Imagine this: Bangladesh just reported a stunning 19% surge in Foreign Direct Investment (FDI) in the fiscal year 2024-25, right after the massive July 2024 uprising that shook the nation. It sounds like a roaring success story of economic resilience, doesn't it? But here's where it gets controversial—dig deeper, and you might wonder if this growth is truly a fresh wave of outside money pouring in, or something more nuanced that's sparking heated debates among experts. Let's unpack this intriguing development together, breaking it down step by step so even newcomers to economic jargon can follow along.
Foreign Direct Investment, or FDI for short, refers to the money that foreign companies or individuals put into businesses in another country, often to build factories, start new ventures, or expand operations. In Bangladesh's case, FDI climbed to $1.7 billion in FY25 from $1.4 billion in FY24, marking a 19.13% increase. At first glance, it appears like a sign of renewed investor faith following the July events. But, as the data reveals, this boost didn't stem from new external funds flooding in. Instead, it was driven by a sharp uptick in reinvested earnings—up 23.30%—and a whopping 180.66% rise in intra-company loans from existing foreign players, according to Bangladesh Bank figures. Meanwhile, equity capital, which is the upfront money used to buy ownership in a company, actually dropped by 17% year-on-year.
To clarify for beginners, equity capital is like the initial stake you put into a startup—it's fresh cash from outside to kick things off and buy shares. Reinvested earnings, on the other hand, are the profits from that investment that the company decides to keep and reinvest back into the business instead of handing them out as dividends. Think of it as a business using its own earnings to grow without needing new money from investors. Intra-company loans add another layer: these are funds transferred within the same multinational group, say from a parent company abroad to its subsidiary in Bangladesh, often for operational needs. The key difference? Equity capital brings in brand-new external investment, while reinvested earnings and intra-company loans rely on internal or group resources. As a result, equity capital's slice of the total FDI pie shrank to just 33% in FY25 from 45% in FY24. And this is the part most people miss—without fresh equity injections, is this growth as robust as it seems?
In a Facebook post titled 'FDI Picture Post-Mass Uprising,' Chowdhury Ashik Mahmud Bin Harun, the executive chairman of Bangladesh Investment Development Authority (BIDA), celebrated this trend on November 3. He proclaimed that the numbers reflect ongoing investor confidence in Bangladesh's economy, even amid the political instability typical after major upheavals. Ashik praised the efforts of institutions like the National Board of Revenue (NBR) and Bangladesh Bank, along with promotional bodies such as the Public-Private Partnership (PPP) Authority, Bangladesh Economic Zones Authority (Beza), and BIDA itself, for crafting sound policies and staying committed to growth.
But here's where it gets even more controversial. Zahid Hussain, a former lead economist at the World Bank's Dhaka office, told TBS that it's premature to declare victory. He argues that reinvested earnings aren't necessarily a sign of expansion—they're just profits retained by existing companies, and we can't be sure if they're being plowed back into business growth, stashed in banks, or even invested in low-risk options like treasury bills and bonds. If those profits are sitting idle or in safe assets, Hussain points out, they're not driving real investment. With equity capital plummeting, he cautions against jumping to conclusions about the uprising yielding positive results. And to add perspective, he notes that Bangladesh's FDI remains tiny relative to its economy—small inflows can inflate growth percentages, making them look more impressive than they are.
Hussain also highlights that, despite advantages like excellent land and sea connections, Bangladesh hasn't drawn major foreign interest yet. While it's positive that institutions are ramping up post-uprising efforts, he stresses the need for sustained action. This raises a provocative question: Is this FDI bump a genuine recovery signal, or just a temporary blip amid larger challenges?
Critics like Hussain have pointed out that Ashik's post focused solely on the growth figure without delving into its sources, leaving out the details on equity declines and reliance on reinvested funds. To put Bangladesh's performance in context, Ashik compared it favorably to nations hit by turmoil: Sudan's FDI dropped 27.60% after 2019, Sri Lanka's fell 19.49% in 2022, Chile's by 15.68% in 2019, Ukraine's by 81.21% in 2014, Egypt's by 107.55% in 2011, and Indonesia's by 161.45% in 1998. 'Bangladesh's greatest quality is its ability to bounce back despite adversities,' Ashik said. 'Usually, foreign investment plunges after mass uprisings, but we're seeing the reverse.' He credits this to strong economic policies, dedicated institutions, private sector resolve, and government support.
Looking forward, Ashik warns of possible short-term FDI dips before the next national election, but predicts stabilization afterward. He encourages a long-term perspective, urging stakeholders not to let temporary wobbles eclipse the country's recovery potential. 'We've always strived to support investors. Not every issue is resolved... but goodwill hasn't been lacking,' he added, noting BIDA's upcoming annual report on investment achievements.
Shifting gears to where this investment is landing, the textile and apparel sector—traditionally Bangladesh's top FDI magnet—has been on a downward trend. It slipped from $530 million in FY23 to $403 million in FY25, with its share of total FDI falling to 24% from 30%. For example, this sector includes everything from cotton mills to ready-made garment factories, which have long been pillars of Bangladesh's economy.
On a brighter note, the food products industry surged to become the second-largest recipient, claiming 22% of total FDI at $379.36 million—up from not even ranking in the top 10 in FY24. Think of investments in food processing plants or beverage factories that cater to local and export markets. Banking followed with $319.58 million (19% of FDI), the power sector at $292.24 million (17%), and leather products at $60.16 million (4%). These shifts highlight evolving investor interests, perhaps driven by growing demand in consumer goods and infrastructure.
Finally, let's talk investor origins. The Netherlands, absent from the top 10 in FY24, vaulted to the top spot in FY25 with $453.65 million— a 20-fold increase from $23 million. Much of this went into food and beverages ($365 million) and power ($66.7 million). The UK, previously leading, saw a 41% drop to $300 million, mostly in textiles, with its share shrinking to 17.81% from 34.5%. China held steady in third place at $274 million, slightly below $283.55 million in FY24. Interestingly, the US, once Bangladesh's top investor in FY22 with $426 million, barely registered in FY25's top 21, with just $89 million in FY24. Other key players include Korea, Singapore, India, Hong Kong, Malaysia, Japan, and Sri Lanka.
So, is Bangladesh's FDI surge a beacon of hope or a misleading statistic? Do reinvested earnings count as 'real' investment, or should we focus only on equity capital? And what do you think—will sustained efforts truly attract global giants, or is the country stuck in a cycle of small-scale gains? Share your thoughts in the comments; I'd love to hear your take on this debate!
