2014 Index of Economic Freedom

Bangladesh

overall score54.1
world rank131
Rule of Law

Property Rights20.0

Freedom From Corruption23.3

Limited Government

Government Spending92.3

Fiscal Freedom72.5

Regulatory Efficiency

Business Freedom70.8

Labor Freedom51.9

Monetary Freedom65.9

Open Markets

Trade Freedom59.0

Investment Freedom55.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 150.0 million
  • GDP (PPP):
    • $306.0 billion
    • 6.1% growth
    • 6.2% 5-year compound annual growth
    • $2,039 per capita
  • Unemployment:
    • 5.0%
  • Inflation (CPI):
    • 8.7%
  • FDI Inflow:
    • $990.0 million
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Bangladesh’s economic freedom score is 54.1, making its economy the 131st freest in the 2014 Index. Its overall score has increased by 1.5 points since last year, reflecting improvements in trade freedom and business freedom that offset a notable decline in freedom from corruption. Bangladesh is ranked 27th out of 42 countries in the Asia–Pacific region.

Over the 20-year history of the Index, Bangladesh has advanced its economic freedom score by over 10 points. The overall score increase has been relatively broad-based in six of the 10 economic freedoms including trade freedom, business freedom, and fiscal freedom, the score for which has improved by more than 20 points.

Nonetheless, Bangladesh continues to be considered “mostly unfree” due to a serious lack of progress in other critical areas of economic freedom. The country has lagged in promoting the effective rule of law. The judicial system remains vulnerable to political interference, and property rights are not strongly protected. Lingering corruption further undermines enforcement of the rule of law and hampers the emergence of more vibrant economic activity.

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Background

The political landscape was marred by violence in early 2013 when a war crimes tribunal set up by the government of Prime Minister Sheikh Hasina Wajed to investigate and punish human rights violations during the war for independence in 1971 handed down its verdicts. The political volatility comes, however, in the context of overall economic and social gains of the past decade. Life expectancy has increased by 10 years, infant mortality has declined by nearly two-thirds, female literacy has doubled, and economic growth has averaged over 5 percent annually. Yet Bangladesh remains one of the world’s poorest nations. The majority of its people work in agriculture, and garment manufacturing accounts for over 90 percent of export earnings. On April 24, 2013, a garment factory collapsed, killing over 1,100 workers and spurring calls for tighter regulations.

Rule of LawView Methodology

Property Rights 20.0 Create a Graph using this measurement

Freedom From Corruption 23.3 Create a Graph using this measurement

Corruption is a serious impediment to investment and economic growth in Bangladesh. By some estimates, bribes and other off-the-record payments paid by firms related to public procurement, tax and customs collection, and other regulatory authorities may reduce annual GDP by 3 percent. The British-legacy legal system provides for an independent judiciary, but contract enforcement and dispute settlement are inefficient.

Limited GovernmentView Methodology

The individual income tax rate remains at 25 percent, and the corporate income tax rate is 45 percent. Financial institutions and mobile phone operators are taxed at higher rates. Other taxes include a value-added tax (VAT). Overall tax revenue has risen to 9.9 percent of GDP. Government spending has fallen slightly to 16 percent of the economy. The government has raised taxes on mobile phones to cover food subsidies.

Regulatory EfficiencyView Methodology

Despite some progress, significant bureaucratic impediments to entrepreneurial activity and economic development persist. The labor market remains underdeveloped, and enforcement of the labor codes is ineffective. The informal sector continues to be an important source of employment. 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 percent average tariff rate due to its reliance on tariff revenue to finance the government. Regulations affecting investors can be non-transparent and burdensome. Amendments to the Bank Companies Act, intended to strengthen the independence of the central bank and reduce special treatment of the state-owned commercial banks, were passed in 2013.

Country's Score Over Time

Bar Graph of Bangladesh  Economic Freedom Scores Over a Time Period

Country Comparisons

Bar Graphs comparing Bangladesh  to other economic country groups

Regional Ranking

rank country overall change
1Hong Kong90.10.8
2Singapore89.41.4
3Australia82-0.6
4New Zealand81.2-0.2
5Taiwan73.91.2
6Japan72.40.6
7Macau71.3-0.4
8South Korea71.20.9
9Malaysia 69.63.5
10Kazakhstan63.70.7
11Thailand 63.3-0.8
12Azerbaijan61.31.6
13Samoa61.14.0
14Kyrgyz Republic 61.11.5
15The Philippines60.11.9
16Sri Lanka60-0.7
17Vanuatu59.52.9
18Mongolia58.9-2.8
19Fiji58.71.5
20Indonesia58.51.6
21Tonga58.22.2
22Cambodia57.4-1.1
23Bhutan56.71.7
24India55.70.5
25Pakistan 55.20.1
26Bangladesh 54.11.5
27Papua New Guinea53.90.3
28China52.50.6
29Tajikistan52-1.4
30Laos51.21.1
31Maldives512.0
32Vietnam50.8-0.2
33Nepal50.1-0.3
34Micronesia49.8-0.3
35Burma46.57.3
36Uzbekistan46.50.5
37Kiribati46.30.4
38Solomon Islands46.21.2
39Timor-Leste43.2-0.5
40Turkmenistan42.2-0.4
41North Korea1-0.5
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