Bangladesh’s Foreign Policy in a New Era: Priorities and Challenges
Trump’s re-election and evolving ties with neighbors require Bangladesh to rethink its foreign policy, prioritizing economic growth and domestic stability for long-term progress.
রেমিট্যান্স অর্জন এবং গার্মেন্টস পণ্য রপ্তানিতে বাংলাদেশ ইউরোপ ও মধ্যপ্রাচ্যের উপর নির্ভরশীল। এক্ষেত্রে চীন, ভারত, ও পাকিস্তান সহ দক্ষিন এশিয়ার দেশগুলো বাংলাদেশের প্রতিযোগী। এছাড়াও ভারত ও চীনের সাথে বাংলাদেশের বড় ধরণের দৈনিক বাণিজ্য হয়। পরিবর্তিত রাজনৈতিক পরিস্থিতিতে এবং ডোনাল্ড ট্রাম্পের ক্ষমতা গ্রহণের পরে বাংলাদেশকে অত্যন্ত চতুরতা ও সতর্কতার সাথে বৈদেশিক সম্পর্ক উন্নয়ন ও রক্ষা করতে হবে। এই নিবন্ধে ভু-রাজনৈতিকভাবে অত্যন্ত গুরুত্বপুর্ণ বাংলাদেশের বৈদেশিক নীতির নানাদিক আলোচনা করা হয়েছে।
Bangladesh is at a critical juncture as domestic politics have continued to evolve since August 2024 after the fall of Sheikh Hasina’s regime through an anti-government uprising. While the fall of the authoritarian government has initiated hope for democratic renewal in Bangladesh, it left the state with uncertainties. One of the biggest tasks that the interim government and any future elected government must prioritize is to rethink Bangladesh’s foreign policy trajectories. Bangladesh’s foreign policy has been historically shaped by its geopolitical location, economic and development needs, and domestic political dynamics. With the re-election of Donald Trump and with the competing relations with India, China, and Pakistan in a complex geopolitical scenario, Bangladesh needs to adopt a very proactive and forward-looking foreign policy. Considering these realities, Dhaka’s foreign policy will be guided by economic development, stable remittances through sustainable labor migration, navigating tensions with neighbors, and improving relations with the U.S. in the coming years.
Economic Stability and Trade Diversification
While formulating foreign policy, Bangladesh’s top priority should be Economic growth and development. In recent years, significant economic setbacks confronted Bangladesh, such as persistent inflation, sluggish private investment, and volatility in the foreign exchange market. However, by December 2024, the gross foreign exchange reserves had reached $26.67 billion, and the official dollar rate had also increased. Despite small progress, inflation remains high due to a lack of coordination among monetary, fiscal, and market policies. While remittances and exports show an upward trail, inadequate and unstable business environments hinder sustainable growth. The interim government struggles to implement effective economic management policies and thereby is holding back recovery efforts. Besides immediate inflation control, long-term structural reforms are needed to stabilize the economy.
One key area for ensuring sustained economic growth is diversifying Bangladesh’s foreign markets and export items. Bangladesh’s export industry is one of the least diversified in the world. Also, our export destinations are extremely concentrated, with four-fifths of them in North America or the EU. More than 80% of the exports are in knitwear and woven garments, and the rest is textile, footwear, jute products, fish, and a few other items. As one of the top apparel exporters to the EU, Bangladesh has exported $19.77 billion worth of apparel products to the EU, reflecting a 4.86% growth from 2023. However, during the first ten months of 2024, the exports saw poor growth of 0.76 percent due to less demand from the EU. Such occasions can cause uncertainties for the economy.
Bangladesh is the second-largest apparel exporter to the EU after China. As Bangladesh is set to graduate from the Least Developed Country status by 2026, it might result in the loss of preferential trade benefits in the European Union (EU) markets. Besides, the U.S. and EU emphasize improving labor conditions and environmental sustainability in the Ready-made garments sector. Any major failure to maintain these standards could lead to restrictions or regulations on RMG exports. Therefore, it has become imperative for Bangladesh to maintain these standards and at the same time, look for new partners, diversify export items beyond textiles, and explore new investment avenues.
Unfortunately, export diversification is still not on the priority agenda of the government. Export diversification faces barriers due to policy inconsistency, inadequate infrastructure, financial constraints, and weak bargaining power of the non-RMG sector. The lack of export-oriented foreign direct investment is also another major concern. Stronger FDI initiatives in non-RMG sectors, policy reforms, and infrastructural investments are needed to diversify the export sector. The Chief Advisor’s meeting with 27 diplomats from the EU is a commendable initiative in this regard. In a letter to Bangladesh Interim Government’s Chief Adviser Prof. Dr. Muhammad Yunus, European Commission President Ursula von der Leyen has expressed interest in a comprehensive partnership agreement with Bangladesh and reaffirmed the EU's support for Bangladesh’s democratic principles and human rights. While these communications mostly focused on election reforms, the government must utilize this connection to diversify the economy and trade activities with EU countries.
Another challenge for Bangladesh is to create investment-friendly conditions at home. Since political instability hit the country last year, investment has significantly decreased. In the fiscal year 2023-2024, net FDI inflow was $1.47 billion, reflecting a fall of 8.8% from $1.61 billion in FY23. Besides political instability, currency devaluation, dollar crisis, and economic instability have contributed to the investment crisis. Lack of investment by foreign partners will result in further economic downturn. Some reforms have already been initiated at the Bangladesh Investment Development Authority (BIDA). However, addressing underlying issues such as regulatory inefficiency, inadequate trust between government and private sector, difficulties in accessing industrial loans, establishing more effective Special Economic Zones (SEZs), and more proactive diplomacy by Bangladeshi missions abroad are essential to facilitate foreign investment.
Migrant Workers’ Rights and Remittance Stability
Labor migration to Gulf countries and other parts of the world fuels Bangladesh’s economy, with millions of migrant workers sending remittances that constitute around 5% of nominal GDP each financial year. According to the International Organization for Migration (IOM), Bangladesh is the sixth-largest migrant-sending country and the eighth-largest remittance-receiving country. In December 2024, the total amount of remittances received was nearly US$27 billion, an increase of about US$4.7 billion from 2023. While these workers are the fuel for national economic growth, concerns remain regarding the rights of migrant workers in their workplaces. Around 64% of the migrant workers from Bangladesh go to Gulf and Arab countries, and the rest migrate to Southeast Asia. In 2024, among 700,000 workers who went abroad, 374,000 went to Saudi Arabia. In recent years, systemic exploitation of workers characterized Saudi Arabia’s treatment of migrant workers. Saudi Arabia announced its megaproject NEOM (“new future”) under Vision 2030 in 2016. Since then, 21,000 workers have died, and many of these deceased workers are Bangladeshi citizens. Extreme working hours, bad working conditions, and abusive treatment towards domestic workers remain long-term issues. Bangladesh must take action to mitigate these malpractices by assuring immediate support to the migrant workers through diplomatic missions. The government should pressure the Saudi administration diplomatically to prevent these malpractices.
Bangladesh faces competition from India, Pakistan, the Philippines, and Sri Lanka, the other largest remittance receivers, in grabbing opportunities for migrant workers in Gulf countries. One way to cope with this challenge is to create more skilled labor, considering the current market demands. In 2023, Bangladesh sent 308,000 skilled workers, a 22% rise from the previous year when it sent 252,000 skilled workers. While this is good progress, more needs to be done to fulfill the global demand. In February 2023, Saudi Arabia launched the Workers’ Recruitment and Skill Verification Programme (SVP) with Bangladesh, under which skilled workers will receive Saudi Riyal 1500 to 1800, and unskilled workers will receive Saudi Riyal 800 to 1200. This could be an effective step in encouraging migrant workers to develop their skills. Bangladesh must prioritize developing more technical training centers (TTCs) and ensuring better coordination among them to produce skilled labor.
Trump’s re-election, geopolitical considerations and relations with India, China, Pakistan
Bangladesh’s foreign policy is constrained by its geopolitical realities. It has maintained a hedging strategy towards India and China for over a decade and a half. Despite the effort, in 2024, before the fall of the former Sheikh Hasina regime, relations with China faced tensions due to the regime’s prioritization of relations with India to serve its own interest. However, as Bangladesh invokes a new era, its foreign policy must utilize the benefits of its geopolitical position. Economic development and development assistance should be high on the agenda while formulating foreign policy with neighboring states.
India is the biggest neighbor of Bangladesh, and both states have maintained strong political, economic, connectivity, and security relations since the birth of Bangladesh in 1971. Bangladesh’s priorities in its foreign policy with India include development partnerships, attracting foreign investments, and fostering trade relations. For India, Bangladesh remains strategically important to ensure smoother connectivity with its northeastern states. Bangladesh is also India’s largest trading partner in South Asia, and India is the second biggest trading partner of Bangladesh. The bilateral trade reached US$14.01 billion during FY 2022-2023 from US$6.35 billion in FY 2014-20215. Bangladesh imports rice, wheat, onion, ginger, garlic, sugar, Cotton, Cereals, Iron and steel, refined petroleum, electronic equipment, plastics, etc. from India. This import dependence has contributed to Bangladesh's trade deficit against India. Bangladesh’s gain in regard to its relationship with India has been somewhat asymmetric, whereas India’s gain in trade and connectivity has outweighed Bangladesh’s gains. Indian Prime Minister Modi’s government has consistently offered unwavering support for the Hasina regime to stay in power by downplaying the state interest, and thus, democratic values were compromised. Additionally, border killing, BJP’s decades-long unfair approach towards Bangladeshi immigrants, the unresolved water-sharing issue, and the 2019 Citizenship Amendment Act - all these have contributed to the increasing distrust within Bangladesh vis-à-vis India and reinforced the ‘India-out’ campaign.
Despite an ever-growing anti-India sentiment, India remains a key player in South Asia and continues to affect our foreign policy. Dhaka must understand these crucial geopolitical realities and maintain a stable relationship with India. India is a potential development partner of Bangladesh and has offered three Lines of Credit (LOC) of US$ 7.36 billion since August 2010. While much needs to be done on the part of the Modi government to reduce the tension in relation, Dhaka should also keep an open diplomatic approach toward India. India’s stance on Hasina’s extradition and democratic governance in Bangladesh will significantly shape the direction of the relationship. Bangladesh must pursue a pragmatic and robust diplomatic approach to prevent any interference from India in undermining democratic values in Bangladesh. However, ignoring India should not be an option in that pursuit. Dr. Yunus has made little or no effort so far to restore relations with India. An India-free and China-focused foreign policy is not feasible for Bangladesh, which might lead to Bangladesh’s alienation from major global platforms and result in fragile relations with major Western nations.
While searching for a reinvigorating foreign policy, the interim government is trying to alter the geopolitics of South Asia by improving relations with Pakistan. Dr. Yunus and Pakistani Prime Minister Shehbaz Sharif met at the D-8 Summit in Cairo in December 2024 and since then, several initiatives have been underway to increase security and intelligence cooperation between the two nations. While China welcomes this development, it has also proactively engaged with the interim government in Dhaka and had separate meetings with the opposition leaders, including the Bangladesh Nationalist Party (BNP) and Bangladesh Jamaat-e-Islami (BJI).
While all these seem to be an exciting development, the relationship with Pakistan should be navigated carefully so that it does not strain our relationship with India. Choosing Pakistan over India or vice versa will only result in halted progress on different fronts. Bangladesh cannot ignore major powers like India and China, who can significantly contribute to Bangladesh’s economic stability and development needs. Relations with Pakistan still hold uncertainty. While Deep-seated historical grievances might not fade away suddenly, a calculation of tangible benefits from bilateral relations must guide Dhaka’s foreign policy agenda. Additionally, China’s normalization of hostilities with India through a deal during last year’s BRICS summit sends mixed signals regarding China’s interest in antagonizing its relationship with India over Bangladesh.
To make the situation more complex, Trump’s re-election can have serious implications for Bangladesh. Trump’s decision to stop development aid in Bangladesh and several other states will create further economic vulnerability. This disinterest from Washington will give greater freedom to India in pressurizing Bangladesh and will offer China the opportunity to make Bangladesh further dependent on its development aid. Therefore, Bangladesh must adopt a carefully maneuvered and balanced foreign policy so as not to risk its relationship with the Western world and major regional powers.
While Bangladesh enjoys some privileges being positioned in a geopolitically significant location, it also faces challenges. Despite being confined by the constraints of a small state, this moment in history has given wonderful opportunities to the leaders to shape the course of their foreign policy in a way that can bring development, stability, and prestige to the nation. Dhaka must prioritize economic development and domestic democratic stability in national and foreign policy and must not tilt towards any one side of the regional balance of power to upset another. Navigating relations with India, China, and the U.S. requires pragmatic and rational considerations of national interest and risks, both in the short and in the long term.
About the Author:
Umme Salma Tarin is an Assistant Professor at Department of International Relations at Bangladesh University of Professionals and currently pursuing PhD at the University of Delaware. She can be reached at tarin@udel.edu .
Disclaimer: The views expressed in this article are the authors' own and do not necessarily reflect The Insighta's editorial stance. However, any errors in the stated facts or figures may be corrected if supported by verifiable evidence.
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