Institutions matter most in international trade

Bangladesh shows UK needs practical facilitators as much as it needs new trade deals

Dean Miah LLB, LLM is a British businessman and specialist in oil, gas and international trade, and co-editor of ‘Crescent and Delta: The Bangladesh Story’.

The Bangladeshi diaspora in the UK contributes an estimated $4 billion to the economy. Almost 90 per cent of the country’s ‘Indian’ restaurants are in fact owned by British Bangladeshis. The connection goes beyond the curry Britons eat, though, to the tea they drink and the clothes they wear. Bangladesh is the world’s second-largest exporter of textiles and garments after China, staking a serious claim to a $1.2tn global industry. In the modern world, such links matter more than geographical proximity. Using Britain’s familial and commercial connections to exploit the many import opportunities with Bangladesh ought to be making us very rich indeed. Why isn’t it? The answer is government failure on their part and policy failure on ours.

500 years ago the Bengal region was renowned for its exceptional wealth. When the region was governed by the Bengal Sultanate around 1526, contemporary European, Chinese and Middle Eastern travellers described it as an exceptionally rich place to trade. The economy peaked in the late seventeenth and early eighteenth centuries, when Bengal alone generated roughly 12 to 14 per cent of global GDP and provided half of the Mughal Empire’s revenue.

It was in Bengal that the East India Company laid its foundations, and later those of an empire that became the jewel in the British Crown. Historians have many theories about the region’s decline. Some point to the capital’s move from Calcutta to Delhi in 1911, followed by famines, both man-made and natural. The 1947 partition then split Bengal, and its eastern half was neglected until the violent 1971 war of independence, from which modern Bangladesh was born. Despite immense opportunity, foreign investment is extremely low, and has fallen a further 43 per cent in the last five years.

The best way to evidence Bangladesh’s Acemoglu-and-Robinson-grade institutional failure is through the lens of a private international company like mine. We had a subsidiary, Ocean Bangladesh Corporation, which identified potential gas reserves of over 20 trillion cubic feet in our acreage in Block 22 in the Chittagong Hill Tracts. That’s worth about $58 billion once extracted. Political instability, red tape and the occasional military coup have driven private companies like us to abandon this project and many others. Even bringing capital into Bangladesh faces barriers that are many times more costly in practice than bona fide capital control regimes found in the likes China. Millions of pounds a year are deterred by restrictions on investors moving their money back to the UK, or by heavy losses on currency exchange. At least capital control rules are clear and written down.

The Bangladesh Investment Development Authority (BIDA) is a chief culprit. It is a development office that is simply not designed to assist foreign companies. It, like its many equivalents in developing countries, functions as a facade. It was built as a promotion agency with a “One-Stop Service” bolted on, yet it controls almost none of the stops that matter. Land sits with the deputy commissioners, gas with Petrobangla and its subsidiaries, environmental clearance with a separate department, foreign exchange with Bangladesh Bank. BIDA can take your application but it cannot make anyone act on it, and perversely profits from doing the opposite. It is a textbook principal-agent problem. What it can do is host summits for the gratification of its own leaders. A decade of gala investment conferences and roadshows has produced a country of over 170 million people that attracted $1.78 billion of FDI in 2025, less than Uganda, and of that only a sliver was fresh equity: most was existing multinationals lending to their own subsidiaries because they could not get their profits out. In the first quarter of this year new equity fell by roughly 70 per cent. Readers of this Substack know investors do not need to be promoted to; they need clear rules, enforceable contracts, and the freedom to move capital and people in and out without begging.

On our end, UK Export Finance (UKEF) has an appetite for up to £2 billion of support in Bangladesh, and our own group received an expression of interest worth £650 million to develop a unique, British-patented technology for the transport sector in Bangladesh. However, unlike the Japanese JICA, which has a strong presence in Bangladesh, UKEF operated from India, with no physical support on the ground to secure contracts. In the way that business – and bureaucracy – is conducted in countries like Bangladesh, this functionally rules out all except the most ‘well-connected’ investment projects. The UK must avoid making the mistake of assuming business and government are done in broadly the same way there as they are here.

The Japanese, meanwhile, have committed a cumulative $33.62 billion in official development assistance and is Bangladesh’s single largest bilateral development partner. This funds infrastructure projects such as the Dhaka Metro Rail, the Matarbari deep-sea port and power hub, and other rail and transport schemes. The UK needs to adopt a model like JICA’s, tailored to improving trade and investment between the UK and Bangladesh. These depth of familial and historical ties warrant a proper political and trade memorandum, but too often, such efforts have been led by organisations with vested interests, or by NGOs that on many occasions have done more harm than good by ensuring that poverty of the mind remains the status quo.

More broadly, if we really believe in ‘trade not aid’, British development strategy ought to focus on proper infrastructure and reducing dependence on local or third parties, which means addressing corruption, nepotism and the opportunities needlessly lost to red tape.