WORLD  TRADE  
ORGANIZATION  WT/TPR/S/168/Rev.1 
15 November 2006  
 
(06-5514) 
Trade Policy Review Body  
   
 
  
 
TRADE POLICY REVIEW 
 
Report by the Secretariat 
 
BANGLADESH 
 
Revision 
 
 
 
 
This report, prepared for the third Trad e Policy Review of Bangladesh, has been 
drawn up by the WTO Secretariat on its own responsibility.  The Secretariat has, 
as required by the Agreement establishing the Trade Policy Review Mechanism 
(Annex 3 of the Marrakesh Agreement Establishing the World Trade 
Organization), sought clarification from Bangladesh on its trade policies and 
practices. 
 
Any technical questions arising from this report may be addressed to 
Mr. Sergios Stamnas (tel:  022 739 5382). 
 
Document WT/TPR/G/168 contains the policy statement submitted by 
Bangladesh. 
 
 
 
Note: This report is subject to restricted ci rculation and press embargo until the end of the 
first session of the meeting of the Trade Policy Review Body on Bangladesh. Bangladesh WT/TPR/S/168/Rev.1 
 Page iii 
 
 
CONTENTS 
    Page 
 
SUMMARY OBSERVATIONS ix  (1) E
CONOMIC ENVIRONMENT  ix 
 (2) T RADE POLICY FRAMEWORK  x 
 (3) T RADE POLICY DEVELOPMENTS  xi 
 (4) S ECTORAL POLICY DEVELOPMENTS  xiii 
 (5) O UTLOOK  xiv 
I. ECONOMIC ENVIRONMENT 1 
 (1) O VERVIEW  1 
 (2) R ECENT ECONOMIC PERFORMANCE  2 
 (3) M AIN MACROECONOMIC POLICY DEVELOPMENTS  7 
 (i) Monetary and exchange rate policy 7 
 (ii) Fiscal policy 10 
 (4) M AIN STRUCTURAL POLICY DEVELOPMENTS  10 
 (i) Tax reform 11 
 (ii) Privatization 11 
 (iii) Governance 12 
 (5) B ALANCE -OF-PAYMENTS DEVELOPMENTS  13 
 (i) Current and trade accounts 13  (ii) External liabilities/debt 14 
 (6) D
EVELOPMENTS IN MERCHANDISE TRADE  14 
 (i) Composition of trade 14  (ii) Direction of trade 15 
 (7) T
RENDS AND PATTERNS IN FOREIGN INVESTMENT  18 
 (8) O UTLOOK  19 
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES  20 
 (1) O VERVIEW  20 
 (2) I NSTITUTIONAL FRAMEWORK  20 
 (3) D EVELOPMENT AND ADMINISTRATION OF TRADE POLICY  21 
 (i) Main trade laws 21 
 (ii) Formulation and implementation of trade-related policies 22  (iii) Advisory and review bodies 23 
 (4) T
RADE POLICY OBJECTIVES  24 
 (5) T RADE AGREEMENTS AND ARRANGEMENTS  25 
 (i) World Trade Organization 25 
 (ii) Regional agreements 27 
 (iii) Bilateral agreements 29 
 (iv) Other preferential arrangements 30 
 (6) T RADE DISPUTES AND CONSULTATIONS  31 
 (7) F OREIGN INVESTMENT REGIME  32  
 WT/TPR/S/168/Rev.1 Trade Policy Review 
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    Page 
 
ANNEX II.1: Trade-related t echnical assistance (TRTA) 34 
III. TRADE POLICIES AND PRACTICES BY MEASURE  36 
 (1) I NTRODUCTION  36 
 (2) M EASURES DIRECTLY AFFECTING IMPORTS  37 
 (i) Registration and documentation 37  (ii) Customs valuation and inspection 39 
 (iii) Customs clearance and administration 40 
 (iv) Tariffs 42  (v) Other border charges and levies 52 
 (vi) Import prohibitions and restrictions 54 
 (vii) Import licensing 56  (viii) Import quotas 57 
 (ix) State trading 57 
 (x) Standards and other technical regulations 58  (xi) Government procurement 61 
 (xii) Local-content schemes 64 
 (xiii) Anti-dumping, countervailing, and safeguard measures  64 
 (3) M
EASURES DIRECTLY AFFECTING EXPORTS  65 
 (i) Registration and documentation 65  (ii) Quality control and export clearance 66 
 (iii) Export taxes, charges, and levies 67 
 (iv) Minimum prices and price controls 67  (v) Export prohibitions and restrictions 67 
 (vi) Export licensing 68 
 (vii) Voluntary restraints, surveillance, and similar measures 68  (viii) Export subsidies and other financial assistance 68 
 (ix) Duty concessions 70 
 (x) Tax concessions 72  (xi) Currency retention scheme 72 
 (xii) Export processing zones 73 
 (xiii) Export finance 74  (xiv) Export insurance and guarantees 75 
 (xv) Export promotion and marketing assistance 76 
 (4) M
EASURES AFFECTING PRODUCTION AND TRADE  77 
 (i) Registration of companies and investment 77 
 (ii) Taxation 78 
 (iii) Tax concessions and incentives 80 
 (iv) Interest rate subsidies 81 
 (v) Input subsidies, pricing, and marketing arrangements 81  (vi) Assistance to sma ll enterprises and SMEs 82 
 (vii) State-owned enterprises and privatization 83 
 (viii) Trade-related investment measures 86  (ix) Trade-related intellectual property rights 86 
 (x) Competition and consumer protection policies 89 
IV. TRADE POLICIES BY SECTOR 91 
 (1) I
NTRODUCTION  91 
 (2) N OMINAL TARIFF PROTECTION  92 Bangladesh WT/TPR/S/168/Rev.1 
 Page v 
 
 
    Page 
 (3) A GRICULTURE  93 
 (i) Features 93 
 (ii) Crops 95 
 (4) E NERGY   102 
 (i) Natural gas 102 
 (ii) Electricity 103 
 (5) M ANUFACTURING  105 
 (i) Features 105 
 (ii) Textiles and clothing 106 
 (6) S ERVICES  110 
 (i) Financial services 110 
 (ii) Telecommunications 115  (iii) Transport 118 
REFERENCES   123 
APPENDIX TABLES  127 
 WT/TPR/S/168/Rev.1 Trade Policy Review 
Page vi 
 
 
CHARTS 
    Page 
I. ECONOMIC ENVIRONMENT 
 I.1 Exchange rates and consumer price index developments, 1998-05 9 
I.2 Trade in goods and non-factor services, 1998-05 15 
I.3 Product composition of merchandise trade, 1997/98 and 2003/04 16 I.4 Direction of merchandise trade, 1997/98 and 2003/04 17 
I.5 FDI inflows by sector and origin, 2004 18 
 III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Distribution of MFN tariff rates, 1999/00 and 2005/06 46 III.2 MFN applied averages by HS section, 1999/00 and 2005/06 47 
III.3 Tariff escalation by two-digit ISIC industry, 1999/00 and 2005/06 49 
 IV. TRADE POLICIES BY SECTOR 
 
IV.1 Tariff averages by two-digit ISIC category, 1999/00 and 2005/06 93 
IV.2 Interest rates (weighted) on loans and deposits, 1998-05 114 
  
TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
I.1 Selected macroeconomi c indicators, 1998-05 3 
I.2 Basic economic and soci al indicators, 1998-05 5 
I.3 Balance of payments, 1998-05 13 
 II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES 
 
II.1 Main legislation relating to trade and trade-related activities 21 II.2 Ministerial responsibility for trade and trade-related issues 22 
II.3 WTO notifications, 2000 to end March 2006 27 
  
III. TRADE POLICIES AND PRACTICES BY MEASURE 
 
III.1 Tariff structure, 1990-06 43 
III.2 Structure of MFN tariff, 1999/00 and 2005/06 44 III.3 Applied MFN tariff by degree of processing, 1992-06 48 
III.4 Concessionary tariff rates 50 
III.5 Preferential trad ing agreements, 2006 51 
III.6 Tariff and other duties on imports, 1999-00 and 2005/06 52 
III.7 Evolution of the control list IPO 1991-93 to IPO 2003-06 56 
III.8 Certificates required for export 66 III.9 Export prohibited items 67 
III.10 Export incentives, 2000-05 69 
III.11 Export processing zones:  investment by sector, as at 30 June 2005 74 III.12 Tax revenue receipts by source, 1998-05 78 
III.13 Economic performance of selected non-financial SOEs, 2004-05  84 
III.14 Terms of intellectual property rights protection in Bangladesh, February 2006 87 Bangladesh WT/TPR/S/168/Rev.1 
 Page vii 
 
 
    Page 
 
IV. TRADE POLICIES BY SECTOR 
 IV.1 Medium-term output target, 2005-08 94 
IV.2 Developments in domestic support to agriculture and livestock, 1997-04 96 
IV.3 Agricultural and rural credit, 1996-05 99 IV.4 Food procurement and stock, 2000-05 100 
IV.5 Gas utilization/sales, 1998-04 103 
IV.6 Destination of RMG exports, 1990-04 109 IV.7 Structure of the banking sector, 1998 to 2005 111 
IV.8 Structure of the insurance sector, 1998/99 and 2004 115 
  
APPENDIX TABLES 
 
I. ECONOMIC ENVIRONMENT 
 
AI.1 Merchandise exports by group of products, 1997-04 129 
AI.2 Merchandise imports by group of products, 1997-04 131 
AI.3 Merchandise exports by destination, 1997-04 133 AI.4 Merchandise imports by origin, 1997-04 134 
 
III. TRADE POLICIES AND PRACTICES BY MEASURE  
AIII.1 Average MFN tariff and bound rates by HS chapter, 2005/06 135 
AIII.2 Applied tariff escalation and tariff ranges, 1999/00 and 2005/06 139 AIII.3 Banned items under Import Policy Order 2003-06, July 2005 142 
AIII.4 Restricted items under Import Policy Order 2003-06, July 2005 144 
 IV. TRADE POLICIES BY SECTOR 
 
AIV.1 MFN tariff by ISIC category, 1999/00 and 2005/06 151  
 Bangladesh WT/TPR/S/168/Rev.1 
 Page ix 
 
 
SUMMARY OBSERVATIONS 
 1. Since its previous Trade Policy 
Review in 2000, Bangladesh, a least developed 
country (LDC), has pursued prudent 
macroeconomic policies, structural reform in some priority areas, and trade liberalization aimed at raising export competitiveness.  The adoption and implementation of a 
comprehensive poverty reduction strategy as 
well as the deepening of preferential treatment and regional integration ties are among the most notable developments during the period under review (2000-06).  Developmental constraints, such as infrastructure bottlenecks, 
institutional and other policy limitations, 
persist, but are receiving attention.  Bangladesh's economic ou tlook depends on the 
healthy adjustment of the dominant ready-made garments industry to the elimination of 
quotas in accordance with the Agreement on 
Textiles and Clothing (ATC)
, the development 
of the labour-intensive agricultural sector, and 
the pace of progress in improving governance, tax administration, and privatization. 
(1) E
CONOMIC ENVIRONMENT  
2. Bangladesh has maintained cautious 
macroeconomic policies ensuring steady demand-driven economic growth with modest 
inflation.  The recent slowdown in growth and inflationary pressures were largely due to the impact of crop-devastating floods as well as 
an upswing in global oil and commodity 
prices.  The informal sector (covering activities in crop and non-crop agriculture, manufacturing, construction, trade, transport and other services) remains significant, 
involving up to 90% of the labour force. 
3. Monetary policy has been broadly 
supportive of growth while ensuring price stability and orderly foreign exchange market conditions.  The declining trend of interest rates has continued, aided by lower interest 
rates paid on national savings certificates.  
Since the national currency - the taka - was floated on 31 May 2003, the exchange rate has been managed flexibly;  it is seen as a means for maintaining external competitiveness and a first line of defence against external shocks.  
Between 1999/00 and 2004/05 the taka depreciated by 22% against the U.S. dollar (from Tk 50.3 to Tk 61.4 per US$1). 
4. Macroeconomic stabilization and 
structural reform have been pursued to, 
inter alia, 
assist Bangladesh's orderly 
adjustment to the phasing-out of the quotas 
associated with the ATC.  A Poverty Reduction Strategy Paper (PRSP) issued in 
October 2005, has trade as an integral part.  
Despite state action and civic activism allowing for considerable improvement of social indicators, aggregate poverty rates (36% of the population is estimated to be living under the poverty threshold of US$1 a 
day) in Bangladesh remain high and income 
disparity has increased.  In order to enhance governance, a key priority, a 2002 Money Laundering Prevention Act, a 2004 Anti-Corruption Commission Act, and a 2005 Tax 
Ombudsman Bill were passed.  The external 
public debt (ratio to GDP) of Bangladesh (a non-beneficiary of the enhanced Heavily Indebted Poor Countries Initiative) has dropped, while the amount of medium- and 
long-term public debt has risen. 
5. Tax reforms are being undertaken to  
improve the collection of taxes, which, at 10.9% of GDP, would appear to be insufficient to meet Bangladesh's developmental needs.  The fiscal stance has been fairly prudent, with 
an overall downward trend in the budget 
deficit.  However, the deficit rose again to 4.2% of GDP in 2004/05, partly due to expenditure associated with flood relief efforts.  Bangladesh's medium-term fiscal strategy 
remains centered on boosting revenues and 
reorienting expenditure to better support job-creation and achievement of the United Nations Millennium Development Goals (MDGs).  Slower than projected revenue growth reflected delays in the implementation 
of tax administration reforms and resulting 
lingering weaknesses in enforcement;  on the spending side, development expenditure was expected to be lower than projected in 2004/05.  Despite the possible decline in 
import-related tax revenue owing to the WT/TPR/S/168/Rev.1 Trade Policy Review 
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reduction of customs duties, the authorities are 
of the view that overall tax revenue should increase due, inter alia, to the restructuring 
and rationalization of customs duties and 
other tax rates as well as import growth, and, 
above all, the strengthened administration of the tax system. 
6. During the period under review, over 
three consecutive years (2001/02-2003/04) 
Bangladesh registered current account 
surpluses, largely due to steadily rising worker remittances from abroad (through official channels, induced by the Money Laundering Prevention Act 2002).  However, moderate export earnings (due to sharp declines in 
prices associated with the elimination of 
ATC-related quotas) and large import growth (due to higher oil and commodity prices, an increase in food imports, and stronger demand for investment goods) turned the current 
account to a deficit, of 0.9% if GDP, in 
2004/05.  Gross official reserves have followed a rising trend, reaching a peak in 2004/05 (2.6 months of import cover). 
7. Bangladesh remains heavily 
dependent on exports of clothing, and to a 
lesser extent textiles.  Imports are 
concentrated in food, chemicals, machinery and transport equipment, and textiles.  The European Communities and the United States remain Bangladesh's main export markets;  
the withdrawal of GSP treatment for 
Bangladeshi ready-made garments exports to the United States and the strengthening of preferential access to  the EC under its 
Everything But Arms Initiative reversed the 
order of importance of these two export 
markets. 
8. Despite a costly business environment 
and risks arising from the elimination of quotas associated with the ATC,  Bangladesh's liberal, export-oriented and generous (in terms 
of incentives) investment regime has attracted 
increasingly large annual inflows of foreign direct investment;  these inflows originated largely in the EC and Norway and were channelled mainly into textiles manufacturing, 
as well as telecommunications, energy, and power.  Although privatization of state-owned 
entities is considered a key element in Bangladesh's private-sector-led development strategy, progress has been mixed. 
(2) T
RADE POLICY FRAMEWORK  
9. Bangladesh, a contracting party to the 
GATT since 16 December 1972, is an original Member of the WTO.  It grants at least MFN treatment to all its trading partners and 
receives the special and differential treatment 
provided for in the WTO Agreements.   
10. Trade is at the heart of Bangladesh's 
development strategy and poverty reduction efforts;  its 2005 PRSP contains a review of its trade policy and reform measures with future 
directions following the elimination of quotas 
in accordance with the ATC.  Since its previous Trade Policy Review, Bangladesh has taken steps to better coordinate policy on trade and related matters through a WTO Cell 
in the Ministry of Commerce, a National 
Advisory Committee, and a Foreign Trade Institute. 
11. Reforms of the legal and regulatory 
framework have become essential in certain areas for facilitating economic growth and 
social development;  since 2000, in addition to 
the regular import and export policy guidelines, new legislation was passed on trade-related areas, such as:  customs valuation;  money loans;  public procurement;  
copyrights;  energy;  telecommunications;  
and land ports.   
12. Bangladesh's late involvement in and 
commitment to regional integration initiatives is being deepened with the progressive setting 
up of a South Asian Free Trade Area (SAFTA) 
(in force as of 1 January 2006) and a Bangladesh – India – Myanmar – Sri Lanka – Thailand Economic Cooperation (BIMST-EC) Free Trade Area (to be established between July 2006 and June 2015) as well as the 
expansion of product coverage under the Asia 
Pacific Trade Agreement (APTA), known as the Bangkok Agreement. Bangladesh WT/TPR/S/168/Rev.1 
 Page xi 
 
 
13. Bangladesh, a beneficiary under 
various GSP schemes and an active participant in the Global System of Trade Preferences among Developing Countries 
(GSTP), is pursuing efforts to obtain duty-free 
access to the United States market for its textiles and clothing.  Tariff concessions among members of the Trade Preferential System - Organisation of Islamic Countries 
(TPS-OIC) should be implemented 
progressively as from January 2006.  Bangladesh is also involved in negotiations among GSTP countries and among the participants in the Developing Countries–8 (D-8) arrangement (involving eight Islamic 
countries). 
14. Bangladesh has made some effort to 
improve transparency at the multilateral level by, inter alia, meeting obligations relating to WTO notifications in certain areas, e.g. 
agriculture, import licensing; nevertheless, its 
latest submission of tariff data to the WTO Integrated Database prior to the preparation of this report was for 1998/99. 
15. In 2006, Bangladeshi officials are to 
participate in WTO activities, such as:  trade 
policy courses in Geneva;  regional trade 
policy courses;  short trade policy courses on the Doha Development Agenda (DDA);  workshops or seminars on a number of issues at the regional or sub-regional level;  
negotiating techniques;  meetings to promote 
awareness among parliamentarians;  and various other activities at the WTO headquarters.  Further integration of trade in Bangladesh's economy is also supported by 
several development partners.  Although 
Bangladesh benefited from the programme of the old Integrated Framework (IF), it has not applied to be included in the enhanced IF. 
(3) T
RADE POLICY DEVELOPMENTS  
16. The customs tariff is Bangladesh's 
main trade policy instrument as well as a 
major source of government revenue (26.4% of total tax revenue).  Almost all tariff rates are ad valorem, thus ensuring a high degree of transparency of the customs tariff.  The tariff comprises four tiers:  zero, 6% (basic raw 
materials), 13% (intermediate goods) and 25% (finished goods).  The average applied MFN tariff (exclusive of specific duties and other 
charges) fell from 22.2% in 1999/00 to 15.5% 
in 2005/06.  The average customs duty on agricultural products (WTO definition) (19.6%) remains higher than for industrial goods (14.7%).  There is a concentration of 
tariff lines at the three higher customs duty 
rates, and pronounced escalation in several activities (including textiles and leather), seemingly in line with national policy priorities. 
17. Bangladesh has bound 15% of all 
tariff lines.  Whereas, 100% of agricultural 
tariff lines (WTO definition) are bound, only 3% of industrial tariff lines are bound.  As a consequence, market-access conditions for manufactured items is subject to some 
uncertainty;  the absence of bindings for most 
tariff lines and the current gap of 149 percentage points between the average bound and applied MFN tariff rates provides a great deal of scope for the authorities to raise applied rates.  In 2005/06, the applied MFN 
tariff rates of more than 40 eight-digit items 
were increased significantly.  At present, tariff binding commitments seem to be met, except for two items (vanilla ot her than vanilla beans, 
and sparking plugs for use exclusively in 
aircraft or helicopter engines), where applied 
rates appear to exceed bound ceilings, possibly as a result of tariff nomenclature changes. 
18. Additional protection has been 
maintained through other border charges 
(infrastructural development surcharge, advance income tax) and discriminatory internal taxes (VAT, supplementary duty, regulatory duty (as from 2000/01));  other border charges are at a minimum rate of 4%, 
which is higher than the bound rate of 2.5% 
for this type of levy. 
19. In February 2000, Bangladesh passed 
legislation to implement the WTO Agreement on Customs Valuation. Since then, 
preshipment inspection has been mandatory WT/TPR/S/168/Rev.1 Trade Policy Review 
Page xii 
 
 
with importers bearing the associated costs 
(1% of the c.i.f. value).  Certain customs requirements have undergone significant streamlining (e.g., migration to the Automated 
System for Customs Data ASYCUDA++, red 
and yellow channels, and a reduction in the number of signatures required on the manual customs entry form). 
20. Significant progress has been made in 
reducing the product coverage (3.3% of all 
HS 4-digit items as of July 2005) of the control list containing import prohibitions and restrictions in force;  only two HS 4-digit products (live poultry, eggs) are subject to a trade-related ban (i.e. for "trade reasons") and 
one (common salt) to a trade-related 
restriction.  Bangladesh maintains few compulsory standards;  the number of national standards identical/equivalent to international standards as well as of  firms having obtained 
ISO 9000 certificates seems to have risen.  A 
Product Labelling Policy 2004 ensures, inter alia, that barriers are not created for the 
import (and export) of goods and that products 
with expired dates for consumption/use are not imported;  it also requires observance of 
international labelling standards in 13 sectors.  
An import ban on packaging cartons with implications for domestic production costs was withdrawn in July 2005.  No contingency measures were taken during the period under 
review. 
21. Export prohibitions are maintained 
mainly for reasons of health, ecological balance, security, archaeological value, or maintenance of adequate domestic supply.  
Export permits/authorizations are required for 
a few items.  Re-exports remain banned unless minimum value-added and other transformation conditions are met.  Exports of urea fertilizer produced at the state-owned  
Khanaphuli Fertilizer Company (KAFCO)  
plant remain restricted. 
22. Assistance for domestic production 
and exports (export-oriented firms, "deemed exporters", and firms operating in export processing zones) varies by type of activity to, 
inter alia, encourage use of domestic technology, import subs titution, adjustment 
and/or boost export performance as well as to offset the adverse effects of tariffs and other border taxes.  Such assistance is available in 
the form of tax  and non-tax incentives.  The 
former include:  indirect tax measures such as concessionary duty rates for imports of capital machinery and spare parts, duty drawback for exports, special bonded warehouses for inputs 
used in the manufacture of finished products, 
and VAT rebates on certain export-related services;  and, direct tax measures, like rebates on taxable income generated from any export business or exemption from income tax.  Marginal effective tax rates on income from 
investment can vary substantially by sector, 
thus constituting a potential impediment to the efficient allocation of domestic resources.  Other forms of support consist of cash grants for exports (tied to local-content requirements 
not yet notified to the WTO), accelerated 
depreciation, and various types of loans at concessional interest rates (for exports, agricultural production, small and cottage industries) determined by the Bangladesh Bank.  The ceiling for foreign currency 
retention by exporters (i.e. the part of  
earnings retained in bank deposit in foreign currency) has been increased gradually.  
23. Widespread state involvement in the 
economy persists with SOEs largely engaged 
in commercial activities and exercising a 
dominant influence in many prominent industries (jute, textiles, steel, chemical/fertilizer production, sugar, utilities).  The new regulatory and institutional 
framework on public procurement established, 
inter alia, a domestic preference of 15% of the delivered price for goods and 7.5% of the contract price for works. 
24. Work is under way to bring 
intellectual property right laws into line with 
the WTO TRIPS Agreement in areas such as 
trade marks, patents, plant variety protection, and copyrights.  Banglad esh benefits from an 
extended time-limit (until July 2013) for the full implementation of the Agreement. Bangladesh WT/TPR/S/168/Rev.1 
 Page xiii 
 
 
25. No legal framework relating to 
competition policy is in place.  A consumer rights protection law is being finalized. 
(4) S
ECTORAL POLICY DEVELOPMENTS  
26. Raising productivity in the labour-
intensive agriculture sector is a concern in Bangladesh, which is prone to natural disasters.  Despite an upsurge in cereal production, Bangladesh remains a food aid 
recipient (rice, wheat) with self-sufficiency and 
food security as major policy objectives (medium output targets have been set for wheat, maize, pulse, oilseed, sugarcane, and vegetables).  Tariff and non-tariff protection has been reduced.  To cut production costs 
and face competition from neighbouring 
countries, support to domestic production was strengthened through the subsidization of agricultural inputs (i.e. seeds, fertilizer, irrigation, capital, through concessional 
interest rates, and electricity) and public 
procurement practices.  Despite being a recipient of food aid, Bangladesh  introduced a direct cash subsidy of up to 30% for certain agricultural and fisheries exports (i.e. frozen shrimp and fish, fruits, vegetables, 
agro-processed products) in 2003;  according 
to Bangladesh's first notification to the WTO, its domestic support observed de minimis requirements established under the Agreement on Agriculture.  As a result, in 2005/06 the 
budget allocation for subsidies and other 
assistance to the agriculture sector doubled and agricultural products are becoming an increasingly important component of Bangladesh's foreign trade.  Efforts are being 
made to diversify products of the jute and 
revive the tea industries. 
27. Gas transmission inadequacies and 
electric power shortages are still among the most important bottlenecks for economic development.  During the period under review, 
reforms have focused on the regulatory and 
institutional framework as well as on the prices of energy products, which continue to lag behind world market prices.  Natural gas, Bangladesh's dominant source of energy, 
remains mainly produced by the State and used for power generation and fertilizer 
production, for which tariffs are less than half of those charged to other activities.  In 2001, the average electricity tariff remained lower 
than the cost of supply;  agricultural pumping 
and high voltage (manufacturing) end-users benefit from rates substantially lower than those applied to commercial and residential users . 
28. Manufacturing remains dependent on 
the labour-intensive ready-made garment (RMG) sub-sector and the large loss-making SOEs.  Although the elimination of quotas in accordance with the ATC did not seem to have immediate negative effects on RMG exports, 
risks remain;  a Development Strategy and an 
Action Programme are being implemented to facilitate the adjustment of the RMG sub-sector.  Efforts were made to delay the elimination of cash grants for exports of local 
fabrics, and to expand preferential access of 
RMG exports to major developed country markets.  In order to protect domestic production of backward linkage industries of the RMG sub-sector from competing industries in neighbouring SAARC countries,  the 
authorities have not endorsed the EC's relaxed 
regional cumulation (rules of origin) criteria.  A ban on imports of yarn/textiles entering over land from India was in place from March 2002 to December 2005.  The 2005 industrial policy 
framework is aimed, inter alia, at raising 
sectoral productivity and employment.  As a result of the domestic drug policy (updated in 2005), domestically produced medicines increased their market share, thus reducing 
imports by approximately US$600 million 
every year;  exports of pharmaceuticals have increased fourfold since 2001. 
29. Services account for more than half of 
Bangladesh's GDP.  Inefficiencies and shortages in essential services hamper 
economic growth.  Despite increased private 
sector involvement, banking remains dominated by state-owned institutions subject to a bank-by-bank (i.e. case by case) reform strategy.  Micro-finance programmes have 
played an important role in poverty 
alleviation.  Banking supervision and WT/TPR/S/168/Rev.1 Trade Policy Review 
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mandatory loan repayment requirements have 
been strengthened.  The spread between the lending and deposit interest rate has fallen, but remains wide reflecting the high level of 
non-performing loans, inadequate 
competition, and inefficiencies in bank operations.  State involvement in insurance has declined though some insurance business remains reserved for the state insurance firm, 
Sadhran Birma Corporation (SBC);  premiums 
are set by a central committee.  The telecoms legal and institutional framework has been updated and policy targets revised;  the state-owned Bangladesh Telegraph and Telephone Board (BTTB) and seven private sector 
operators have continued to run the network.  
Despite capacity constraints, national flag vessels are subject to local participation/ownership  requirements, and 
part of the overseas sea-born cargo is 
reserved for them (unless a waiver is in place), 
except for foreign feeder operators (as from 2003).  Following recent reform, the previously loss-making state-owned shipping company is to expand its fleet.  Regulatory reforms were undertaken to improve private 
sector participation in the state-run ports;  
Private Sector Infrastructure Guidelines, passed in 2004 to provide investment guarantees, were issued to deal with the absence of foreign investment in port services. 
30. Since its previous Review, Bangladesh 
has made no changes to its GATS commitments;  the Schedule of Specific Commitments remains limited to the  activities of five star hotel and lodging services, and 
telecommunication services;  an MFN  
 exemption remains in force in international 
telecommunications services to allow for different accounting rates as covered under international agreements with other operators 
or countries.  Domestic  routes are reserved for 
the national airlines;  the state-owned operator is faced with loss-making  domestic 
operations due to higher operating costs owing to its aging fleet compounded by the 
rise in aviation fuel prices.   
(5) O
UTLOOK  
31. Bangladesh's economic performance 
since its previous Review, together with the authorities' commitment to reform, should lead it toward sustained growth and poverty 
alleviation.  The intensity of efforts to 
strengthen and simplify the legal and institutional framework for coherent and sound policy-making (particularly on tax incentives), to cope with the post-MFA/ATC 
challenges, and to promote export and market 
diversification, will determine the speed and sustainability of Bangladesh's economic growth.  As an LDC, Bangladesh will continue to need technical assistance from its development partners, as it has from the WTO 
since 1995.  The negotiations under way in the 
WTO could make a major contribution to improving Bangladesh's market access as well as the predictability and stability of its own trade and investment regime (by expanding its 
limited tariff bindings and GATS 
commitments).  Nevertheless, the benefits to Bangladesh will not be fully realized until its economy is able to respond competitively to external demand.