Bangladesh: Economic Freedom

Bangladesh and The Index of Economic Freedom 2005

TRADE POLICY
Score: 5–Stable (very high level of protectionism)

The U.S. Department of Commerce reports that “business people consider Customs to be…a thoroughly corrupt organization in which officials routinely exert their power to influence the tariff value of imports and to expedite or delay import and export processing at the ports.”

FISCAL BURDEN OF GOVERNMENT
Score—Income Taxation: 2.5–Stable (moderate tax rates)
Score—Corporate Taxation: 4–Better (high tax rates)
Score—Change in Government Expenditures: 3.5–Stable (low increase)
Final Score: 3.5–Better (high cost of government)

Bangladesh’s top income tax rate is 25 percent. The top corporate tax rate is 30 percent, down from the 40 percent reported in the 2004 Index.

GOVERNMENT INTERVENTION IN THE ECONOMY
Score: 3.5–Stable (high level)

According to the World Bank, the government consumed 5 percent of GDP in 2002, up from the 4.5 percent reported in the 2004 Index

MONETARY POLICY
Score: 2–Worse (low level of inflation)

CAPITAL FLOWS AND FOREIGN INVESTMENT
Score: 4–Worse (high barriers)

Foreign investors receive national treatment and are allowed full ownership in most sectors. The International Monetary Fund reports that foreign investments, with the exception of investments in the industrial sector, require approval. Most of the barriers that remain are informal or involve inadequate implementation of existing laws.

BANKING AND FINANCE
Score: 5–Worse (very high level of restrictions)

According to the Economist Intelligence Unit, “State-owned banks—known as nationalised commercial banks, or NCBs—dominate the financial sector. Given that the government is the owner, regulator and major customer of the NCBs, there has been ample opportunity for mismanagement and political interference…. [T]he banking sector remains hampered by poor credit discipline, an archaic loan recovery system, corruption, inefficiency, overstaffing and unionisation.”

WAGES AND PRICES
Score: 3–Stable (moderate level of intervention)

The government affects prices through its many state-owned monopolies.

PROPERTY RIGHTS
Score: 4–Stable (low level of protection)

The constitution provides for an independent judiciary; however, reports the Economist Intelligence Unit, “The legal framework is archaic and court procedures are often cumbersome.

REGULATION
Score: 5–Stable (very high level)
Corruption is the largest burden on business. Other problems include a bureaucracy characterized by vested interests, lack of transparency, and outdated business laws that do not protect private contracts.

INFORMAL MARKET
Score: 4.5–Stable (very high level of activity)