Bangladesh

GDP (US$ Billion)

250.02 (2017)

World Ranking 43/191

GDP Per Capita (US$)

1,532 (2017)

World Ranking 152/190

Economic Structure

(in terms of GDP composition, 2017)

Services
(53.5%)
Industry
(28%)
Agriculture
(13%)

External Trade (% of GDP)

38 (2016)

Currency (Period Average)

Bangladeshi Taka

80.44 per US$ (2017)

Political System

Unitary multiparty republic

Overview

Bangladesh has an impressive track record for growth and development. It has made great progress in reducing poverty and has grown steadily over the past decade. Based on the international poverty line of USD1.90 per person per day, Bangladesh reduced poverty from 44.2% in 1991 to 14.8% in 2016/17. While the income growth, human development and vulnerability reduction efforts to date have been extraordinary, Bangladesh faces daunting challenges with about 24 million people still living below the poverty line. Furthermore, in April 2019, the World Bank said Bangladesh requires large investments in physical capital, human capital and reforms to better enable innovation to become an upper middle-income country by 2031.

Sources: World Bank, Fitch Solutions

Major Economic/Political Events and Upcoming Elections

October 2018

The opposition Bangladesh Nationalist Party (BNP) formed an alliance with other smaller opposition parties, creating the Jatiya Oikya Front (United National Front) to contest the next general election.

December 2018

Prime Minister Sheikh Hasina and the ruling Awami League secured a third consecutive term in the general election.

Sources: BBC Country Profile – Timeline, Fitch Solutions

Major Economic Indicators
Graph: Bangladesh real GDP and inflation
 
Graph: Bangladesh real GDP and inflation
 
Graph: Bangladesh GDP by sector (2017)
 
Graph: Bangladesh GDP by sector (2017)
 
Graph: Bangladesh unemployment rate
 
Graph: Bangladesh unemployment rate
 
Graph: Bangladesh current account balance
 
Graph: Bangladesh current account balance
 

e = estimate, f = forecast

Sources: IMF, World Economic Outlook Database, World Bank

Date last reviewed: May 14, 2019

External Trade

Merchandise Trade

Graph: Bangladesh merchandise trade
 
Graph: Bangladesh merchandise trade
 
 

Source: WTO

Date last reviewed: May 14, 2019

Graph: Bangladesh major export commodities (2015)
 
Graph: Bangladesh major export commodities (2015)
 
Graph: Bangladesh major export markets (2015)
 
Graph: Bangladesh major export markets (2015)
 
Graph: Bangladesh major import commodities (2015)
 
Graph: Bangladesh major import commodities (2015)
 
Graph: Bangladesh major import markets (2015)
 
Graph: Bangladesh major import markets (2015)
 

Note: Latest available direct data is 2015; direct data not available for 2016 or 2017 from Trade Map

Sources: Trade Map, Fitch Solutions

Date last reviewed: May 14, 2019Trade in Services

Graph: Bangladesh trade in services
 
Graph: Bangladesh trade in services
 
 

Source: WTO

Date last reviewed: May 14, 2019

Trade Policies
  • In July 1978, Bangladesh joined the World Customs Organisation; in January 1995, Bangladesh became a member of the World Trade Organisation (WTO).

  • Bangladesh used to benefit from preferential access to the United States market through the generalised scheme of preferences (GSP) programme, but in June 2013 former-president Barack Obama suspended Bangladesh's membership in light of the government's insufficient progress in securing the rights of Bangladeshi workers. The United States government has provided Bangladesh with a 16-point action plan which, if implemented, will provide a basis for the reinstating of GSP trade benefits. The United States is the single-largest export destination for Bangladesh. As a least developed country, 97% of goods originating from Bangladesh enjoy duty-free benefits on export to the United States. However, the country's main export items – garments – have not been included in this package, despite comprising 95% of Bangladeshi exports to the United States per year. As a result, Bangladeshi exporters face a 15.6% tariff on export of apparel items to the United States, although some competing countries, such as mainland China, Vietnam, Pakistan and India, face far lower tariffs.

  • Bangladesh continues to impose high tariffs on imports, which increase costs for businesses, with an average tariff rate of 10.7%, rising to 25% for some finished products. In addition, a 4% infrastructure development surcharge is levied on almost all imports, as well as a value added tax (VAT) of 15%. Although some raw materials and capital goods imports are exempt from customs duties, these charges increase the difficulties of operating in Bangladesh.

  • Bangladesh and India's joint membership of regional free trade areas eases the flow of goods between the two countries, with India providing an important source of imports for Bangladesh. Dhaka has attempted to improve its economic relationship with India in recent years by reducing trade barriers and improving connectivity.

  • Bangladesh has imposed an export ban on raw hides and wet blue leather. Only exports of finished leather and leather goods are allowed.

  • In August 2015, Bangladesh imposed a regulatory import duty of 20% on raw and refined sugar. The measure was initiated to protect local suppliers in times of falling global prices of sugar.

  • Vehicles imported into Bangladesh are subject to a 165% import duty, while domestically assembled vehicles are subject to a 60% tax. Therefore, domestically-assembled vehicles are more affordable.

Sources: WTO - Trade Policy Review, Fitch Solutions

Trade Agreement

Trade Updates

  • Bangladesh and Sri Lanka expressed interest to sign a free trade agreement (FTA) in March 2017 in an attempt to boost bilateral trade ties. The two countries are set to benefit significantly from the FTA as Bangladesh produces textiles, pharmaceuticals, cement, paper, electrical items and jute products that are high in demand in Sri Lanka; Sri Lanka is also an important transhipment hub for the region. The FTA is expected to be signed in 2019.

  • In October 2018, Brazil and Bangladesh agreed to sign an FTA to boost bilateral trade. Brazil also seeks to form a Brazil-Bangladesh Chamber of Commerce and Industry to encourage private sector investors of both countries to enhance business communication. Exports from Bangladesh to Brazil are currently subject to duties of 35%. It is not yet certain when negotiations will begin.

  • Bangladesh has successfully negotiated several regional trade and economic agreements, including the South Asian Free Trade Area (SAFTA), the Asia-Pacific Trade Agreement (APTA), and the Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (BIMSTEC). Bangladesh has not ratified any bilateral FTAs but has started initial FTA discussions with Sri Lanka and Brazil. As a founding member of the WTO and as a less-developed country (LDC), Bangladesh has been an active advocate for LDC interests in WTO negotiations.

Multinational Trade Agreements

Active

  1. SAFTA: SAFTA consists of Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan and Sri Lanka. SAFTA entered into force on January 1, 2006 and covers trade in goods. The agreement is an attempt to increase intraregional trade through the gradual dismantling of some tariff barriers; however, the agreement leaves out a large number of products denominated as 'sensitive' and does not address non-tariff trade barriers. Intraregional trade has the potential to increase the existing trade by over 300%. The growing demand in the region for agricultural products creates an opportunity for exploring new avenues of intraregional trade and investments in this sector.

  2. EU-Bangladesh Cooperation Agreement: European Union (EU) countries are major export markets and businesses enjoy duty-and-quota-free access for most goods exports to the bloc under the Everything But Arms agreement. The cooperation agreement entered into force on March 1, 2001. The EU is Bangladesh's main trading partner, accounting for around 24% of Bangladesh's total trade in 2015. EU imports from Bangladesh are dominated by clothing, accounting for over 90% of the EU's total imports from Bangladesh. EU exports to Bangladesh are dominated by machinery and transport equipment (49%). From 2008 to 2015, EU imports from Bangladesh have almost trebled from EUR5.5 billion to EUR15.2 billion, which represents nearly half of Bangladesh's total exports. There will be increasing pressure on the government to improve working conditions in the garments industry as the EU will be closely observing Bangladesh. Several European importers have already come forward to help the country in improving safety features of readymade garment factories, which is a good sign for the country.

  3. Asia Pacific Trade Agreement (APTA): APTA consists of Bangladesh, mainland China, India, Laos, South Korea and Sri Lanka. Some 4,721 Bangladeshi products enjoy duty-free access to the mainland China under APTA (in effect since September 1, 2006). In 2013, Bangladesh again sought duty-free access for 17 more items. The country will have to grant duty-free access to products from mainland China in its market if an FTA is signed between Bangladesh and mainland China.
Under Negotiation

The BIMSTEC: BIMSTEC is a regional organisation comprising Bangladesh, India, Myanmar, Sri Lanka, Thailand, Bhutan and Nepal. Apart from India, other developing Asian states are not key trade partners for Bangladesh, although this agreement creates opportunities to increase regional trade flows. The organisation has been active since 2006. Negotiations for a tariff-free zone began between various actors at multiple points in 2014. Once in place, the agreement is expected to further integrate the seven-nation area and aid in regional development.

Sources: WTO Regional Trade Agreements database, Asia Regional Integration Centre, Fitch Solutions

Investment Policy

Foreign Direct Investment

Graph: Bangladesh FDI stock
 
Graph: Bangladesh FDI stock
 
Graph: Bangladesh FDI flow
 
Graph: Bangladesh FDI flow
 

Source: UNCTAD

Date last reviewed: May 14, 2019

Foreign Direct Investment Policy

  1. The Bangladesh Investment Development Authority (BIDA) is the principal authority tasked with supervising and promoting private investment. The Bangladesh Export Processing Zone Authority (BEPZA) acts as the investment supervisory authority in export processing zones (EPZs). BEPZA is the one-stop service provider and regulatory authority for companies operating inside EPZs. Investments that are wholly foreign owned, joint ventures and wholly Bangladeshi-owned companies are all permitted to operate and enjoy equal treatment in the EPZs.

  2. Some key sectors are reserved for government investment, such as defence equipment and machinery, forest plantation and mechanised extraction within the bounds of reserved forests, production of nuclear energy and certain media and security services. In addition, there are 17 controlled sectors that require prior clearance from the respective line authorities. These sectors include fisheries, banking, insurance and other financial institutions, power generation, supply and distribution of power in the private sector, minerals extraction, large-scale infrastructure projects, crude oil refineries, energy-intensive operations, transport services telecommunications and media.

  3. The government's industrial policy favours manufacturing and labour-intensive industries using local inputs. Various subsidies and other incentives are available to different industrial ventures, primarily in export sectors and, to some degree, import substitution sectors. The government also provides loans at concessionary rates through state banks and government-owned development banks for exports, cottage industries and agriculture.

  4. The Bangladeshi government is keen to attract more foreign direct investment and has set out an ambitious plan to build 100 special economic zones (SEZs) by 2030. In January 2017, the Bangladesh Economic Zones Authority approved the construction of four SEZs in the districts of Madaripur, Faridpur, Noakhali and Kishoreganj.

  5. Under the Belt and Road Initiative, mainland China intends to set up economic corridors in alliance with other countries – with one covering Bangladesh, India and Myanmar (for example, the BCIM Economic Corridor). The corridor will link India's Kolkata with mainland China's Kunming, Myanmar's Mandalay and Bangladesh's Dhaka (among the key points). The government from mainland China has pledged to finance multi-billion USD infrastructure projects in Bangladesh, including the construction of a 220km oil pipeline in Bangladesh which will reduce the time and costs of transferring and unloading imported crude oil to onshore facilities in the country.

Sources: WTO – Trade Policy Review, ITA, U.S. Department of Commerce

Free Trade Zones and Investment Incentives

Free Trade Zone/Incentive Programme Main Incentives Available
EPZs – general incentives - The VAT rate on exports is 0%



- For companies that only export, import duties are waived for imports of capital machinery and spare parts



- For companies that primarily export (80% and above) an import duty rate of 1% is charged for imports of capital machinery and spare parts identified and listed in notifications to relevant regulators



- Import duties are also waived for EPZ industries and other export-oriented industries for imports of raw materials consumed in production



- Investors benefit from duty-free import of construction materials, capital goods and certain raw materials



- Exemption of double taxation subject to double taxation agreements



- Full repatriation of capital
EPZs Mongla, Ishwardi, Uttara – specific incentives Income tax exemption of 100% for the first three years, 50% for the next three years, and 25% for the seventh year
EPZs Chittagong, Dhaka, Comilla, Adamjee, Karnaphuli – specific incentives Income tax exemption of 100% for the first two years, 50% for the next two years, and 25% for the fifth year
Economic Zones: Mongla, Sirajganj, Anowara, Mirershorai, Maulvibazar – specific incentives - Income tax exemption of 100% for the first two years, falling to 80% in the third year, and reducing by 10% increments each following year, to 10% in the 10th year



- Exemption from dividend tax



- 50% exemption on stamp duty for lease-hold land or factory space



- 50% tax rebate on income tax of employees for five years



- Exemption from capital gains tax
General incentives - 50% tax rebate on export income



- Tax holidays of five to seven years for new enterprises in textiles, pharmaceuticals, plastics, ceramics, iron and steel, fertilisers, computer hardware, petrochemicals, agricultural and industrial machinery



- Exemption from income tax for up to 15 years for new projects in the power sector



- Cash subsidies are offered to firms in the furniture sector (at a rate of 15%), plastic products (10%), textile products that are destined for eurozone markets (4-6%) and fruit and vegetable production (20%) to help improve their global competitiveness



- Independent non-coal fired power plants (IPPs) commencing production after January 1, 2015 are granted a 100% tax exemption for five years, a 50% exemption for years six to eight years, and a 25% exemption for years nine to 10 years



- For coal-fired IPPs contracting with the government before June 30, 2020 and with a commercial operating date before June 30, 2023, the tax exemption rate is 100% for the first 15 years of operations



- For power projects, import duties are waived for imports of capital machinery and spare parts

Sources: Bangladesh Economic Zones Authority, Fitch Solutions

Taxation – 2019
  • Value Added Tax: 15%
  • Corporate Income Tax: 25%

Source: National Board of Revenue, Bangladesh

Business Taxes

Type of Tax Tax Rate and Base
Corporate Income Tax - 25% on profits for listed companies

- 35% on profits for unlisted companies

- 40% on profits for listed banks, insurance companies and financial institutions

- 42.5% on profits for unlisted banks, insurance companies and financial institutions

- 45% on profits for mobile phone operators and cigarette manufacturing companies
Branch Remittance Tax 20%
 
Value Added Tax 15%
Capital Gains Tax 15% net earnings
Withholding Taxes (paid to non-residents) - 20% on dividend income

- 20% on royalties

- 20% on interest

Source: National Board of Revenue, Bangladesh

Date last reviewed: May 14, 2019

Foreign Worker Requirements

Localisation Requirements

The BIDA stipulates that private sector industrial enterprises wanting to employ foreign nationals are required to apply in advance. Foreign nationals can normally be employed for jobs for which local personnel are not available and the number of foreign employees should not exceed 5% of total employees (including management staff) in the industrial sector and 20% in the commercial sector. In addition, foreign nationals are initially considered for a term of only two years, after which employment may be extended dependent on BIDA approval.

Visa/Travel Restrictions

All foreign nationals seeking paid employment in Bangladesh must be in possession of a valid work permit. The tenure of a work permit for a foreign worker is generally two years. Foreign citizens or nationals of India, Pakistan and South Korea travelling to Bangladesh by air with a valid visa for 90 days or more are required to register at the airport.

Sources: InterNations, The Bangladesh Investment Development Authority, Fitch Solutions

Risks

Sovereign Credit Ratings


 
Rating (Outlook) Rating Date
Moody's
 
Ba3 (Stable)
 
10/10/2018
Standard & Poor's BB- (Stable)
 
06/04/2010
Fitch Ratings BB- (Stable)
 
06/12/2018

Sources: Moody's, Standard & Poor's, Fitch Ratings

Competitiveness and Efficiency Indicators


 
World Ranking
 
2017 2018 2019
Ease of Doing Business Index
 
176/190
 
177/190
 
176/190
Ease of Paying Taxes Index
 
104/190 152/190 151/190
Logistics Performance Index
 
N/A 100/160
 
N/A
Corruption Perception Index
 
143/180 149/180 N/A
IMD World Competitiveness N/A N/A N/A

Sources: World Bank, IMD, Transparency International

Fitch Solutions Risk Indices


 
World Ranking
2017 2018 2019
Economic Risk Index
 
N/A 57/202
 
63/202
Short-Term Economic Risk Score
 
66.9 70.0
 
62.7
Long-Term Economic Risk Score 62.6 63.4 61.8
Political Risk Index N/A 109/202 110/202
Short-Term Political Risk Score 60.0 58.1
 
57.5
Long-Term Political Risk Score 60.4 60.4
 
60.4
Operational Risk Index N/A 142/201 143/201
Operational Risk Score 38.2
 
38.6
 
38.8

Source: Fitch Solutions

Date last reviewed: May 14, 2019

Fitch Solutions Risk Summary

ECONOMIC RISK

Bangladesh has relatively low economic risk; this is a reflection of the country's high economic growth rate amid still-elevated inflation and its long-running fiscal deficit. Remittances from overseas workers help to cover the substantial goods and services trade deficit. However, the trade gap remains a risk to economic growth in the near term amid rising headwinds for the global economy. That said, advance estimates released by the Bank of Bangladesh suggest the economy accelerated this fiscal year, which ends in June 2019. The growth uptick has come from a near-doubling in the expansion of exports of goods and services, which contrasts a significant deceleration in imports. On the other hand, private and public consumption growth have slowed considerably, as has the expansion in fixed investment.

OPERATIONAL RISK

Bangladesh's large population, competitive labour costs and proximity to key source markets are significant pull factors for businesses looking to set up labour-intensive operations. The country offers promising opportunities for investment in the oil and gas sectors, power, pharmaceutical, ICT, agribusiness and infrastructure sectors. However, Bangladesh's underdeveloped transport sector and barriers to trade and investment constrain the country's overall investment attractiveness.

Source: Fitch Solutions

Date last reviewed: May 14, 2019

Fitch Solutions Political and Economic Risk Indices

Graph: Bangladesh short term political risk index
 
Graph: Bangladesh short term political risk index
 
Graph: Bangladesh long term political risk index
 
Graph: Bangladesh long term political risk index
 
Graph: Bangladesh short term economic risk index
 
Graph: Bangladesh short term economic risk index
 
Graph: Bangladesh long term economic risk index
 
Graph: Bangladesh long term economic risk index
 

100 = Lowest risk; 0 = Highest risk

Source: Fitch Solutions Political and Economic Risk Indices

Date last reviewed: May 14, 2019

Fitch Solutions Operational Risk Index


 
Operational Risk Labour Market Risk Trade and Investment Risk Logistics Risk Crime and Security Risk
Bangladesh Score 38.8
 
51.7
 
29.0 39.0
 
35.5
 
South Asia Average 42.1
 
44.3
 
40.4
 
43.4
 
40.5
 
South Asia Position (out of 8) 5
 
1
 
8
 
6
 
6
 
Asia Average 48.5
 
49.7
 
48.2
 
46.0
 
50.1
 
Asia Position (out of 35) 25
 
14
 
33
 
21
 
28
 
Global Average 49.7
 
50.3
 
49.8
 
49.0
 
49.8
 
Global Position (out of 201) 143 97
 
176
 
132
 
143
 

100 = Lowest risk; 0 = Highest risk

Source: Fitch Solutions Operational Risk Index

Graph: Bangladesh vs global and regional averages
 
Graph: Bangladesh vs global and regional averages
 
Country
 
Operational Risk Index
 
Labour Market Risk Index
 
Trade and Investment Risk Index Logistics Risk Index Crime and Secruity Risk Index
India 51.0
 
45.9
 
53.6 61.8
 
42.8
 
Sri Lanka 50.4
 
46.0 49.3
 
58.2
 
48.4
 
Bhutan 50.4 43.6
 
44.7
 
51.0
 
62.5
 
Maldives
 
47.9
 
46.5
 
45.7 39.5
 
59.9
 
Bangladesh
 
38.8
 
51.7
 
29.0
 
39.0
 
35.5
 
Nepal 36.8
 
37.8 33.3
 
34.9
 
41.1
 
Pakistan
 
36.5
 
43.3 38.3 43.1
 
21.4
 
Afghanistan 25.1
 
39.5 29.0
 
19.7
 
12.3
 
Regional Averages 42.1
 
44.3
 
40.4
 
43.4
 
40.5
 
Emerging Markets Averages 16.0
 
48.1
 
46.5 44.7
 
44.8
Global Markets Averages 49.7
 
50.3
 
49.8
 
49.0 49.8
 

 

100 = Lowest risk; 0 = Highest risk

Source: Fitch Solutions Operational Risk Index

Date last reviewed: May 14, 2019

Hong Kong Connection

Hong Kong’s Trade with Bangladesh

 

Graph: Major export commodities to Bangladesh (2018)
 
Graph: Major export commodities to Bangladesh (2018)
 
Graph: Major import commodities from Bangladesh (2018)
 
Graph: Major import commodities from Bangladesh (2018)
 

Note: Graph shows the main Hong Kong exports to/imports from Bangladesh (by consignment)

Date last reviewed: May 14, 2019

Graph: Merchandise exports to Bangladesh
 
Graph: Merchandise exports to Bangladesh
 
Graph: Merchandise imports from Bangladesh
 
Graph: Merchandise imports from Bangladesh
 

Note: Graph shows Hong Kong exports to/imports from Bangladesh (by consignment)

Exchange Rate HK$/US$, average

7.75 (2014)

7.75 (2015)

7.76 (2016)

7.79 (2017)

7.83 (2018)

Sources: Hong Kong Trade Statistics, Census and Statistics Department

Date last reviewed: May 14, 2019


 
2017
 
Growth rate (%)
Number of Bangladeshi residents visiting Hong Kong 5,258 -14
 
Number of Bangladeshis residing in Hong Kong 450
 
1.4
 

Sources: Hong Kong Tourism Board, United Nations Population Division, Fitch Solutions


 
2017
 
Growth rate (%)
Number of Asia Pacific residents visiting Hong Kong 54,482,538 3.5
Number of South Asia residents residing in Hong Kong 36,680
 
N/A
 

Sources: Hong Kong Tourism Board, United Nations Population Division, Fitch Solutions

Date last reviewed: May 14, 2019

Commercial Presence in Hong Kong


 
2016
 
Growth rate (%)
 
Number of Bangladeshi companies in Hong Kong N/A N/A
- Regional headquarters
- Regional offices
- Local offices



Treaties and agreements between Hong Kong and Bangladesh

  • Hong Kong concluded an air services agreement with Bangladesh in October 2000, with the negotiation on a double taxation agreement in progress.

  • Bangladesh has a double taxation agreement with mainland China, which was entered into force on April 10, 1997.

  • Bangladesh has a bilateral investment treaty with mainland China, which entered into force on March 25, 1997.

Sources: Fitch Solutions, Inland Revenue Department, Investment Policy Hub, OECD Tax Treaties

Chamber of Commerce (or Related Organisations) in Hong Kong

Bangladesh Chamber of Commerce & Industry Hong Kong (BCCIHK)

Address: Room 1913-1916, China Merchants Tower, Shun Tak Centre, 200 Connaught Road, Central, Hong Kong

Email: info@bccihk.org

Tel: (852) 2812 1528 / 2834 1991

Source: Bangladesh Chamber of Commerce and Industry Hong Kong (BCCIHK)

Consulate General of the People's Republic of Bangladesh in Hong Kong

Address: 13/F, Kyoto Plaza, 491 Lockhart Road, Causeway Bay, Hong Kong

Email: bangladt@netvigator.com

Tel: (852) 2827 4278 / 2827 4279

Fax: (852) 2827 1916

Source: Consulate General of The People's Republic of Bangladesh Hong Kong

Visa Requirements for Hong Kong Residents

Hong Kong residents need a visa before arrival when visiting Bangladesh.

Source: Consulate General of The People's Republic of Bangladesh

Date last reviewed: May 14, 2019

 

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