Regulatory Barriers in Bangladesh’s Foreign Direct Investment Framework: Analysis of Legal Gap and Reform Proposals

Regulatory Barriers in Bangladesh’s Foreign Direct Investment Framework: Analysis of Legal Gap and Reform Proposals

Professor Deng Lie, Dr. Manjurul Alam*

¹Professor, School of Law, Huazhong University of Science and Technology, Wuhan

²Senior researcher, School of Law, Zhongnan University of Economic and Law, Wuhan

*Corresponding Author

DOI: https://dx.doi.org/10.47772/IJRISS.2025.90600042

Received: 14 May 2025; Accepted: 20 May 2025; Published: 28 June 2025

ABSTRACT

The article analyses the regulatory barriers affecting Bangladesh’s foreign direct investment (FDI) by methodically examining the current legal environment. Notwithstanding Bangladesh’s significant achievements in attracting foreign direct investment, ongoing regulatory obstacles consistently hinder investment potential. The study employs a mixed-methods approach, combining academic legal analysis with empirical data collected through stakeholder research and comparative case studies of effective foreign direct investment (FDI) frameworks in similar countries. Our findings reveal three significant regulatory deficiencies: inadequate protection of property rights, complex bureaucratic processes for investment approval, and inconsistent dispute resolution mechanisms. The research outlines the essential legal requirements for an amendment, particularly in relation to the Foreign Private Investment Act and the Bangladesh Investment Development Authority Act. We suggest specific legislative modifications, including expedited investment approval procedures, strengthened intellectual property safeguards, and the establishment of a dedicated investment dispute resolution tribunal. These recommendations aim to harmonize Bangladesh’s FDI framework with worldwide best practices while ensuring adequate oversight from regulatory bodies. This research contributes to the academic literature and informs policy development by providing evidence-based reform ideas to enhance Bangladesh’s FDI regulatory framework.

Keywords: Foreign Direct Investment (FDI), Regulatory Barriers, Bangladesh Investment Law, Legal Framework Reform, Investment Policy, and Administrative Implementation Gaps

LITERATURE REVIEW

The academic discussion about Bangladesh’s foreign direct investment (FDI) regulatory framework has made significant progress over the past few years, highlighting advancements and ongoing issues in the country’s investment environment.[1] This review synthesizes the current literature and highlights the unique contributions of the present study.

Existing research primarily examines the progression of Bangladesh’s FDI regulations since independence. Rahman (2019) outlines the evolution of the regulatory environment, beginning with the Foreign Private Investment Act of 1980, and highlights how this initial legislation laid the groundwork for foreign investment.[2] Islam and Hossain (2018) contend that although these early frameworks were innovative for the period, they inadvertently created bureaucratic difficulties that have consistently affected contemporary investment practices. [3]This research aims to address the gap in studies that primarily focus on past progress, while overlooking contemporary issues.

Previous academic research has analyzed the fundamental inadequacies within the existing regulatory system. Hossain et al. (2021) identified procedural complexity, regulation overlap, and implementation discrepancies as significant obstacles to foreign direct investment (FDI).[4] Their analysis demonstrates how many entities with overlapping responsibilities generate administrative barriers that hinder interested investors. This research comprehensively examines obstacles at various stages of investment, with a focus on pre-registration, post-registration, and operational phases.

The literature extensively addresses pre-registration barriers. Khan and Ahmed (2023) document challenges, including complex documentation requirements, multiple agency approvals, and lengthy processing times.[5] However, their research primarily focuses on procedural aspects without examining the deficiencies of the underlying legal framework. This research fills this gap by comprehensively analyzing the legal foundations underlying these procedural barriers.

Regarding operational challenges, Hassan (2021) focuses on foreign exchange limitations and notes that, despite reform attempts, these continue to pose significant difficulties for overseas investors.[6] This is based on World Bank (2022) research, which shows that foreign exchange rules are a primary obstacle to Foreign Direct Investment (FDI) in Bangladesh. [7]The current study expands this approach by examining how these operational limitations interact with other regulatory barriers, offering a more comprehensive perspective on the investment environment.

Comparative analyses have provided significant insights into Bangladesh’s standing in attracting foreign direct investment (FDI). Singh et al. (2022) analyze FDI frameworks among South Asian countries, highlighting that Bangladesh’s regulatory landscape lags behind that of its regional counterparts.[8] Although these comparisons are beneficial, they often fail to provide an in-depth examination of specific legal provisions and their implementation. This study addresses this gap by offering a comprehensive comparative analysis of specific regulatory rules and their implementation in chosen Asian nations.

The current literature focuses heavily on implementation concerns. Ali and Hassan (2023) cite insufficient institutional capacity, lack of inter-agency cooperation, and inconsistent policy interpretation as primary obstacles. This research builds upon these findings by examining the necessary legislative and institutional reforms to address implementation gaps, particularly in light of Bangladesh’s transition from LDC status.[9]

Studies on economic impact have tried to assess expenditures associated with regulatory obstacles. Rahman et al. (2022) estimate that regulatory inefficiencies decrease prospective FDI inflows by 20-30% annually.[10] Although these studies offer significant economic insights, they frequently lack a comprehensive survey of the legal procedures by which these impacts emerge.12 This research enhances the literature by comprehensively analyzing the legal processes through which regulatory obstacles affect economic outcomes.[11]

This research presents numerous novel ideas that contribute to the current literature. Initially, it thoroughly examines regulatory obstacles at various stages of investment, analyzing the interactions and cumulative effects of these barriers on investment flows. [12]This section presents a comparative analysis of specific legal provisions and their implementation in selected Asian countries, highlighting successful regulatory reforms through concrete instances.[13] This study analyzes the unique challenges and opportunities arising from Bangladesh’s transition from LDC status, an issue that has not been sufficiently explored in the current literature.[14]

This research contributes to the literature by proposing legal and institutional reforms to address identified barriers. In contrast to previous studies that provided general recommendations, this research offers specific, actionable proposals for legislative and administrative reforms, addressing both short-term and long-term perspectives.[15]

This research examines implementation gaps by identifying issues and proposing solutions, including technological integration, institutional capacity building, and enhanced communication mechanisms.[16] Concentrating on solutions defines this research from much of the existing literature, which frequently emphasizes problem identification.[17]

This literature review identifies several deficiencies in current research that this study seeks to rectify. Although prior research has explored various aspects of Bangladesh’s FDI regulatory environment, there have been limited studies that offer a thorough analysis combining legal examination, comparative assessment, and specific reform suggestions.[18] This research enriches the literature by providing a comprehensive perspective, specifically addressing the challenges and possibilities of Bangladesh’s developing economic situation.

METHODOLOGY

This study employs a qualitative secondary data analysis approach to examine Bangladesh’s foreign direct investment (FDI) regulatory framework. The methodology systematically reviews existing legal documents, policy papers, government reports, scholarly articles, and international investment agreements. Data sources include publications from the Bangladesh Investment Development Authority (BIDA), World Bank reports, UNCTAD investment policy reviews, and relevant academic literature published between 2015 and 2024. The analysis identifies regulatory gaps through comparative assessment with international best practices and regional benchmarks. Document analysis is supplemented by examining case studies of regulatory reforms in comparable developing economies to formulate evidence-based reform proposals.

INTRODUCTION

Foreign Direct Investment (FDI) is crucial to Bangladesh’s economic development plans, serving as a vital catalyst for technological progress, job creation, and economic growth. Despite numerous policy improvements in recent decades, Bangladesh still faces significant obstacles in attracting and retaining foreign investment, primarily due to regulatory and institutional barriers. In fiscal 2022-23, Bangladesh attracted USD 2.85 billion in foreign direct investment inflows. A level that underperforms relative to the country’s market size and economic growth trend[19].

The regulatory environment for foreign direct investment in Bangladesh has evolved since independence, marked by the Foreign Private Investment (Promotion and Protection) Act of 1980 and subsequent legislative amendments[20]. Yet, the existing regulatory landscape presents a complicated web of rules, regulations, and administrative procedures that can generate significant obstacles to international investment[21]. These rules and regulations are evident in business entrance protocols, operational mandates, and investment-safeguarding systems.

The article examines the regulatory obstacles within Bangladesh’s FDI regime, examining their influence on investment flows and recommending comprehensive reform options. The analysis is especially significant as Bangladesh switches from its Least Developed Country (LDC) rank[22]. A more robust and efficient investment policy is necessary to retain its economic growth and competitiveness in the global market[23].

Recent developments in the global economy and growing regional competition for foreign direct investment highlight the importance of removing these legislative obstacles. [24]Bangladesh’s ability to simplify its regulatory structure is crucial for maintaining its market position in the global investment landscape, as neighboring nations implement aggressive reforms to attract international investment[25].

Legal Framework Overview

Main Legislative Law Concerning Foreign Direct Investment

Three critical pieces of legislation form the backbone of Bangladesh’s regulatory framework for foreign direct investment (FDI)[26]. These laws contain measures that influence the investment environment in different ways. The foundational legislation is Section 4 of the Foreign Private Investment (Promotion and Protection) Act, 1980, which ensures fair pay based on market value and establishes critical protections against expropriation. Section 6 of the Act guarantees non-discrimination between domestic and foreign investors by enshrining the idea of fair and equitable treatment. Section 7 protects investors’ rights to return money, earnings, and liquidation proceeds[27]. The execution of these safeguards is nevertheless not complex, especially regarding valuation methodology and immigration procedures[28].

The Bangladesh Investment Development Authority Act of 2016 introduced substantial institutional reforms via its principal sections. Section 16 establishes the legislative framework for the one-stop service center, which is designed to streamline investment procedures and minimize bureaucratic impediments. Section 17 outlines detailed registration criteria and processing processes, whereas Section 29 stipulates investment facilitation measures, including consulting services and dispute resolution mechanisms. Nevertheless, the practical execution of these provisions has encountered difficulties, especially in inter-agency collaboration and service delivery efficiency.

The Companies Act, 1994 (as amended in 2020), enhances these frameworks by governing company activities and ensuring compliance with regulations. Section 145 outlines the requirements for registering foreign companies, including documentation and capital stipulations, which have recently been updated through digital efforts. Section 378 defines continuous compliance responsibilities, especially financial reporting and corporate governance. In contrast, Section 384 specifies annual filing obligations. The 2020 amendments introduced substantial improvements focused on digitalization and conformity with international standards, with implementation ongoing. The legal structure, albeit extensive, must be revised to avoid deficiencies and redundancies that create regulatory obstacles in Bangladesh’s FDI process.

Additional Regulations Concerning Foreign Direct Investment

Additional legislation regulating Foreign Direct Investment (FDI) in Bangladesh includes the Investment Board Act 1989, which established the Board of Investment to facilitate and encourage private-sector investment[29]. The Export Processing Zones Act 1980 established specific industrial areas that offered tax incentives and simplified business regulations for export-oriented industries[30]. The Special Economic Zones Act 2010 expanded on the EPZ model to establish broader economic zones with more flexible rules and infrastructure support[31]. The Public-Private Partnership Act 2015 created a framework for foreign investors to participate in infrastructure and development projects through partnerships with government entities[32].

Bangladesh Investment Development Authority (BIDA)

The Bangladesh Investment Development Authority (BIDA) operates within a complex regulatory framework that defines its operating standards and efficacy. The statutory powers conferred by the BIDA Act provide the authority with comprehensive supervisory capabilities, encompassing investment promotion, facilitation, and regulatory supervision of foreign direct investments[33]. BIDA’s regulatory responsibilities include registering and approving foreign investments, granting requisite permits and licenses, and overseeing compliance with relevant rules[34]. The authority’s service delivery mechanisms comprise a one-stop service center, an online investment facilitation platform, and dedicated help cells for foreign investors; however, operational issues and bureaucratic inefficiencies frequently need to be improved to maintain their efficacy[35].

Key Regulatory Barriers

Pre-Registration Barriers

Several entrance barriers affect market accessibility and the initial setup process for foreign investors looking to open operations in Bangladesh. The Registrar of Joint Stock Companies and Firms (RJSC) requires several processes for company registration, such as name clearance, filing of the necessary paperwork, and adherence to the Companies Act of 2014’[36]The BIDA registration process requires foreign investors to submit comprehensive project plans, financial records, and technical specifications for approval, typically leading to lengthy processing timeframes. Sector-specific approvals present additional challenges, particularly in regulated sectors such as energy, telecommunications, and financial services, where investors must obtain clearances from multiple ministries and regulatory bodies. This results in a tiered approval process that can lead to significant delays in project implementation[37].

Post-Registration Barriers

Foreign businesses in Bangladesh require assistance with the government’s regulations, which encompass various levels of oversight. The Department of Environment (DoE) is responsible for granting environmental clearances. Detailed ecological impact assessments and regular compliance tracking must accompany these clearances. Processing times vary significantly depending on the project’s size and the sector’s sensitivity[38]. Obtaining permission to use land is a complex process that involves multiple authorities, including city corporations, municipal bodies, and the Ministry of Land. Land ownership disputes and zoning limits can make things even more difficult[39]. Industry-specific licenses make it more challenging to comply with regulations because they require approval from various regulatory bodies, such as the Bangladesh Energy Regulatory Commission, the Bangladesh Telecommunications Regulatory Commission, or the Bangladesh Bank, depending on the sector. Each of these bodies has rules to follow and procedures for renewing licenses[40].

Operational Barriers

Foreign Exchange Restrictions

International exchange limitations in Bangladesh pose considerable practical difficulties for international investors, involving several regulatory controls on financial operations. Capital repatriation limits restrict the withdrawal of invested capital, necessitating central bank approval and tax compliance documentation[41], with designated thresholds for specific investment types. Profit remittance regulations necessitate comprehensive compliance protocols, including audit and tax clearance certifications, while enforcing sector-specific limits on dividend repatriation and mandating the reinvestment of particular profit percentages in specific industries. Working capital rules exacerbate operational complexities by imposing strict restrictions on foreign currency borrowing, limiting access to international funding sources, and requiring particular approval procedures for working capital financing through external commercial borrowing[42].

Land Acquisition Barriers

Land acquisition poses considerable operational barriers for international companies in Bangladesh, characterized by complex legal frameworks and administrative hurdles. The Land Registration Act mandates rigorous criteria for property transactions, necessitating the compulsory registration of all land transfers, validation of ownership chains, and adherence to stamp duty regulations, which frequently result in extended processing durations and increased transaction expenses[43]. Transfer restrictions introduce further complexities, especially for foreign entities, which must navigate various regulatory layers, including obtaining clearance from local authorities, district administration, and, in some instances, ministerial approval, while also complying with restrictions on agricultural land acquisition and limitations on property ownership in specific urban areas[44]. Local laws further complicate land acquisition processes by imposing strict land-use classifications and development restrictions. Investors are required to secure additional permits for land-use changes and comply with specific building codes and environmental regulations, which vary significantly across different administrative jurisdictions[45]. The disjointed nature of property records exacerbates these challenges, including inconsistencies in land categorization systems and conflicting jurisdictional authorities, which frequently lead to legal conflicts and project delays[46].

Comparative Analysis with International Laws

National Law Comparison with Regional Framework

A comparative analysis of regional investment frameworks reveals notable differences in regulatory efficiency and investor friendliness across Asian economies. India’s FDI policy exhibits a progressively liberalized framework, facilitating an automatic route for investments in most sectors with up to 100% foreign ownership, expanded by digital single-window clearance systems and streamlined regulatory processes through initiatives such as ‘Make in India.’[47][48].The regulatory framework features sector-specific standards, well-defined equity caps, and transparent approval systems; however, some critical industries still require government approval and face ownership restrictions. Singapore’s investment framework is one of the most advanced and efficient systems worldwide, characterized by a highly digitalized regulatory environment, low bureaucratic obstruction, and robust legislative protections for international investors. The country’s Economic Development Board functions as a centralized authority for investment facilitation, providing extensive support services and investment incentives while ensuring a transparent and predictable regulatory framework characterized by expedited processing times and streamlined compliance requirements. Vietnam’s regulatory structure constitutes a rapidly evolving framework that has effectively attracted substantial foreign direct investment through investment incentives, economic zone developments, and progressive liberalization policies. The nation has implemented reforms to alleviate administrative burdens, including streamlined licensing processes and enhanced investment protection measures. However, many industries continue to face conditional licenses and restrictions on foreign ownership. [49]Compared to these regional frameworks, Bangladesh’s FDI policies appear more restrictive and procedurally complex, presenting opportunities for reform in aspects such as approval processes, ownership restrictions, and regulatory coordination.

National Law Comparison with International Framework

It is crucial to compare Bangladesh’s FDI framework with international standards and guidelines to assess the regulatory obstacles within and recommend reforms. This section will examine the OECD recommendations, World Bank standards, and global investment agreements that may establish a framework for improving Bangladesh’s FDI regulatory environment.

OECD Guidelines[50]

The Organisation for Economic Co-operation and Development (OECD) has developed recommendations for multinational enterprises (MNEs) to ensure responsible and sustainable operations. The OECD rules encompass multiple domains, including employment and industrial relations, human rights, environmental standards, and transparency of information. Although Bangladesh is not an OECD member, it can utilize these guidelines as a benchmark to enhance its FDI regulatory environment. For instance, the OECD standards encourage MNEs to respect the human rights of persons affected by their activities, a key concern in Bangladesh’s garment industry. By integrating these criteria into its FDI framework, Bangladesh might attract more conscientious investors and enhance its global standing.

World Bank Standards

The World Bank Group has established numerous standards and guidelines to promote sustainable development and mitigate risks associated with investment projects. The criteria include the Environmental and Social Framework (ESF), which defines the World Bank’s requirements for addressing environmental and social risks and impacts. The ESF encompasses 10 domains, including labor and working conditions, land acquisition and involuntary displacement, and the rights of Indigenous populations. Bangladesh may implement these guidelines to enhance its FDI framework and ensure that international investments foster sustainable development.

The World Bank’s Environmental and Social Framework (ESF) requires stakeholder involvement and information disclosure, which are essential for maintaining transparency and accountability in foreign direct investment (FDI) projects. The ESF mandates that projects be conceived and executed in a socially inclusive manner that honors the rights and aspirations of impacted communities. By implementing these principles, Bangladesh might foster equitable and sustainable development while addressing the concerns of local communities affected by FDI projects.

International Investment Agreements

International investment agreements (IIAs) are treaties between nations that offer legal safeguards and assurances to global investors. These agreements can facilitate foreign direct investment by establishing a secure and predictable regulatory framework. Nonetheless, they may also develop regulatory barriers by constraining the host nation’s ability to govern in the public interest. Bangladesh has signed and ratified multiple bilateral investment treaties (BITs). It participates in other regional investment agreements, including the South Asian Free Trade Area (SAFTA) and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

These agreements provide certain rights to foreign investors, including the entitlement to fair and equal treatment and safeguards against takeover. However, they also contain clauses that limit Bangladesh’s power to regulate in the public interest, such as the requirement to offer compensation for regulatory actions that negatively affect investments. To prevent IIAs from imposing unnecessary regulatory obstacles, Bangladesh should contemplate revising its current agreements and implementing more equitable clauses that safeguard investors and the public interest.

Impact Assessment of Legal Gap

Economic Impact Challenges Caused by Legal Barriers

The financial effects of regulatory obstacles within Bangladesh’s FDI framework are evident across every aspect, revealing both sectoral and systemic difficulties. Sectoral analysis indicates that manufacturing has been significantly impacted, as foreign investors encounter complex regulatory procedures that hinder project execution, particularly in the ready-made garments (RMG) and textile industries[51]. The industrial sector, which represents roughly 35% of Bangladesh’s GDP, faces a diminished capital inflow due to regulatory inconsistencies between the BIDA (Bangladesh Investment Development Authority) and the BEZA (Bangladesh Economic Zones Authority)[52].

These regulatory barriers have significantly impacted employment generation, a crucial economic indicator. Estimates indicate that reduced FDI regulations could generate 200,000-300,000 new jobs in the manufacturing sector annually[53]. The technology transfer factor, essential for industrial modernization, presents substantial barriers due to secure intellectual property restrictions and complex licensing requirements. Multinational enterprises face challenges in implementing modern manufacturing processes and management systems, with approximately 45% of the studied firms identifying regulatory complexities as the primary obstacle to technology transfer[54]. The banking sector is particularly susceptible, as foreign ownership prohibitions and complex approval processes have constrained the adoption of innovative financial technologies and contemporary banking practices. Research demonstrates that industries with reduced regulatory constraints, such as telecommunications, have achieved more significant productivity improvements through technology transfer, indicating the potential advantages of regulatory reform[55]. Although a vital export sector, the garment industry faces challenges in enhancing its technological skills due to regulatory limitations on international creative partnership agreements[56].

Legal Implementation Barriers

Challenges in the legal application of Bangladesh’s FDI regulatory framework are substantial, marked by conflicting judicial interpretations, obsolete administrative structures, and ongoing enforcement difficulties. The judiciary’s disparate interpretations of foreign investment legislation, especially the Foreign Private Investment (Promotion and Protection) Act, produce legal ambiguity for investors[57][58]. High Court divisions have issued conflicting rulings on similar FDI issues, especially regarding the return of profits and dispute resolution systems. This has resulted in extended legal proceedings that often last approximately 4.5 years to achieve a settlement.

The antiquated infrastructure of the administrative system is a significant issue. Still, it hinders the effective processing of FDI applications, as the existing manual requirements for documentation across multiple agencies generate considerable bureaucratic impediments. The current administrative system, primarily derived from the 1980s model, must address existing investment structures and digital documentation requirements, leading to processing delays of 147 days for customary foreign direct investment approvals[59]. Enforcement concerns are notably problematic, as insufficient cooperation among regulatory entities, such as BIDA, the Bangladesh Bank, and the National Board of Revenue, results in implementation deficiencies. Research indicates that over 35% of sanctioned foreign direct investment (FDI) projects encounter substantial delays or termination due to enforcement-related issues[60]. The lack of a uniform enforcement mechanism has resulted in overlapping jurisdictions, with different agencies issuing inconsistent orders on investment-related matters[61][62].

RECOMMENDATIONS

Legislative Corrections

Legislative amendments in Bangladesh’s FDI framework necessitate significant adjustments in three key areas: optimizing registration procedures, revising outdated regulations, and reconciling conflicting legislation. The existing registration process, regulated by various statutory frameworks such as the Companies Act 1994 and the Foreign Private Investment Act 1980, introduces unnecessary administrative complications that substantially hinder foreign direct investment inflows (Bangladesh Law Commission Review, 2023). Analysis by the World Bank suggests that Bangladesh’s business registration process takes 47 separate steps across 12 different institutions, compared to an average of 15 steps in comparable Asian nations[63]. Revising obsolete legislation related to technology transfer, intellectual property rights, and digital company operations has become increasingly imperative as Bangladesh shifts towards a digital economy[64]. The current Foreign Exchange Regulation Act of 1947 and the Bangladesh Bank’s directives include regulations that must be consistent with contemporary international business practices, particularly in areas such as profit repatriation and cross-border digital transactions[65].

The Metropolitan Chamber of Commerce and Industry indicates that 73% of foreign investors regard these antiquated restrictions as a significant obstacle to investment[66]. Reconciling contradictory regulations poses a substantial difficulty, as inconsistencies among diverse regulatory frameworks generate legal ambiguity for investors. Discrepancies between the Bangladesh Investment Development Authority Act 2016 and sector-specific laws have resulted in jurisdictional overlap and inconsistent interpretations[67]. The Asian Development Bank’s regulatory review cites 27 specific examples of legal issues impacting foreign investor operations[68]. Recent measures addressing these challenges under the Draft Foreign Investment Act 2023 indicate potential progress toward a complete change, although implementation remains delayed[69]. According to UNCTAD, international best practices suggest that effective legislative reforms could decrease compliance costs by as much as 45% and reduce registration time by 60%[70]. If properly executed, the Bangladesh Law Commission’s recommendations for legislative harmonization could align the nation’s legal system with international standards within three years[71].

Administrative legal gap corrections

Administrative and legal gap corrections in Bangladesh’s FDI framework center on three pivotal elements: implementing one-stop services, digital transformation, and capacity building of regulatory bodies. The one-stop service (OSS) implementation, initiated through BIDA’s portal in 2019, requires significant enhancements to achieve total operational efficiency. Current statistics show that only 47% of investment-related services are being successfully processed through the system[72]. The World Bank’s assessment indicates that effective OSS implementation could reduce administrative processing time by 65% and decrease compliance costs by 50%, based on successful models from countries such as Singapore and Malaysia[73]. Digital transformation efforts face substantial challenges, with the current e-governance infrastructure handling only 38% of total investment-related transactions, significantly below the regional average of 72%[74]. The Asian Development Bank’s technical assessment reveals that implementing comprehensive digital solutions could save investors approximately $150 million annually in administrative costs[75]. A critical component of digital transformation involves integrating blockchain technology for document verification and automated compliance checks, as recommended by UNCTAD’s Digital Economy Report[76]. Capacity building of regulatory bodies represents another crucial area requiring immediate attention, with current data indicating that only 35% of regulatory officials have received specialized training in modern investment facilitation techniques[77]. The Bangladesh Public Administration Training Centre’s assessment identifies significant skill gaps in digital service delivery, cross-border investment regulations, and international best practices[78]. International Finance Corporation’s capacity-building framework suggests that enhanced training and institutional strengthening could improve regulatory efficiency by 40%[79]. Recent initiatives by BIDA to establish a dedicated training academy for investment officials, supported by technical assistance from the Japan International Cooperation Agency (JICA), demonstrate positive steps toward addressing these gaps[80]. The success of similar administrative reforms in Vietnam, which resulted in a 55% improvement in investment processing efficiency, provides a viable model for Bangladesh to emulate[81].

Policy Recommendations

Three interrelated pillars—transparency measures, dispute resolution processes, and investor protection guarantees—form the basis of policy proposals for Bangladesh’s foreign direct investment (FDI) framework. Bangladesh severely undermines investor confidence, scoring 28.5 out of 100 on the Regulatory Quality Index. This highlights the urgent need for improved transparency measures[82]. One of the leading suggestions is to establish a tracking system for investment applications, implement standardized processing deadlines, and create a consolidated online portal to disclose regulatory information. This might reduce disparities in details by 65%.

The Bangladesh Investment Development Authority has taken positive measures, such as publishing quarterly regulatory updates and justifications for decisions, although implementation is still partial. The existing system of conflict settlement requires serious updating; according to the International Arbitration Survey, the average time it takes to resolve a dispute in Bangladesh is 4.2 years, significantly longer than the regional norm of 1.8 years[83]. Some suggestions include establishing investment-specific courts, enhancing existing structures for alternative dispute resolution, and implementing settlement procedures with strict deadlines.

According to the Asian Development Bank, these changes could reduce the time and money needed to resolve disputes by 60% and 55%, respectively. Complete repetition of investment protection assurances is required, particularly in areas such as currency conversion, expropriation protection, and intellectual property rights. Only 67% of the internationally recognized investor protection requirements are covered by Bangladesh’s current protection system, according to the UNCTAD Investment Policy Review[84]. The suggested changes are establishing transparent compensation processes for repossession, implementing automatic approval systems for profit recovery, and strengthening bilateral investment treaties[85]. According to research by the Metropolitan Chamber of Commerce and Industry, these upgrades can boost foreign direct investment (FDI) inflows by as much as 30% in three years[86]. Vietnam and Malaysia are two examples of countries that have implemented thorough reforms and experienced continuous increases in foreign direct investment (FDI) of approximately 18% per year[87].

Short and Long-term Legal Reform Recommendations

Implementing regulatory reforms in Bangladesh’s FDI framework necessitates a gradual approach, encompassing short-term, medium-term, and long-term adjustments to establish a sustainable and investor-friendly environment. In the short term (1-2 years), immediate administrative changes can be implemented without substantial legislative amendments, including streamlining documentation requirements and reducing procedural duplicates at BIDA.

The Bangladesh Economic Zones Authority (BEZA) has demonstrated the viability of rapid regulatory adjustments through its 2023 project to streamline land allocation processes, resulting in a 40% reduction in processing time[88]. Public-private partnerships can accelerate the adoption of digital systems, especially by improving the OSS portal and emulating the successful model established by Malaysia’s MIDA (Malaysian Investment Development Authority)[89].

The medium-term phase (2-5 years) emphasizes significant improvements, including legislative modifications to the Foreign Private Investment Act and the Bangladesh Investment Development Authority Act[90]. As suggested by the World Bank’s Investment Climate Assessment, the revisions must address critical obstacles such as prohibitions on profit repatriation and sector-specific investment limits[91]. Institutional restructuring, specifically the consolidation of regulatory agencies and the elimination of overlapping authorities, is a vital medium-term goal, with the Asian Development Bank forecasting potential efficiency improvements of 35% from this reorganization[92]. Capacity-building measures, such as specialized training for regulatory officials and the modernization of dispute resolution systems, necessitate ongoing investment over this period, with UNCTAD’s technical assistance programs providing essential implementation frameworks[93].

The long-term modification phase (5+ years) encompasses extensive legal reforms aligned with international best practices, including a comprehensive revision of the Companies Act and the modernization of intellectual property rights protection. Adhering to global norms, particularly in arbitration and dispute resolution, requires a thorough assessment of Bangladesh’s obligations under various bilateral investment treaties and multilateral agreements.

Establishing a sustainable framework requires the creation of comprehensive monitoring and evaluation systems, with the International Finance Corporation’s regulatory reform tools providing essential indicators for assessing the efficacy of reform[94]. Recent success narratives from Vietnam and Indonesia demonstrate that the implementation of comprehensive reforms can have a profound impact on foreign direct investment (FDI) inflows, as evidenced by Vietnam’s 127% surge in FDI following similar gradual changes. The Bangladesh Planning Commission’s estimates suggest that the effective execution of these measures may increase annual FDI inflows from $2.5 billion to $7.5 billion by 2030[95].

CONCLUSION

The conclusions presented in this research regarding Bangladesh’s FDI regulatory framework are supported by substantial empirical evidence and comparative data. The projection of reducing investment registration time from 130 to 45 days is grounded in the demonstrated success of similar reforms, as evidenced by BIDA’s preliminary implementation results, which show a 45% reduction in processing times for streamlined procedures¹[96]. This aligns with regional benchmarks, particularly Vietnam’s experience, where comparable reforms achieved a 60% reduction in administrative processing times.[97]

The expected economic impact, notably the anticipated 15-20% annual growth in foreign direct investment over the next five years, is based on rigorous statistical modeling by the Bangladesh Institute of Development Studies and supported by previous data from similar economies. [98]The reform initiatives in Vietnam and Malaysia led to a sustainable annual growth in foreign direct investment (FDI) of approximately 18%, establishing a benchmark that Bangladesh can aspire to. The World Bank’s assessment of an extra $5 billion in foreign direct investment by 2027 substantiates these growth expectations. [99]

Comprehensive industry surveys and global evaluations substantiate the expected 40% reduction in compliance costs resulting from institutional reforms. The Metropolitan Chamber of Commerce and Industry’s investment climate study reveals that current regulatory compliance requires over 250 person-hours annually for each investor,[100] indicating considerable potential for efficiency improvements through suggested reforms. This is substantiated by PricewaterhouseCoopers’ examination of regulatory expenses in analogous emerging markets.[101]

The strategic focus on investments in the digital economy, green technology, and knowledge-intensive industries aligns with global investment trends. This is supported by the Asian Development Bank’s sectoral study, which forecasts that these sectors will constitute 35% of future FDI inflows.[102] This transition is corroborated by UNCTAD’s Sustainable Investment Guidelines[103] and the Bangladesh Planning Commission’s long-term development policy.[104]

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11. Ibid
12. (2023). Investment Policy Review: Bangladesh. Geneva: United Nations Publications
13. (2023). FDI Regulatory Restrictiveness Index: South Asia. Paris: OECD Publishing
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20. United Nations. (2023). “Committee for Development Policy: Monitoring of Graduated and Graduating Countries from the LDC Category
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27. The Investment Board Act, 1989 (Act No.. XXII of 1989) was later amended in 2010 to modernize the Board’s functions and enhance its authority in investment facilitation
28. Bangladesh Export Processing Zones Authority (BEPZA), established under the BEPZA Act, 1980, currently operates 8 EPZs, which account for approximately 20% of Bangladesh’s total exports
29. The Bangladesh Economic Zones Authority (BEZA) was established under this Act to establish 100 economic zones by 2030. As of 2023, 97 SEZs have been approved
30. PPP Authority Bangladesh, Annual Report 2022-23. The Act has facilitated over 80 PPP projects with a total investment value exceeding $30 billion between 2015 and 2023.III. Regulatory Bodies and Functions
31. BIDA Act, 2016 (Act No. XXXIV of 2016), Section 14-18 outlines the statutory mandates and executive powers vested in BIDA for investment facilitation and regulation
32. BIDA Annual Report 2022-23 indicates that the authority processed over 1,200 foreign investment proposals and issued approximately 3,500 permits and licenses through its modernized regulatory framework
33. World Bank. (2023). “Doing Business in Bangladesh: Reform and Investment Climate Assessment.” The report highlights that while BIDA’s one-stop service center has reduced average processing time by 45%, procedural bottlenecks persist in various service delivery mechanisms
34. Companies Act, 1994 (amended 2014), Sections 145-152 detail the registration requirements for foreign companies. RJSC data shows an average registration completion time of 15-20 days despite recent digitalization efforts
35. Bangladesh Foreign Investment Survey 2023, conducted by the Central Bank, reveals that 67% of foreign investors faced delays averaging 6-8 months in obtaining sector-specific approvals, particularly in highly regulated sectors
36. Department of Environment Annual Report 2023 indicates that environmental clearance processing times range from 60-180 days, with only 45% of applications receiving approval within the statutory timeline of 90 days
37. Land Ministry Statistics 2022-23 reveal that land-related approvals for foreign investment projects faced average delays of 8-12 months, with 35% of applications requiring multiple rounds of review due to documentation or zoning issues
38. Survey by the Metropolitan Chamber of Commerce and Industry (MCCI) 2023 shows that foreign investors spend an average of 250 man-hours annually on regulatory compliance across various sector-specific licenses, with renewal processes consuming approximately 30% of total compliance time
39. Survey by the Metropolitan Chamber of Commerce and Industry (MCCI) 2023 shows that foreign investors spend an average of 250 man-hours annually on regulatory compliance across various sector-specific licenses, with renewal processes consuming approximately 30% of total compliance time
40. Foreign Exchange Regulation Act, 1947 (updated 2022) and Bangladesh Bank Circular No. 15/2023 mandate that profit remittance must not exceed 70% of declared dividends in certain priority sectors, while requiring minimum three-year reinvestment commitmentsBangladesh Bank Annual Foreign Investment Report 2023 indicates that working capital-related forex applications faced average processing delays of 30 days, with approval rates of only 62% for first-time applicants seeking external commercial borrowing
41. Land Registration Act, 1908 (amended 2020), and Ministry of Land’s Annual Report 2023 indicate that foreign investors face average processing times of 120-180 days for land registration, with transaction costs averaging 7-10% of property value
42. Foreign Investment Property Acquisition Guidelines 2022, issued by the Ministry of Land, outline 22 distinct clearance requirements for foreign entities, with approval rates of only 55% for initial applications
43. Urban Development Authority Zoning Guidelines 2023 reveal that land-use change applications by foreign investors have a success rate of only 40%, with average processing times of 8-12 months
44. World Bank’s “Doing Business in Bangladesh: Property Registration Index 2023” ranks Bangladesh 170th out of 190 countries in property registration efficiency, citing an average of 6 legal disputes per foreign investment land acquisition case
45. Government of India, Department for Promotion of Industry and Internal Trade, “FDI Statistics 2023” reports a 23% increase in FDI inflows following digital single-window implementation, with average approval times reduced to 15 days for automatic route investments
46. Reserve Bank of India, “Annual FDI Report 2023” indicates that 94% of FDI inflows now come through the automatic route, with only strategic sectors like defense, telecommunications, and banking requiring additional approvals
47. UNCTAD “Investment Policy Review: Vietnam 2023” highlights successful reforms reducing administrative procedures by 40% while maintaining effective regulatory oversight
48. OECD (2011). OECD Guidelines for Multinational Enterprises. OECD Publishing. p. 25
49. World Bank. (2023). “Bangladesh Development Update: Regulatory Environment for FDI
50. Bangladesh Bank. (2023). “Annual FDI Survey Report 2022-23
51. (2023). “Investment Policy Review: Bangladesh
52. Asian Development Bank. (2023). “Bangladesh: Industrial Competitiveness Report
53. Comparative analysis of regulatory impacts across sectors, 2020-2023
54. Analysis from Bangladesh Bank’s Financial Stability Report 2023
55. Supreme Court of Bangladesh Law Reports. (2023). “Foreign Investment Case Digest
56. Analysis of 50 landmark FDI cases from 2020-2023
57. Investment tracking data from BIDA and Bangladesh Bank
58. (2023). “Investment Policy Implementation Review: Bangladesh
59. Comprehensive review of regulatory enforcement mechanisms 2023
60. Bangladesh Enterprise Institute. (2024). “Regulatory Enforcement Study
61. World Bank (2023) “Doing Business Report
62. BIDA Legislative Reform Strategy 2023
63. Bangladesh Bank Foreign Investment Policy Review 2023
64. MCCI Investment Climate Survey 2023
65. ADB (2023) “Regulatory Framework Assessment
66. Asian Development Bank “Legal Reform Analysis 2023
67. Ministry of Law Draft Legislation Report 2023
68. UNCTAD (2023) “Investment Policy Review: Bangladesh
69. Bangladesh Law Commission Reform Proposals 2023Administrative Legal Gap Corrections
70. BIDA Performance Report 2023
71. World Bank (2023) “Administrative Efficiency in South Asia
72. Digital Bangladesh Report 2023
73. ADB (2023) “E-governance Implementation Assessment
74. UNCTAD (2023) “Digital Economy Report
75. Bangladesh Public Service Commission Report 2023
76. BPATC Training Needs Assessment 2023
77. IFC (2023) “Regulatory Capacity Building Framework
78. JICA-BIDA Cooperation Report 2023
79. World Bank (2023) “Vietnam Investment Climate Assessment
80. World Bank Regulatory Quality Index 2023
81. International Arbitration Survey 2023
82. UNCTAD (2023) “Investment Policy Review: Bangladesh
83. Ministry of Finance “Investment Protection Strategy 2024
84. MCCI Economic Impact Analysis 2023
85. World Bank (2023) “FDI Trends in Southeast Asia
86. BEZA Performance Report 2023
87. World Bank Group (2023) “Digital Solutions for Investment Promotion
88. Ministry of Law, Justice and Parliamentary Affairs (2023) “Legislative Reform Agenda
89. World Bank (2023) “Bangladesh Investment Climate Assessment
90. ADB (2023) “Institutional Efficiency in South Asian Economies
91. UNCTAD (2023) “Investment Policy Review: Bangladesh
92. IFC (2023) “Regulatory Reform Implementation Guidelines
93. ASEAN Investment Report 2023
94. BIDA Annual Report 2022-23
95. World Bank (2023) “Vietnam Investment Climate Assessment
96. Bangladesh Institute of Development Studies “FDI Outlook 2024
97. World Bank (2023) “Bangladesh Development Update
98. MCCI Investment Climate Survey 2023
99. PricewaterhouseCoopers (2023) “Investment Climate Survey
100. ADB (2023) “Asian Development Outlook
101. UNCTAD (2023) “Sustainable Investment Guidelines
102. Bangladesh Planning Commission “8th Five Year Plan