Abstract: During the past three decades, FDI turned out to be the major resource for economic development in the developing countries along with domestic resource mobilisation. The context has changed so far because of declining trend in official development assistance (ODA), political unrest both in local and international arena and above all in the wake of globlisation. To attract more and more FDI the government of Bangladesh has been trying to establish private investment friendly environment. But increasing private investment will continue to remain a challenge for the country. The study presents the underlying reasons behind poor inflow of FDI and suggests measures to overcome these problems. In addition this study has made an attempt to identify some of the sectors for prospective investment and highlight the facilities and incentives currently prevailing in the country both for local and foreign entrepreneurs.