A recent assessment by the United Nations Conference on Trade and Development (UNCTAD) incorporates a vital legal and political economy perspective to the continued discussion in Bangladesh about managing foreign direct investment (FDI). The report recognises the progress made by Bangladesh since its 2013 Investment Policy Review, notably in establishing the Bangladesh Investment Development Authority (BIDA), increasing digital investor services and addressing labour regulation, taxation, intellectual property and sectoral policies, and also identifies a deeper structural challenge. The main recommendation of UNCTAD is that the time has come for Bangladesh to move from fragmented investment promotion towards a coherent system of investment governance and investment delivery. This requires not only administrative reform, but also substantial legal and institutional restructuring through a unified national investment policy, a consolidated investment law with stronger statutory authority for BIDA and thorough digitalisation of regulatory procedures.
This recommendation is particularly significant in the post-July uprising context, where economic policymaking has begun to be dominated by questions of governance reform, institutional accountability and state capacity. Bangladesh's investment bottlenecks are not just technical inefficiencies but stem from the political economy of institutional fragmentation and weak regulatory coordination. Consequently, investment administration is characterised by overlapping mandates, inconsistent procedures, discretionary approvals, and fragmented regulatory authority. From a legal perspective, such fragmentation undermines the certainty of regulatory certainty and increases transaction costs which both directly impact investor confidence and economic governance enforcement.
UNCTAD's findings reinforce this concern. Bangladesh's inward FDI stock remains concentrated in textiles, finance, and power to a great extent, just slowly moving into areas like pharmaceuticals, ICT, telecommunications and the digital economy. The degree of concentration is indicative not only of sectoral dependence but also a lack of well-coordinated legal and policy framework which has the ability to facilitate higher-value segments of global value chains (GVCs) and global Production Networks (GPNs). The garment sector has mostly linked Bangladesh to the lower-value assembly end of global markets. Functional upgrading in respect of design, branding, advanced logistics, component manufacturing, research and supplier development is still limited.
In this context, the government's plan to amalgamate six investment-related agencies in Bangladesh, including BIDA, Bangladesh Economic Zones Authority (BEZA), Bangladesh Export Processing Zones Authority (BEPZA) and Bangladesh Hi-Tech Park Authority (BHTPA), Public-Private Partnership Authority (PPPA) and Bangladesh Small and Cottage Industries Corporation (BSCIC) should not be viewed simply as an administrative matter but rather as a significant legal institutional reform. The Prime Minister's Office has already formed an inter-agency committee to review the restructuring process, and recent discussions suggest that the first phase may involve the consolidation of BIDA, BEZA, PPPA and BHTPA.
From a legal-institutional perspective, the proposed merger raises important questions concerning statutory harmonisation, administrative jurisdiction, delegated authority and regulatory accountability. Currently, the legal processes apply differently to investors depending on whether they are in an economic zone, an export processing zone, a public-private partnership, or general investment regime and face different approval systems, incentives, land administration rules and dispute resolution mechanisms. These parallel legal structures have regulatory unevenness and induce negotiation-based governance at the expense of rule-based governance. Instead of clear rules, investors often depend on discretionary administrative interpretation. This undermines transparency and will likely contradict principles of equal treatment that are now common under international investment law.
Therefore, a single Investment Promotion Agency (IPA) supported by a comprehensive investment law could improve the situation through standardised approval procedures and streamlined licensing requirements, clearly defined institutional authority, and reduced overlap between jurisdictions. More importantly, it would enhance the state's capacity to implement an investment governance framework consistent with sound principles of administrative efficiency, procedural fairness and regulatory predictability. Such reforms assume an even more critical role given that Bangladesh will soon be graduating from LDC status and the competitive pressures on maintaining foreign investment both regionally and globally are increasing.
In this regard, the comparative experiences of Vietnam and China are instructive. Success in Vietnam after Doi Moi in 1986 was largely through the setting up of a much more coherent legal and institutional environment connecting investment policy, trade liberalisation, industrial zones and export-oriented production. Likewise, the Chinese experience of Reform and Opening Up in 1978 depended on a slow and steady but gradual establishment of legally predictable regimes relevant for special economic zones, foreign investment statutes, taxation legislature, industrial incentives. Although both countries followed rather divergent political and economic paths, they each created relatively unified legal systems that were suited for sectoral industrialisation in automotive, electronics, semiconductors and digital services.
This is why the IPA merger proposal should not just be seen as a vehicle for speeding up approvals. More generally, its importance will depend on whether it can sustain a pivot to strategic investment management with a greater focus on industrial upgrading. Ideally, a single authority should have sufficient statutory powers and institutional strength to not only guide the entry of investments, but also identify priority sectors, attract anchor investors, nurture domestic supply chains and link investment policy with long-term industrial strategy.
A more general lesson emerging both from UNCTAD's assessment and comparative experience in Asia is that investment climate reform must not be separated from institutional and legal reform. Fiscal incentives cannot alone attract top-quality FDI. Investors are still more interested in predictable regulatory environments, enforceable contracts, efficient administrative procedures, transparent governance, reliable infrastructure and coherent dispute resolution systems. UNCTAD stressed that Bangladesh can attract quality investment as long as there is coordinated institutional reform to support diversification, technology transfer, employment generation and industrial upgrading.
The experience of Vietnam and China demonstrates that successful investment climates are not created through promotion alone. These are constructed through institutions and legal systems which can provide coordination, credibility, predictability and continuity. So, for Bangladesh, the key issue is not just to attract more FDI but to build a legal and institutional system that can ensure that investment supports domestic capacity building, export promotion and moving up the global production ladder.
Md Sayful Islam, Deputy Director, Bangladesh Investment Development Authority (BIDA),
Prime Minister's Office.
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