Budget investment outlook: Problems and prospects

The investment-GDP ratio has long been a structural problem in the country’s economic history. The total investment-GDP ratio was about 29.3 percent in the 2023-24 financial year. Of this, the share of private investment was about 23 percent. This is considerably lower than the 30-35 percent seen in competing economies such as Vietnam and Cambodia. Foreign Direct Investment (FDI) in Bangladesh has remained stagnant at below one percent of GDP year after year. In contrast, this rate reaches four to six percent in Vietnam and 11-13 percent in Cambodia. 

In this context, the BNP government’s idea of transforming from a debt-based economy to an investment-based economy, as announced in the 2026-27 budget, is timely and points in the right direction. However, the important question is how much of a practical and workable framework exists behind this idea, and whether there are enough financial resources to support it. This article analyses the four main pillars of the Deregulation Agenda, Financing Framework, Creative Economy and Sports Economy. It uses comparative data to assess the reasoning behind each initiative, the amount of money allocated, and how realistic the plans are.

The time-bound commitments made by the BNP government to make investment easier are ambitious and clearly stated in numbers. Measures have been announced to complete the licensing process in a maximum of seven days under the single window system, to finish the visa issuance process for foreign investors in 10 days, and to complete company registration within 48 hours. The government has also announced the introduction of goods clearance facilities in the green channel under the Authorised Economic Operator (AEO) system and plug-and-play investment facilities. 

These commitments need to be viewed in the light of the history of the World Bank’s Doing Business Index. Bangladesh has long been ranked near 168th position out of 190 countries in this index. In the past, it took an average of more than 33 days and more than eight procedural steps to start a business. By comparison, Vietnam has reduced its company registration process from 16 days to an average of three days by introducing a comprehensive digital one-stop service. Singapore completes company registration in just one day.

Therefore, the target of 48-hour company registration is not impossible by regional standards. However, its successful implementation depends on real-time data integration between the Registrar of Joint Stock Companies and Firms (RJSC), the National Board of Revenue (NBR), and the Bangladesh Investment Development Authority (BIDA). The budget document does not mention any specific amount for technology investment or a clear timeframe for this digital connection between institutions. This creates a significant gap between the announcement and actual implementation. Several governments in the past have also announced the launch of one-stop services. Despite the One-Stop Service Act under BIDA being passed in 2016, in practice most services have not been fully digitalised. Investors still have to make physical visits to multiple offices. Given this historical pattern, it does not make economic sense to accept the current commitments without careful examination.

Investment financing infrastructure

The e-loan facility announced in the budget, which offers a maximum loan of Tk50,000 for a period of 12 months, may be a useful financial tool for small entrepreneurs. However, the adequacy of this amount must be judged against real conditions. According to Bangladesh Bank, the initial capital needed to set up a small enterprise is on average between three and five lakh taka. Therefore, an e-loan of Tk50,000 may serve as a supplementary facility, but describing it as a transformative tool for small and medium enterprises or the SME sector does not match reality. 

Although the Tk2,000 crore allocated for providing loans on easy terms to SME entrepreneurs appears to be a large sum, the number of registered SMEs in Bangladesh is close to one crore (according to the SME Foundation). This means the average allocation per institution is only around Tk2,000, which is negligible in practical terms.

The promise to expand the corporate bond market also shows an important direction. Bangladesh’s bond market is currently less than one percent of GDP, compared with over 50 percent in Malaysia and around 18 percent in India. The announcement to increase the use of bonds, sukuk and infrastructure funds to finance long-term projects is a step in the right direction. However, unless Bangladesh addresses its structural weaknesses — such as the lack of depth in the capital market, the limited presence of institutional investors, and the immature rating agency system — policy announcements alone will not create real market depth. 

The decision to reduce government borrowing from the banking sector to Tk 1.18 trillion from Tk 1.12 trillion in the last financial year should, in theory, create more room for credit to flow to the private sector. However, in reality, whether this extra space actually reaches the private sector depends on the banks’ ability to assess creditworthiness and their willingness to take risks, especially with non-performing loans standing at 35.73 percent in the banking sector. Simply reducing government borrowing does not automatically lead to higher private investment if banks remain risk-averse and hold on to liquidity.

Creative economy

The attempt to recognise the creative economy as a separate sector in the budget is itself a positive change. It gives official recognition to creative industries for the first time in Bangladesh’s economic planning. The establishment of a world-class creative hub on a public-private partnership (PPP) model on 160 acres of land in Purbachal, Dhaka, the preparation of a 10-year investment plan to build regional creative hubs across the country, the formation of a National Pool of Designers made up of local designers, and the initiative to identify creative products such as pottery, weaving, Shitalpati and Shatranj under the One Village, One Product programme — these are all well-considered policies.

However, when examined in terms of actual numbers, an inconsistency becomes clear. The initial allocation of Tk 3 billion for the development of the creative economy, together with the plan to raise an additional Tk 5 billion from Bangladesh Bank’s CSR sector, gives a total of Tk 8 billion. This represents just 0.085 percent of the Tk 938,000-crore national budget. 

By comparison, India’s creative economy (also known as the orange economy) contributed about 2.5 percent to the country’s GDP in the 2022-23 financial year. The Indian government has allocated several thousand crore rupees to a dedicated cultural and creative industries fund. Indonesia has given its creative economy agency the status of a separate ministry and allocates hundreds of millions of dollars every year. This has helped the sector grow to contribute more than seven percent of GDP. 

The BNP government’s allocation of Tk 8 billion to build world-class infrastructure on 160 acres of land, create a national pool of designers, and expand the international market for rural handicrafts at the same time appears to be at odds with financial reality. The apparent shortage of government funding may be partly addressed if there is a strong plan to attract private investment under the PPP model. However, the budget document contains no specific projections about the nature and scale of this private participation.

Structural challenges and overall risks

The overall challenges in this area can be divided into three levels. The first is institutional incoherence. Investment facilitation requires coordination among at least five institutions (BIDA, RJSC, NBR, the Department of Environment, and local government agencies). Historically, coordination between different ministries in Bangladesh has been a persistent weakness. 

The second is the link between political stability and investment decisions. Foreign investors generally place greater importance on long-term institutional stability than on short-term policy changes. Building long-term policy credibility under a new government is a natural challenge that cannot be solved overnight simply by announcing a budget.

In addition, Bangladesh’s labour productivity also has a major influence on investment decisions. According to the Asian Productivity Organisation, Bangladesh’s labour productivity is about 40 percent lower than that of Vietnam. This factor is often more important than regulatory simplification when foreign investors make decisions. Therefore, if investment attraction strategies focus only on administrative simplification and are not combined with skill development and improvements in infrastructure competitiveness, the expected growth in investment may not materialise.

Recommendations and policy solutions

A few practical recommendations can be made. Firstly, a detailed digital integration roadmap should be published to achieve the 48-hour company registration target. This should include API-based real-time data sharing between RJSC, NBR and BIDA. Secondly, government allocations for the creative economy should be clearly identified as a seed fund, and specific co-financing agreements with private companies and international development partners should be publicly announced. This would bring transparency about the actual financial resources available. 

Thirdly, separate regulatory reforms should be introduced to strengthen credit rating agencies and to develop institutional investors such as pension funds and insurance companies. This would help expand the corporate bond market. Fourthly, a tiered lending system can be created within the SME lending framework alongside the e-loans. After the initial loan of Tk50,000, proven entrepreneurs could access next-tier loans ranging from Tk5 lakh to Tk 10 lakh.

Writer: Mahmudul Hasan Kamal  is Spokesperson of Bangladesh Study Forum (BDSF)

The article was originally published in the Bengali online edition of The Daily Samakal and has been rewritten for the English version by Mohammed Humayun Kabir, Assistant News Editor.