Bangladesh WT/TPR/S/270 
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I. ECONOMIC ENVIRONMENT 
(1) INTRODUCTION  
1. The Bangladesh economy emerged relatively unscathed from the global economic crisis 
though the country remains vulnerable because its e xports are not diversified and it depends heavily 
on migrant workers' remittances.   
2. The economy has become increasingly open in recent years. As a share of GDP, total 
merchandise trade (exports + imports) was 48% in FY 2011.  Despite gains over the past decade, total 
merchandise exports, averaged only 17.8% of GDP  during the period under review.  Moreover, 
exports remain highly concentrated both in terms of products and destinations, which carries some 
risk, with ready-made-garment (RMG) exports to  the EU and the U.S. the current mainstay.  
However, as a reputable low-cost producer of garmen ts, Bangladesh has gained global market share in 
recent years.  This trend is expected to continue  over the medium term, which could partially mitigate 
the impact of slow growth in advanced economies.  
3. Although the outlook appears optimistic, both RM G exports and remittances are vulnerable to 
shocks:  external demand with garments, domestic labour unrest, and changes in market access;  and 
remittances from changes in labour regulations and policies, or shocks in Kuwait or Saudi Arabia, 
which absorb over half of the migrant Bangladeshi popul ation.  A deterioration in the outlook for both 
could cause significant external pressure, particular ly as FDI flows remain low by most measures, 
constrained by the trade regime, poor infrastructure and the business climate.   
(2) ECONOMIC DEVELOPMENTS  
4. Bangladesh has made impressive economic and so cial progress in the past decade, despite 
frequent natural disasters and external shocks.  Poverty declined from 57% of the population in 1990 
to an estimated 31.5% in 2010.  Broad-based priv ate-sector-led growth and macroeconomic stability 
contributed to significant decline in rural and ur ban poverty.  Bangladesh is on track to meet the 
Millennium Development Goal of halving extreme poverty by 2015.1  Inadequate power and gas 
supplies are a major constraint to growth.  Only 47 % of households have an electricity connection.  
Growing and chronic urban congestion is re ducing the benefits of urbanization.  
5. Bangladesh is one of the most vulnerable count ries to climate change and natural calamities 
like cyclones and floods, which can result in subs tantial economic losses, reduced economic growth 
and halting progress in poverty reduction (Box I.1).  The 1998 flood inundated over two-thirds of the 
country and resulted in estimated losses of 4%-8 % of GDP, while Cyclone Sidre (2007) resulted in 
damage and losses of 2.6% of GDP.  In order to counter the effects of climate change, the 
Government has prepared a long-term Bangladesh  Delta Plan 2100, aimed at sustainable delta 
management, integrated water resource s management and disaster management.2   
                                                      
1 According to the authorities, the recent Household Income and Expenditure Survey (2010) data reveal 
that incidence of poverty has been declining at an annual rate of 1.4% in Bangladesh between 1992 and 2010 
against the MDG target of 1.23%.  Also, Bangladesh has met one of the MDG indicators of target no.1 by 
bringing down the poverty gap ratio to 6.5 against the 2015 target of 8;  if this trend continues, the authorities 
contend that the MDG target of halving the population under the poverty line (From 56.6% to 29%) would be 
achieved before 2015.   
2 With the assistance of the Dutch government, a delta Commission will be formed to implement the 
plan.  WT/TPR/S/270 Trade Policy Review 
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Box I.1:  The challenge of climate change  
Bangladesh, with nearly 160 million inhab itants on a landmass of 147,570 square kilometers, is among the most densely-populated  
countries in the world.  It remains a low-income country, with  a per capita income of US$750 and around 56 million people still  live 
below the poverty line.   
Geography is a strong determinant of Bangladesh's development.   The country is bounded by India on the west, north, and north-e ast, 
Myanmar on the south-east, and the Bay of Bengal on the south.  80 % of its area consists of floodplains created by more than 30 0 
rivers and channels, including three major rivers:  the Gange s, the Brahmaputra, and the Meghna.  Bangladesh's geographical pos ition 
and very high population density make it ex tremely vulnerable to natural disasters in cluding floods, droughts, and cyclones.  G lobal 
climate change has increased these vulnerabilitie s manifold.  Anywhere from 30% to 50% of  the country is aff ected by floods eve ry 
year.  In the past decade, the country has become better prepared to deal with weat her uncertainty and emergency responses, mak ing 
recent events less deadly than earlier disasters.  However, climate change  effects are exacerbating Bangladesh's vulnerability by 
increasing the frequency and severity of w eather events.  The long-run impact of clim ate change is uncertain, but it is estimat ed that a 
four degree rise in global temperature w ould raise the sea level by 100cm by 2100, inundating 15% of the country's land area an d 
displacing 20 million people.  Adapting to climate change and e nhancing preparedness to deal w ith climate-change-related disast ers are 
policy priorities for Bangladesh.   
Source : World Bank (2010), Bangladesh Country  Assistance Strategy 2011-14, p.1.  
 
(a) Macroeconomic developments 
6. The average GDP growth of the Bangladesh economy over the last six years was over 6% 
(Table I.1), increasing to an estimated 6.7% in FY 2011, aided by conducive policies, strong export 
growth and favourable weather.  GDP growth was broadbased with agriculture, industry and service 
sectors performing well.  In FY2011, agricultural gr owth is estimated at 5.0%, as all major crops 
performed better than expected, responding to favourable weather, continued policy support 
(including access to inputs at subsidized prices), great er access to credit, and better extension services. 
Services, which account for half of Bangladeshi GDP , grew by 6.6%, marginally better than a year 
earlier, as the trade, transport, and telecommuni cations subsectors continued to perform well.  
Industry grew briskly by 8.2%, largely on the b ack of a strong recovery in garment exports.  
Industries targeting the domestic market, as well  as construction and housing activities, also 
contributed.  These factors offset the only modest  expansion in workers' remittances, which are 
usually an important contributor to growth.  I nvestment rose marginally to 24.7% of GDP, from 
24.4% the previous year.  
Table I.1  
Selected economic indicators, 2005/06 to 2010/11  
  2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 
A.  Income and growth  
GDP annual growth (%) 6.6 6.4 6.2 5.7 6.1 6.7 
   Consumption 4.4 5.9 5.4 5.9 7.1  ..  
        Private consumption expenditure 4.3 5.9 5.5 5.9 7.0  ..  
        Government consumption expenditure 6.0 6.4 3.6 5.9 9.2  ..  
   Gross fixed capital formation 8.7 8.1 1.8 6.2 5.8  ..  
   Exports of goods and services 25.8 13.0 7.0 0.0 0.7  ..  
   Imports of goods and services 18.2 16.0 -2.1 -2.6 -.07  ..  
B.  Savings and investment (current market prices, % of GDP) 
National savings 26.0 25.9 25.1 27.2 28.1 25.6 
Gross domestic investment 24.7 24.5 24.2 24.4 24.4 24.7 
C.   Prices and interest rates        
Inflation (CPI, percentage change, a nnual average) 7.2 7.2 9.9 6.7 7.3 8.8 
Commercial lending rate (%) 11.06 12.28 12.63 13.30 12.75 12.46 
Deposit Rate, 3 to less than 6 months (%) 5.77 6.51 7.23 8.03 7.34 7.63 
Table I.1 (cont'd)Bangladesh WT/TPR/S/270 
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  2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 
D.  Government finance (% of GDP)       
Revenue 10.2 10.4 11.1 10.5 11.0 11.8.  
   Tax revenue 8.2 8.1 9.0 8.6 9.0 10.1  
       NBR tax revenue 7.8 7.7 8.6 8.2 8.7 9.7 
Expenditure 13.4 13.7 16.9 14.5 14.7 16.2  
Overall balance -3.2 -3.3 -5.8 -4.0 -3.7 -4.4  
Public sector total debt 46.7 44.8 42.9 45.1 41.0 40.2  
     Domestic debt 16.6 16.6 17.4 20.7 19.7  20.8  
E.  External sector (% of GDP, unless otherwise 
indicated)       
Current account  1.3  1.4  0.9  2.7  3.7  0.9  
Net merchandise trade  -4.7  -5.1  -6.7  -5.3  -5.1  -6.6  
   Merchandise exports 16.8  17.6  17.8  17.4  16.2  20.8  
   Merchandise imports 21.5  22.7  24.5  22.7  21.3  27.4  
Services balance  -1.7  -1.8  -1.9  -1.8  -1.2  -2.2  
    Services exports 2.2  2.2  2.4  2.1  2.5  2.3  
    Services imports 3.8  4.0  4.3   3.9   3.7  4.5  
Remittances 7.7  8.7  9.9  10.8  10.9  10.5  
Capital account 0.6  0.7  0.7  0.5  0.5   0.5  
Financial account -0.2  0.8  -0.6   -0.9  -0.6  -1.4  
     Foreign direct investment 1.2  1.1  0.9  1.1  0.9  0.7  
Balance of Payments  0.5  2.2  0.4  2.3  2.9  -0.6  
Terms of trade 81.5  71.3  71.0  71.8  71.9   ..  
Merchandise exports (annual percentage cha nge) 21.5  15.8  17.4  10.1  4.2  41.7  
Merchandise imports (annual percentage cha nge) 12.1  16.6  25.6  4.2  5.4  41.8  
Service exports (annual percentage change ) 13.8  10.7  27.4  -3.1  35.3  3.7  
Service imports (annual percentage change ) 15.4  16.2  24.4  0.9  7.6  33.9  
Foreign exchange reserves (US$ million) 3, 483.8  5,077.2  6,148.8  7,470.9  10,749.7  10,911.6  
    in months of imports 2.7  3.3  3.2  3.8  4.5  3.9  
Total external debt stocks (US$ million; end-pe riod) 20,032.3  21,295. 8  22,886.1  23,820.2   ..   ..  
Debt service ratio  (% of exports of goods & services) 5.0  6.4  4.8  5.5   ..   ..  
GDP per capita at current market price (US$) 446.5  486.8  558.7  619.7  687.0  748.1  
Current GDP (Taka billion) 4,157.3  4,724.8  5,458.2  6,148.0  6,943.2  7,875.0  
Current GDP (US$ million) 61,975.0  68,445.2  79,565.9  89,359.7  100, 364.8  110,649.9  
Taka/US$ (annual average) 67.08  69.03  68.60  68.80  69.18  71.17  
Population (millions) 138.8  140.6  142.4  144.2  146.1  147.9  
 
Note: Bangladesh's fiscal year is 1 July -30 June.  
Source: Bangladesh Bank.  Viewed at:  h ttp://www.bangladesh-bank.org;  International Financial Statistics,  September;  
IMF (2009), Asian Development Bank.  Viewed at:  http: //beta.adb.org/countries/bangl adesh/main;  Government 
finance figures supplied by the Finance Division.  
7. GDP growth in FY2012 has slowed to an estim ated 6.3% according to the Bangladesh Bureau 
of Statistics' preliminary estimate.3  The performance of exports, a key growth driver, has declined as 
the year has progressed, largely due to weaknesses in  Bangladesh's key market, the EU, which is in a 
prolonged period of adjustment to its debt crisis .  Weaker growth in large-scale manufacturing is 
attributable mainly to a significant decline in expor t growth because of the deteriorating efficiency of 
trade logistics, as well as weak demand in Europe.  Slower growth in woven garments, knitwear and 
leather and a decline in exports of frozen food and jute goods has underpinned the slower export 
growth so far.  Additional factors that have led to slower growth in FY2012 include: slower 
                                                      
3 World Bank (2012a), p. 4.   WT/TPR/S/270 Trade Policy Review 
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agricultural growth, affected by rising irrigation costs and because of the hi gh base in the previous 
year;  recent macroeconomic tightening measures and fi nancial sector restraints needed to stabilize the 
economy;  the lack of important improvements in the enabling environment for private investments 
and an unfavourable external environment.  
(b) Medium-term growth strategy 
8. Bangladesh has outlined a vision of becoming a middle income country by 2021, which 
would require it to grow at 8% per year.  Vision 20214 calls for a significant increase in GDP growth, 
from 6% in FY2010 to 8% per annum in FY2015 and to  10% in FY2017.  Per capita annual income is 
projected to rise to around US$2000 (in constant 2013 dollars) by 2021, thus crossing the middle 
income threshold. Reaching these targets, sustaini ng the high rates of growth, as well as achieving 
success in reducing poverty, will largely depend on  Bangladesh's ability to rapidly increase gross 
domestic investment to around 38% of GDP a nd gross national savings to 39% of GDP. 
9. During the review period, however, the investme nt/GDP ratio stagnated within the 24%-25% 
range, which is lower than those of other South As ian countries such as India, Nepal and Sri Lanka.  
Both public and private investment are low, the former because of ADP (Annual Development 
Programme) underutilization and the latter because of the poor investment climate and critical 
infrastructure shortcomings in electricity, gas and transportation.5  Gas supply has increased only 
marginally relative to demand growth during the last  three years.  The electricity supply situation 
could have been worse if additional capacity had not materialized, although significant electricity 
shortfalls continue due to  rapidly growing demand. 
10. Annual FDI inflows to Bangladesh remain low at  below 1% of GDP, underlining the need to 
improve the investment climate to attract FDI a nd boost overall investment, and increase total factor 
productivity.  Bangladesh has a number of strategic advantages, including cheap labour and a favourable location in a fast-growing region, which can  help to attract FDI inflows into industry.  
However, in order to attract more FDI, it is necessa ry to invest heavily in infrastructure and remove 
energy and transportation bottlenecks, upgrade skills  of the labour force and continue to remove 
administrative delays and impediments, which rai se enterprise costs.  Tax breaks, fiscal incentives, 
and the establishment of special industrial and en terprise zones have been used to work around a 
difficult institutional setting but at the cost of regulatory complexity.   
11. While some  progress has been made in improvi ng the investment climate setting, Bangladesh 
is still ranked low (122
nd  among 183 countries, down from 118th position a year earlier) in the most 
recent World Bank  Doing Business Survey of 2012.6  Bangladesh ranks particularly low in getting 
electricity (182nd position), registering property (173rd), enforcing contracts (180th)  and trading across 
borders (115th). In the World Economic Forum's Global Competitiveness report 2010-117, Bangladesh 
ranks 107th out of 139 countries surveyed, with particul arly low scores for infrastructure (134), quality 
of electricity supply (134), trade tariffs (120), burde n of customs procedures (119) irregular payments 
and bribes (124) and company spending on R&D (129).  The Government states that it will work with 
the International Finance Corporation and othe r development partners to strengthen property 
registration, contract enforcement and adjudica tion processes, each of which currently constrain 
                                                      
4 Planning Commission (2010). 
5 ADB (2011), p. 8. 
6 World Bank (2012c). 
7 World Economic Forum (2010), pp. 92-93. Bangladesh WT/TPR/S/270 
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investment.  In addition, attracting and retaining FD I is considered a priority, with a focus on ensuring 
adequate power supply in export process ing zones, as well as logistical support.8  
(c) Inflation 
12. Inflation, year on year, rose rapidly through mo st of FY2011, settling at 10.2% in June 2011 
with average annual inflation at 8.8%.  Moun ting global food and commodity prices as well as 
domestic demand pressures were the main reasons  for the change, abetted by a hike in 
administratively fixed fuel and power tariffs, as well  as depreciation of the taka from January 2011.  
Food inflation, at 12.5% in June 2011, was the main factor in the rise in overall inflation.  In FY2012, 
inflationary pressures, in particular from an incre ase in non-food prices, in  excess of 10%, worsened, 
due to rising commodity prices and strong aggregate demand.  The Bangladesh Bank's monetary 
policy statement for the second half of FY2010 aims  at further tightening and focus on achieving 
single digit levels of inflation. 
(d) Fiscal developments 
13. On the revenue side, although tax revenue is  gradually becoming less dependent on trade-
related taxes, they still account for about 35% of tota l tax revenue (see table III.1 in chapter III).  At 
under 10% for most of the review period, Bangladesh 's tax revenue to GDP ratio is among the lowest 
in the world due to the narrow tax base and difficul ties encountered in tax collection.  As a result, 
public investment in infrastructure and human capital has been inadequate compared to most countries 
in the region.  However, tax revenue surpassed 10%  of GDP in FY2011, which is a major milestone 
for Bangladesh, with gains coming partly thro ugh administrative reforms (i.e. automation, 
registration, and enforcement).  The timely approv al of a new VAT law and direct tax code will 
provide the main anchors for a modern tax regime, wh ich is needed for the Government to achieve its 
medium-term tax revenue target of 13% of GDP.  
14. Regarding expenditures, subsidy costs in Bangl adesh are increasing rapidly, mainly due to 
higher domestic demand and rising import-related cost s of heavily subsidized products namely fuel, 
electricity, and fertilizer.  The Government has rais ed fuel and electricity prices in phases to cut the 
subsidies but these adjustments  have been inade quate to cover rising costs.  Currently, broad 
subsidies are used to shield consumers from the fu ll impact of price movements.  The largest single 
contributor are fuel subsidies, which could underm ine fiscal sustainability in the absence of price 
adjustments.  The IMF estimates that this cost al one could rise to about 1.6% of GDP in FY2012 from 
1% FY2011. 
15. SOE (State-owned enterprise) losses, arising mainly from administered prices that do not 
cover input costs, reached around 3% of GDP in FY2008.  Losses were concentrated in four main enterprises: the petroleum company (Bangladesh Petroleum Corporation or BPC);  the fertilizer company (Bangladesh Chemical Industries Corpora tion or BCIC);  the power company (Bangladesh 
Power Development Board or BPDB) and Biman Ba ngladesh Airlines (converted to a public limited 
company in 2007 with 100% government ownership).  As  a result of the rapid decline in international 
oil prices during FY2009, losses at the state-owne d oil company were contained.  However, 
international oil prices have been rising in recent months and domestic prices  for petroleum products 
and electricity are again below the levels need ed to cover the costs of the relevant SOEs. 
                                                      
8 IMF (2012), p. 52.  WT/TPR/S/270 Trade Policy Review 
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(e) Balance of Payments  
16. Sustained robust growth of expor ts and remittances has helped the country to maintain the 
current account in surplus and build up foreign exch ange reserves in recent years.  External sector 
policy will be geared to sustain the export grow th achieved in the recent past, enhance remittance 
flows, and ensure the steady flow of imports requi red to attain the targeted growth rate of the 
economy and meet consumer demand.  The current account  is projected to move to a deficit of 0.5% 
of GDP in FY2012 (and 1.0% in FY2013) as the trade deficit widens further.  
17. The overall balance of payments remained in surplus during most of the review period, 
reaching 2.9% of GDP in FY2010, enabling the c ountry to continue accumulating international 
reserves.  By November 2009, gross reserves had exceeded US$10 billion.  However, the continued 
rapid growth in import payments has progressively lowered foreign exchange reserves which, in terms 
of months of imports, had been d eclining over the past two years.  
18. The overall balance of payments turned into defi cit in FY2011, for the first time in a decade, 
because of the combined impact of rising imports of  food, fuel and capital goods, and weak growth of 
workers' remittances and aid inflows.  Fuel imports  will account for a large share of the import bill in 
FY2012.  A further slowdown in the global econom y may worsen the balance of payments by 
negatively affecting exports, remitta nces and FDI inflows.  As a result, the current account surplus 
eroded by almost 3 percentage points of GDP in FY 2011 to about 1% of GDP.  Continued deficits in 
the balance of payments have contributed to furt her losses in reserves, and depreciation of the taka 
against the dollar.  During FY2012, pressure on the ba lance of payments has intensified with larger 
import payments relative to export and remittance re ceipts.  The Government has adopted policies to 
address the growing imbalances in the context of a reform programme under the IMF's Extended Credit Facility.  In April 2012, the Government not ed that despite recent policy adjustments and 
sizeable exchange rate depreciation, reserves c ould fall below two months of imports and that 
Bangladesh's external position could come under fu rther pressure from increased import demand (in 
particular for petroleum products  to feed the liquid fuel-based power plants) and the slowdown in 
export growth.
9  
19. Remittances play an increasingly important role in Bangladesh's economy, representing over 
10% of GDP in recent years and reaching US$ 12.8 billion in FY2012..  Insufficient job opportunities 
in the domestic economy and the promise of highe r wages abroad have led to an exodus of 
Bangladeshi workers overseas.  In 2010, Bangladesh ranked seventh in the world with US$11 billion 
in global remittances, behind Indi a, China and the Philippines.  However, on a per capita basis, 
Bangladeshi workers remitted US$2,000 annually, far lo wer than the levels achieved by the country's 
Asian competitors.  In the first eight months of FY2012, overseas workers remitted an estimated US$8.4 billion, reflecting a substantial rise in the number of workers leaving for overseas jobs since 
June 2011.
10  Most Bangladeshi overseas workers go to Gulf  countries and are mainly recruited to fill 
low-skilled jobs.   
(3) TRENDS IN MERCHANDISE AND SERVICES TRADE AND FDI  
20. During the review period, Bangladesh has mainta ined a merchandise trade deficit of between 
5% and 7% and a negative services trade balance of between 1% and 2%.  In global terms, 
Bangladesh's share of total world merchandise expor ts remains small at around 0.1%, while its share 
of commercial services is only 0.02%.  Overall, the country ranks 76th in merchandise exports and 
120th in commercial services exports among 180 countries.   
                                                      
9 IMF (2012), p.41. 
10ADB (2012),  pp. 160-161. Bangladesh WT/TPR/S/270 
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(a) Merchandise trade  
21. Even though Bangladesh's exports have incr eased significantly, Bangladesh still suffers from 
a chronically weak foreign trade account because of its dependence on imports of most essential 
goods. 
 Exports 
22. Over the past 10 years, Bangladesh has manage d to steadily raise its share of industrialized 
countries' imports of knitted and w oven garments.  Non-RMG exports ha ve not been able to keep pace 
with RMG exports.   These also held up better than non-RMG exports during the global crisis and 
they currently make up more than 79% of total ex ports (Chart I.1 and appendix table AI.1).  The 
garments sector became the main driver of expor ts and continues to outpace the growth of other 
exports, which is partly due to trade policies that  facilitated credit flows and the availability (through 
bonded warehouse facilities) of inputs at world prices fo r garment exports.  By contrast, other exports 
(frozen food and shrimp, and leather and jute products) have stagnated or declined as a share of total 
exports.  
Chart I.1
Product composition and direction of merchandise exports, 2011/12
Per cent
Food products
3.9
Source :  WTO calculations based on data provided by the authorities  and  on Export Promotion Bureau online
information.   Viewed at:  http://www.epb.gov.bd/statisticshome.php.Clothing
79.2Other manufactures
6.0
Textiles
7.8Other primary products
3.2
Other EU27
9.7Asia
12.2United States
21.0
EU27
52.5Other 
10.3
Italy
4.0
Spain
4.7Belgium 
3.1
France
5.7United Kingdom
10.1Germany
15.2Canada
4.1
 
23. Export growth increased by over 40% in FY2011 from only 4% the previous year, reflecting a 
rebound in demand for garment exports, including knitwear and woven prod ucts.  Higher export 
prices following the rise in cost of cotton, ya rn, and accessories, inventory rebuilding among 
international buyers, and sales to new markets su ch as South Africa, Turkey, and various Latin 
American countries, contributed to the unprecedented export gain.  Other exports also sharply rebounded, benefiting from a rise in demand and the pr evious year's low base.  Escalating wages in 
other garment-exporting countries and relaxed rul es of origin under the Generalized System of 
Preferences by the European Union, from January 2011, should continue to boost the country's garment industry.   WT/TPR/S/270 Trade Policy Review 
Page 8 
  
24. Bangladesh's top export destinations as estim ated for FY2012 were the European Union 
(52.5%), United States (21%), Canada (4.1%), Tu rkey (3.2%), and Asia (10.6%) (Chart I.1 and 
Appendix Table AI.2).  Bangladesh trading activiti es also include informal trade along the border 
with India.  As a result, in recent years, exports to India have been significantly understated because 
of the large amount of unofficial trade, for which the authorities did not give an estimate.   
25. Exports from Bangladesh have been boosted by duty-free access to th e European Union, 
Canada, Australia, Japan, Norway, and China.  Th e United States does not provide duty-free access 
for some key Bangladesh exports, and only a few g oods qualify under the U.S.  Generalized System 
of Preferences.  At present, 96% of Bangladesh's exports to the United States consist of readymade 
garments and textile products, wh ich are bought by retail groups such as Walmart, Gap, and Target.  
Although Bangladesh can apply for preferential tariff s for some products under the U.S. Generalized 
System of Preferences, currently, only 0.62% of the country's goods exported to the United States 
qualify under this system.  As a result, import duties on Bangladesh exports to the United States 
amount to more than US$500 million per year.   
26. The outlook for the RMG sector remains favour able.  Production capacity has continued to 
expand and there are signs that Japanese retailers, wh ich have hitherto mostly sourced from China and 
Vietnam, are starting to source more of their textiles and garments from Bangladesh.   
 Imports  
27. Although exports have risen significantly, the country's imports have been rising even faster, 
resulting in a chronic and widening trade deficit that, fortunately, has been offset by a strong flow of 
remittances from Bangladeshi overseas workers.  Ba ngladesh’s imports are primarily textiles, inputs 
for the RMG sector, petroleum products, and food items , all of which are critical to the economy and 
difficult to reduce. 
28. In step with the rebound in garment exports in FY2009/10, which depend heavily on imported 
raw materials, imports climbed by a similar rate .  Food grains rose sharply in FY2010/11, reflecting 
higher international prices and larger volumes, as the Government sought to build stocks and enhance 
food security.  Imports of intermediate goods and capital equipment also climbed sharply, reflecting 
the pickup in exports and domestic economic activity (Chart I.2 and Appendix table AI.3).  Because 
the base for imports is larger than that for exports, even with similar growth rates, the trade deficit 
widened to nearly US$11 billion in FY2011 from the previous year's US$7.5 billion.  Bangladesh WT/TPR/S/270 
 Page 9 
 
 
Chart I.2
Product composition and direction of merchandise imports
2011/12Per cent
Asia
64.4Other Asia  
16.9
India
13.6Americas
6.6
Source :  WTO calculations based on data provided by the authorities.EU27
6.7
Other Middle
East
5.3
Japan
3.9Other   
9.7
Malaysia
5.2China
17.6Kuwait
3.6CIS
3.6
Korea, Rep. of
3.3 Singapore
3.82010/11
Note:      Imports figures are up to May 2012 only.Textiles & clothingb
19.3Chemicalsa
8.8Plastic & rubber
3.8
Petroleum oils 
& lubricants
11.1
Crude petroleum
2.8
Capital machinery
5.6Base metals
6.3
Other
23.6Other food products
5.6
Edible oils
4.7
Food grains
2.5
a              Including chemicals, pharmaceutical products , fertilizers,  and dyeing and tanning materials.           
b              Including  textiles a nd articles, raw cotton, yarn, and staple fibres.Imports of EPZ
5.9
 
 
29. The largest category of imports relates to tex tile-related inputs.  In order to supply its 
readymade garment sector, Bangladesh needs to im port raw materials, particularly raw cotton and 
textiles, which represent about 50% of the typical  garment cost.  Textile-related inputs (19.3%), 
followed by petroleum related products (13.9%) and food items (12.8%), as well as capital goods, 
make up the core of the country's imports;  all are critically important to the Bangladesh economy.  
Bangladesh imports goods primarily from Asian countries (64.4%), including China (17.6%), India (13.6%), Singapore and Japan (nearly 4% each), a nd other Asian countries (24%), while imports from 
the European Union and North America combined account for only (14.7%) of the total value in 
FY2010/11. (Appendix Table AI.4) .  
(b) Trade in services  
30. Although services constitute nearly half of the country's GDP, services exports represent less 
than 10% of Bangladeshi exports, despite being included in chapter 6 of the 2009-12 Export Policy.  The Export Promotion Bureau (EPB) has been tasked  with preparing a comprehensive plan of action 
for increasing services exports and maintaining expo rt statistics for the services sector.  Based on 
Bangladesh Bank statistics, services imports are a pproximately twice the size of services exports, 
largely due to freight transport costs (Appendix tabl e AI.5).  The data does not include the temporary 
movement of Bangladeshi workers, which is curren tly the second largest source of foreign exchange 
after RMG exports.    WT/TPR/S/270 Trade Policy Review 
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(c) Foreign Direct Investment 
31. In contrast to the significant increase in tr ade activities, foreign direct investment in 
Bangladesh has stagnated over the past five year s, accounting for only around 1% of GDP on average 
(Table I.2).  More than 40% of annual FDI flows in recent years have come from reinvested earnings 
and intra-company loans from foreign companies alr eady operating in Bangladesh, rather than equity 
from new foreign investors.  It appears that betw een 2000 and 2009, the country's stock of FDI rose 
by only US$2.9 billion, the smallest increase among a ll Asian countries.  According to the authorities, 
it rose to US$6 billion by end-2010.  Among major con cerns identified by investors are the shortage 
of power and energy and inade quate transport facilities and other infrastructure bottlenecks.  
Table I.2  
FDI inflows by sector and origin, 2005/11  
  2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 
Total FDI inflows (US$ millio n) 744.6 792.7 768. 7 960.6 913.0 779.0 
    % of GDP 1.2 1.2 1.0 1.1 0.9 0.7 
(Per cent of total) 
(a) Main sectors 
   Power generation 3.7 3.1 3.3 2.4 4.0 6.7 
   Gas and petroleum 24.4 25.9 17.3 2.4 4.0 9.6 
   Manufacturing 16.2 18.6 16.8 19.2 25.6 42.4 
         Textiles and clothing 9.9 13.3 12.2 13.6 17.3 28.9 
   Services 55.4 51.8 62.2 73.9 65.1 39.8 
         Banking 17.5 11.6 20.4 11.5 12.2 26.8 
         Insurance 0.8 0.8 0.9 0.5 1.2 2.0 
         Telecommunication 36.0 38.4 39.0 60.3 48.8 6.7 
(b) Main countries of Origin 
United States 25.2 20.4 7.1 3.8 3.8 12.1 
EU27 15.5 20.6 24.4 18.0 14.9 30.5 
     Netherlands 2.0 2.3 2.9 4.2 5.3 9.2 
     United Kingdom 10.5 15.6 19.5 11.0 7.3 18.6 
United Arab Emirates 13.5 7.8 17.5 7.3 3.6 2.8 
Hong Kong, China 5.8 7.9 5.4 5.0 8.0 12.0 
India 0.8 0.3 1.1 0.6 4.3 2.7 
Japan 3.0 3.6 3.5 6.1 2.4 4.5 
Singapore 3.5 1.5 4.9 1.5 34.2 2.9 
Korea, Republic of 6.7 3.8 4.8 4.3 5.1 9.5 
 
Source: Bangladesh Bank, Foreign Direct Investment in Bangl adesh, Survey Report January-June 2011 .  Viewed at:  
 http://www.bangladesh-bank.org. 
32. The four sectors receiving the largest amounts of FDI are gas and petroleum, 
telecommunications, textiles and clothing, and ba nking. Combined, these sectors accounted for three-
quarters of the total FDI stock in Bangladesh at  the end of December 2009.  FDI flows into 
Bangladesh are characterised by a number of large investments.  For example, during the period  
2005-09, Egypt was the largest source of FDI at US$675 million, representing a single 
telecommunications investment.  Companies from the United Kingdom (US$611 million) and the 
United States (US$546 million) have also been major investors in Bangladesh, and these amounts reflect very large investments by companies such as Chevron.  Bangladesh WT/TPR/S/270 
 Page 11 
 
 
(4) OUTLOOK  
33. Bangladesh has enjoyed robust growth in the p ast decade, mainly due to expansion of the 
manufacturing sector and domestic services such as wholesale and retail trade, transport and communications.  Given its inherent strengths - especi ally a vibrant private sector and a large pool of 
inexpensive labour - the prospects for continuation of  such growth are relatively good.  Unit labour 
costs in the dominant garment industry are 50% below the nearest competitor and only about  
one-third of those in China.  Foreign investors are showing interest in large-scale relocation of  
labour-intensive industries, particularly garments and related textile manufac turing.  In addition, 
sectors such as shipbuilding, pharmaceuticals, cerami cs, and processed and frozen foods have shown 
dynamism in recent years. 
34. Longer-term growth prospects hinge on generating sufficient resources to relieve 
infrastructure bottlenecks and ensuring a comp etitive business environment focused on labour-
intensive activities.  Low tax collections are a majo r constraint since they affect the Government's 
capacity to increase public investment in energy a nd other infrastructure sectors.  Bangladesh also 
needs to improve the investment climate and contin ue to carry out trade-related reforms to increase 
domestic and foreign investment for more rapid an d inclusive trade-enhancing growth. This means 
that to put Bangladesh in the ranks of emer ging economies by end-decade, public and private 
investment rates will need to rise s ubstantially in the next few years, including FDI.  For this to occur, 
the Government needs to focus its  trade reform efforts on reducing trade distortions, minimizing anti-
export bias through tariff reforms and ensuring greater  integration of Bangladesh into the multilateral 
trading system.  Improvements in the investment climate are expected to come from maintaining a 
stable macroeconomic environment, developing a  transparent tax enforcement and compliance 
regime, a stable and well-governed financial sy stem, supported by improved social and physical 
infrastructure.