2015 Index of Economic Freedom

Bangladesh

overall score53.9
world rank131
Rule of Law

Property Rights20.0

Freedom From Corruption27.0

Limited Government

Government Spending92.0

Fiscal Freedom72.7

Regulatory Efficiency

Business Freedom62.2

Labor Freedom63.7

Monetary Freedom67.7

Open Markets

Trade Freedom59.0

Investment Freedom45.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 156.3 million
  • GDP (PPP):
    • $325.1 billion
    • 5.8% growth
    • 6.1% 5-year compound annual growth
    • $2,080 per capita
  • Unemployment:
    • 4.3%
  • Inflation (CPI):
    • 7.5%
  • FDI Inflow:
    • $1.6 billion
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Bangladesh’s economic freedom score is 53.9, making its economy the 131st freest in the 2015 Index. Its overall score has decreased by 0.2 point since last year, with improvements in labor freedom, freedom from corruption, and monetary freedom outweighed by notable declines in investment freedom and business freedom. Bangladesh is ranked 27th out of 42 countries in the Asia–Pacific region.

Over the past five years, Bangladesh’s economic freedom has fluctuated at the lower end of the “mostly unfree” category. Modest score improvements have occurred in just four of the 10 economic freedoms (financial freedom, labor freedom, freedom from corruption, and trade freedom), and overall policy reform appears to have stalled.

A general disregard for the rule of law, rampant corruption, and a judicial system that suffers from political interference provide a weak foundation for economic modernization. Lack of a national consensus on the direction of future policy changes has diminished the momentum for economic reforms, and deteriorating prospects for near-term improvements in economic freedom make it unlikely that the relatively high growth rates of recent years can be maintained.

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Background

Prime Minister Sheikh Hasina was reelected in January 2014. The opposition boycotted the election and blocked roads and highways. The government’s use of force to open thoroughfares led to violent clashes, and Bangladeshis suffered economically. In 2014, the war crimes tribunal set up to investigate human rights violations committed during the 1971 war for independence handed down several death sentences that led to rioting by Islamists. Despite a decade of overall economic and social gains for much of the population, Bangladesh remains one of the world’s poorest nations. Garment manufacturing accounts for over 90 percent of export earnings, and the collapse of the Rana Plaza garment factory in April 2013, which killed over 1,000 people, has focused international attention on working conditions and labor and safety standards.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 27.0 Create a Graph using this measurement

Institutional accountability is not well established, and the judiciary is not clearly separated from the executive. Government effectiveness is undermined by pervasive graft. Contract enforcement and dispute settlement procedures are inefficient. Antiquated real property laws and poor record-keeping systems complicate land and property transactions. Poor governance is one of the main barriers to foreign direct investment.

Limited GovernmentView Methodology

Bangladesh’s top individual income tax rate is 25 percent, and its top corporate tax rate is 45 percent. Other taxes include a value-added tax. Despite relatively high rates, tax revenue remains low at around 10 percent of gross domestic product. Public expenditures account for about 16.3 percent of the domestic economy, and public debt has grown to a level equal to about 40 percent of GDP.

Regulatory EfficiencyView Methodology

Reform measures in recent years have streamlined the procedures for establishing a business, but other institutional deficiencies such as pervasive corruption and poor access to credit discourage start-ups. The labor market remains underdeveloped, and the enforcement of labor rules is ineffective. The government maintains an extensive system of price controls and subsidies for basic food staples, fuels, fertilizers, and electricity.

Open MarketsView Methodology

Bangladesh has a relatively high 13.0 percent average tariff rate, and tariffs are a significant source of government revenue. Efforts are underway to improve customs processes. Foreign investors face bureaucratic hurdles. The financial sector remains underdeveloped despite modernization efforts. State-owned commercial banks account for over 30 percent of total banking system assets. Stock market capitalization is low.

Country's Score Over Time

Bar Graph of Bangladesh  Economic Freedom Scores Over a Time Period

Country Comparisons

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Regional Ranking

rank country overall change
1Hong Kong89.6-0.5
2Singapore89.40.0
3New Zealand82.10.9
4Australia81.4-0.6
5Taiwan75.11.2
6Japan73.30.9
7South Korea71.50.3
8Malaysia 70.81.2
9Macau70.3-1.0
10Brunei Darussalam68.9-0.1
11Kazakhstan63.3-0.4
12Thailand 62.4-0.9
13Philippines62.22.1
14Samoa61.90.8
15Kyrgyz Republic 61.30.2
16Vanuatu61.11.6
17Azerbaijan61-0.3
18Tonga59.31.1
19Mongolia59.20.3
20Fiji590.3
21Sri Lanka58.6-1.4
22Indonesia58.1-0.4
23Cambodia57.50.1
24Bhutan57.40.7
25Pakistan 55.60.4
26India54.6-1.1
27Bangladesh 53.9-0.2
28Maldives53.42.4
29Papua New Guinea53.1-0.8
30China52.70.2
31Tajikistan52.70.7
32Vietnam51.70.9
33Laos51.40.2
34Nepal51.31.2
35Micronesia49.6-0.2
36Solomon Islands470.8
37Uzbekistan470.5
38Burma46.90.4
39Kiribati46.40.1
40Timor-Leste45.52.3
41Turkmenistan41.4-0.8
42North Korea1.30.3
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