difficult to revive foreign investment.