2021 Index of Economic Freedom

Bangladesh

OVERALL SCORE56.5
WORLD RANK120
Rule of Law

Property Rights38.0

Judicial Effectiveness35.4

Government Integrity27.7

Government Size

Tax Burden84.0

Government Spending93.8

Fiscal Health66.3

Regulatory Efficiency

Business Freedom55.6

Labor Freedom68.8

Monetary Freedom69.9

Open Markets

Trade Freedom63.4

Investment Freedom45.0

Financial Freedom30.0

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Quick Facts
  • Population:
    • 163.0 million
  • GDP (PPP):
    • $838.6 billion
    • 7.9% growth
    • 7.5% 5-year compound annual growth
    • $4,951 per capita
  • Unemployment:
    • 4.2%
  • Inflation (CPI):
    • 5.7%
  • FDI Inflow:
    • $1.6 billion

Bangladesh’s economic freedom score is 56.5, making its economy the 120th freest in the 2021 Index. Its overall score has increased by 0.1 point, primarily because of an improvement in the tax burden score. Bangladesh is ranked 25th among 40 countries in the Asia–Pacific region, and its overall score is below the regional and world averages.

Bangladesh has made slow but steady progress toward greater economic freedom over the past decade. While the economy remains in the mostly unfree category, the control of government spending and debt has been a positive achievement. Additional improvements in judicial effectiveness and government integrity would strengthen the rule of law, and opening the banking sector to foreign competition would further benefit the country.

IMPACT OF COVID-19: As of December 1, 2020, 6,675 deaths had been attributed to the pandemic in Bangladesh, and economic growth was forecast to decline to 3.8 percent for the year.

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Background

Bangladesh is a large Muslim-majority democracy that shares borders with India and Burma. The British partition of India in 1947 resulted in the creation of West Pakistan and, in the Muslim-majority areas of Bengal east of India, East Pakistan. Following a brutal conflict for independence from West Pakistan, East Pakistan, aided by India, declared itself the independent state of Bangladesh in 1971. Two political parties have alternated in power for decades. Prime Minister Sheikh Hasina of the Awami League secured her third consecutive term with a landslide victory in December 2018 elections. The opposition Bangladesh Nationalist Party won only seven seats. Despite political instability and poor economic freedom indicators, economic growth has been robust, led by garment exports.

Rule of LawView Methodology

Property Rights 38.0 Create a Graph using this measurement

Judicial Effectiveness 35.4 Create a Graph using this measurement

Government Integrity 27.7 Create a Graph using this measurement

Property rights are enforced unevenly. Poor record-keeping systems can complicate land and property transactions. The weak judiciary is slow and lacks independence. Procedures for the enforcement of contracts and settlement of disputes are inefficient. Endemic corruption and criminality, weak rule of law, limited bureaucratic transparency, and political polarization undermine government accountability and remain serious impediments to progress.

Government SizeView Methodology

The top individual income tax rate is 30 percent, and the top corporate tax rate is 25 percent. The overall tax burden equals 8.8 percent of total domestic income. Government spending has amounted to 14.3 percent of total output (GDP) over the past three years, and budget deficits have averaged 4.4 percent of GDP. Public debt is equivalent to 35.7 percent of GDP.

Regulatory EfficiencyView Methodology

Several fees paid when starting a business have been reduced or eliminated, and getting electricity is now less time-consuming and less expensive. Access to credit information has also improved. Labor laws are enforced inconsistently. Informally employed workers vastly outnumber the formally employed. The government maintains significant subsidies for energy and agricultural products.

Open MarketsView Methodology

Bangladesh has five preferential trade agreements in force. The trade-weighted average tariff rate is 10.8 percent, and layers of nontariff barriers continue to impede dynamic flows of trade. The government has taken steps to reduce bureaucratic barriers to investment, but progress has been slow overall. The financial sector is dominated by banks and is characterized by state ownership and considerable state interference.

Country's Score Over Time

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Regional Ranking

RANK COUNTRY OVERALL CHANGE
1Singapore89.70.3
2New Zealand83.9-0.2
3Australia82.4-0.2
4Taiwan78.61.5
5Malaysia74.4-0.3
6Japan74.10.8
7South Korea740.0
8Kazakhstan71.11.5
9Thailand69.70.3
10Indonesia66.9-0.3
11Brunei Darussalam66.60.0
12Philippines64.1-0.4
13Kyrgyz Republic63.70.8
14Mongolia62.46.5
15Fiji62.2-1.2
16Samoa61.9-0.2
17Vietnam61.72.9
18Vanuatu60.5-0.2
19Papua New Guinea58.90.5
20China58.4-1.1
21Uzbekistan58.31.1
22Bhutan58.3-3.8
23Tonga57.5-1.3
24Cambodia57.30.0
25Bangladesh 56.50.1
26India56.50.0
27Solomon Islands56.53.6
28Sri Lanka55.7-1.7
29Tajikistan55.23.0
30Burma55.21.2
31Maldives55.2-1.3
32Laos53.9-1.6
33Afghanistan53-1.7
34Pakistan51.7-3.1
35Nepal50.7-3.5
36Micronesia50.4-1.6
37Turkmenistan47.40.9
38Timor-Leste44.7-1.2
39Kiribati44.4-0.8
40North Korea5.21.0
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