[🇧🇩] Reforms carried out by the interim/future Govts.

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Why deeper reform can no longer wait

Last week the World Bank launched a report, "Bangladesh Trade Policy at a Crossroads". The message coming out of that report could not be more prescient. Tariff and trade policy reforms cannot wait any longer. Furthermore, what was made clear is that reforms would actually pay for themselves. The a

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BANGLADESH'S TRADE REGIME

Why deeper reform can no longer wait

Last week the World Bank launched a report, "Bangladesh Trade Policy at a Crossroads". The message coming out of that report could not be more prescient. Tariff and trade policy reforms cannot wait any longer. Furthermore, what was made clear is that reforms would actually pay for themselves. The argument about revenue loss that has thus far stalled reforms for over two decades are no longer valid. Latest modelling techniques are able to project outcomes based on the latest economy-wide applications that can coalesce second and third effects showing that reforms actually can generate growth which yield higher revenues.

With Least Developed Country (LDC) graduation approaching and the need for export diversification becoming increasingly urgent, the country can no longer afford to treat trade policy reform as a marginal or incremental policy issue. The structure of protection has implications not only for import prices and customs revenue, but also for export competitiveness, investment incentives and the prospects for entering into deeper trade agreements.

Rapid implementation of the National Tariff Policy (NTP) has become more urgent than ever because Bangladesh's tariff regime has long needed a coherent policy framework rather than piecemeal adjustments.

The setting for trade policy today remains fundamentally unchanged over the past 25 years. Thanks to the high tariff and protection regime, exporting -- outside the RMG industry -- is not a profitable activity relative to selling in the domestic market. The domestic market has effectively been created behind high tariff walls. And the divergence is not marginal; it is significant. This is the anti-export bias that has become a widely used expression in policy circles.

Trade policy reforms must therefore be formulated within these limiting parameters. If Bangladesh is serious about export diversification and competitiveness, correcting this anti-export bias has to be at the heart of tariff reform.

There is also an important methodological point in assessing protection. Much tariff analysis uses import-weighted tariffs because disaggregated tariff data by countries and products are difficult to obtain. But if existing tariffs are effective in restricting imports, import-weighted tariffs will understate the magnitude of protection. There is a stark difference between ex ante protection (tariff-induced) and ex post tariff protection (outcome of restricted imports).

For Bangladesh, Policy Research Institute of Bangladesh (PRI) has a repository of disaggregated tariff data covering more than three decades, allowing us to undertake ex ante nominal protection analysis. On this basis, the average nominal protection rate in FY2027 is around 28 per cent, with roughly half coming from para-tariffs, while average trade taxes are considerably higher.

Surprisingly, despite pronouncements to the contrary, the proposed measures under the short-term stabilisation programme and the FY2027 Budget fall short of the commitments under the National Tariff Policy 2023. Implementation of the NTP is a critical part of preparation for LDC graduation. The question is: why is it still stuck at the proposal stage?

Among the principal tariff rationalisation measures proposed by the World Bank is a reduction in tariffs on intermediate goods. While this is an absolutely correct posture of tariff reform, and is found to have worked well in Indonesia and Vietnam, the context in Bangladesh is so different that this reform measure has to be reformulated in the Bangladesh context. There exists a deep wedge between output and input tariffs that ensure super-high effective protection. While deep cuts in intermediate goods tariffs can improve competitiveness (if producers were to export), reducing input tariffs without a commensurate reduction in output tariffs could actually raise effective protection and intensify the anti-export bias for non-RMG exports, driving such exporters away from world markets. Therefore, unlike Indonesia, Vietnam, or even India, downward adjustment in intermediate goods tariffs must be associated with a commensurate downward adjustment in output tariffs. Note that this concern is not relevant to RMG exports, which operate under a duty-free import regime.

Exemption rationalisation in the tariff structure is another area where reform is warranted. There is ample justification for eliminating end-user tariff concessions applied to a plethora of industrial sectors and subsectors, except for capital machinery imports. Protective Most Favoured Nation (MFN) output tariffs average around 42 per cent, compared with around 17 per cent for MFN input tariffs. This is already a wide divergence and provides significant protection, which need not be amplified with more input tariff concessions for specified sectors and sub-sectors.

The question of immediate revenue loss will inevitably arise. But tariff reform should not be assessed only through its first-round fiscal impact. Second- and third-round effects can generate more revenue through higher economic activity. Economy-wide models such as TRIST and GTAP can help simulate alternative reform scenarios and assess their wider effects. The World Bank has done that and found clear evidence of Free Trade Agreements (FTAs) and tariff cuts adding $4 billion to GDP.

Before touching customs duty, regulatory duty (RD) and supplementary duty (SD) have to be addressed. RD is effectively an additional customs duty, meaning the top customs duty is not 25 per cent but 28 per cent when the 3 per cent standard RD is included. RD should be eliminated in a couple of years, while SD needs to cut sharply and become trade-neutral before LDC graduation. This would be an essential part of preparation for LDC graduation.

Protection is concentrated particularly in consumer goods industries. Export producers have to sell at world prices over which they have no control, while high tariffs keep domestic prices of durable and non-durable consumer goods well above international prices. Beyond customs duty and RD, SD has increasingly become a protective instrument. In effect, half the protection comes from para-tariffs-RD and SD.

The industrial policy dimension is equally important. Industrial policy in Bangladesh is essentially trade policy -- or, by and large, import tariff and export subsidy policy, applied to thrust sectors, priority sectors, development sectors, and so on. In recent times distortive and trade restrictive measures have multiplied, according to WTO reports. It is interesting that the New Industrial Policy Observatory (from Global Trade Alert) finds Bangladesh to have adopted as many trade distortive as trade liberalising measures since 2009. However, there is a catch. Such international comparisons based on WTO tariff policy reviews can be misleading because Bangladesh does not always notify all distortive measures, while WTO assessments typically focus on MFN customs duty and give limited attention to para-tariffs.

The bottom line is that economy-wide impacts of tariff reform can offset short-term revenue losses. Bangladesh's deep tariff reforms in the 1990s showed no reduction in customs revenues throughout the decade, during which customs revenue grew by 11 per cent during the decade despite average tariffs were cut by half.

The implications for trade agreements are equally important. With the current tariff structure, an FTA agenda will remain difficult, if not impossible. Note that Bangladesh has not been able to sign one FTA in the past 25 years despite several initiatives that were widely broadcasted. Bangladesh may be limited largely to EPAs (Economic Partnership Agreement) and CEPAs (Comprehensive Economic Partnership Agreement). How about an FTA with EU? If we cannot sign an FTA with Bhutan, can we realistically sign one with the EU? The competitive implications are becoming more urgent as India and Vietnam - our main competitors in garment exports to EU -- have already signed FTAs with EU.

The bottom line is clear: doing nothing will be costly; reform will pay for itself. The challenge is to move from tariff and trade policy reform as a stated policy objective to tariff and trade policy reform as an implemented economic strategy.

Dr Zaidi Sattar, Chairman, Policy Research Institute of Bangladesh (PRI).​

 

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Bangladesh needs urgent reforms to reverse slowdown in growth, World Bank says

Bangladesh needs urgent and comprehensive reforms in the financial, energy and revenue sectors to reverse the slowdown in economic growth, restore investor confidence and create jobs, the World Bank said on Tuesday. In its latest Bangladesh Development Update, the multilateral lender projected Ban

thefinancialexpress.com.bd

Bangladesh needs urgent reforms to reverse slowdown in growth, World Bank says

Bangladesh needs urgent and comprehensive reforms in the financial, energy and revenue sectors to reverse the slowdown in economic growth, restore investor confidence and create jobs, the World Bank said on Tuesday.

In its latest Bangladesh Development Update, the multilateral lender projected Bangladesh’s economic growth at 3.4 per cent in FY2026 and FY2027, citing persistent structural constraints, weak domestic revenue mobilisation, vulnerabilities in the financial sector and an uncertain global investment environment.

Growth is expected to recover to 3.9 per cent in FY2028, provided there is a gradual easing of energy supply constraints and faster implementation of government reforms, the report said.

“Bangladesh needs to respond with urgency and speed up the reforms essential for protecting the poor and creating more and better jobs,” said Jean Pesme, World Bank Division Director for Bangladesh and Bhutan.

The World Bank said investment activity has softened while exports lost momentum. Elevated inflation has reduced household purchasing power and raised business costs, while weaknesses in financial-sector intermediation have undermined investor confidence.

At the same time, limited fiscal space has constrained public investment. The external sector, however, showed resilience, supported by stronger remittance inflows and improvements in foreign exchange reserves.​

 

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Bangladesh, WB, IMF reach policy consensus on reforms; govt focuses on investment

Adviser to the Prime Minister on Finance and Planning Prof Dr Rashed Al Mahmud Titumir on Monday said Bangladesh has reached broad policy alignment with the World Bank (WB) and the International Monetary Fund (IMF) on key economic reforms aimed at restoring stability, strengthening discipline in th

thefinancialexpress.com.bd

Bangladesh, WB, IMF reach policy consensus on reforms; govt focuses on investment

Adviser to the Prime Minister on Finance and Planning Prof Dr Rashed Al Mahmud Titumir on Monday said Bangladesh has reached broad policy alignment with the World Bank (WB) and the International Monetary Fund (IMF) on key economic reforms aimed at restoring stability, strengthening discipline in the banking sector, increasing tax revenue and creating employment.

“The government is pursuing a comprehensive economic recovery and reconstruction strategy, with greater domestic and foreign investment, reopening closed factories, expanding social protection and addressing rising energy costs among its major priorities,” he said.

The adviser made the remarks while speaking to journalists ahead of the 2026 Annual Meetings of the IMF and the World Bank Group in Thailand, a press release said.

Titumir said the government had a politically mandated roadmap to recover, restore and rapidly rebuild the economy to put the country on a path to prosperity.

The plan has been outlined in a five-year economic strategy, with several fundamental priorities aligning with the reform proposals of the World Bank and the IMF, he added.

“The people want discipline in the financial sector, higher tax collection relative to GDP, increased spending on social protection and employment generation through industrialisation,” he said, adding that reopening closed factories was also a public expectation.

The adviser said alignment between the government’s reform priorities and those of multilateral development partners would facilitate implementation and improve the prospects for sustainable reforms.

However, he emphasised that the political government would retain ownership of the reform agenda and responsibility for its implementation.

Titumir said the government had discussed with the World Bank the additional financial pressure on the energy sector arising from the conflict in the Middle East, which began on February 28, and its impact on ordinary people.

He said the government had refrained from fully adjusting domestic energy prices to international market levels to limit the burden on consumers.

Referring to the World Bank’s recent report, he said poverty had increased during the previous government’s tenure.

The present government is planning to support poor households through programmes such as the Family Card, he added.

According to assessments by independent research institutions, such initiatives could potentially reduce the poverty rate by around five percentage points over five years, he said.

The government has also highlighted the need for financing to strengthen climate resilience, expand renewable energy and develop essential infrastructure.

Titumir identified restoring discipline in the financial sector as one of the major challenges to economic recovery.

He said ordinary citizens were now bearing the consequences of irregularities and lending-related disorder in the banking sector during the previous administration.

Restoring confidence in banks and rehabilitating the weakened financial system would require refinancing support, he said, adding that discussions were underway with the International Finance Corporation (IFC) and other institutions on the issue.

Without stability in the banking sector, it would be difficult to achieve the targets for higher investment and employment, he continued.

The adviser also stressed the need to raise the tax-to-GDP ratio, saying excessive tax exemptions and irregularities in tax administration had weakened revenue collection in the past.

Lower revenue mobilisation had widened the fiscal deficit and constrained public spending on social protection and development, he said.

He called for coordinated action to strengthen financial discipline, increase revenue, expand social safety nets and create jobs.

The government is taking initiatives to arrange special financing to reopen closed factories and encourage fresh investment, Titumir said.

He noted that the number of educated and young unemployed people was growing while many factories remained shut, requiring coordinated efforts to boost production, develop new entrepreneurs and generate employment.

Migrant workers, entrepreneurs in the ready-made garment sector and women’s participation in formal employment had played important roles in Bangladesh’s economic progress, he said.

The country would need to build on these contributions by expanding production and employment opportunities alongside social protection programmes, he added.

Titumir also expressed optimism about expanding trade and investment ties between Bangladesh and Thailand.

He said several promising sectors for Thai investment in Bangladesh had been highlighted during a meeting with the Thai Chamber of Commerce, particularly those offering opportunities for production, processing and value addition.

Thai investors had shown interest in agro-processing, fruits, dairy products and halal food processing, he said.

Bangladesh produces substantial quantities of seasonal fruits, including mangoes, jackfruits and lychees, but inadequate cold-storage and processing facilities result in significant post-harvest losses, often depriving farmers of fair prices.

Investment in processing these products could help reduce waste, increase farmers’ earnings and create export opportunities for processed foods, including halal products, he said.

Titumir said Bangladesh’s objective was not merely to reduce the bilateral trade deficit but also to expand overall trade by establishing stronger links between the two countries’ production and supply chains.

He said there was scope to develop integrated production networks under which raw materials could be produced in Bangladesh, intermediate goods manufactured in Thailand and finished products assembled for export, with the reverse arrangement also possible for other products.

Discussions had also covered improving maritime connectivity between Chattogram Port in Bangladesh and Ranong Port in Thailand, he said.

More efficient shipping links between the two ports could facilitate cargo movement and open up new opportunities for regional trade, he added.

The adviser stressed the importance of exploring free trade agreements with members of the Association of Southeast Asian Nations (ASEAN) and opportunities under the Regional Comprehensive Economic Partnership (RCEP) framework.

Greater access to regional tariff preferences could help Bangladesh expand exports beyond the bilateral market, he said.

Thailand had also expressed interest in expanding cooperation in agriculture and agro-processing, maritime connectivity and the utilisation of fisheries resources in the Bay of Bengal, Titumir said.

Such cooperation could help boost production, exports and employment in both countries, he added.

About multiple sources of financing, Titumir said the government was mobilising financing from multiple sources to implement its electoral commitments, with domestic and foreign investment expected to account for a substantial share.

He said investment from China had begun, while the government had engaged with Japanese companies, including Toyota and Marubeni Corporation.

A US delegation had also visited Bangladesh, while the government was in contact with Silicon Valley-based investment and innovation platform Plug and Play and major technology companies, he added.

According to the adviser, expectations of political stability and policy continuity were helping generate investor interest in Bangladesh.

The government aims to combine financing from international development partners, foreign investment and domestic resource mobilisation to advance economic recovery and reconstruction, he said.

He also noted that Bangladesh was expanding cooperation with the World Bank, the Asian Development Bank (ADB), the Asian Infrastructure Investment Bank (AIIB) and the Islamic Development Bank (IsDB).

Titumir said the ADB had already announced assistance worth US$5 billion.

He stressed that financial-sector discipline, stronger revenue mobilisation, wider social protection, industrialisation and employment generation would need to advance together to establish the economy on a sustainable footing.

The government intends to work in coordination with international development partners and investors to achieve these objectives, he added.​