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IV. TRADE POLICIES BY SECTOR 
(1) INTRODUCTION  
1. The customs tariff remains the main trade policy instrument directly affecting agriculture and 
manufacturing in Bangladesh.  The overall level of  nominal tariff protection has continued to fall 
during the review period as a consequence of ta riff reform, although other border charges and 
discriminatory internal taxes afford additional prot ection to selected activities (Chapter III).  Notable 
tariff and para-tariff protection remains in the export-oriented but import-dependent textiles and 
clothing sectors, and on processed food and tobacco products. 
2. Despite a drop in their share of GDP, to 19.2% in 2004/05, agriculture, forestry and fisheries 
provide employment to more than half  of the labour force, which indicates that labour productivity in 
this sector is only a quarter of the level in the r est of the economy.  Significant policy shifts allowed 
for an upsurge in cereal production in the crops subsector, which remains the single largest economic 
activity in the country.  During the period under review, average applied nominal MFN tariff protection for the agriculture, forestry and fisheries sector dropped more slowly than for manufacturing;  average duty rates for fisheries remained high and unchanged while those of meat 
products rose (Table AIV.1).  Only live poultry and eggs are currently subject to trade-related bans 
(Chapter III).  To reduce production costs and f ace competition from neighbouring countries, support 
to domestic production was strengthene d through the subsidization of agricultural inputs (i.e. seeds, 
fertilizer, irrigation, capital, and electricity) as well as procurement practices and the introduction of a 
direct cash subsidy for certain agricultural and fisheries exports in 2003;  according to its first 
notification to the WTO, Bangladesh's domestic support observed de minimis requirements under the 
Agreement on Agriculture.  Action has also been take n to support the diversification of jute industry.  
As a result, the budget allocation for subsidies and other assistance to agriculture sector doubled in 2005/06, and agricultural products are becoming an increasingly important component of Bangladesh's foreign trade.  Bangladesh continu es to ensure food security through food aid (rice, 
wheat) and the setting of medium output targets (for wheat, maize, pulse, oilseed, sugarcane, 
vegetables).   
3. Bangladesh's consumption of and access to energy remain among the lowest among 
developing countries.  Despite some adjustment efforts, domestic energy prices continue to lag behind 
world market prices, due, inter alia , to recent increases in international oil prices.  It would appear 
that efforts are being made to revise the Nationa l Energy Policy and complement the institutional 
setting with an independent Energy Regulatory Commi ssion;  a restructuring plan to improve the 
performance of the energy sector SOEs is being defined.  Natural gas,  Bangladesh's dominant source of energy, mainly produced by th e State, remains largely destined for power generation and fertilizer 
production, which benefit from gas tariffs at less than  half of those charged to other industrial and 
commercial activities.  Although new generating stati ons have been established by independent power 
producers (IPPs), power shortages remain amon g the most important bottlenecks for economic 
development.  Despite tariff rationalization effort s and preferential natural gas tariffs for power 
production, the average electricity tariff in 2001 remain ed lower than the cost of supply;  agricultural 
pumping and high voltage (manufacturing) end-user s benefit from substantially lower rates than 
commercial and residential users   
4. Growth in manufacturing is driven almost en tirely by the import-dependent, labour-intensive 
ready-made garment (RMG) subsector, where state i nvolvement remains pervasive.  A new Industrial 
Policy was announced in 2005 and a Productivity Policy is being implemented.  The average nominal 
MFN tariff on manufacturing has dropped.  Although the post-MFA trade liberalization did not seem to have immediate negative effects on RMG exports, significant risks remain.  Appropriate adjustment WT/TPR/S/168 Trade Policy Review 
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                                                     policy responses could mitigate the impact of pos t-MFA/ATC liberalization, though a fall in RMG 
exports seems unavoidable in the immediate futu re.  Financial support was provided by the 
World Bank, the IMF, and bilateral donors to est ablish and implement a Post-MFA Development 
Strategy and a Post-MFA Action Programme.  Effort s were undertaken to delay the elimination of 
cash subsidies for exports of local fabrics and to expand preferential access to major developed 
country markets. 
5. During the review period, Bangladesh has taken steps to improve its basic infrastructure, 
including banking and telecommunications; neve rtheless, the economy remains hampered by 
inefficiencies and shortages in essential services.  Pr ivate sector banks have grown significantly in the 
past few years, though the sector remains domina ted by state-owned institutions due to slow 
privatization/divestment.  Bangladesh's micro-fina nce programmes, the world's largest, have played 
an important role in poverty alleviation.  Effort s have been taken to st rengthen banking supervision 
and to introduce mandatory loan repayment reschedu ling.  State involvement in the insurance sector 
has declined though some insurance business remains reserved for th e state insurance firm, Sadhran 
Birma Corporation (SBC);  premiums are set by a central committee "to maintain uniformity and to 
avoid cut-throat competition".  The telecoms lega l and regulatory framewor k was updated in 2001 and 
2004 (through implementing directives); a new regulatory body was established and policy targets 
were revised.  A new national shipping policy was adopted; despite capacity constraints, national flag 
vessels remain subject to local participation/owners hip requirements and, unless a waiver is in place, 
part of overseas sea-born cargo is reserved for them.  Regulatory reforms were undertaken to improve 
private sector participation in the state-run ports;  no foreign investment in port services has yet been 
undertaken.  Domestic routes remain reserved for the national airlines.  GATS commitments reflect 
the existing situation rather than a path to further lib eralization;  they are limited to hotel, lodging, and 
telecommunication services. 
6. Reportedly, the costs of doing business in Bangladesh remain unnecessarily high thus 
impairing the competitiveness of firms operating there.  According to the 2005 World Bank 
Investment Climate Assessment (ICA) and Value Chain Analysis (IVCA), infrastructure (erratic 
electricity supply, port congestion, bad rural roads,  poor telecommunications), institutional constraints 
(customs), corruption, burdensome (and weakly enforced) regulation, and poor access to finance, 
constitute major constraints to investment, disp roportionately affecting small and medium-sized 
enterprises.1 
(2) NOMINAL TARIFF PROTECTION  
7. The pattern of nominal tariff protection on a sect oral basis has remained virtually unchanged; 
average nominal tariff protection for fishing, food,  beverages and tobacco, and textiles and leather 
production greatly exceeds the average level (Chart IV.1 ).  No recent estimates on the effective rates 
of protection (ERPs) afforded to different sectors were available from the Bangladesh Tariff Commission (as at the time of the previous Review). 
 
 
 
 
1 World Bank (2005b). Bangladesh WT/TPR/S/168 
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05101520253035
Agriculture & hunting
Forestry & logging
Fishing
Mining & quarrying
Food, beverages & tobacco Textiles & leather 
Wood & furniture
Paper printing & publishing
Chemicals
Non-metallic mineral productsBasic metals
Fabricated metal products & machinery
Other manufacturingPer centChart IV.1
Tariff averages by two-digit ISIC category, 1999/00 and 2005/06
Source :WTO Secretariat estimates, based on data provided by the authorities of Bangladesh.MFN 1999/00
MFN 2005/06Average 1999/00
(22.2%) Average 2005/06
(15.5%)
 
 
(3) AGRICULTURE  
(i) Features 
8. Since the previous Review of Bangladesh, as a result of faster growth in other sectors 
(manufacturing, services) the joint contribution to GD P of agriculture, livestock, forestry and fisheries 
dropped from 25.3% to 19.2% (Table I.2)2, although employment remained at 51.7% of the labour 
force (2002/03).  This suggests that labour productivity in the sector is only about one-quarter  of the 
level in the rest of the economy (owing, inter alia , to a relative lack of both capital and scale 
economies resulting from the low level of mechanization and the fragmented land size of farms).  In 
2003/04, crops accounted for 11.5% of GDP, down from 14.6% in 1999/00, the share of livestock and 
fisheries also shrank, to 2.4% and 4.4%, respectively.3  Crop production is still dominated (volume) 
by rice;  other major crops include sugarcane and potatoes.  Between 1997/98 and 2003/04, rice output grew steadily, while that of wheat declined.
4 
9. In order to meet the challenge of ensuring food security (see below)5, Bangladesh needs to 
maintain agricultural growth at least in the range of 3%-4%;  these rates were not always attained 
during the period under review (Table IV.1).  Banglad esh maintains a security stockpile of food grains 
                                                      
2 Ministry of Finance (2005a). 
3 Bangladesh Bureau of Statistics (2005), Annex Table 2. 
4 Bangladesh Bank, Economic trends,  Table V.  Available at:  http://www.bangladesh-bank.org/pub/ 
monthly/econtrds/econtrdsv.html [15 August 2005].  
5 Planning Commission (2004). WT/TPR/S/168 Trade Policy Review 
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to meet the demand for emergency and normal food distribution through different channels.  This 
stockpile is built-up through local procurement, f ood-aid and occasional import by the Government.  
Private imports of food-grain also contribute in me eting the demand of the domestic market.  Between 
2000/01 and 2004/05 the volume of food-aid , which was delivered mainly through the World Food 
Programme and individual donors (United States, Cana da, Australia), has dropped considerably.  In 
2004 /2005, out of a total of 3.3 million tonnes of food-security-related imports (1.3 million tonnes of 
rice, 2.1 million tonnes of wheat) 9% were food-ai d imports (27,000 tonnes of rice, 263,000 tonnes of 
wheat) and 3% (72,000 tonnes of rice, 30,000 tonnes of wheat) were government imports.  The share 
of food aid in total food consumption is only about 1%. 
Table IV.1 
Medium-term output target, 2005-08 
Target (million tonnes )Items 
2005-06 2006-07 2007-08 
Wheat  1.32 1.40 1.40 
Maize 0.55 0.58 0.60 
Pulse  0.67 0.68 0.70 
Oilseed  0.66 0.67 0.69 
Sugarcane  6.50 6.60 6.65 
Vegetables 7.78 7.80 7.83 
Source: Ministry of Agriculture, Department of Agriculture Extension.  
10. Agricultural products are an increasingly important component of Bangladesh's foreign trade;  
between 1998/99 and 2003/04, they rose from 20.7% to 27.7% of total imports, and from 8.9% to 9.9% of total exports.
6  The main agricultural imports are cotton, edible oils, unmilled wheat, rice, 
leguminous vegetables, and sugars;  the main e xports now include frozen crustaceans and jute. 
11. Bangladesh's overall sectoral development policy ob jectives and priorities are contained in its 
National Agricultural Policy 1999 (supplemented with  a Plan of Action of February 2004), National 
Agricultural Extension Policy  1996, National Seed Policy  1993, Integrated Pest Management Policy  
2002, National Forestry Policy 1994, and National Fishery Policy 1998.  The objectives in the National Agricultural Policy consist of achieving self-sufficiency in the production of all crops, ensuring the operation of a reliable food security sy stem for all, enhancing the purchasing power of 
farmers by increasing their real income, and tran sforming the livelihood of people engaged in 
agriculture into trade/commerce.
7  Action is being taken in crop production (section (3)(ii)), seed and 
fertilizer production and distribution, small-scal e irrigation, pest management, mechanization, 
agricultural extension services8, marketing, land use, education and training, loans, and women's 
participation, etc.  The 2004 Action Plan is the current sectoral policy framework for implementing the National Agricultural Policy through various programmes/projects.
9  To create an enabling 
environment in the sector this policy framewo rk recognizes that action should be focused on 
improving factor productivity, increasing investments, and improving risk management. 
12. In 2003, the authorities' Interim Poverty Reduction Strategy Paper (I-PRSP) delineated a 
policy framework focused on four issues:  intensification of major crops  (cereals), diversification to 
high-value non-cereal crops (vegetables and fruit), development of non-crop agriculture (livestock, 
                                                      
6 UNSD, Comtrade database (SITC Rev.3). 
7 Ministry of Finance (2005c). 
8 Agricultural extension services include training, demonstrations, field days, publication (booklets, 
leaflets, etc.), and input delivery/distribution in emergency or natural disaster situations. 
9 Ministry of Agriculture (2004). Bangladesh WT/TPR/S/168 
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                                                     poultry, fishery), and promotion of rural non-farm  activities (rural construction, transport, and 
services).10  Rural development is a priority for rapid poverty reduction.11  According to the World 
Bank, agricultural diversification and rural non-farm activities constitute the more promising sources 
of rural growth and employment.12  Strengthening the performance of the agriculture sector requires:  
further deregulation of input and output markets;  public investment in and better management of 
irrigation and flood control;  intensification of agricultural research and extension services;  improvements in the functioning of the land market , including legal reforms to facilitate land 
transactions;  and agricultural credit delivery in partnership with NGOs and community-based 
organizations.  The priority reform areas set by th e World Bank are:  (i) rationalizing the tariff 
structure, particularly reducing tariff dispersion that hurts small entrepreneurs, and revising special incentive schemes that bypass small and rural entrepre neurs;  (ii) ensuring access to basic physical 
infrastructure (rural electrification, telecommunications , and roads);  (iii) reforming the rural financial 
system;  (iv) providing a regulatory framework to facilitate development of agri-food supply chains 
and refocusing agricultural research and extension services to non-cereal crops;  and (v) sustaining 
progress in natural disaster management. 
13. The Ministries of Agriculture, Environment and Forests, and Fisheries and Livestock are 
responsible for policy formulation and im plementation in their respective areas.   As from July 2004,  a 
Steering Committee under the leadership of the State Minister for Ag riculture has reviewed issues 
relating to subsidies and other forms of assistance for the sector on a regular basis13;  at the latest 
review, it was recommended to maintain  and expand these forms of support. 
(ii) Crops 
14. According to the authorities, the crop subsector , which accounts for about 74% of agriculture 
and forestry sector GDP, remains the single largest economic activity in Bangladesh;  in 2004/05, 
crops and vegetables accounted for 12.1% of GDP.14  In the light of its weight in total employment, 
crops subsector must be made more efficient and therefore more profitable, through modernization 
and diversification.  This would help to reduce ru ral poverty, and thereby raise the living standard of 
the people of Bangladesh.15  The authorities continued to assist crop farmers through strengthened 
intervention in the agricultural input markets (seeds,  fertilizer, irrigation, concessional interest rates, 
electricity tariffs) and in public food procurement.  This support is aimed at reducing the cost of 
agricultural production, helping to cope with price hikes of inputs (domestic and international) and 
facing competition from neighbouring countries.16   
15. A direct cash subsidy for agricultural exports has been introduced since the previous Review;  
in their notification to the WTO Committee on Ag riculture (period 1995/96-1999/00), the authorities 
indicated that they did not apply export subsidies subject to reduction commitments.17  A s  f r o m  
 
10 Planning Commission (2004). 
11 Three-quarters of the total population and 85% of the nation's poor live and earn their livelihood in 
the rural areas. 
12 World Bank (2005). 
13 Ministry of Finance (2005c). 
14 Planning Commission (2004);  Bangladesh Bureau of Statistics (2005), Annex Table 2;  and Ministry 
of Finance (2005a). 
15 Reportedly, Bangladesh can produce a large variety of crops efficiently, either for import substitution 
or for export (Shahabuddin and Dorosh, 2004).   
16 According to the authorities, Bangladeshi farmers need a level playing field to compete with 
neighbouring countries, where there are elaborate support systems for agri culture, including heavy subsidization 
to reduce irrigation and electricity tariffs (Planning Commission, 2004). 
17 WTO document G/AG/N/BGD/1, 15 July 2002. WT/TPR/S/168 Trade Policy Review 
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2002/03, a cash subsidy of 20% or 30% (depending on th e degree of local content) has been applied to 
exports of agricultural commodities and processed items (Chapter III).  
16. Bangladesh's first notification on domestic support to the WTO Committee on Agriculture 
indicates a rise of spending in the period 1997/98 to 1999/00;  this trend has continued (Table IV.2).  
During the period covered by the notification, the Aggregate Measurement of Support (AMS) 
exceeded Green box outlays by up to 36%.  Outl ays grew faster for AMS than for Green box 
measures.  The entire amount of product-specific AMS-related expenditure has been used for price 
support operations for rice and wheat;  between 19 95/96 and 2003/04, according to the authorities, 
Bangladesh kept its AMS well below the de minimis  level (10% for developing country members), 
which ranged from 0.18% to 1.57% for product-speci fic support and 0.29% to 1.45% for non-product 
specific support.18  Until 1999/00 Green-box-type support was largely directed at research and 
development activities;  from 2001/02, there was a shift toward extension and advisory services, where support was strengthened considerably (Table IV.2). 
17. The Government procures rice and wheat fro m the farmers and millers.  The procurement 
price is fixed before harvesting taking into cons ideration the cost of production, the local market 
price, international market price, and farmers' profit margin.  There is no obligation to sell to the authorities.  
Table IV.2 
Developments in domestic support to agriculture and livestock, 1997-04 
(US$ million) 
 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 
Total domestic support (I+II+III) 69.90 92.63 99.01 .. 116.07 97.66 142.31 
Share of total domestic support to GDP 0.16 0.20 0.21 .. 0.24 0.19 0.25 
Share of total domestic support to total 
tax revenue 2.06 2.75 3.10 .. 3.13 2.27 2.96 
Share of total domestic support to total government expenditure 1.23 1.50 1.45 .. 1.64 1.29 1.70 
I. Aggregate Measurement of Support (AMS)  
(a) Product-specific AMSa       
Rice 9.25 14.02 15.14 .. -6.77 -3.85 -11.97 
Wheat 5.33 3.62 1.46 .. -4.39 -0.58 .. 
(b) Non-product-specific AMS        
Indirect subsidy through the use of 
electricity for irrigation at subsidized rate 6.65 8.93 7.14 .. 7.68 7.32 8.24 
Subsidy provided through manufactured 
fertilizer and indirect subsidy to farmer 
through imported urea fertilizer 15.40 26.83 33.04 .. 64.22 44.53 58.50 
II. Measures exempt from the reduction commitment – "Green Box"  
General services 33.20 39.02 42.01 .. 55.12 50.06 87.42 
(i) Research and development of non-rice crops, (fruit, vegetables, spices for 
FY 96-97, 97-98, 98-99) except sugar 
cane, jute, cotton, and tea 12.77 12.66 15.25 .. 10.34 9.32 12.58 
(ii) Research and development of rice crops 3.93 7.66 7.21 .. 1.06 2.73 3.76 
Table IV.2 (cont'd) 
                                                      
18 WTO document G/AG/N/BGD/2, 30 August 2005;  data for 2001/02-2003/04 supplied by the 
Bangladeshi authorities for this report. Bangladesh WT/TPR/S/168 
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 1997/98 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 
(iii) Research and development of 
sugar cane 0.97 1.31 1.44 .. 0.99 1.07 1.05 
(iv) Research and development of 
cotton 0..40 0.40 0.39 .. 0.37 0.35 0.38 
(v) Research and development of jute 0.38 0.45 1.04 .. 0.48 0.52 0.53 
(vi) Pest and disease control 0.01 0.01 0.01 .. 0.02 0.46 0.47 
(vii) Training services 0.08 0.14 0.34 .. 4.10 1.21 1.28 
(viii) Extension and advisory serv ices 0.53 0.95 1.95 .. 30.50 27.44 59.39 
(ix) Marketing and promotion serv ices 0.94 1.13 1.03 .. 0.60 1.49 2.11 
(x) Infrastructure services 0.99 0.44 0.61 .. 2.29 0.06 0.06 
(xi) Research and extension for 
improving dairy sector 5.12 5.06 4.82 .. 2.12 2.19 3.22 
(xii) Research and extension for improving poultry sector 7.48 8.81 7.92 .. 2.25 3.22 2.59 
III. Measures exempt from the reduction commitment  
Special and Differential Treatment "Development programmes"  
Investment subsidies available to poor and 
marginal farmers (including fisheries and 
livestock subsectors) 0.07 0.21 0.22 .. 0.21 0.18 0.12 
(i) Re-finance facilities provided to farmers at a concessional rate of 
interest at 1.5% per annum for credit to 
"Special Economic Zone of the country" 0.03 0.14 0.12 .. 0.10 0.09 0.09 
(ii) 2% interest rebate for repayment of loan on schedule.  This is generally 
available to marginal farmers  0.04 0.07 0.10 .. 0.11 0.09 0.03 
.. Not available. 
a Product-specific support was provided through market price support measures. 
Source:  Notification from Bangladesh, G/ AG/N/BGD/2, 30 August 2005, covering fiscal years 1995/96 to 1999/00;  
Bangladeshi authorities for other years. 
18. In 2004/05 and 2005/06, budget a llocations for subsidies and other assistance for crops were 
Tk 13.15 billion and Tk 11 billion, respectively.  Total budget allocations for crops for the same years 
(revenue and development budget combined) reach ed Tk 23.71 billion and Tk 23.39 billion, 
respectively, which is about three times more than the outlays for the previous fiscal years.  These 
increases seem to be due largely to expenditure on the recent imported fertilizer subsidy.  These 
figures do not take into account forgone tax revenue  and costs relating to other support (e.g. fiscal 
incentives) measures . 
19. The upsurge in cereal production, which has helped to close the food gap and attain a modest 
surplus of cereals in recent years, is mainly attr ibuted to significant policy shifts towards increased 
private sector involvement in input distribution, liberalization of equipment imports, deregulation, 
rationalization of subsidy allocations, and restru cturing of agricultural research and extension 
linkages.19  The increased involvement of the private sector in the agricultural input markets has 
continued to improve the efficiency of crop producti on.  The authorities intend to continue with pro-
market policies and remove barriers to market operati ons, particularly those relating to the availability 
of fertilizers.  
                                                      
19 Planning Commission (2004). WT/TPR/S/168 Trade Policy Review 
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                                                     Seeds 
20. The Bangladesh Agricultural Development Corporation (BADC) produces and distributes 
various crop seeds including paddy, wheat, maize, vegetables, potatoes, jute, pulse  and oil seeds to 
meet a small portion of the country's demand20;  the remainder is produced, preserved, and used by 
private operators.  Most seeds produced by the BADC ar e sold to farmers at a price below the costs of 
production, processing, and distribution, thus impl ying an element of subsidy.  The authorities 
consider that their modest support is not an element of subsidy as BADC has to play a role in 
replacing or refreshing the type of seeds for cultiva tion.  In February 2006, the BADC was in the 
process of restructuring;  the authorities intend to expand its work on seed production, preservation 
and distribution.21  In 1994/95, the latest data provided by th e authorities, the total subsidy disbursed 
through BADC seed-related services was Tk 410 million;   the share of subsidy in the value of output 
of each crop was negligible, except for maize,  which accounted for 1.92% of total output. 
Fertilizers 
21. Reportedly, international prices of different fertilizers have been increasing considerably 
since early 2002.22  As from 2004/05, a (non-urea) fertilizer programme was introduced for providing 
25% subsidy on imported di-ammoni um phosphate, muriate of potash and triple super phosphate 
fertilizers.  The fertilizer subsidy programme is, inter alia,  aimed at reducing price differences 
between urea and non-urea fertilizers, ensuring a bala nced use of fertilizers, maintaining soil fertility, 
and reducing crop production costs.  For imported urea fertilizer, support is provided to bridge the gap 
between the import price and domestic sale price;  domestically produced urea is cheaper than 
imported urea, but local production cannot meet demand.  In 2004/05, Tk 5 billion was allocated for 
the (imported) fertilizer subsidy programme.23  Delays in the release of the promised subsidy to 
private traders caused a distribution crisis in 2005.   Natural gas, the main input for urea fertilizer 
production, has been provided at a reduced rate to  the Bangladesh Chemical Industries Corporation 
(BCIC), the state-owned producer of urea (section (4)(i) and Chapter III).  Given that BCIC losses have been covered by the Government, this app ears to entail a subsidy for the provision of urea 
fertilizer.  In 2004/05, 67% of the volume of fer tilizers used in Bangladesh was urea fertilizer.  
22. Since July 2001, the overall fertilizer situation has been reviewed monthly by a Fertilizer 
Distribution National Coordination Committee under the Ministry of Agriculture;  supply and 
distribution have improved following its recommendations.24 
Irrigation 
23. Apart from the subsidy on electricity bills for irrigation (see below), the level of support for 
irrigation remains difficult to assess.  Accordi ng to data supplied by the Bangladesh Water 
Development Board (BDWB), which receives the mo st in government grants among SOEs, between 
2000/01 and 2004/05, the ratio of water charges coll ected to the amount assessed ranged from 3% to 
37%;  similarly, the ratio for the irrigation service charge, introduced in 2001/02 for some irrigation 
projects, ranged from 25% to 57%.  Collected and assessed amounts seem well below the operation 
and maintenance costs relating to this utility.  No  further information was available to enable the 
Secretariat to estimate the level of support (e.g. ta riffs for farmers/other consumers, water cost, public 
expenditure on irrigation). 
 
20 BADC's market share ranged from 0.77% (pulse seed) to 18.33% (maize seed) in 2004/05. 
21 Ministry of Finance (2005b). 
22 Centre for Policy Dialogue (2006).  
23 Ministry of Finance (2005c). 
24 Ministry of Finance (2005c). Bangladesh WT/TPR/S/168 
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Electricity 
24. Since 2004/05, there has been a 20% subsidy on  electricity bills from the state firm Palli 
Bidyut Samities (PBS) for electricity used in irrigatio n;  the electricity tariff on agricultural pumping 
remains among the lowest of all consumer categor ies (section (4)(ii)).  In addition, the minimum 
charge for electricity connections for irrigati on throughout the country was waived as of 1  July 
2005.25  From 2003/04, a subsidy has been granted for electricity used in agri-based industries;  its 
rate was increased from 15% to 20% in 2004/05.  This measure is intended to encourage private 
sector participation in agri-business and support the sustainable development of infant industries.  
Credit 
25. Agricultural credit is provided  through the nationalized commercial banks and specialized 
banks (mainly the Bangladesh Krishi Bank and the Rajshahi Krishi Unnoyan Bank) at concessionary 
interest rates, in the range of 8% to 10% (July 2005) (Chapter III), fixed by the Bangladesh Bank;  the Bank provides refinancing to the relevant banks at 5%  interest rate to enha nce the agricultural credit 
flow.
26  On 1 July 2005, interest on agricultural loans for the production of pulses, mustard seeds, 
spices, and maize was reduced from 8% to 2%, seemingly for food security reasons.27  The authorities 
waived interest on classified agri cultural loans of up to Tk 5,000 as of 31 December 2003;  the 
repayment date for the principal was exte nded from 30 March 2005 to 30 March 2006.  
26. The disbursement of agricultural credit has increased substantially in recent years with 
producers of crops remaining the main recipients.  At  the same time, the repayment rate has been very 
low and total outstanding loans incr eased to more than Tk 140 billion in  2004/05 (Table IV.3).  While 
the majority of agricultural credit is channelled th rough the above financial institutions, the Grameen 
Bank (section (6)(i)(a)) and NGOs' also provide loan s through micro-credit facilities to farmers. 
Table IV.3 
Agricultural and rural credit, 1996-05 
(Tk billion and per cent) 
 1996/97 1997/98 2001/02 2002/03 2003/04 2004/05 
Credit disbursements       
Crops (other than tea) 15.2 16.4 12.7 17.0 18.5 21.1 
Irrigation equipment 6.4 6.4 0.0 0.0 0.0 0.0 
Livestock 0.0 0.0 1.1 1.5 2.5 2.9 
Marketing of agricultural products 0.9 0.7 3.8 3.1 4.2 5.6 
Fisheries 1.9 1.8 0.7 0.6 1.1 1.3 
Other agricultural activities 0.2 0.2 6.6 2.9 4.0 6.8 
Poverty alleviation 2.2 3.2 4.7 7.7 10.2 11.9 
Total actual disbursement 3.4 4.1 29.6 32.8 40.5 49.6 
Term structure of loans disbursed       
Short term .. .. 23.9 28.2 33.5 33.9 
Longer term .. .. 5.7 4.6 7.0 15.6 
Loans due for recovery 69.1 71.9 .. .. .. .. 
Table IV.3 (cont'd) 
                                                      
25 Ministry of Finance (2005b). 
26 Ministry of Finance (2005b). 
27 Ministry of Finance (2005b). WT/TPR/S/168 Trade Policy Review 
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 1996/97 1997/98 2001/02 2002/03 2003/04 2004/05 
Actual recovery  16.0 17.0 32.6 35.2 31.4 31.7 
Total outstanding loans 82.6 85.1 115.0 119.1 127.1 140.4 
Total overdue loans 53.1 54.9 67.6 65.3 62.7 57.8 
Overdue loans/total outstanding (%) 64.3 64.5 58.8 54.8 49.3 41.2 
.. Not available. 
Source: Bangladesh Bank (2004), Annual Report 2004-05 .  Available at:  http://www.bangladesh-
bank.org/pub/annual/anreport/ar0405/chap7.pdf [March 2006]. 
Rehabilitation 
27. Bangladesh has continued to confront na tural disasters through emergency/flood 
rehabilitation programmes.  The latest flood reha bilitation programme (July 2004) at a cost of 
US$400 million was implemented with the assistance of the World Bank and the Asian Development 
Bank as well as the United Kingdom and Japan.28  Flood-affected small and marginal farm-families 
were provided with free fertilizer and seeds, at a cost of Tk 1.85 billion, for 12 crops (transplanted 
aman rice, boro rice, wheat, maize, mustard, black gram, soyabean, peanuts, vegetables, sugarcane, betel leaf, and chillies). 
Distribution of food grains 
28. The Government continues to procure food gr ains (rice and wheat) at pre-announced prices 
(recommended by the National Food Committee) from growers and rice millers, for public food distribution through the Public Food Distribution Sy stem (PFDS).  The authorities indicate that the 
pre-announced procurement price takes into acc ount production costs and prevailing open market 
prices; prices are set at a "reasonable" level, to protect the interests of domestic growers without affecting market prices.  This internal procurem ent by tender is supplemented by foreign aid and 
commercial imports (Table IV.4);  in principl e, the authorities no longer undertake commercial 
imports of food grain.  
Table IV.4 
Food procurement and stock, 2000-05 
('000 tonnes) 
 2000/01 2001/02 2002/03 2003/04 2004/05 
Imports      
Total 1,554 1,800 3,221 2,799 3,374 
Rice 561 127 1,557 801 1,295 
Wheat 993 1,673 1,664 1,998 2,079 
Of which:      
Government imports      
Rice  0 0 0 0 72 
Wheat 0 0 0 29 30 
Foreign aid imports      
Rice  32 9 4 4 27 
Wheat 459 502 250 285 263 
Domestic procurement      
Rice 823 726 816 828 897 
Wheat 265 327 136 15 1 
Table IV.4 (cont'd) 
                                                      
28 Ministry of Finance (2005b). Bangladesh WT/TPR/S/168 
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 2000/01 2001/02 2002/03 2003/04 2004/05 
Distribution      
Rice 983 648 761 628 1,102 
Wheat 791 807 674 347 264 
Stock      
Rice 422 500 526 723 606 
Wheat 445 444 151 116 142 
Source:  Ministry of Food a nd Disaster Management.  
29. The food grains are distributed by the Minist ry of Food and Disaster Management through 
various channels, including open market sales, f ood for work, food for education, and vulnerable 
group feeding and relief (including "test relief" and "g ratuitous relief").  The latter three categories are 
granted temporarily, in the case of natural disaster or other similar situations. 
Other  
30. Other forms of public support to  agriculture relate to research, agricultural extension, pest and 
disease control measures, training, marketing services, and various infrastructural services.  Such 
assistance is provided both on a product-specific and general basis.  A large part includes water 
development infrastructure, such as flood control embankments and drainage.  A long-term strategic 
research plan has been produced under the title "B angladesh NARS-2020:  Vision for Agricultural 
Research".29  In 2004/05, Tk 1 billion was budgeted for special assistance, comprising:  establishing a 
mini soil testing laboratory, jute-seed production by farmers, cultivating sugarcane in 40,000 acres of land using a transplantation system , enhancing production of high quality seeds of pulse, oil, and 
spices etc., popularizing the use of agricultural mach inery, and distributing refined cotton seed among 
farmers.
30 
31. In 2005, measures were being taken to protect Ba ngladeshi plant varieties and the interests of 
farmers;  in February 2006, work on approvin g a Plant Variety and Farmers' Right Protection 
Act - 2005 and a final draft of a plant protection regulation was being finalized.31  
32. Export Policy 2003-2006 envisages special measure s to promote the tea industry, including 
rehabilitating "sick" tea gardens, connecting gas to tea gardens to ensure th eir price competitiveness, 
loans for "sick" tea gardens, lo ans on easy terms to help promote tea quality, increased productivity 
and modernization of tea plants, and duty-dra wback/bond warehouse facilities for imported packaging 
materials.32  The issue of establishing a brand name of  Bangladeshi tea abroad was to be examined. 
33. Since the previous Review of Bangladesh, action has been taken to support the jute 
industry33, which had been hurt by government involve ment in procurement and processing activities 
                                                      
29 Ministry of Finance (2005c). 
30 Ministry of Finance (2005c). 
31 Ministry of Finance (2005c). 
32 Export Promotion Bureau (undated). 
33 Jute goods were one of the main sources of fore ign exchange earnings (1 .3% of total exports in 
2003/04, UNSD, Comtrade database (SITC Rev.3) and a large part of the industrial work force is engaged in the 
industry.  Most raw jute produced in the country is pro cessed in the local mills.  The state-owned Bangladesh 
Jute Mills Corporation (BJMC) purchases raw jute through purchase centres sp read over the country to ensure a 
fair price to the growers.  At present, BJMC runs 26 ju te mills and 3 non-jute mills and 6 closed mills.  Private 
sector participation in the production and export activitie s is ensured by Bangladesh Jute Mills Association 
(BJMA, 52 mills) and Bangladesh Jute Spinners Associ ation (BJSA, 46 mills).  Ministry of Textiles & Jute 
online information.  Available at:  http://www.motj.gov.bd/jute/html/jdpc.html [2 June 2005]. WT/TPR/S/168 Trade Policy Review 
Page 102 
 
 
                                                     (Chapter III) as well as low prices.34  A Jute Diversification Promotion Centre (JDPC), set up in 2002 
under the Ministry of Textiles and Jute, has provide d financial assistance through:  a Tk 200 million 
revolving fund to support jute-diversified enterprises;  a Tk 30 million grant fund extending 
incentives, not exceeding 15% of the machinery cost, to investing entr epreneurs to reimburse the cost 
of acquiring new technologies and related training, ma rket survey, intelligence and promotion;  and an 
investment fund to ensure adequate supply of fund s to entrepreneurs investing in diversified jute 
products.  By December 2005, the JDPC had sponsored 45 basic diversified jute industries, which are in production.
35  Moreover, 150 enterprises receive support from JDPC for producing diversified jute 
products for the domestic and export markets.  Export Policy 2003-06 envisages, inter alia :  a 
coordinated plan of action for increasing productiv ity and diversification of jute goods;  reduced 
interest rate loans;  and "steps to remove legal obstacles in WTO regulations", and trade policies of 
EC and other jute importing countries.36  No clarification was provided by the authorities with respect 
to these objectives. 
(4) ENERGY  
34. Bangladesh's consumption of and access to ener gy are among the lowest in the developing 
countries:  only about 2.2% of households had access to gas in 2000, and 37% (15% at the time of 
previous TPR) had access to electricity in 2004.37  No information was provided by the authorities on 
the social and economic opportunity cost of power shor tages, or on privatization efforts in the energy 
sector from 2000 onwards. 
35. Bangladesh's first National Energy Policy dates back to 1996 and covers all issues, policies, 
options, and action for all subsectors, including non-renewable energy.  A draft of the revised National Energy Policy, was under considera tion by the Government in January 2006.
38  It outlines 
Bangladesh's policy objectives as follows:  to provide  energy for sustainable economic growth;  to 
meet the energy needs of different zones of th e country and socio-economic groups;  to ensure 
optimum development of all indigen ous energy sources;  to ensure the sustainable operation of energy 
utilities;  to ensure rational use of total energy sour ces;  to ensure environmentally sound sustainable 
energy development programmes;  to encourage public and private sector participation in the 
development and management of the energy sector;  to bring the entire country under electrification 
by the year 2020;  to ensure reliable supply of en ergy to the people at reasonable and affordable 
prices;  and to develop a regional energy market for rational exchange of commercial energy to ensure 
energy security. 
36. During the period under review, reforms have focused on the regulatory framework and 
pricing of energy products.  Following the Energy Regulatory Commission Act, 2003, an independent Energy Regulatory Commission (ERC) became operational in 2004 to, inter alia,  facilitate proper 
pricing for electricity and gas.
39  In 2005, the authorities intended to work with the World Bank and 
the Asian Development Bank to define a restructuri ng plan to improve the operational and financial 
performance of the energy sector SOEs, and intensify bill collection efforts;  reforms are needed in 
energy sector SOEs to contain losses, reduce infrast ructure bottlenecks, and improve service delivery. 
 
34 USTC (2003). 
35 Ministry of Textiles & Jute online information.  Available at:  http://www.motj.gov.bd/jute/html/ 
jdpc.html [2 June 2005]. 
36 Export Promotion Bureau (undated). 
37 More information on power policy issues is available online at: 
http://www.powercell.gov.bd/inde x.php?page_id=213 [6 March 2006].  Mini stry of Power, Energy and Mineral 
Resources (2004). 
38 Ministry of Power, Energy and Mineral Resources (2004). 
39 IMF (2005c). Bangladesh WT/TPR/S/168 
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                                                     37. Despite adjustments in early 2005, domestic energy prices are lagging behind world prices, 
which have risen recently owing to higher oil prices.  The authorities were to adjust energy prices in 
view of inflationary pressures from the latest floods and taking into account social considerations.40 
38. Bangladesh participates in regional initiatives, such as the SAARC Energy Center (share 
information, coordinate energy planning, promote regional trade and investment in energy), the South Asia Regional Initiative for Energy Cooperation a nd Development (sponsored by the USAID) the 
South Asia Forum for Infrastructure Regulation (sponsored by the World Bank).   
(i) Natural gas 
39. Bangladesh's only indigenous sources of commercial fuel are natural gas, the dominant source 
of energy, which accounts for 70% of all commercial energy supply, and recently discovered coal, for 
which a draft revised policy is under considerati on.  Gas production grew by 35.8% between 1999/00 
and 2003/0441, driven mainly by the power and fertilizer sector;  gas consumption in major industries 
(e.g. textiles, dyeing, paper, pulp, cement), the commercial sector, and as domestic fuel is also increasing.
42 
40. Bangladesh had proven, recoverable natural gas reserves of 14.47 trillion cubic feet at end of 
June 2005;  total estimated reserves including probable reserves, amount to 22 trillion cubic feet.  With annual production of about 0. 487 trillion cubic feet in 2004/05,  reserves will be exhausted in 
about 29 years.  Gas exploration and production contracts are granted through a bidding process. 
41. In 2004/05, subsidiaries of the state petroleu m company, Petrobangla, supplied about 73% 
(70% at the time of previous TPR) of Bangladesh's  commercial gas consumption;  the remainder was 
produced and delivered to Petrobangla by international oil companies.  Gas supply goes mainly to power generation and fertilizer pr oduction, and to a lesser extent for industry and commercial use 
(Table IV.5).
43  Tariffs, set by the Government for different uses of gas, were most recently revised in 
January 2005.  The rates are Tk 73.91 per metric c ubic feet (mcf) for power generation, Tk 63.41 per 
mcf for fertilizer, Tk 148.13 per mcf for industr y, and Tk 233.12 per mcf for commercial use.44   
42. At present, shortage of gas supply is considered  to be a serious bottleneck to growth, and is 
being addressed by projects financed by the Wo rld Bank and the Asian Development Bank through 
the Gas Sector Development Strategy and Gas Sect or Development Programme.  The formulation of a 
Gas Act is in its final stages;  no further information on this project was available from the authorities. 
 
40 IMF (2005c). 
41 Petrobangla online data.  Available at:  h ttp://www.petrobangla.org.bd/data/production.html 
[18 August 2005]. 
42 Ministry of Power, Energy and Mineral Resources (2004). 
43 Natural gas available in Bangladesh contains mostly methane;  it is not a good raw material for 
producing petrochemical products except chemical fertilizer and methanol.  
44 Petrobangla online data.  Available at:  http://www.petrobangla.org.bd/data/natural%20gas% 
20tariff.html [18 August 2005]. WT/TPR/S/168 Trade Policy Review 
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Table IV.5 
Gas utilization/sales, 1998-04 
(Billion cubic feet and per cent)  
 1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 
Total (billion cubic feet) 292.1 306.9 348.7 364.6 400.8 427.7 
 (Per cent) 
Power 48.2 48.1 50.3 52.1 47.5 54.1 
Fertilizer 28.3 27.2 25.4 21.6 23.9 21.7 
Domestic 9.2 9.6 9.1 10.1 11.2 11.5 
Commercial 1.6 1.3 1.2 1.2 1.1 1.1 
Industry 12.3 13.5 13.8 14.7 15.9 10.9 
Tea estate 0.2 0.2 0.2 0.2 0.2 0.7 
Brick field 0.1 0.1 0.1 0.1 0.1 0.0 
Source: Petrobangla online information.  Available at:  http// www.petrobangla.org.bd/dat a/categorywise.html 
[18 August 2005]. 
(ii) Electricity 
43. Power shortages have remained among the most important bottlenecks for economic 
development.  While Bangladesh's installed power  generation capacity of 5,025 MW (2004/05) is 
much greater than the peak demand, of 4,308 MW, actual generati on is about 3,800 MW.45  Therefore 
demand still cannot be met despite the establishment of new generating stations  by independent power 
producers (IPPs) and some rehabilitation of some existing units.46  This is due to continued serious 
financial constraints (affecting timely maintenanc e of old units), high system losses, and low 
efficiency.  In 2004/05, following actions against illegal connections, combined distribution losses by 
the SOEs Bangladesh Power Development Board (BPDB) and Dhaka Dhaka Electric Supply Company (DESCO) had dropped to 16.7% (from 33% in 1997/98 and 26.7% in 2001/02);  system 
losses reported by the Electricity Supply Author ity (DESA) followed a similar trend, falling from 
25.7% (1999/00) to 22.6% (2004/05).
47 
44. Generation and urban distribution of electric ity are the responsibility of the BPDB, the 
statutory body.  The Power Grid Company of Ba ngladesh (PGCB) is solely responsible for 
transmission.  Distribution is also carried out by the state-owned  DESA, DESCO, West Zone Power Distribution Company (WPZPDC) and the Rural Electrification Board (REB).  Total electricity 
generation increased from 14.7 billion KWH in 1999/00 to 21 billion KWH in 2004/05.  Gas-based 
generation constituted 88.7%, hydro generation 4.1% , and liquid-fuel-based generation 7.2% (i.e. 
virtually unchanged since the previous Review).  In  2004, the residential sector accounted for 43% of 
total electricity consumption, industry for 43.5%, the commercial sector for 7.5%, agriculture/irrigation for 4%, and other users for 2%.  
45. Under the 1996 private sector power generation po licy, the authorities lifted restrictions on 
private investment, both domestic and foreign.48  Under this policy, private power companies are 
exempt from income tax for a period of 15 years and from customs duties and VAT normally levied on the import of plant and equipment. 
                                                      
45 Bangladesh Power Development Board key online sta tistics.  Available at:  http://www.bpdb.gov.bd/ 
key_statistics.htm [18 August 2005]. 
46 Ministry of Power, Energy and Mineral Resources (2004). 
47 Ministry of Finance (2005a). 
48 More information on power policy issues may is  available online at: http://www.powercell.gov.bd/ 
index.php? page_id=213 [6 March 2006]. Bangladesh WT/TPR/S/168 
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                                                     46. The authorities aim to increase generation capacity  to 7,000 MW by 2008;  according to one 
report, they may be raising the total proportion of electricity supplied by IPPs from 21% to 35%.49  To 
meet this target, the authorities planned the following investments:  additional generating capacity of 
2,000 MW from public sector and IPPs;  constr uction of a 850 km, 230/132 kV transmission line, 
construction of 45,000 km of distribution lines (33kV, 11 kV, 0.4kV) and associated substations;  
construction of a national load dispatch centre;  and rehabilitation of existin g power plants.  Further 
measures under consideration include the redesign of the distribution network and effective resolution 
of intra-SOE arrears.50 
47. Under a 2004 power pricing framework, the electricity tariff is to gradually reflect the supply 
cost but, if required, the Government may provide a direct subsidy from the budget.  Tariff rationalization efforts (semi-annual tariff adjustment s based on a formula to compensate for variations 
in fuel costs and foreign exchange fluctuations) br ought the average rate approximately equal to the 
average delivery cost until September 2003 when the last tariff adjust ment was made.  In 
January 2006, the authorities indicated that the ta riff did not cover costs (despite the preferential 
natural gas tariffs for power generation (section (4)(i))) and that utilities were not yet financially 
viable.  The bulk tariff was Tk 2.12 or Tk 2.05 (33kV) per kWh for urban areas (from BPDB to REB) 
and Tk 2.12 per kWh for outside of the urban area (from DESA to REB), where as cost of supply was 
Tk 2.32 and Tk 2.37 per kWh, respectively for 132kV and 33kV;  thus, supply costs are up to 15% 
higher than the tariff charged.  The current electric ity tariff contains several rates (flat, off-peak, peak) 
depending on the consumer category;  agricultu ral pumping and high volta ge (manufacturing) end-
users benefit from rates substantially lower th an those for commercial and residential users.
51  Future 
tariffs are to be determined by the ERC. 
(5) MANUFACTURING  
(i) Features 
48. The share of manufacturing in GDP was 16.58% in 2004/05 (of which 4.85 percentage points 
was contributed by small size industries), up from 14.9% in 1998/99 (Table I.2);  the sector employs 
9.7% of the labour force (2002/03)52, which indicates that labour productivity in manufacturing is 
more than twice the level in the rest  of the economy (presumably owing, inter alia , to its greater 
capital intensity and ability to exploit economies of scale).  The growth of the sector has been driven 
almost entirely by the ready-made garment (RMG) and knitwear industries.53 
49. The industrial sector remains characterized by the existence of large loss-making state-owned 
enterprises.  These include the Bangladesh Textile Mills Corporation (BTMC), the Bangladesh Steel 
and Engineering Corporation (BSEC), the Bangl adesh Sugar and Food Industries Corporation 
(BSFIC),54 the Bangladesh Chemical Industries Corporation (BCIC), and the Bangladesh Jute Mills 
Corporation (BJMC).55  Factories owned by these corporations (or joint ventures) engage, inter alia,  
 
49 USTC (2003). 
50 IMF (2005c). 
51 Online electricity tariff (BPDB/DESA).  Available at:  http://www.powercell.gov.bd/ 
index.php?page_id=222 [7 March 2006]. 
52 Ministry of Finance (2005a). 
53 Ministry of Finance (2005a). 
54 The BSIFC is also involved in producing high yield and high sucrose-content sugarcane;  
maintaining the price of sugar stable in the domestic mark et through efficient marketing;  and establishing sugar 
mills, to attain self-sufficiency in sugar. 
55 More information on three of these corporations is available online at:  http://www.moind.gov.bd/ 
index.html. WT/TPR/S/168 Trade Policy Review 
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                                                     in the production of agrichemicals, urea, phos phate, pharmaceuticals, cement, sanitary ware 
insulators, glass sheets, safety matches, paper, cables, copper wires, steel items, and power 
transformers.  According to the IMF, the moment um for SOE reform in manufacturing needs to be 
regained as soon as practicable;  in 2004, the aut horities aimed to significantly downsize loss-making 
SOEs and not extend budgetary support nor new bank credit for capital spending.56  Ongoing 
programmes to improve the management system  of manufacturing SOEs include:  gradual 
privatization of the financially insolvent entities;  settlement of short- and long-term liabilities of 
closed or privatized enterprises;  reduction of losses through reduction of manpower and curtailment of non-essential expenditure;  ensuring record-keeping of assets and liabilities and annual audit;  
enhancement of reward/punishment scheme for ensuring accountability at every stage;  and 
rationalization of prices of goods/services consistent with market demand and cost of production.
57 
50. Industrial sector policy is now governed by the Industrial Policy, 2005.58  Its guidelines are 
expected to help expand planned industrialization (including agri-based), bring about sustainable and 
continuous industrial growth, overc ome the past failures of industria lization, and contribute to poverty 
and unemployment reduction.  The policy, inter alia,  is aimed at strengthening efficiency in import-
substitution industries so as to meet domestic demand.  The objective for supporting the so-called 
"thrust" sectors (Chapter III) will be to, inter alia , use domestic technology and import substitution.  
Efforts are to be made to remove policy discrim ination between domestic a nd foreign investments, 
and enhance regional and sub-regional cooperation.  Steps are to be ta ken to bring about the country's 
industrial development in line with different WTO agreements.  Incentives and infrastructural 
facilities for the private industrial sector are provided by the Board of Investment (BOI), the Bangladesh Export Processing Zones Authority (BEPZA) and the Bangladesh Small and Cottage 
Industries Corporation (BSCIC) (Chapter III).  A sep arate Productivity Policy is to be drawn up.  The 
authorities expect that by 2015 the contribution of the industrial sector to GDP will rise to 30%-35%, 
and the workforce to 35% of the total workforce.   This would imply a reducti on in labour productivity 
by more than half (from more than twice the level in the rest of the economy to the national average). 
51. Nominal tariff and effective protection for the manufacturing sector has fallen during the 
period under review.59  According to a recent Word Bank study,  the direct effects of trade 
liberalization have been generally positive.60 
52. As a result of the domestic policy, between  1970 and 2002 local drug companies increased 
their share of production from 30% to 80%, and le ss dependency on imports and prioritization of 
useful drugs saved approximately US$600 million a year;  during the same period, the share of 
substandard drugs fell from 36% to 2%.  To mode rnize and further expand the pharmaceutical sector, 
the updated National Drug Policy 2005 was adopted.  Its aim is, inter alia,  to encourage the 
manufacture of good quality essential drugs in adeq uate quantities and ban the manufacture, sale, and 
 
56 IMF (2004). 
57 Ministry of Finance (2005a). 
58 Similarly to past industrial policy, in addition to manufacturing activities, the Industrial Policy, 2005, 
also governs some service industries, including entertainment, hospitals and clinics, IT-based activities, 
construction, and hotels (Industrial Policy 2005.  Available at:  http://www.fbcci-bd.org/HTML/ 
POLICY/Industrial_Policy_2005.htm [8 November 2005]).   
59 The Bangladesh Tariff Commission's Review of Relative Protection 2002  found average ERP in a 
large sample of manufacturing enterprises to be 78%, dow n from 100% or more in the past.  The review also 
found that although average nominal protection rates had come down significantly, the sector resisted any reduction of the effective rates by pressing for and obta ining reduced tariffs on intermediate inputs as well as 
continued tariff concessions, by end-use, for imported capital machinery and many industrial raw materials (World Bank, 2004). 
60 World Bank (2004). Bangladesh WT/TPR/S/168 
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                                                     distribution of counterfeit, adulterated, and sub-st andard drugs.  Implementation of the National Drug 
Policy 2005 is expected to better protect consumer rights, help expand this growing export-oriented 
industry, and attract more invest ment, both domestic and foreign.61  The policy also strengthened the 
Drug Regulatory Authority's powers and will revise the existing system of maximum retail prices.62  
In 2005, the 233 companies producing locally about 12,000 types of branded drugs and various 
essential ingredients for drugs, could meet 96% or more of Bangladesh's demand for drugs.  Advancement in 'good medicines practice' (GMP) has resulted in the production of international 
quality drugs, thus turning Bangladesh from a drug importer into a drug-exporter.  Total export of 
drugs and related raw materials rose from Tk 322.8 million in 2001 (17 markets) to Tk 1.3 billion in 
June 2005 (62 markets). 
(ii) Textiles and clothing 
53. Despite the post-MFA threat, the textiles and clot hing industry has remained the driving force 
behind Bangladesh's exports, accounting for over 83% of total exports since the previous Review.63  
The sector continues to be dominated by the RMG sub-industry (consisting of 3,800 units), which in 2003/04 accounted for 9.5% of the country’s GDP and 29.7% of the manufacturing GDP, and 
provided direct employment for about two million Bangladeshis (mostly women).
64  According to 
IMF estimates, at least 10 million people are directly or indirectly employed by this industry.65  RMG 
activities contributed to 76.6% of the country's foreign exchange earnings in 2003/04, a relatively 
stable performance during the period under review.  Nevertheless, there h as been a considerable 
slowdown in the export growth rates compared with the 1990s.66  Knitted garments, such as t-shirts, 
jackets and trousers, made up a large part of the RMG exports in 2003/04.  Inadequate backward 
linkages keep the RMG sector largely dependent  on imports of raw cotton and yarns, which 
represented 17.2% of total imports in 2003/04;  acc ording to the authorities, in February 2006 the 
volume and quality of domestic output of these ra w materials could meet about 80% and 25% of 
demand by the export-oriented knitted a nd woven RMG industries, respectively.67 
54. The possible impact of the complete integration of the textiles and clothing sector, as of 
January 2005 into the GATT/WTO framework, as provided under the Agreement on Textiles and 
Clothing (ATC), raises concerns for Bangladesh.68  The past growth of the labour-intensive RMG 
industry is attributable to several factors, in cluding abundant and cheap labour, quota-free access to 
the EC market under the GSP, considerable quota allowance under bilateral agreements with the 
United States and Canada (see below) as well as generous government assistance, involving, 
inter alia,  import barriers, duty concessions, tax incentives, and cash subsidies still in place 
(Chapter III, Box IV.1).  Nevertheless, the sector's competitiveness has been impaired by, inter alia,  
restrictions on FDI in the sector;  a requirement for back-to-back letters of credit (LCs) before imports 
can be approved;  a requirement to reserve 40% of export cargo for domestic vessels;  and an 
 
61 Ministry of Finance (2005a). 
62 Ministry of Public Health and Family Welfare No tification, No. Public Health-1/Drug-22/2004/154, 
18 April 2005. 
63 UNSD, Comtrade database (SITC Rev.3). 
64 World Bank (2005b);  and Ministry of Textiles & Jute online information.  Available at:  
http://www.motj.gov.bd/ministry/html/allied.html [2 June 2005]. 
65 IMF (2004). 
66 UNSD, Comtrade database (SITC Rev.3). 
67 The authorities are still of the view that to face the post-MFA quota-free environment, the prime 
necessity is to develop backward linkage facilities (spinning, weaving, knitting and dyeing-finishing) to ensure 
local supply of quality fabrics to meet the growing demand of the export-oriented RMG industry as well as 
domestic demand (Ministry of Textiles and Jute, 2005). 
68 More information on the possible impact of the lifting of quotas on the world economy may be found 
in WTO document WT/TPR/OV/10, 15 November 2004.WT/TPR/S/168 Trade Policy Review 
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inefficient quota allocation system.69  In an effort to lift certain impediments, under Industrial Policy 
2005, 100% FDI has been allowed in the establishment of RMG factories and a waiver has been given 
on the compulsory use of domestic vessels fo r export consignments (section (6)(iii)(a) and 
Chapter II). 
Box  IV.1:  Post MFA response 
No comments were provided by the authorities on the content in this box.  
The expiry of the Agreement on Textiles and Clothing (ATC ) and all restrictions thereunder is expected to  
result in great benefits to efficient producers.  Bangladesh's garment export sector has been under increasing 
pressure to correct structural deficiencies and improve its performance and quality.  To deal with the problems of the RMG sector on a priority basis, a National Coordination Council was formed, and submitted 
its report to the Prime Minister with specific reco mmendations.  The Ministry of Commerce, with support 
from the World Bank, conducted a study on the Post-MFA Development Strategy and efforts are under way 
to implement its recommendations in areas including, export promotion, development of physical 
infrastructure, establishment of a central bonded warehouse, provision for investment incentives, lowering 
interest rates on exporting activities, human resource development, and marketing support.    
The authorities rely on and have taken initiatives to c ontinue and expand preferential access to the EU and 
Canadian markets, and those of Australia, Norway, an d New Zealand.  In associ ation with the Bangladesh 
Garments Manufacturers and Exporters Association, the authorities are continuing efforts to gain duty-free 
access to the U.S. market.  Although MFN tariffs mi ght fall as a result of a Doha Round agreement, 
Bangladesh will be somewhat sheltered from the full ef fects of competition as its key competitors will 
continue to face higher MFN import duties in these ma rkets.  Possible safeguards imposed by the United 
States and the EC on imports from China would help tide the industry over the difficulties of the abolition of MFA.  
To aid adjustment to the MFA quota  phase-out, the authorities sought IM F assistance in accordance with the 
Trade Integration Mechanism through an augmentati on of access under the Pove rty Reduction and Growth 
Facility of SDR 53.33 million (10% of  quota), in three equal tranches.  
The Ministry of Commerce formulated a US$40 million Post-MFA Action Programme (PMAP) with assistance from development part ners.  The PMAP has eight components:  the Skill and Quality 
Development Programme providing training in co mpliance norms, quality management, productivity 
management, marketing, merchandising, inventory management, and customs and port procedures;  support for women losing jobs as a result of a potential export shock, under the Displaced Workers Rehabilitation 
Programme;  the Small Enterprise Capacity Enhanc ement Programme;  the Technological Capacity 
Development Programme for the primary textile sector ;  assistance for setting up separate design and 
development centres for the primary textile and handloom subsectors;  support to forward linkage industries (such as designing);  and promotion of activities to explore new markets will be promoted.  A budget 
allocation of Tk 200 million was made for the PMAP in 2004/05.  Several ministries, led by the Ministry of 
Commerce, and leading NGOs particip ate in training, re-training, a nd rehabilitation of displaced RMG 
workers. 
In addition to the range of domestic support measures, the phase-out of the 5% cash subsidy to exports of 
local fabrics in 2004/05 was reconsidered, and extended for 2005/06. 
Sources:  USTC (2003);  IMF (2005c);  Planning Commission (2004);  IMF (2004);  and Export Promotion Bureau (undated).  
 
55. During the period under review, the growth of RMG exports (in value terms) was low or 
negative (Table IV.6) except in 200 2/03, when exports grew by 13% as a result of trade facilitation 
measures, cost-cutting techniques and better business management, as well as the lifting of a portion 
of MFA quotas leading to a rise in global RMG dema nd, which was largely captured by China, India, 
                                                      
69 Mlachila and Yang (2004). Bangladesh WT/TPR/S/168 
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and Pakistan.70  Furthermore, during the first full year fo llowing the termination of the quota regime 
(2005), the authorities indicate that RMG exports gr ew by 11%.  The main destinations for RMG 
exports remain the EC and the United States, wh ich accounted for 93.7% in 2003/04;  the EC share 
increased significantly due to the Everything But Arms Initiative (introduced in March 2001), while 
the U.S. share dropped sharply as a result of, inter alia,  the AGOA initiative, China's access to the 
WTO, and the U.S. textile agreement with Viet Nam.71  Duty- and quota-free access (including 
relaxed rules of origin) to Canada for LDC exports helped Canada to remain the third largest export 
market for Bangladeshi RMGs;  its share in total RM G exports registered a peak of 4.2% in 2003/04. 
Table IV.6 
Destination of RMG exports, 1990-04  
 Total exports 
(US$ million)  Growth rate 
(%) Exports to EC15 
(% of total)  Exports to U.S. 
(% of total)  Exports to other 
markets 
(% of total)  
1990/91 840.4 30.7 47.4 47.5 5.1 
1991/92 1,041.7 24.0 41.7 53.8 4.5 
1992/93 1,307.4 25.5 42.3 52.4 5.3 
1993/94 1,478.8 13.1 47.8 47.1 5.1 
1994/95 1,969.2 33.2 46.8 47.7 5.5 
1995/96 2,218.4 12.7 54.0 41.3 4.7 
1996/97 2,688.5 21.2 51.9 43.7 4.4 
1997/98 3,785.9 40.8 49.5 44.7 5.8 
1998/99 .. .. .. .. .. 
1999/00 3,907.0 .. 49.5 45.8 4.7 
2000/01 4,260.8 9.1 49.7 45.5 4.8 
2001/02 3,947.3 -7.4 48.1 47.3 4.6 
2002/03 4,461.3 13.0 55.2 39.1 5.7 
2003/04 4,442.4 -0.4 64.7 29.0 6.3 
.. Not available. 
Source:  UNSD, Comtrade Data base (SITC Rev.3). 
56. According to the IMF, the lifting of MFA -related quotas creates significant risks for the 
Bangladeshi economy.72  Bangladesh should be able to retain some of its competitive edge in the EC 
and Canadian markets, given its duty-free access, and be able to compete in the high volume, 
low-margin segment of the world garment market , particularly as RMG buyers were apparently 
diversifying their sources of supply to avoid over dependence on a few major exporters such as China 
and India.  However, with intensified competition, Bangladesh is likely to face price competition 
pressure and the risk of losing significant market sh are (particularly in the woven garments segment) 
in the United States, and continue to encounter funding and implementation constraints in upgrading 
the infrastructure crucial for attracting FDI and improving competitiveness.  In mid 2005, private 
sector operators suggested that at the early post-MF A stage, the situation was manageable as no major 
structural break in the RMG-export climate had occurred;  orders had held up well, and new 
investment for planned expansion had been reported. 
                                                      
70 IMF (2004). 
71 According to the IMF, Bangladesh's exports of products on which quotas were removed in 2002 
dropped by 44% in the U.S. market, and exports of quota-free items dropped by 15% (IMF, 2004).  Reportedly, 
Bangladeshi exporters also blame U.S. pr eferential trade agreements for their e xport decline.  In particular, they 
believe that the AGOA has diverted U.S. textiles impor ts away from Bangladesh to Africa (Mlachila and Yang, 
2004). 
72 IMF (2005c). WT/TPR/S/168 Trade Policy Review 
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                                                     57. Policy adjustments are under way to boost reform and export competitiveness in the sector 
(Box IV.1), although in mid 2005, the authorities ac knowledged that it was too early to gauge the full 
extent of the post-MFA impact.  According to IMF projections, in the absence of policy adjustments, 
RMG exports were expected to fall by 20% durin g 2004/05–2005/06, with a possible net adverse 
impact on the trade balance of US$1.4 billion (or 1. 0 percentage point of GDP on an annual average 
basis).73  With timely and adequate policy response, th e impact could be mitigated, notably through a 
downward exchange rate movement , a more rapid reduction in import barriers whose effects feed 
through to impede exports, and a more concerted effort to improve the investment climate and 
upgrade infrastructure (finance, customs, port, and transportation systems).  
58. Bangladesh continues to enjoy quota-free and duty-free entry into the EU countries under the 
GSP/EBA Initiative, for products that fulfil the rules of origin and are accompanied by a Certificate of 
Origin issued by the Export Promotion Bureau.74  Under these rules, exporte d goods generally have to 
meet "2-stage transformation" criteria to ensure that the goods are sufficiently transformed within the 
exporting country in order to be classified under a di fferent four-digit HS code category.  Unlike other 
countries in the region, in January 2006 Banglad esh had not yet endorsed the relaxed regional 
cumulation criteria of origin offered by the EU to exports eligible for GSP/EBA in 2001 (Chapter II). 
59. Since January 2003, Canada has granted du ty-free and quota-free access to all Bangladeshi 
exports, including RMGs (Chapter II).75 
60. Until end 2004, market access to the United States was governed by the 1994 bilateral 
agreement.  Quotas were in place on 21 garment-rela ted products;  the quotas were allowed to grow at 
an annual rate of 7%.  All ga rment exports, both quota and non-quot a items, had to be accompanied 
by a visa issued by the Textile Cell in the Export Pr omotion Bureau to clear U.S. Customs.  During 
the period under review, Bangladesh's U.S. quota utilization rates exceeded 70% in most product 
categories.  Until 1997, a similar arrangement between Bangladesh and Cana da covered ten product 
categories, with growth rates from 6.96% to 8. 7%, and quota utilization at 24.4% to 103.2%.  
61. The Textile Cell has been in charge of quota allocation and monitoring76;  its present tasks 
include issuing country of origin and GSP certificates and monitoring the social compliance requirements of the RMG industry in Bangladesh. 
(6) SERVICES  
Features 
62. Services make up more than half of the Bangladeshi economy and have been the fastest 
growing component of the GDP during the period under review;  their share in GDP rose from 46.9% in 1998/99 to 50.7% in 2004/05 (Tab le I.2).  Wholesale and retail trade;  transport, storage and 
communications, community, social and personal services;  and real estate and business services have 
 
73 IMF (2004). 
74 Under the EU-Bangladesh bilateral textile agreement,  several textile categories have been subject to 
the double-checking system of surveillance, based on expo rt licences issued by the Export Promotion Bureau.  
The categories included tee-shirts and undervests, trousers, and men's and boy's woven shirts.  The aim of the 
system has been to stop illegal exports from third countr ies in the name of Bangladesh.  The agreement was to 
expire on 31 December 2004.  
75 Canadian International Development Agency (2003). 
76 More information on quota allocation procedures can be found in WTO (2000). Bangladesh WT/TPR/S/168 
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                                                     been by far the leading service ac tivities in Bangladesh.  The services s ector employs about a third of 
the labour force (mainly in trade, hotel and restaurant services).77 
63. Between 1998/99 and 2003/04 exports of non-factor services rose 30.7% to US$924 million, 
equivalent to 12.2% of merchandise exports (Table I.3).  In 2003/05, the value of imports was almost 
two times greater than exports. 
Overall commitments under the GATS 
64. Bangladesh has not changed its GATS commitments since its previous Review;  its Schedule 
of Specific Commitments covers the activities of fi ve star hotel and lodging services and, as from 
1997, telecommunication services (section (6)(ii)).78  To date, Bangladesh has not made any services 
offer in the ongoing round of negotiations. 
(i) Financial services  
(a) Banking services  
65. There have been no major chang es to the structure of the banking sector since the previous 
Review (1.2% of GDP).79  It consists of four nationalized  commercial banks (NCBs), five state-
owned specialized banks, 30 domestic private banks , 22 (2006) non-bank financial institutions, 
including the Dhaka Stock Exchange and the Ch ittagong Stock Exchange and 12 (2006) foreign banks 
(Table IV.7).80  The NCBs financial performance is poor and the government has adopted a bank-by-
bank strategy for their reform81;  special audits based on international accounting standards (IASs) at 
all four NCBs led to progress in reducing non-performing loans (NPLs), classified loans, decreasing 
excess manpower, and rationalizing branch networks .  By mid 2005, the authorities had made good 
progress with the privatization of the Rupali Bank and intend to continue their efforts to divest Agrani and Janata Banks during the next two years;  the privatization of Sonali (the largest NCB) seems 
politically untenable.
82  
66. While private sector banks have grown signifi cantly in the past few years, NCBs still 
dominate the banking sector, accounting for about 40% of all bank deposits and more than 40% of 
total industry assets (Table IV.7).   The specialized banks were created with special mandates to 
address the financial needs of the agricultural and industrial sectors and are used as a means of 
assisting these sectors.83  While their share of deposit taking remains relatively small, 7.2% in 
2004/05, they hold 7.7% of all bank assets, finan ced by large borrowings from the Bangladesh Bank 
(BB).  Foreign banks are active principally in trade finance. 
 
77 Ministry of Finance (2005a). 
78 WTO documents GATS/SC/8, 15 April 1994, and GATS/SC/8/Suppl.1, 11 April 1997. 
79 Bangladesh Bureau of Statistics (2005), Annex Table 2. 
80 UNESCAP (2004). 
81 For more detailed information on the NCB reform strategy, see Planning Commission (2004);  and 
IMF (2004). 
82 IMF (2005c). 
83 The specialized banks include the Bangladesh Krishi Bank, the Bangladesh Shilpa Bank, the 
Rajshahi Krishi Unnyan Bank, the Bank of Small Industries and Commerce Bangladesh Ltd., and the 
Bangladesh Shilpa Rin Sangstha. WT/TPR/S/168 Trade Policy Review 
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Table IV.7 
Structure of the banking sector in Bangladesh, 1998 to March 2005 
(Per cent) 
1998/99 2001/02 2004/05a
Type of bank No. of 
banks 
(branches) Share in 
total 
deposits 
(%) Share in 
total 
advances 
(%) No. of banks 
(branches) Share in 
total 
deposits 
(%) Share in 
total 
industry 
assets 
(%) No. of banks 
(branches) Share in 
total 
deposits 
(%) Share in 
total 
industry 
assets 
(%) 
Nationalized commercial 
banks (NCBs) 4 (3,616) 59.2 53.9 4 (3,496) 50.3 45.6 4 (3,388) 39.8 40.1 
Specialized 
banks (DFIs) 5 (1,175) 5.2 13.2 5 (1,311) 5.8 11.5 5 (1,334) 7.2 7.7 
Private 
commercial 
banks (PCBs) 28 (1,173) 27.7 26.8 30 (1,398) 36.8 36.2 30 (1,557) 47.2 42.7 
Foreign banks (FCBs) 13 (31) 7.9 6.1 10 (31) 7.0 6.8 10 (39) 5.8 9.5 
Total 50 (5,995) 100.0 100.0 49 (6,236) 100.0 100.0 49 (6,318) 100.0 100.0 
a As at end March 2005. 
Note: No comments were provided by the authorities on this table. 
Source:  Bangladesh Bank (2004), Annual Report 2003-2004;  and Ministry of Finance (2005), Bangladesh Economic 
Review 2005, June, Dhaka. 
67. Bangladesh has the largest micro-finance progra mme in the world, one of the success stories 
of the country's recent economic and social deve lopment.  Micro-finance institutions, mostly 
multipurpose NGOs dependent on grants and soft lo ans, serve about 13 million households and have 
played an important role in poverty alleviation.  However, their total asset base is still quite small 
(about 1.4% of GDP).84  There is no regulatory or supervisory framework for micro-finance, except 
for the domestic Grameen Bank (1,084 branches, 12,500 staff serving 2.1 million borrowers in 
37,000 villages)85, which is covered by a special ordinance i ssued in 1983.  Micro-finance institutions 
cater only to the poorest segments of the population (for very short-term loans) and are not accessible to micro and small enterprises.   
68. The Banking Companies Act, 1991, is the princi pal legislation regulating the banking sector.  
Enforcement of the Act, as well as supervision of the banking sector, is entrusted mainly to the BB, 
which is controlled by the Ministry of Finance.86  As envisaged in the legislation, the Ministry of 
Finance also takes charge of certain areas of ba nking regulation, including appointment of the board 
of directors and chief executives of NCBs and specialized banks.87  No individual company or 
members of the same family, individually or jointly,  can hold more than 10% of a bank's total shares.  
The activities that banking institutions are allowed to conduct are specified in Section 7 of the 
Banking Companies Act. 
                                                      
84 World Bank (2005b). 
85 The Grameen Bank Project began in the village of Jo bra, in 1976.  In 1983, it was transformed into a 
formal bank under a special law passed for its creation.  It is owned by and works exclusively for the poor 
borrowers of the bank, who are mostly women.  These borrowers currently own 94% of the total equity of the bank;  the remainder is owned by the Government.  In 1996, Grameen Bank contributed 1.1% to the GDP 
(Grameen Bank online information.  Available a t:  http://www.grameen-info.org/bank/contribu.html). 
86 Such authority is conferred upon the Bangladesh Bank by the Bangladesh Bank Order, 1972. 
87 The functions and responsibilities of the Bangladesh Bank are not clearly defined, and the bank lacks 
autonomy in areas such as the licensing  and supervision of banks.  As the NCBs are monitored by the Ministry 
of Finance, in reality almost two thirds of the banking system is not fully under the regulatory oversight and 
hence the legal authority of the Bank (IMF, 1998;  and World Bank, 1999). Bangladesh WT/TPR/S/168 
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                                                     69. Given Bangladesh's lack of funds for development, foreign banks are generally encouraged to 
take a role in the provision of banking services.  There is no minimum domestic equity requirement 
and they are allowed to open branches with permission from the BB.  Foreign banks are free to take 
deposits from and grant loans to domestic companies and residents;  they also have full access to 
credit from the BB, local financial markets, deposit insurance, and clearing facilities.  Foreign banks 
are allowed to conduct the same business as local banks. 
70. In addition to providing banking services t hough the establishment of subsidiaries in 
Bangladesh with their own capital base, foreign banks may operate through branches.  Minimum 
capital requirements, reporting obligations, and prud ential requirements, as well as the scope of 
activities are listed in the Banking Companies Act.  A licence is required from the BB to operate a 
branch;  the condition for granting such a licence is reciprocity between Bangladesh foreign bank's 
home country. 
71. Since the previous Review, the author ities have strengthened BB's supervision.88  BB has 
raised minimum capital requirements, taken steps to reduce insider lending, and has improved the 
institutional framework for prudential s upervision of the financial system.89  On- and off-site 
inspections were being intensified and are to be further improved to ensure compliance with 
prudential regulations.   Despite the persistence of certain weaknesses (in the legal structure, financial 
reporting, internal audit, internal control areas), progress was also made to strengthen BB's safeguards 
framework in a number of areas, including throu gh the publication of BB's financial accounts and 
improvements in foreign reserve management.90 
72. Section 31 of the Banking Companies Act, 1991, c ontains the conditions for issuing licences.  
In 2003, the minimum capital requirement for ope ning a new bank was raised to Tk 1 billion from 
Tk 400 million;  50% must be paid by the appli cant, and the remaining capital raised by offering 
public shares through the stock exchange within four years. 
73. All prudential requirements are applied equally to local and foreign banks;  performance is 
monitored under the five indicators of the CAMEL rating of banking operations91, and an early 
warning system of supervision, which have been in effect since 1994 and 2004, respectively.  The 
capital adequacy ratio (CAR) for banks has been rai sed from 8% to 9% of risk-weighted assets (with 
at least 4.5% in core capital) or Tk 1 billion, whic hever is higher;  these re quirements had to be met 
fully by March 2005, but no information on this matter was available from the authorities.92  This has 
brought the capital adequacy requirement closer to th e Basle standards.  As at 31 December 2005, the 
private commercial banks (of which five have a CAR below 9%) and foreign commercial banks 
maintained CAR of 9.92% and 25.13%, respectively;  however, the CAR of NCBs and the specialized 
financial institutions remained below the minimu m regulatory CAR owing to their high NPLs and 
continuing losses.  The 1997-01 downward trend in a ggregate CAR has been reversed, and in 2002 
the ratio rose to 7.5%;  it was 7.65% in 2005. 
74. The Money Loan Court Act, 2003 requires a mandatory repayment of 10% of a loan in the 
first year, 15% in the second year, and 25% in the third year.93  Under this Act, money loan suits and 
 
88 IMF (2004). 
89 IMF (2005c). 
90 IMF (2005c).
91 At end 2003, the CAMEL rating was 1 (strong) for 15 banks;  2 (satisfactory) for 11 banks;  3 (fair) 
for 11 banks;  4 (marginal) for 10 and 2 banks received a 5 (unsatisfactory) rating.  All NCBs and four of the 
DFIs received a Marginal rating. 
92 Bangladesh Bank (2004). 
93 UNESCAP (2004). WT/TPR/S/168 Trade Policy Review 
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                                                     prosecution cases have been disposed of much fast er than previously.  Loan arrears are being 
recovered more effectively;  Tk 710 billion w as recovered over a period of ten months (to end 
February 2004), which had not been r ecovered in the previous ten years.94 
75. The large stock of non-performing loans in NCBs  is a legacy of mismanagement and political 
interference in a system of directed lending to  money-losing parastatals and to unsecured private 
borrowers.95  As from 9 April 2005, banks have not been a llowed to approve large loans in favour of 
any individual or group of borrowers in excess of 35%  of their total capital.  The portion of "funded" 
loan in an approved large loan must not be more th an 15% of total capital.  However, at end 2003 the 
proportion of large loans of NCBs was very high, 13.4 times of their own funds, whereas the ratio for 
private commercial banks, foreign commercial banks , and specialized financial institutions was 
5.7, 3.0, and 3.5 times, respectively.  The ratio of  NPLs to total loans of all the banks has been 
improving since reaching a peak of 41.1% in 1999, although the aggregate ratio was still as high as 
22.1% in December 2003 and 15.79% in June 2005.96  The rates, in June 2005, were 24.37% for 
NCBs, 35.25% for government-owned specialized banks, and 7.76% for domestic private banks.  
Only foreign banks have been able to keep  their level of NPLs in check at 1.54%. 
76. Interest rates have come down across-the-boa rd, but lending rates are still high due to 
structural factors, which have led to (more or less ad hoc ) rationing of credit to private businesses and 
have hurt the efficiency of private investment.97  Spreads between lending and deposit rates remain 
wide, reflecting the high level of NPLs in the banking  system, the lack of adequate competition in the 
banking sector, and inefficiencies in bank operations  (Chart IV.2).  However, between 2000/01 and 
2004/05, the interest rate spread fell from 6.78 to 5.31 percentage points.  Some disparities in the 
structure of interest rates (e.g. treasury bill rates lower than deposit rates, and administered lending rates to some sectors) remain, owing to rigidities.  Loans at concessional interest rates are provided for exports (fixed rate 7%), agriculture, and smal l and cottage industries, through the NCBs, and 
specialized banks (Chapter III).  
(b) Insurance services  
77. Insurance services represent 0.36% of GDP.98  Since the previous Review of Bangladesh, 
private sector participation in the sector has progressed considerably (Table IV.8);  two SOEs remain operational, the Sadhran Bima Corporation (SBC) in general insurance business, and the Jiban Bima Corporation (JBC) in life insurance business.  Insu rance business was opened to the private sector in 
1984 through an amendment to the Insurance Corporation Act, 1973.
99  The American Life Insurance 
Company (ALICO) remains the only foreign in surance company operating in Bangladesh.   
 
94 Presentation by H.E. Moudud Ahmed, Minister for Law, Justice & Parliamentary Affairs, Promoting 
Good Governance and Human Security,  at the Bangladesh Development Forum-2004, held in Dhaka on 
9 May 2004.  Available at:  http://www.minlaw.gov.bd/bdf2004.htm [2 June 2005]. 
95 IMF (2005c);  and USTC (2003). 
96 Bangladesh Bank (2004). 
97 IMF (2004). 
98 Bangladesh Bureau of Statistics (2005), Annex Table 2. 
99 After Independence in 1971, all 49 privately owned insurance companies were nationalized through 
the Bangladesh Insurance (Nationalisation) Order, 1972, and restructured into five insurance corporations.  They 
were further restructured into two corporations, SBC and JBC, under the Insurance Companies Act, 1973. Bangladesh WT/TPR/S/168 
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0123456789101112131415
1998/99 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05Chart IV.2      
Interest rates (weighted) on loans and deposits, 1998-05
Per cent 
Source :     Central Bank of Bangladesh.Average rates on depositsAverage rates on loans
Interest spread
Inflation
Note:          Averages on loans, deposits and interest sprea d are as of end-June.  Interest rates for 2004/05 are provisional.
 
Table IV.8 
Structure of the insurance sector, 1998/99 and 2004 
No. of companies Gross premiums (Tk million) Share in total premiums (%) Type of insurance 
1998/99 2004 1998/99 2004 1998/99 2004 
General insurance 25 44 4,000 6,797 100.0 100.00 
SBC 1 1 700 778 17.5 11.45 
Private companies 24 43 3,300 6,019 82.5 88.55 
Life insurance 7 18 5,000 15,329 100.0 100.00 
JBC 1 1 1,400 1,970 18.0 12.85 
Private companies 6 17 3,600 13,359 72.0 87.15 
Source: Chief Controller of Insurance.  
78. During the period under review, premium income  in general insurance rose as a result of 
industrial and external trade growth as well as e fforts undertaken to bring uninsured property under 
insurance coverage.  Growth in life insurance prem ium income was mostly due to the introduction of 
various micro- and Islamic insurance schemes by private sector firms. 
79. Insurance services are still governed by the Insu rance Act 1938, as amended;  the Insurance 
Corporation Act, 1973, as amended;  the Insuran ce Rules, 1958, as amended;  and various finance 
Acts.  The Chief Controller of Insurance (CCI), under the Ministry of Commerce, is responsible for 
supervising insurance companies' activities.   
80. The minimum capital requirement for setting up an insurance company is Tk 75 million for 
life insurance business, and Tk 150 million for genera l insurance business;  40% of the capital must 
be subscribed by the sponsor at the time of formation, and the remaining 60% by the public within WT/TPR/S/168 Trade Policy Review 
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                                                     three years of the formation of the company.  Part  of the required capital must be deposited with the 
BB at the time of registration:  Tk 4 million for each life insurance contract, and Tk 3 million for each 
fire, marine, or other general insurance contract.  
81. The Central Rating Committee, headed by the CCI, is in charge of setting premiums for all 
general insurance business.  To maintain uniformity  and to avoid cut-throat competition, premiums 
for all general insurance products, such as fire, marine, motor, personal accident, and worker's 
compensation, are set and regulated by the Committee and must be adhered to by all insurers.100  An 
insurer must obtain a "certificate and recommendation from approved actuary" as well as approval from the CCI after examination by the Committee to introduce new life insurance products, rates, 
terms, conditions, policy formats, etc. 
82. Unless exempt by the CCI, all insurance polic ies for properties in Bangladesh,  must be 
insured with the local insurers (the SBC or private ge neral insurers).  As at the time of the previous 
Review, some insurance business remain reserved for the state firm SBC;  public sector companies or agencies must have at least 50% of their insura nce underwritten by the SBC;  all private general 
insurers are required to place at least 50% of their reinsurance with the SBC.    
(ii) Telecommunications 
83. Between 1999/00 and 2004/05 the share of pos t and telecommunications in GDP rose 
steadily, from 0.83% to 1.73%, partly due to the rise of mobile telephone lines.101  Nevertheless, 
reportedly the telecommunications sector is still characterized by very low penetration, limited capability to meet growing demand, low public invest ment (0.3% of GDP compared to 2% at regional 
level)
102, and some outdated systems and technologies.  According to the au thorities, Bangladesh's 
telephone penetration rate was 0.85 telephones per 100 population in 2005, far below the world 
average of 10 per 100.  Between 2000 and 2005 (August), the number of main lines in use grew by about 105% to 1.0 million;  and the number of mobile phone subscribers rose by 221% to about 
6.6 million.
103  Bangladesh's call completion rate remains under 50% and its land-line network barely 
supports modern telecom accessories such as call-wa iting, call forwarding, and voice mail.  Due to 
inadequate interconnection facilities for mobile phones (cheaper and easier to obtain than fixed lines), 
only about 10% of mobile phones can actually call a land-line.  These limitations place businesses operating in Bangladesh at a severe disadvantage comp ared with their competitors elsewhere in the 
region and around the world.  
84. While the telecommunications sector is, in principle, open to private investment, the 
Government retains the authority to determine the number of operators.104  Licences are granted for 
15 to 25 years  and usually specify conditions for revenue sharing and interconnection.  Private 
operators are not allowed to re-sell their services;  however, they are permitted to make provisions for 
interconnection with the BTTB.  Generally, it take s 10 to 12 months to obtain a licence approval.  
There are no restrictions with regard to the fore ign equity shareholding in a telecom company and, 
according to the authorities, foreign investors receive national treatment.  
 
100 Apart from the Committee, th e Bangladesh Insurance Association also monitors members' 
compliance with the set premiums.  The Association was established by private insurers in 1988 to promote, 
support, and protect the interest and welfare of the insuranc e industry and to ensure le gal and ethical practices in 
the conduct of insurance business. 
101 Ministry of Finance (2005a), Appendix 5. 
102 USTC (2003);  and Ministry of Finance (2005a), Appendix 2 and 19.
103 Data supplied by the Ministry of Post and Telecommunications. 
104 The telecommunications sector was removed from the list of "reserved industries" reserved 
exclusively for public sector investme nt, in the Industrial Policy, 1991. Bangladesh WT/TPR/S/168 
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                                                     85. The telecommunications sector is said to comprise the state-owned Bangladesh Telegraph and 
Telephone Board (BTTB) and seven private operators , including foreign operators, providing various 
basic telecommunications services.  In voice tele phone services, the BTTB still seems to provide 95% 
of local and long-distance telephone services;  two pr ivate operators (one local and one local-foreign 
joint venture, one for paging and radio trunking and one for personal handyphone services (PHS)) 
account for the remaining 5% in rural areas.  International telephone services are provided only by the 
BTTB.  By contrast, mobile services are run by five private operators (Grameen Phone, Aktel, 
Citycell, Banglalink, Teletalk), most with foreign capital participation;  a sixth mobile phone operator 
(Warid telecom of the United Arab Emirates) is to  launch its service in 2006, thus making the market 
more competitive and facilitating further reductions in call charges.105  Facsimile and data transaction 
services are provided only by the BTTB. 
86. The BTTB provides (but has no monopoly on) value-added telecommunications services.  
BTTB's services include calling cards, internet, packet-switch public data network, facsimile, operators, trunk dialling, paging and home-country di rect dialling services.  Currently, there are some 
181 private internet service providers.   
87. The telecoms legal and regulatory framework was updated in 2001 and 2004 (implementing 
directives, interconnection regulations).   It now covers institutional matters, licences for 
telecommunication (through competitive bidding) , interconnection matters, telecommunication 
tariffs/charges (authorization of minimum and maximum levels), standards for telecom apparatus/service, radio communication and sp ectrum management, consumer complaints, 
enforcement and offence/penalties matters.  Principl es of neutrality, transparency, non-discrimination, 
fair competition, access to information, and equal terms and conditions seem to be embodied in the 
new framework.106
107
  Apart from a definition ("providing telecommunication service to any citizen of 
Bangladesh or to other persons irrespective of their place of stay or occupation in Bangladesh") and a 
provision on cost-sharing among operators, the Act does set explicitly an obligation for providing 
universal access service. 
88. According to the World Bank, the National Te lecommunications Policy of 1998 is inward 
looking and did not receive the high priority it deserved in an economy aspiring to compete108;  the 
authorities indicate that it will be updated soon.  The Bangladesh Telecommunication Act 2001 sets 
sectoral policy objectives, for example:  encourag e the orderly development of telecom systems;  
ensure affordable and reliable access to modern te lecom services;  encourage the introduction of new 
services;  and create a favourable atmosphere for local and foreign investors.109  Furthermore, the Act 
stipulates that the Bangladesh Telegraph and Te lephone Board (BTTB) "shall, on the commencement 
of this Act, acquire the status of a licensee, and the same conditions, so far as may be, shall apply to 
that Board as are applicable to an operator unde r this Act".  In February 2006, the authorities 
indicated to the Secretariat that the BTTB was bei ng restructured and that there were plans to fully 
"corporatize" it into a public limited company entirely owned by the Government. 
 
105 China's People's Daily Online, Fierce competitiveness witnessed in Bangladesh Cell phone sector , 
17 February 2006.  Available at: http://English.people.com.cn/200602/17/eng20060217_ 243461.html 
[17 March 2006]. 
106 The Bangladesh Telecommunication Act, 2001 (Act No. 18 of 2001).  Available at:  
http://www.btrc. org.bd/telecom_act_2001.htm [24 June 2005].  The Act (in Bangla) was assented to by the 
President on 16 April, 2001 (3 Baishakh, 1408) and published by the Bangladesh Parliament in the Bangladesh 
Gazette, Extra-ordinary issue of 16 April, 2001.
107 Licensing Procedure Regulations, 2004  (BTRC Regulation No. 1 of 2004).  Available at:  
http://www.btrc.org.bd/li cencing_regulation.htm [24 June 2005]. 
108 World Bank (2003a). 
109 Bangladesh Telecommunication Regulatory Commission (BTRC) online information.  Available at:  
http://www.btrc.org.bd/ [24 June 2005]. WT/TPR/S/168 Trade Policy Review 
Page 118 
 
 
                                                     89. The Ministry of Post and Telecommunications (MOPT) determines the general telecoms 
policy.  Since 31 January 2002, the Bangladesh Telecommunication Regulatory Commission (BTRC), 
an independent body110, has sought to facilitate affordable telecommunication services of acceptable 
quality for all, regardless of their location.  The BTRC mission consists, inter alia,  of increasing the 
teledensity to at least ten telephones per 100 inha bitants by 2010;  establishing a phone in every 
village by 2006;  and promoting information and communication technology applications to support 
socio-economic development.111 
90. According to a 2003 World Bank survey, key actions needed for the development of the 
sector include deregulating controls on intern ational gateways and on the long-distance service 
market, instituting operational autonomy for the BT RC, and enhancing institutional capacity.  Private 
investment seemed to be needed urgently to im prove the coverage and quality of telecom services.112  
91. Chapter VI of the 2001 Act stipulates provisions fo r setting tariffs, charges, etc.  Tariffs for 
different telecom services are set by MOPT in consultation with the Ministry of Finance and with the 
approval of BTRC.  On the other hand, private operato rs fix their tariffs with the approval of BTRC.  
Before providing service, operators submit to the BTRC a tariff containing the maximum and 
minimum charges that may be realized.  The BTRC,  in determining or approving a tariff, follows 
general principles on its fairness and reasonable le vel, the methodology used, and subsidy-related 
matters.  Discriminatory tariffs are prohibited.   
92. The use of locally manufactured telecom e quipment has been encouraged, though not 
required, for all service providers in Bangladesh.113  Two state-owned manufacturers continue to meet 
domestic needs for telecom equipment, Telephone Sh ilpha Sanghtas, and Bangladesh Cable Shipha.  
Telecom equipment in Bangladesh must comply with ITU standards, and be certified by the BTRC  for domestic sale and import.  Bangladesh does not have any mutual recognition agreements for 
certification, but conformity certificates may be accepted on a case-by-case basis. 
93. Bangladesh participated in the GATS negotia tions on Basic Telecommunications, and 
submitted commitments in February 1997.  These co mmitments bound the sectoral status quo rather 
than further liberalizing the telecommunications sect or.  They include the issuing of two licences to 
private operators to supply domestic long-distance and local voice services and transmission facilities 
(leased circuit services) in rural areas;  competition in voice and data transmission over closed user 
groups and for internet access services;  and the issuing of four licences to private operators of cellular 
mobile voice telephone services.  Bangladesh has liste d exclusive provision of international services 
by the government operator (the BTTB) and restric tions on call-back services.  Moreover, it maintains 
two MFN exemptions in international telecommuni cations services, for ten years, to permit the 
Government or the government-run ope rator to apply differential measures, such as accounting rates, 
as may be provided under agreements with othe r foreign operators or neighbouring countries.114 
 
110 Reportedly, the commission, however, maintains close ties with the Government and, due to lack of 
trained human resources, lacks the necessary independen ce to provide for meaningful advances in the ICT 
sector (USTC, 2003).  
111 Bangladesh Telecommunication Regulatory Commission (BTRC) online information.  Available at: 
http://www.btrc.org.bd/ [24 June 2005]. 
112 World Bank (2003a). 
113 The 1998 National Telecommunications Policy stipulat es that the use of local  products of acceptable 
standard and competitive price is to be made obligatory through regulations for all the service providers. 
114 WTO document GATS/EL/8, 11 April 1997. Bangladesh WT/TPR/S/168 
 Page 119 
 
 
                                                     (iii) Transport 
(a) Maritime transport and related services 
Maritime transport services 
94. As over 90% of Bangladesh's internationally traded goods are carried by sea, efficient 
maritime transport services, as well as auxiliary ser vices, such as port and cargo-handing services, are 
essential for a cost-effective business environment.  In 2004/05, 92% of Bang ladesh's imports and 
98.6% of its exports were transported by sea. 
95. Despite rapid growth of overall trade volume in recent years, and cargo preferences available 
to Bangladesh flag vessels, a shortage of vessels in the national fleet has prevented them from meeting 
their allocated share in sea-borne trade.  As of  1 January 2006, Bangladesh's national-flag fleet 
consisted of 31 vessels (22 in 2000), of which 13 vessels at 195,741 dead weight tonnage (dwt) are 
owned by the state-owned carrier Bangladesh Sh ipping Corporation (BSC), and the remainder by 
private operators.  There is no foreign particip ation in the nationally owned or operated fleet. 
96. In 2004/05, BSC's shares in total import and export cargos (including chartered vessels) were 
5.5% and 5.4%, respectively.  BSC also participat es in agency services, chartering mother tankers and 
food-grain vessels, container handling, non-vessel -operating cargo carrier services, as well as 
vac-u-vator (pneumatic grain conveyor) rent, a nd marine workshop services.  Following a recent 
reform programme (reducing excess manpower, clos ing the London and Singapore offices, cutting 
overhead costs, repairing foreign and local vessel s), the previously loss-making BSC has registered 
increasingly higher profits.115  In line with its objective of transporting the major share of export and 
import cargo, BSC plans to build a fleet of 24 vessels.  
97. A new National Shipping Policy was adopted in 2000.116  The authorities indicate that the 
new policy lays down a framework in ship-ownin g business in order to encourage private sector 
participation with clearly set business objectives.  Deta ils of this policy were not available in English 
at the time of completion of this report. 
98. The Department of Shipping, under the Mini stry of Ports, Shipping and Inland Water 
Transport, regulates maritime transport and relate d services.  The department's main responsibilities 
include, inter alia :  registering ships;  inspecting ships;  implementing rules and re gulations relating to 
dangerous cargo;  implementing in ternational shipping conventions;  setting freight rates of shipping 
lines;  and coordinating with different agencies, to  remove congestion at ports of entry and speed up 
the movement of cargo.  
99. The Bangladesh Merchant Shipping Ordinance, 1983, establishes conditions for vessels 
registered under the Bangladesh flag.  They must be owned by:  a citizen of Bangladesh;  a company whose principal place of business is in Bangladesh;  a company with 50% of its shares and voting 
power held by Bangladesh citizens;  a company where the majority of directors are Bangladesh citizens;  or a company whose Chairman or Managing Director of the Board of Directors is a 
Bangladeshi citizen.  Moreover, the vessels must be manned by Bangladeshi nationals.   
 
115 Ministry of Finance (2005a). 
116 Planning Commission (2004). WT/TPR/S/168 Trade Policy Review 
Page 120 
 
 
                                                     100. To facilitate trade, the Bangladesh Flag Vess els (Protection) Ordinance, 1982 was amended 
(proclaiming a two-year general waiver)117, with effect from 11 July 2005, in order to exempt foreign 
feeder operators from having to obtain waiver certif icates before loading and unloading cargo at ports 
in Bangladesh.118  The Ordinance provides for the protection of national flag vessels.  The Ordinance 
ensures that at least 40% of sea-borne cargo relating to foreign trade is carried by national flag 
vessels, in conformity with the UNCTAD Code of Conduct for Liner Conferences.  In addition, some 
special types of cargo (e.g. defence cargo) must be  carried by national flag vessels.  Moreover, the 
Import Policy Order, which governs conditions for import into Bangladesh and is formulated under 
the Imports and Exports (Control) Act, 1950, genera lly requires the shipment of goods by Bangladesh 
flag vessels, for single consignments of goods over 20 tonnes, or group consignments up to a 
maximum 100 tonnes.119 
101. Bangladesh is a member of:  the India-Pa kistan-Bangladesh-Ceylon Conference (IPBCC);  
the Bay of Bengal-Japan Conference (BENJAP);  and the West Asia Gulf Conference.  According to 
the authorities, these conferences do not include any ki nd of cargo-sharing or fixi ng of freight rates.  
Moreover, Bangladesh has signed bilateral shipping agreements with 14 countries;  most concern 
cargo sharing on a 50:50 or 40:40:20 basis. 
102. Bangladesh's cabotage practice has shielded the domestic water-borne routes, including inland 
waterways and coastal routes, from foreign competition.120  With regard to international trade 
conducted on domestic routes (due to shared use of  rivers with India), a protocol signed under a 1972 
Trade Agreement between Bangladesh and India pr ovides for inter-country and transit cargo-sharing 
on a 50:50 basis.  The protocol, which is aimed at minimizing discrimination in the water-borne trade between the two countries, has been extended sever al times (last expiry date 31 March 2006).  The 
authorities indicate that the current tariff fixed for transit cargo is too low and does not allow 
Bangladeshi vessels to operate profitably. 
Port services 
103. Bangladesh has two sea ports handling intern ational cargo:  in 2004/05 Chittagong handled 
1,983 ships (24.38 million tonnes of cargo) and Mo ngla handled 455 ships (1.48 million tonnes).  
 
117 The general waiver applies to cargo carried between Bangladesh and Australia, Canada, China, 
Chinese Taipei, Indonesia, Japan, Korea (Rep. of), the United States as well as all European and South 
American countries.  It also covers  liquefied petroleum gas, oil in bulk, and all cars carried by car-carrier 
between Bangladesh and Japan, Kuwait, Saudi Arabia , United Arab Emirates or Korea (Rep. of). 
118 Reportedly, foreign shipping companies halted operations to Bangladesh from 31 May to 
4 June 2003, following the enforcemen t of a court decision upholding the Ordinance.  The two local flag 
companies, with only eleven vessels between them, were unable to car ry more than 8% of Bangladesh's cargo.  
As a result, a few days after the foreign flagged ve ssels ceased operations, inbound and outbound cargo faced 
significant delays, warehouses were full, and garment factories stopped deliveries of export-bound products.  The crisis was resolved only after the authorities rescinded their directive and gave assurances that the law 
would be amended (USTC, 2003;  and UNESCAP, 2004). 
119 Import Policy Order 2003-2006, para. 4(5).  However, a waiver can be granted by the 
Director-General of Shipping when goods are shipped from foreign ports that are not visited by Bangladesh 
vessels;  or when imports of goods are on the basis of spec ific agreements that provid e for c.i.f. contract.  The 
Bangladeshi flag requirement does not apply to imports under such foreign aid, loans or grants that contain specific provisions regarding shipment of goods;  shipments of goods by export-oriented industries are also 
exempted. 
120 Cabotage is a term universally adopted in the international maritime community to mean the 
reservation of maritime coastal trades for ships register ed or licensed in the country concerned.  The authorities 
indicate that Bangladesh has no cabotage policy.  An autonomous government body, Bangladesh Inland Water Transport Authority, is responsible for the development, maintenance, and control of inland water transport. Bangladesh WT/TPR/S/168 
 Page 121 
 
 
                                                     104. The two ports are administered by autonomous governmental bodies, the Chittagong Port 
Authority (CPA) and the Mongla Port Authority (MPA), under the Ministry of Shipping.  They 
provide port facilities, and regulate movements of ves sels and navigation within the ports.  They also 
construct and operate docks, moorings, piers, etc. and undertake loading, unloading activities, and 
storage of the goods in the ports.  There is no foreign investment in port services;  port activities are managed entirely by the port authorities.  The au thorities have been seeking private sector investment 
in port activities since the 2004 Private Sector Infrastructure Guidelines were issued, to promote the 
development of infrastructure projects. 
105. New guidelines (including a Land Port Act-2001) for private participation in ports were 
adopted in 2001 and in February 2002, 13 land cu stoms stations were declared land ports.  These 
regulatory reforms are to improve efficiency and competitiveness by granting more autonomy to the 
port authorities, implementing labour reform progr ammes, setting performance evaluation criteria, 
and establishing procedures of accountability.  A pr ogramme has been initiated to lease 12 land ports 
to private operators for 25 years;  agreements have been reached with four operators. 
106. The authorities indicate that overall port efficiency  has improved over the last few years;  in 
Chittagong there has been no labour unrest, the port is handling three times more cargo than the installed capacity, and its port services tariff (accounting for 10%-15% of the entire port handling cost) has not been revised since 1986.  Accordin g to other governmental sources, congestion, 
inefficient management practices, cumbersome proc edures, the vested interest of labour unions and 
other groups, and high unofficial costs (Chapter III) continue to increase transportation costs and 
result in delays and uncertainties that severely undermine the economy's productivity and 
international trading links.
121  Under-utilization of the seaports is also attributable to lack of a linked 
transport system, gradual silting and inadequate dredging, lack of skilled manpower, and lack of 
appropriate planning for upgrading and modernization.  The operations of land ports are similarly 
constrained by lack of efficient organization,  a weak implementation authority, inefficient 
enforcement capacity in traffic regulation an d vehicle controls, and weak commitment and 
participation by stakeholders.  A master plan is being prepared for the modernization of the Benapole 
land port;  three land ports are being developed by a private operator on a build, operate, and transfer 
basis. 
107. The average turn-around time for vessels calling at Chittagong dropped from 6.5 days in 
1998/99 to 4.24 days in 2003/04  and to 4.19 days in 2004/05.122  These improvements are, inter alia,  
due to the installation of ten new cranes, allocation of increased berths to container vessels, introduction of a private handling operator, and ni ght pilotage (since 2000).  The authorities indicate 
that the cost of container handling in Chittagong re mains lower or similar to all regional feeder and 
transhipment ports.  Nevertheless, in combination with delays in customs clearance (Chapter III), 
slow cargo handling, and an inadequate inland distribution system for goods has continued to hamper 
Bangladesh's competitiveness and economic development.   
108. Steps have been taken to improve the provision and security of port services in recent years.  
Since January 2005, a one stop service centre has operated in Chittagong.  A private operator to 
handle containers has been engaged by open tender  for seven years;  in 2001, a truck terminal 
adjacent to the port was awarded to a private operato r for 15 years.  The authorities have decided to 
further improve infrastructure to, inter alia,  upgrade the capacity of Chittagong port;  with assistance 
from the Asian Development Bank, a computerized computer terminal management system will be 
introduced, environmental facilities created, and so me internal bridges/roads improved for quicker 
 
121 Planning Commission (2004). 
122 CPA online data.  Available at:  http://www.cpa.gov.bd/Index/Index.htm [13 September 2005]. WT/TPR/S/168 Trade Policy Review 
Page 122 
 
 
                                                     cargo clearance.123  A new mooring terminal (to be completed by September 2006) is to be awarded 
by international tender to a private operator of repute. 
109. Container handling charges for imports are 119% (2 0 ft container) and 125% (40 ft container) 
higher than for exports. 
(b) Air transport 
110. The Civil Aviation Authority of Bangladesh (CAAB), under the Ministry of Civil Aviation 
and Tourism, is responsible for the operation of international and domestic air traffic within the 
territorial airspace of Bangladesh.  The CAAB's  other responsibilities include issuing licences to 
aircraft, air crew, and aircraft-maintenance pers onnel, and constructing and maintaining aviation 
infrastructure, such as air terminals and other airport facilities. 
111. Bangladesh Biman Airlines, a state-owned enterp rise, provides domestic and international air 
services, as the national carrier, operating to and from 26 international and 8 domestic destinations;  
during the last 14 years Biman has started routes to New Delhi;  Hong Kong, China;  New York;  
Brussels;  and Dammam.  Despite ongoing cost -reduction measures, Biman has made losses 
(Table III.13) during the period under review (excep t for 1999/00 and 2003/04 );  in 2004/05 losses 
were due to the rise in aviation fuel prices.124  Biman has been profitable on international routes and 
received revenue from ground services and royalties paid by foreign airlines125;  however, it seems 
burdened with loss-making domestic operations due to higher operating costs related to its aging fleet. 
112. Since late 1996, the private sector has been allowed to compete with the state airline on all 
domestic passenger routes and on national and international cargo routes.  Domestic routes are 
reserved for the national airlines.  A foreign air line willing to start operations must obtain clearance 
from the CAAB;  Biman provides advice regarding basic traffic between the two countries, and 
whether operation of services or increased frequency is justified.  In 2005/ 06, about 18 foreign and 
two national airlines offered scheduled passenger services to/from Bangladesh.  Non-scheduled cargo 
services were carried out by eight international and domestic operators.  International air traffic from 
Bangladesh is growing at around 6-7% a year;  Biman and international airlines operate 75 and 
100 weekly international flights, respectively.  Nevertheless, six foreign airlines ceased their 
operations in Bangladesh. 
 
123 IMF (2005c). 
124 Ministry of Finance (2005a). 
125 According to a rough estimate, Biman seem s to earn about US$20 million (and CAAB 
US$15 million) a year from its ground handling and navigation services for foreign airlines.  Biman also seems 
to earn royalties from some foreign airlines.  If a national flag carrier of a country operates flights to Bangladesh 
but Biman does not fly to that country, Biman, can demand royalties from that airline ( The Daily Star,  "Aviation 
industry fails to take off as open sky policy still".  Available at:  http://www.thedailystar.net/2005/02/05/ d50205050155.htm [14 September 2005]. Bangladesh WT/TPR/S/168 
 Page 123 
 
 
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