Foreign Direct Investment and Bangladesh’s SDG Targets: Turning Capital into Sustainable Growth

Foreign Direct Investment (FDI) is increasingly important to Bangladesh’s efforts to achieve the Sustainable Development Goals (SDGs) by 2030. Beyond providing foreign capital, productive FDI can support industrialisation, employment, technology transfer, export diversification, infrastructure development and integration into global value chains.

The relationship is particularly strong with SDG 8 (Decent Work and Economic Growth), SDG 9 (Industry, Innovation and Infrastructure), SDG 7 (Affordable and Clean Energy), SDG 13 (Climate Action) and SDG 17 (Partnerships for the Goals).

FDI and SDG financing

Bangladesh requires substantial investment to achieve its development targets. Domestic resources remain the principal source of development financing, but foreign investment can supplement domestic capital and provide access to international technology, management expertise and global markets.

SDG Target 17.3 calls for mobilising additional financial resources for developing countries, while Target 17.5 specifically calls for investment-promotion regimes for least developed and developing countries. FDI therefore represents an important component of the international partnership envisaged under the SDGs.

Recent FDI trend

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Bangladesh has experienced some improvement in FDI inflows in recent years. According to Bangladesh Bank, net FDI increased from approximately $1.42 billion in

FY2024 to $1.69 billion in FY2025. Separately, calendar-year data reported by Bangladesh Investment Development-related authorities indicate net FDI of around $1.77 billion in 2025, compared with approximately $1.27 billion in 2024. However, the headline increase needs to be interpreted carefully. A significant portion of recent inflows has involved reinvested earnings and intra-company financing, rather than entirely new equity investment. This means Bangladesh needs to focus not only on increasing the volume of FDI but also on attracting new, productive and export-oriented investment.

Contribution to SDG 8

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One of the most direct channels through which FDI contributes to sustainable development is employment.

Foreign-owned and joint-venture companies create direct jobs, while additional employment can emerge through suppliers, logistics companies, distributors and service providers. Investments in manufacturing, information technology, pharmaceuticals, electronics and modern services can also create opportunities for higher-skilled employment.

The quality of employment is

equally important. FDI projects that provide training, workplace safety and opportunities for career development can contribute more substantially to the objectives of SDG 8 than investments based primarily on low-cost labour.

Industrialisation and technology

SDG 9 places emphasis on resilient infrastructure, inclusive and sustainable industrialisation and innovation.

For Bangladesh, FDI can accelerate this process by bringing modern production technology and international management practices into domestic industries. Foreign investors can also connect

Bangladeshi firms with multinational supply chains.

This is particularly relevant as Bangladesh seeks to diversify beyond traditional export sectors. Electronics, pharmaceuticals, light engineering, automotive components, information technology, agro-processing and advanced manufacturing could provide new areas for investment.

FDI and export diversification

Bangladesh's export economy remains heavily concentrated in readymade garments. FDI can contribute to diversification by connecting local production with international buyers and distribution

networks.

Foreign investors operating in export-oriented industries can bring international standards, quality-control systems and market knowledge. Domestic firms participating in their supply chains may consequently gain access to new technologies and overseas markets.

The objective should therefore be to attract FDI that creates additional export capacity, rather than investment that simply competes with existing domestic businesses in protected markets.

Green investment and climate action

Climate change adds another

dimension to Bangladesh's FDI strategy.

Investment in renewable energy, energy-efficient factories, waste management, electric mobility, climate-resilient infrastructure and low-carbon technologies can contribute simultaneously to SDG 7 and SDG 13.

Bangladesh can therefore increasingly promote green FDI by providing transparent regulatory frameworks and appropriate incentives for environmentally sustainable projects.

At the same time, environmental safeguards need to remain integral to investment approval. Investment

that increases pollution or resource depletion without adequate mitigation may generate short-term economic activity but undermine broader SDG objectives.

Economic zones and investment opportunities

Economic zones and export-processing areas can play an important role in attracting FDI if they provide reliable electricity, gas, water, transport, telecommunications and efficient customs services.

The investment environment also depends on factors beyond physical infrastructure. Investors generally require predictable regulations,

efficient dispute resolution, transparent taxation, access to land and faster administrative approvals.

Recent investment-policy assessments of Bangladesh have highlighted areas such as skills development, stronger linkages between foreign and domestic enterprises, land and infrastructure availability, PPP implementation and further digitalisation of investment services as important areas for improvement.

From FDI quantity to FDI quality

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The central policy question for Bangladesh is no longer simply how much FDI can be attracted.

The more important question is what kind of FDI Bangladesh needs to achieve the SDGs.

A $1 billion investment that creates technology-intensive industries, trains local workers, develops domestic suppliers and generates exports may have a substantially different development impact from an investment of the same value that has limited local linkages.

Bangladesh could therefore consider linking investment incentives with measurable outcomes such as:

employment generation;

export growth;

technology transfer;

local procurement;

worker training;

research and development;

energy efficiency;

renewable-energy use; and

environmental performance.

Strengthening local linkages

Another major opportunity is to connect foreign companies with Bangladeshi small and medium enterprises.

Local supplier-development programmes could help domestic companies meet international quality and certification requirements. Such linkages would allow FDI to generate wider economic benefits rather than

remaining concentrated within foreign-owned enterprises. A stronger domestic supply chain would also improve resilience and increase the value retained inside the Bangladeshi economy.

Policy priorities toward 2030

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As Bangladesh moves toward the 2030 SDG deadline, several policy priorities could strengthen the development impact of FDI.

First, investment promotion should increasingly target technology-intensive and export-oriented industries.

Second, Bangladesh should develop

specialised investment strategies for pharmaceuticals, electronics, semiconductor-related industries, ICT, renewable energy, agro-processing and advanced manufacturing.

Third, investment approval should become faster and more predictable through fully integrated digital services.

Fourth, economic zones should offer reliable infrastructure and efficient logistics rather than relying solely on tax incentives.

Fifth, FDI incentives should increasingly be linked to measurable economic and environmental outcomes.

Sixth, stronger partnerships between foreign investors, universities, technical institutions and domestic companies can improve technology transfer and workforce skills.

Conclusion

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FDI can Become Language an important instrument for Bangladesh's SDG implementation, but it is not a substitute for domestic investment, good governance or institutional reform.

The greatest opportunity lies in transforming FDI from a source of foreign capital into a platform for industrial transformation.

If Bangladesh can attract investment that combines capital with technology, skills, exports, domestic supply chains and environmental sustainability, FDI can make a meaningful contribution to the country's SDG agenda. The objective for 2030, therefore, should not simply be “more FDI.” It should be “more productive, sustainable and development-oriented FDI.” That approach would connect foreign investment more closely with Bangladesh's long-term goals of economic diversification, decent employment, technological upgrading and sustainable development.

Writer: Managing Director, North Bengal Paper Mills Ltd, [email protected]

(Dhakatimes/29 september/RZ)