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An investor's visit is an expression of interest. A factory, a research centre or a long-term financial commitment is something else. In August, executives representing 25 American companies visited Dhaka in search of opportunities in energy, technology, finance and manufacturing.

However, figures released by Bangladesh Bank in October revealed that net foreign direct investment (FDI) fell by 28% in the first half of 2026. The two facts are not contradictory. They reflect the gap between attention and investment.

For decades, Bangladesh enjoyed wide access to the US consumer market, most notably through ready-made garments. Yet selling clothes to retailers is different from attracting American capital to productive enterprises. Orders can increase without any investment in construction, specialist training or long-term involvement in Bangladesh's economy. It is time for the next phase of cooperation to distinguish between trade and investment.

Despite a decline in 2026, the country attracted approximately $1.77 billion in net FDI in 2025, an improvement on the previous year. However, fresh equity capital did not increase. Instead, investment came from reinvested profits and loans between companies. This suggests that existing investors remained interested in Bangladesh, while few new companies entered the market.

What are the reasons behind this?

They are less exciting than those featured in investment roadshow presentations. They include contract enforcement, unexpected regulatory changes, the availability of electricity, the ease of clearing imported equipment and the repatriation of dividends.

In its 2026 assessment of Bangladesh's trade barriers, the US government highlighted the lengthy and complicated procedures involved in transferring investment-related funds abroad. International investors also complain about excessive bureaucracy and unpredictable taxation. Tax holidays are of little use when business planning is uncertain.

The Agreement on Reciprocal Trade, signed by the US and Bangladesh in February, provides a good starting point.

The agreement covers regulatory practices, intellectual property, labour rights, digital trade and investment barriers. Both sides have indicated that US development finance institutions may consider supporting eligible projects. However, a trade agreement is not an investment deal, and purchases of American energy, aircraft and agricultural products should not be confused with FDI in Bangladesh. Success will depend on implementation, commercial feasibility and clear rules.

Transparency becomes especially important in the context of infrastructure development. In September, US Ambassador Brent Christensen underlined the importance of transparent competition in major projects.

This advice holds true regardless of who the bidder is. Holding competitive tenders, making contract details public and avoiding preferential treatment can protect taxpayers' interests while giving serious investors a fair opportunity. A country seeking economic diversification should not simply replace one favoured foreign partner with another.

Bangladesh has made a positive institutional move.

In August, it consolidated its investment promotion, economic zone and public-private partnership (PPP) agencies under Invest Bangladesh. This is a welcome move. However, investors will judge the reform by what happens when they walk through the door: how many additional permits are required, how long it takes to obtain land and environmental clearances, and whether ministerial decisions are honoured. A change of signboard should not be mistaken for a change in the process itself.

Three sectors need immediate attention.

First, energy. A credible roadmap covering gas supplies, grid reliability, renewable energy sources and competitive procurement can attract investment far beyond the energy sector.

Second, digital services. Payments, financial technology, cloud infrastructure and cybersecurity require reliable data regulations, consumer protection and enforceable intellectual property rights.

Third, higher value-added manufacturing. Medical devices, pharmaceuticals, industrial components, textile inputs and logistics can connect Bangladesh's workforce with American technology and markets.

None of these sectors can develop on its own. Each requires appropriate incentives. According to the World Bank Group, there are investment opportunities in digital financial services, paints and dyes, affordable housing and sustainable ready-made garments, but certain regulatory constraints need to be removed. 

Even the ready-made garment sector has considerable potential for value addition through the development of man-made fibres, technology and improved working conditions. It would be wrong to assume that moving beyond the garment industry means neglecting the sector that built the country's export economy.

According to the World Bank Group, there are investment opportunities in digital financial services, paints and dyes, affordable housing and sustainable ready-made garments, but certain regulatory constraints need to be removed. Even the ready-made garment sector has considerable potential for value addition through the development of man-made fibres, technology and improved working conditions. 

A company considering setting up an engineering facility in the region will be looking for specialists — technicians, managers and researchers — rather than simply low-cost labour. Collaboration between Bangladeshi universities and vocational institutions and American companies can help develop the specialised skills required. Labour rights, predictable wages and workplace safety should be considered part of the country's competitive advantage, not a price to pay to satisfy trading partners.

The government could begin with a publicly monitored 12-month reform programme. This should include targets for reducing the time required for approvals and customs clearance, facilitating dividend repatriation, setting realistic timelines for dispute resolution and disclosing major procurement decisions. 

The government should also invite companies already operating in the country to identify problems and assess improvements. The focus should be on a limited number of commercially viable projects rather than ambitious investment targets that may never materialise.

American companies, however, should also move beyond expressing enthusiasm during visits. A serious partnership involves capital, technology, human capital development and the willingness to assume commercial risks. Bangladesh should offer investors fair treatment, not preferential treatment. The same rules should apply to Japanese, European, Chinese and other investors.

This article was originally published on The Business Standard.

Views in this article are author’s own and do not necessarily reflect CGS policy.