Photo: Collected

DHAKA, June 11, 2026 (BSS) - The investment incentive package proposed in the national budget for fiscal year 2026-27 sends a generally positive signal to both domestic and foreign investors, according to Selim Raihan, Executive Director of the South Asian Network on Economic Modeling (SANEM).

"The government's decision to keep corporate tax rates unchanged could help reduce policy uncertainty at a time when private investment remains subdued, financing costs are elevated, external sector pressures persist and business confidence remains fragile," he said while talking to BSS.

He said the proposed reduction in withholding taxes on interest payments for foreign loans and machinery leases was a prudent measure that could lower the cost of capital for industrial firms and make foreign-funded investments more attractive.

Raihan also welcomed proposals related to Free Trade Zones, increased foreign ownership in off-docks and inland container depots (ICDs), and new frameworks for private sector participation in ports, terminals and air cargo facilities.

"These measures reflect a growing recognition of the importance of trade logistics," he said, adding that efficient customs services, warehousing, ports and logistics would be essential for Bangladesh's export diversification efforts and deeper integration into global value chains following its graduation from the Least Developed Country (LDC) category.

Describing the sector-specific incentives as ambitious, Raihan said support for renewable energy, electric vehicles, batteries, semiconductors, electronics, digital devices, startups, freelancing and content creation demonstrated the government's intention to move Bangladesh toward a greener and more technology-driven growth model.

However, he cautioned that tax incentives alone would not be sufficient to create globally competitive industries.

He noted that sectors such as solar energy, electric vehicles, semiconductors and advanced electronics require reliable energy supplies, skilled human resources, testing facilities, intellectual property protection, predictable regulations, access to finance and strong supplier networks.

Raihan observed that Bangladesh has often provided fiscal incentives without establishing the institutional and technological foundations necessary for long-term competitiveness, creating a risk that some incentives could encourage import-dependent assembly operations rather than genuine industrial upgrading.

He particularly urged caution regarding incentives for the semiconductor sector, saying that without a realistic strategy focused on areas such as chip design, testing, packaging and electronics-related components, the initiative could remain largely aspirational.

The economist also expressed concerns over the fiscal impact of a broad range of tax exemptions and incentives at a time when Bangladesh continues to face challenges in raising its tax-to-GDP ratio.

He stressed that incentives should be time-bound, transparent, performance-based and subject to regular review. Beneficiary firms, he said, should meet measurable targets related to investment, employment generation, exports, technology transfer and energy efficiency.

Raihan described the proposed accelerated depreciation facility for investments outside Dhaka and Chattogram as a promising initiative, although he noted that its effectiveness would depend on improvements in logistics, utility services, land access, skills development and local administrative support in other regions.

Overall, he said the budget's investment strategy was moving in the right direction as it seeks to reduce investment costs, attract foreign direct investment, support green and technology-based industries and address logistics bottlenecks.

"The success of these measures will depend largely on effective implementation, regulatory consistency and the government's ability to align incentives with a broader industrial development strategy," he added.