Why we remain pessimistic about FDI in Bangladesh

Foreign Direct Investment (FDI) is a lifeline for developing economies like Bangladesh, promising economic growth, job creation, and technological progress. For a country like Bangladesh, with its growing population and evolving industrial base, attracting FDI is both a necessity and a strategic ambition. In 2025, the Bangladesh Investment Development Authority (BIDA) organized a high-profile Investment Summit aiming to shift the narrative surrounding Bangladesh’s investment landscape. The objective was clear: to reframe the country’s image, project long-term potential, and attract international capital while creating meaningful employment opportunities. The event drew attention from global investors, development partners, and corporate leaders, culminating in several pledges and upbeat projections. 

Despite ambitious initiative, a pervasive sense of pessimism looms over its potential success. Several factors fuel pessimism about the summit’s outcomes. The problem is not a lack of investor interest or promotional events—it is the systemic weaknesses embedded in the way Bangladeshi businesses are governed. While traditional challenges like political instability, bureaucratic delays, inter-agency misalignment, and negative propaganda continue to deter foreign investment, the core challenge lies in Bangladesh’s own business logic, governance culture, and systemic inertia across the private sector.

Most Bangladeshi businesses operate under a business-as-usual (BAU), or corporate social responsibility (CSR), or enlightened shareholder value (ESV) mindset—rooted in outdated governance models prioritizing short-term profits, quarterly performance, and shareholder primacy. The BAU governance approaches based on short-term profit maximization rooted in Milton Friedman’s shareholder primacy doctrine from the 1970s published in The New York Times. In this piece, Friedman famously argued that “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits.” While Corporate Social Responsibility (CSR) has improved ethical conduct, it still prioritizes profit-making. ESV logic aims to deliver sustainably, but ultimately continues to prioritise profit over purpose as its end goal.

This narrow view has created businesses that are risk-averse, innovation-stifling, and inward-looking—ill-equipped to navigate the uncertainties and expectations of a rapidly changing global economy.

According to McKinsey & Company, strong governance practices can lead to a twenty percent higher return to shareholders. Yet in Bangladesh, many business owners still perceive it as a barrier rather than a catalyst for success. Governance is too often misunderstood as a compliance burden rather than a strategic enabler. This outdated belief—that governance distracts from growth—remains one of the biggest obstacles to meaningful reform. 

Governance, as defined by the ISO 37000 global standard, is not merely about control—it is the human system by which an organization is directed, overseen, and held accountable to achieve its defined purpose. At the heart of this system lies purpose—not as a branding exercise, but as a foundational anchor guiding decisions, risks, strategy, and impact.

Unfortunately, most Bangladeshi businesses lack a credible, articulated purpose beyond profit. Without purpose, governance becomes performative, and sustainability a checkbox. Governance is integral to how businesses make decisions and is therefore vital to whether a business produces outcomes and impacts that drive a sustainable or unsustainable future. A sustainable future refers to the long-term wellbeing of all people and planet. 

Most businesses in Bangladesh fall far short of these expectations. Governance is often treated as compliance rather than culture. ESG reporting is considered a regulatory checkbox rather than a tool for strategic innovation. Decision-making remains opaque, and non-financial capital—such as natural, human, or social capital—is largely ignored.

As emphasized by the Cambridge Institute for Sustainability Leadership (CISL, businesses do not operate in isolation; they are deeply interdependent with social and environmental systems. Business decisions that ignore these interdependencies risk undermining the very systems upon which long-term profitability and resilience depend. Yet in Bangladesh, this systems thinking is often absent from corporate governance. Most Bangladeshi enterprises often externalize costs—pollution, labor exploitation, ecosystem degradation—treating them as someone else’s problem. 

Today’s global investors are increasingly deploying ESG due diligence to assess how enterprises are managing not only financial risk, but also environmental, social, and governance impacts. Businesses that can demonstrate resilient, ethical, and sustainable practices—through transparent reporting, fit-for-purpose accountability mechanisms, and stakeholder-aligned decision-making—stand a far better chance of earning global trust and capital.

A handful of Bangladeshi firms have managed to attract prestigious investors such as IFC, the Gates Foundation, Alibaba, and SoftBank—not because of promotional events, but due to robust governance, transparency, and a long-term value creation strategy. Their decisions were not based on government promises or regulatory incentives alone, but on robust due diligence of the firms’ governance systems, purpose orientation, and long-term value creation strategies.

To unlock Bangladesh’s FDI potential, businesses must move decisively away from the outdated business-as-usual (BAU) logic rooted in shareholder primacy and begin a structured transition toward purpose-driven organization (PDO) models. This shift entails embedding purpose into corporate governance frameworks, strategy, performance metrics, and culture—guided by international standards such as ISO 37000. 

Forward-looking companies must adopt governance systems that internalize externalities and account for dependencies on natural and human capital. Frameworks like the Task Force on Climate-related Financial Disclosures (TCFD) and Taskforce on Nature-related Financial Disclosures (TNFD) support this by guiding disclosure of climate and nature-related risks, helping investors assess resilience, long-term value, and environmental impact.

The world is moving towards a wellbeing economy—one that values resilience, sustainability, and long-term stakeholder value. FDI, in this context, is no longer a reward for short-term profits or policy incentives. It is a reflection of whether a business—and a country—can be trusted to operate responsibly and adapt to future risks. Bangladesh’s private sector must adopt fit-for-purpose governance—rooted in purpose, aligned with global frameworks like ISO 37000, TCFD, and TNFD, and committed to stakeholder wellbeing. Only then can we build a business ecosystem where FDI is not a windfall, but a sign of enduring confidence in our future.