72535 v1 World Trade Indicators 2009/10 Bangladesh Trade Brief Trade Policy and commodity prices in early 2008 led the government to employ fuel subsidies (the decline in Bangladesh launched comprehensive trade reforms in the price of oil since that time has prompted the the early 1990s that included substantial reduction of government to eliminate the subsidies).2 The tariffs, removal of quotas, and a move to a single government also removed import tariffs on edible oils flexible exchange rate system. In the past several years, and placed a temporary ban on the export of soybean Bangladesh’s trade policy has again shown strong signs oil.3,4 In May 2008, the government banned exports of of liberalization, as demonstrated by the 2007 MFN common varieties of rice for six months.5 This policy Tariff Trade Restrictiveness Index (TTRI)1 of 11.3 has been kept in place almost continuously since, and percent, which is just over half its value in 2001, was extended to all rice varieties in November 2008. compared to average TTRIs of 11.7 and 11.6 percent The policy was most recently renewed in May 2009, for the South Asia region and low-income countries, but was relaxed in September 2009 when the respectively. Based on the MFN TTRI, Bangladesh government decided to permit the export of up to ranks 97th out of 125 countries (where 1st is least 10,000 tons of aromatic rice through December 2009.6 restrictive). Much of the progress in trade liberalization has been in the area of agricultural goods. As a result, there remains a small disparity External Environment between non-agricultural goods and agricultural goods, Bangladesh faces relatively liberal market access as which have TTRIs of 11.6 and 9.3 percent, judged by its Market Access TTRI7 (including respectively. The simple average of the MFN applied preferences), which stands at 3.6 percent for all goods. tariff rate has decreased gradually since the start of the This is considerably lower than average tariff faced by decade to 14.8 percent in 2008. Bangladesh’s both the South Asia region and low-income countries maximum tariff on all goods (excluding alcohol and (7.6 and 5.6 percent respectively). It faced the 72nd tobacco) is now 25 percent. The trade policy space, as lowest tariff restrictiveness abroad (of 125 countries), measured by the wedge between bound and applied its ranking slipping from a year before as other tariffs (the overhang), is 153.3 percent. Regarding its countries secured greater market access. The simple commitment to services trade liberalization, average of the rest of the world tariff faced by Bangladesh ranks 130th out of 148 on the GATS Bangladesh’s exports is 9.6 percent. When taking into Commitments Index. account the volume of exports it is 3.6 percent. Over In January 2008, the government instituted new the course of 2008 and the first half of 2009, the policies designed to streamline the process of Bangladesh taka maintained its peg to the U.S. dollar. obtaining customs bonds for exporters. Rising food With an average exchange rate of 68.60 taka per dollar, the taka appreciated marginally by 0.4 percent in 2008, and depreciated slightly by 0.5 percent by June 2009 from the last quarter of 2008.8 Bangladesh is a member of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Unless otherwise indicated, all data are as of August 2009 Cooperation (BIMSTEC), a grouping of countries in and are drawn from the World Trade Indicators 2009/10 the region which aims at creating a free trade area by Database. The database, Country Trade Briefs and 2017. In addition, Bangladesh belongs to the South Trade-at-a-Glance Tables, are available at Asian Free Trade Agreement (SAFTA), which came into effect in 2006 and is intended to be implemented http://www.worldbank.org/wti. by Bangladesh in 2015. This agreement between seven If using information from this brief, please provide the of the eight countries in the South Asia region following source citation: World Bank. 2010. (Afghanistan is not yet a member) is designed to “Bangladesh Trade Brief.� World Trade Indicators 2009/10: reduce tariffs on intraregional trade. Country Trade Briefs. Washington, DC: World Bank. Available at http://www.worldbank.org/wti. World Trade Indicators 2009/10 Bangladesh Trade Brief Behind the Border Constraints Notes Bangladesh remains a restrictive environment for 1. TTRI calculates the equivalent uniform tariff that businesses, as demonstrated by its ranking of 119th out would keep domestic welfare constant. It is weighted by of 183 countries on the Ease of Doing Business Index import shares and import demand elasticity. in 2009. Its restrictions are not atypical of the region, 2. Asian Development Bank, 2009, pp. 189. however, since the average ranking for South Asia was 3. ESCAP, February 2008, pp. 4; April 2008, pp. 3. 111th in 2008. The Logistics Performance Index, a 4. FAO, 2009. measure of the extent of trade facilitation, rates 5. Oryza, May 2008; May 2009. Bangladesh at 2.47 on a scale from 1 to 5 with 5 being 6. Reuters, 2009. the highest performance. This is compared with 2.3 7. MA-TTRI calculates the equivalent uniform tariff of for the South Asia region and 2.29 for countries in the trading partners that would keep their level of imports low-income group. It ranked 87th in the world and 3rd constant. It is weighted by import values and import in the South Asia region (with India leading the demand elasticities of trading partners. regional group). The area in which it performed the 8. IMF, 2008, 2009. best was the timeliness of shipments and its weakest 9. All quarterly data is from IMF, 2009. performance was in the area of customs procedures. 10. Asian Development Bank, 2009, pp. 191. Trade Outcomes References Bangladesh’s high growth rate of total trade in goods Asian Development Bank. 2009. Asian Development and services during the 2005–07 period of 17.9 Outlook 2009: Rebalancing Asia’s Growth. Manila. percent was not sustained during 2008, with total trade Economic and Social Commission for Asia and the growing by 11.9 percent in real (constant 2000 U.S. Pacific (ESCAP). February 2008. E-TISNET Monthly dollars) terms. Real export growth fell from 13 percent in 2007 to 8.7 percent in 2008. Real imports grew by News. United Nations. 14.6 percent in 2008 compared to 16 percent in 2007. ———. April 2008. E-TISNET Monthly News. United Expectations are that real exports and imports will Nations. grow in 2009, but at much lower rates (5 and 5.5 Food and Agriculture Association of the United Nations percent, respectively). (FAO). 2009. “Policy Measures Taken by Governments to Reduce the Impact of Soaring In nominal terms, total trade grew by an estimated Prices (As of 15 December 2008).� FAO. December 25.6 percent in 2008, which was twice the 2007 rate. 15, 2008. . the year, although in the last quarter of 2008 they grew International Monetary Fund (IMF). August 2009. much slower (12.9 percent) year-on-year in nominal International Financial Statistics (Country Tables). U.S. dollar terms. The United States and EU are the IMF. destinations for over 90 percent of total textile ———. October 2008. Annual Report on Exchange exports, which comprise around three-fourths of all Arrangements and Exchange Restrictions 2008. exports.9,10 The economic slowdowns in these markets Washington, DC: IMF. have contributed to the decline in the growth rate of Oryza. May 9, 2008. “Bangladesh Bans Rice Exports.� garment exports in the beginning of 2009 over the Oryza.com. previous year. However, during the first quarter, ———. May 25, 2009. “Bangladesh Reimposes Rice exports increased by 10.5 percent, year-on-year, during Export Ban.� Oryza.com. a time when many countries experienced dramatic Rueters. September 1, 2009. “Bangladesh Lifts Ban on declines. Bangladesh’s top imports are textiles and Exports of Fine Rice.� . 2008 and poor domestic food production performance U.S. Department of State: Bureau of South and Central increased imports by an estimated 26.1 percent and led Asian Affairs. May 2009. “Background Note: to heavy inflation, which has since fallen. In 2008, remittances were 11.4 percent of GDP, while foreign Bangladesh.� Washington, DC. direct investment as a share of GDP was 1.2 percent. World Bank. 2006. “India-Bangladesh Bilateral Trade and Potential Free Trade Agreement.� World Bank, Washington, DC.