The FDI Drought: A US$450 Billion Economy Foreign Capital Skips

Executive Summary. Bangladesh received US$1.28 billion in net foreign direct investment in 2024, the least of six Asian economies and 6.3% of the peer median of US$20.17 billion, a shortfall of US$18.89 billion in a single year. Set against an economy of US$450.1 billion, that is 0.28% of GDP. The comparison that should end the argument is Vietnam: an economy of US$476.3 billion, close in size to Bangladesh's, which drew 15.79 times as much foreign investment. The gap is not a shortage of capital or of thrift. Gross capital formation was 28.54% of GDP in 2025, fourth of the six and 93% of the peer median, funded by gross savings of 34.81% of GNI, second highest of the five countries reporting. Bangladesh builds at close to a normal rate on its own money, and carries the smallest external debt stock of the six in absolute dollars, US$104.5 billion. Capital is not the binding scarcity. Foreign capital, and everything bundled with it, is simply not arriving, and since 2015 it has been arriving less.

Least of the six, and not narrowly

The 2024 ledger of net FDI inflows, in current US dollars: India 27.14 billion, Indonesia 24.28 billion, Vietnam 20.17 billion, Thailand 14.30 billion, Pakistan 2.67 billion, Bangladesh 1.28 billion. Last of the six, and the distance is not a matter of ranking noise. The peer median, which happens to be Vietnam's own figure, is US$20.17 billion. Bangladesh took 6.3% of it.

The Pakistan line is the one that removes the easy explanations. Pakistan's economy is smaller than Bangladesh's, US$371.7 billion against US$450.1 billion, and it has spent the period under acute external financing stress. It still took US$2.67 billion. Whatever is holding foreign equity out of Bangladesh is not macroeconomic calm, because Bangladesh has more of that than the comparator that outdrew it.

Source: World Bank World Development Indicators, foreign direct investment, net inflows, BoP, current US$ (BX.KLT.DINV.CD.WD), 2024.

Two things this series is not, before it is used for anything. It is a balance-of-payments flow, net of disinvestment and repatriated capital, so a single large exit compresses a small country's number and a single large acquisition inflates it. And it is one year in current dollars, undeflated. The pack behind this essay carries no FDI stock, no sector split and no source-country split, so nothing here identifies which industries the missing money would have entered.

The capital exists. It is domestic.

The reflex explanation for low foreign investment is that a country is too poor to be worth entering, or too capital-starved to absorb the money. Neither survives the investment data.

Gross capital formation in Bangladesh was 28.54% of GDP in 2025. India ran 34.6%, Vietnam 30.8%, Indonesia 30.62%, Thailand 22.07%, Pakistan 14.28%. Bangladesh is fourth of the six, 2.08 points below the peer median of 30.62% and 93% of it. That is a mid-table investment rate, not a collapsed one, and it is the result of a long climb: 16.46% of GDP in 1990 to 28.54% in 2025, a gain of 12.08 points, or 73.41% over the period.

Source: World Bank WDI, gross capital formation, % of GDP (NE.GDI.TOTL.ZS), 2025.

The money behind that rate is raised at home. Gross savings were 34.81% of GNI in 2025, second highest of the five countries reporting (Vietnam has no 2025 figure in this series), 5.5 points above the peer median of 29.32% and 1.19 times it. Bangladesh saves more than most of its comparators and invests roughly as much as they do.

Nor is the shortfall in equity being made up with foreign borrowing. External debt stocks stood at US$104.5 billion in 2024, the smallest of the six in absolute dollars, 54.5% of the peer median of US$191.8 billion, and below Pakistan's US$129.7 billion even though Bangladesh's economy is the larger of the two. That is an absolute stock, not a ratio to GDP or to exports, and the pack contains no debt-service or debt-to-GDP series, so it settles nothing about sustainability. What it does establish is the shape of the external balance sheet: Bangladesh is neither selling much equity to foreigners nor owing them much. Both channels of foreign capital are narrow at once.

A reversal, not a plateau

Measured against its own past, the FDI line looks like growth. Net inflows were US$280.4 million in 2000 and US$1.28 billion in 2024, 4.6 times the level, up 355.7%. Those are current dollars over 24 years with no deflator in this data, and the economy grew a great deal over the same span, so the multiple flatters the record.

The shape inside the period matters more than the endpoints. Inflows peaked in 2015 and have more than halved since, while GDP kept expanding, with growth at 4.2% in 2024. A stable low share of foreign capital can be read as a national preference. An absolute decline in a growing economy over a decade cannot.

Source: World Bank WDI, foreign direct investment, net inflows, BoP, current US$ (BX.KLT.DINV.CD.WD), Bangladesh against comparators, 2000-2024.

What foreign equity carries that domestic saving does not

If domestic savings can fund the machines, the question is what is actually lost. The answer is that FDI is a bundle, and the capital is the least scarce item in it. A foreign plant arrives with a production process already debugged elsewhere, a buyer that is also the owner, a compliance and audit regime imported wholesale, and a place in a distribution network that a domestic firm has to spend a decade earning. Domestic saving buys the equipment. It does not buy the order book, and it does not buy the standards that come attached to it.

The pack contains one measure of the friction an assembly investor prices first. Bangladesh's logistics performance index score was 2.6 in 2022, the lowest of the five countries reporting on that round (Pakistan has no 2022 score), against a peer median of 3.35: Thailand 3.5, India 3.4, Vietnam 3.3, Indonesia 3.0. The gap is 0.75 of a point, and Bangladesh scores 77.6% of the median. An export plant lives on lead-time predictability, and lead time is exactly what that index is trying to capture.

That association is worth stating carefully, because it is easy to over-read. Six countries, one round of one index, no controls: this is a pattern, not a mechanism proved. The index is built substantially on practitioner survey responses, so it partly measures the reputation that also shapes investment decisions, which means the two can move together without either causing the other. And the pack holds none of the variables that would plausibly do the real work: distance to the East Asian electronics cluster, energy availability, the exchange rate regime, corporate tax and profit-repatriation rules, or the size and skill mix of the labour force. Any of those could generate this pattern on its own.

One alternative reading deserves particular weight, because it is the one that would most change the conclusion. Bangladesh's largest export industry expanded predominantly under domestic ownership, on contract manufacturing relationships with foreign buyers who supplied specifications, credit terms and upgrading pressure without taking equity. If that is the dominant form of foreign involvement, then the FDI series understates how integrated the country actually is, and the drought is partly a measurement artefact of where the ownership boundary happens to fall. Nothing in this data resolves ownership structure. It reports flows of equity, and equity is not the only way a foreign firm shapes a factory.

What would change this conclusion

A specific, checkable test. If net FDI inflows rise above US$5 billion by 2030 without any measured improvement in logistics performance or in the terms on which foreign investors enter and exit, then the drought was a pricing cycle rather than a structural feature, and the argument here is wrong. If inflows are still near 0.28% of GDP in 2030 after another growth cycle, the constraint is in the operating environment, not in the weather.

Three moves, each with an owner and a signal.

1. Fix clearance and dwell time before writing another incentive package. Tax holidays discount a cost that a foreign board can already forecast; unpredictable lead times price a risk it cannot. Owner: the customs administration together with the port and inland container depot authorities. Success signal: an overall logistics performance index score above 3.0 in the next published round, which would close most of the 0.75-point gap to the peer median.
2. Publish the exit terms, not only the entry terms. What an investment committee prices is the queue for foreign exchange and the rules for repatriating dividends and capital, and a rule that is unwritten is priced as the worst plausible version of itself. Owner: Bangladesh Bank. Success signal: net FDI inflows above 0.5% of GDP in the WDI series by 2030, from 0.28% in 2024.
3. Compete for the supplier tier, not the anchor plant. Component and intermediate producers move faster, need less land and fewer bespoke concessions, and are the firms that make a later anchor investment viable. Owner: the investment promotion authority with the economic zones authority. Success signal: net inflows recovering above their 2015 peak in current dollars and holding there for three consecutive years, which the series has not done in the decade since.

The counterargument

The strongest objection is not that the numbers are wrong. It is that they describe a defensible model. Bangladesh built a US$450.1 billion economy of 173.6 million people, growing 4.2% in 2024, on gross savings of 34.81% of GNI, and it did so while running the smallest external debt stock of the six in absolute dollars. Foreign direct investment brings volatility, transfer-priced profits, and policy leverage to firms that can relocate. A country that funds its own capital formation keeps ownership and keeps the returns onshore. On this reading, the FDI line is not a drought; it is a deliberate discount that Bangladesh has declined to pay.

Two answers. First, the comparison that hurts is not with an FDI-dependent outlier. It is with Vietnam, an economy of US$476.3 billion against Bangladesh's US$450.1 billion, investing 30.8% of GDP against Bangladesh's 28.54%, a modest difference in rate, alongside 15.79 times the foreign investment. The two countries invest at broadly similar intensity; only one of them is also importing production systems and buyer relationships with the money. Whether Vietnam's foreign capital added to domestic saving or displaced it cannot be settled here, because Vietnam does not report a 2025 savings figure in this series.

Second, the self-reliance defence would be much stronger if the line were flat. It is not. Inflows peaked in 2015 and have more than halved since, in a decade when the economy grew and when Bangladesh's own investment rate reached 28.54% of GDP. A country can reasonably choose to build with its own savings. What it cannot do is treat a decade of decline in the one form of capital that arrives with a market attached as the same thing as that choice.

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Data sources: World Bank World Development Indicators, retrieved from the BDPolicyLab data lake, 2026-08-10. Comparators are India, Pakistan, Indonesia, Thailand and Vietnam; "peer median" is the median of the comparators reporting in the stated year, excluding Bangladesh. FDI, GDP, external debt and population are 2024; gross capital formation and gross savings are 2025; the logistics performance index is the 2022 round, being the latest year available for each. Figures drawn from different vintages are compared as levels, not combined into ratios, except for FDI as a share of GDP, where both terms are 2024. Vietnam does not report gross savings for 2025 and Pakistan has no 2022 logistics score, so those comparisons rest on five countries, not six.

Sources

1. World Bank WDI, Foreign direct investment, net inflows (BoP, current US$), BX.KLT.DINV.CD.WD: https://data.worldbank.org/indicator/BX.KLT.DINV.CD.WD
2. World Bank WDI, GDP (current US$), NY.GDP.MKTP.CD: https://data.worldbank.org/indicator/NY.GDP.MKTP.CD
3. World Bank WDI, Gross capital formation (% of GDP), NE.GDI.TOTL.ZS: https://data.worldbank.org/indicator/NE.GDI.TOTL.ZS
4. World Bank WDI, Gross savings (% of GNI), NY.GNS.ICTR.ZS: https://data.worldbank.org/indicator/NY.GNS.ICTR.ZS
5. World Bank WDI, External debt stocks, total (DOD, current US$), DT.DOD.DECT.CD: https://data.worldbank.org/indicator/DT.DOD.DECT.CD
6. World Bank WDI, Logistics performance index: Overall (1=low to 5=high), LP.LPI.OVRL.XQ: https://data.worldbank.org/indicator/LP.LPI.OVRL.XQ