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Bangladesh must turn to global equity for infrastructure

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  Published in Business and Finance on Wednesday, October 15th 2025 at 19:05 GMT by The Daily Star
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Bangladesh must turn global equity into infrastructure

Bangladesh’s economic transformation over the past two decades has been underpinned by a steady stream of domestic savings, remittances, and modest foreign direct investment (FDI). Yet the country’s infrastructure needs far outstrip the capital available in the local market. In a recent column on The Daily Star, the author argues that to sustain its growth trajectory and meet the expectations of a rapidly urbanising population, Bangladesh needs to open its infrastructure sector to global equity and institutional capital. The piece outlines the current gaps, highlights the opportunities offered by global equity markets, and recommends a set of policy reforms that could attract large, long‑term investors.

1. The magnitude of Bangladesh’s infrastructure gap

Bangladesh’s GDP grew at an average of 7% per annum over the last decade, and the government’s budgetary commitment to infrastructure remains below 10% of GDP. Yet the country’s transport, energy, water and sanitation needs are estimated to require an annual investment of USD 7–8 billion. A survey by the World Bank in 2022 found that the country’s public spending on roads, bridges and railways is only 0.5% of GDP, compared with 1.5–2% in other emerging markets in the region. The gap is even wider for renewable energy projects and digital infrastructure. The article cites the Bangladesh Infrastructure Investment Fund, which has been set up to mobilise both sovereign and private capital, but notes that the fund’s capital base is still modest compared with the scale required.

2. Current sources of funding and their limitations

Domestic savings, largely driven by the garment sector, are insufficient to meet the rising demand for long‑term capital. The capital market in Bangladesh is still developing: the Bangladesh Stock Exchange’s market cap is around USD 40 billion, and listed companies are often capital‑constrained and short‑term focused. Foreign equity inflows have historically been episodic, driven by specific projects or by global market sentiment rather than a sustained institutional appetite. Even the Asian Development Bank (ADB) and the International Finance Corporation (IFC) have invested in a handful of large projects, but their involvement is still limited.

The article highlights that the banking sector, while a primary source of project finance, is constrained by high cost of funds, regulatory restrictions on risk‑taking, and the perception of high default risk in infrastructure assets. Moreover, the lack of a unified, transparent bidding process for large projects deters institutional investors who require predictable and enforceable contract terms.

3. Why global equity matters

Global equity markets offer several advantages that are particularly relevant for Bangladesh:

• Scale and longevity: Institutional investors such as pension funds, sovereign wealth funds, and infrastructure funds routinely manage assets in the tens of billions of dollars and have multi‑decade horizons. This matches the payback periods of infrastructure projects, which are often 10–30 years.

• Risk diversification: Global investors can spread their exposure across multiple geographies and sectors, reducing idiosyncratic risk. This also encourages higher levels of due diligence and project appraisal.

• Governance and transparency: Institutional investors demand robust corporate governance, clear regulatory frameworks, and reliable data, thereby pushing for reforms that improve market integrity.

• Technology and best practice transfer: Investors bring experience in project management, environmental and social impact assessment, and advanced financing mechanisms such as bonds and public‑private partnerships (PPPs).

The column points to successful examples in neighbouring countries where foreign equity has played a pivotal role. In Sri Lanka, the Colombo Port City project attracted $5 billion of equity from Japan’s SoftBank Group. In Vietnam, the Ho Chi Minh City metro line secured equity from the China Railway Construction Corporation and the China Development Bank. These cases illustrate that a well‑structured framework can mobilise large foreign equity flows.

4. Policy reforms to attract global equity

The author outlines a multi‑pronged approach that requires coordination across several ministries and the central bank. The key reforms include:

1. Establish a dedicated infrastructure investment vehicle
   A sovereign-backed fund, governed by a mix of government officials and private sector experts, could aggregate and re‑package infrastructure projects into investment‑grade assets. The fund could then issue global bonds or securitise assets to raise capital on international capital markets.

2. Create a transparent PPP framework
   The government should publish a comprehensive PPP guidelines handbook, setting clear criteria for project selection, risk allocation, and performance measurement. A dedicated PPP unit within the Ministry of Finance would oversee the process and maintain a register of ongoing projects.

3. Simplify regulatory approvals
   A “one‑stop” regulatory portal that consolidates land acquisition, environmental clearance, and licensing would reduce time‑to‑completion. A guaranteed timeline for approvals (e.g., 90 days for projects above USD 50 million) would improve investor confidence.

4. Improve fiscal incentives
   Tax holidays, duty waivers on imported equipment, and preferential financing rates should be offered to projects that meet social and environmental benchmarks. These incentives should be tied to milestone achievements rather than granted in advance.

5. Strengthen institutional capacity
   The capital market should be liberalised by allowing foreign entities to list shares and bonds on the Dhaka Stock Exchange. Introducing exchange‑traded funds (ETFs) and structured derivatives would enhance liquidity and risk management.

6. Adopt a national data strategy
   Reliable data on infrastructure performance, cost overruns, and socio‑economic impact is critical for investors. The government should partner with international agencies (e.g., World Bank, IFC) to develop a central database that feeds into project evaluation models.

5. Potential risks and mitigation strategies

The article does not shy away from potential pitfalls. Currency volatility, political risk, and changing global economic conditions could threaten returns. The column recommends establishing a currency‑hedging framework and a risk‑sharing agreement with the national development bank. It also stresses the importance of stakeholder engagement to ensure that local communities see tangible benefits from infrastructure projects, thereby reducing the risk of social unrest.

6. Lessons from the “Bangladesh Development Bank” and the “Dhaka Metro”

In a sidebar, the author references the Bangladesh Development Bank’s (BDB) recent pilot PPP for the Dhaka Metro line. The project, with a total cost of USD 3.5 billion, attracted a mix of equity from local private partners and a bond issuance on the local market. Though the project is still in early stages, it demonstrates the viability of a blended‑finance structure and the potential for local equity participation when global capital is leveraged. The BDB’s experience underscores the need for a robust risk‑assessment framework and the capacity to manage large, complex projects.

7. The way forward

Bangladesh’s leadership faces a critical juncture. If the country can create a conducive environment for global equity participation, it can unlock the investment needed to modernise its transport networks, build renewable energy plants, and expand broadband connectivity. The article ends with a call for an inter‑ministerial task force to design and implement the reforms within the next 12 months. By doing so, Bangladesh could become a leading case study of how emerging economies can harness global capital markets to accelerate infrastructure development and achieve inclusive growth.