Post-Independence Weakest Investment Performance Under Yunus Government; What Will Tarique Do?

Staff Correspondent

The Bangladesh Nationalist Party (BNP) led by Tariq formed the government after the national elections. In this context of political upheaval, the country’s investment situation has come under renewed discussion in the nearly one and a half year of the interim government.

After the change of power in August 2024, investment, like all economic indicators, did not show the expected momentum. On the contrary, various indicators indicate that such weak investment performance has not been seen since 1981.

The expectation was a ‘tide of reform’

There was an expectation that reforms and a new wave of investment would come to the country after the political change. The leadership of the Bangladesh Investment Development Authority (BIDA) was changed, with Singapore-based banker Ashiq Chowdhury appointed as the executive chairman.

However, there has been no visible progress in attracting new investment in the last 16 months. Many small, medium and large factories have closed, which has had a negative impact on employment. Registration of investment proposals has decreased, new foreign equity has decreased, and credit flow to the private sector has fallen to single digits.

Private investment rate in GDP has decreased

According to government estimates, private investment reached about 25 percent of GDP in 2019—the highest it has ever been. There was no major decline during the COVID-19 period.

But personal investment, which averaged 24 percent until June 2024, fell to 22.48 percent in June 2025. A decline of about 1.5 percentage points in a year—unprecedented in four decades.

Private investment as a percentage of GDP was 23.51 percent in the 2023-24 fiscal year. It decreased to 22.48 percent in the 2024-25 fiscal year.

At the same time, imports of capital equipment fell by about 19 percent, to $2.81 billion—indicating a reluctance to expand industry.

Private sector credit flows at 20-year low

Private sector credit growth stood at just 6.10 percent at the end of last December—the lowest in two decades. The previous low was 6.23 percent.

The business community believes that bank loan interest rates reaching 14-15 percent, gas and electricity shortages, and tax pressures have all discouraged entrepreneurs from making new investments.

Net FDI increased, but new equity decreased

According to Bangladesh Bank data, net FDI was $1.42 billion in the 2023-24 fiscal year. It increased to $1.69 billion in the 2024-25 fiscal year.

However, the bulk of this growth came from reinvestments and intercompany loans. New equity fell to $550 million—the lowest in the last five years. Even during the Corona period, new equity was $720 million.

Although FDI is expected to grow by 80 percent in the first nine months of 2025, economists say it is likely to be higher due to the low base of the previous year. Of the $1.41 billion inflows during that period, about $450 million was new equity.

Lagging behind in regional competition

According to World Bank data, Bangladesh received $1.53 billion in FDI in 2024.

In comparison, India received $27 billion, Indonesia $21 billion, Vietnam $20 billion. Even Pakistan attracted about $1 billion more in investment.

Pakistan was behind Bangladesh even two years ago. Analysts believe that competing countries have gained an advantage due to policy consistency and leading in energy security.

Virupaksha Pal, former chief economist of Bangladesh Bank and professor at the State University of New York Cortland in the United States, said, “Investment growth is the main indicator of a government’s capacity and credibility.”

According to him, such poor investment performance has not been seen since 1981. Neither during the mass uprising of 1990 nor the global financial crisis of 2008-09 did private investment decline so much.

He also said that if domestic investment does not increase, foreign investment will not grow sustainably. Foreigners see local investment trends as an indicator of confidence.

Business environment: Structural entanglements not resolved

Businessmen complain that high interest rates, gas and electricity uncertainty, pressure on advance and source taxes, delays in port management, and administrative complexity are still major obstacles.

Rupali Haque Chowdhury, president of the Foreign Investors Chamber of Commerce and Industry, said that fiscal policy is not investment-friendly and political uncertainty is making investors hesitant.

On the other hand, according to Masrur Riaz, Chairman of Policy Exchange Bangladesh, “Major change is not possible without bold structural reforms.”

The challenges ahead for the new government

The major challenges facing the new government will be ensuring energy security, bringing interest rates to a reasonable level, stability and simplicity in the tax system, increasing port and logistics efficiency, digitalization of administrative services, and ensuring policy continuity and law and order.

According to economists, investment is not just a statistic—it is the foundation of employment, production, and exports. Although net FDI increased slightly during the interim government, the pace of new investment was limited.