FDI vital for financing, tech transfer in Bangladesh

Foreign investment is one of the main pillars of economic transformation. As a nation, Bangladesh aims to attain upper-middle-income status by 2031.The significance of foreign direct investment (FDI) has intensified, serving not merely as a financial resource but also as a driver for technology transfer, innovation, and sustainable industrial development.

Over the last 20 years, Bangladesh has consistently attracted foreign investors due to its strategic location, competitive labor costs, and growing domestic market.Industries include textiles, telecommunications, oil, pharmaceuticals, and electronics have had significant capital inflows, predominantly from China, Japan, South Korea, India, the United States, and European Union member states.

As reported by Bangladesh Bank, FDI inflows totaled $1.5 billion in 2024, indicating a gradual yet consistent increase despite global economic instability.The economic zones created by the Bangladesh Economic Zones Authority (BEZA) have been instrumental in attracting investors through tax benefits, enhanced logistics, and simplified regulatory procedures.

Although foreign direct investment has provided essential funding, the transfer of technology has been mixed.The Bangladesh still depends on foreign equipment and technical personnel, with limited local staff and limited adaptability; besides, all of this isdependent on multinational corporations.

A country does not automatically receive technology through foreign investment; it requires bilateral relations, a stable government, government policy support, linkages between local firms and foreign companies, the country's market size, and skill development.

For example, the Bangladesh ready-made garment sector accounts for over 80% of the country's exports. In this sector, success stories have massive foreign participation andtechnological innovation in mid-level manufacturing processes to climb up the global value chain. This kind of achievementrequires a country to invest in R&D, digitalization, and production-side needs to add higher value. But the question is: the government cannot add the same value as other sectors, even though Bangladesh is a developing and emerging economy and has strong relations with Western and EU nations, as well aswith Japan, China, and South Korea, which are industrially developing countries.

If the Bangladesh government targets to attract the highest amount of FDI and foreign technology, policy makers need to reform the policy and give more attention in strategic partnerships. Such initiatives as the Smart Bangladesh Vision 2041, National Industrial Policy 2022, and ICT Master Plan seek to establish an innovation-driven economy in which technology transfer is essential to industrial advancement.

Increase the win-win corporation with friendship countries like China, Japan significant partnership. Japan's investments in the Araihazar Economic Zone prioritize sustainable manufacturing and advanced technology, whereas China's participation in the Belt and Road Initiative (BRI) centers on energy, transportation, and digital infrastructure. These initiatives have the capacity to introduce advanced engineering, automation, and management techniques to local industries as well as the Korean Export Processing Zone (KEPZ).

The government needsto compare the investment environments of other competitor countries, such as Vietnam and Laos, and simplify regulations while offering competitive tax incentives for high-tech industries. Thishas allowed it to attract significantly higher FDI flows in Bangladesh.

In recent years, countries' financial markets have been broken, especially the banking sector, which is the leading sector. Issues such as limited funds and low transparency, along with an underdeveloped capital market, offer limited options for foreign investors. If the government wants to attract FDI, then it needs to bring the latest technology for the capital market from development partner countries.

Another significant problem that can discourage foreign investors is macroeconomic instability, including excessive inflation, a shortage of foreign exchange, and depreciation of the local currency. The economic strain has been exacerbated by declining foreign exchange reserves. Predictable taxes, consistent industrial policy, and macroeconomic stability should all be maintained. To increase investor trust, bolster intellectual property rights (IPR) protection and contract enforcement. The Government put in place long-term investment protection legislation that complies with global norms.
The government should encourage cooperation in innovation and applied research among academic institutions, research centers, and international businesses.Create training facilities and internship programs for technology-intensive industries in collaboration with international investors. Provide incentives for companies that offer local staff internal training or knowledge transfer initiatives.

The government needs to establish a Technology Transfer Authority (TTA) inside the ICT Division or the Ministry of Industries. Standardize contracts for joint R&D, patents, and technology licensing. Encourage international innovation laboratories and R&D facilities in Bangladesh's economic zones.

Develop an FDI impact assessment procedure to measure outcomes in employment, sustainability, and technology results. Review and revise policies often in response to investor input and global best practices. By releasing yearly reports on technology transfer and foreign direct investment, you may promote transparency.

Despite FDI inflows and progress in technology transfer, Bangladesh faces persistent challenges in attracting and retaining high-quality investment. Convoluted bureaucratic processes, lax enforcement of intellectual property laws, and a lack of technical education hamper technology adoption. International organizations such as the World Bank have different requirements, which make it difficult for Bangladesh to attract FDI.

Bangladesh needs to adopt a two-pronged strategy to fully benefit from high-quality foreign investment in advanced sectors while ensuring strong domestic capacity to assimilate and adapt foreign technologies.To establish an environment that fosters innovation, the government, academic institutions, and the business community must work closely together.

Ultimately, foreign investment should do more than just close financial gaps; it should also create technological, knowledge, and talent bridges that enable Bangladesh to attain sustained and equitable progress. "FDI must evolve from being a financial inflow to becoming a developmental partnership," as economist Dr. Debapriya Bhattacharya. so eloquently states. If properly handled, foreign investment will continue to be the catalyst for Bangladesh's economic development into a technologically advanced, globally competitive nation, in addition to serving as a source of cash.