Bangladesh Finance Profile 2012

The country has created tactical sectors such as the ready-made garments industry, which was supported by the government but with a key role played by private entrepreneurs. Apart from this strategic sector, the best part of Bangladeshis is still employed in the agricultural and informal sectors of the economy. Bangladesh faces troubles in the economic sector that could slow down economic growth and threaten the economic framework. Power shortages are a growing problem, and the country has not implemented needed reforms in the power sector. Increasing oil prices and fierce competition in world textile markets are also major concerns.

The arrangement of monopolies is regulated in an inconsistent manner.

Bangladesh has pursued a policy of trade liberalization and export promotion. In 2006 – 2007, manufactured exports accounted for 92.1% of merchandised exports, with the vast majority being ready-made garments. A high priority has been put on export diversification and import liberalization in recent years. The South Asian Free Trade Agreement (SAFTA), signed by members of South Asian Association for Regional Cooperation (SAARC) and implemented in July 2006, has achieved very little success in the past two years. Intraregional trade accounts for only 5.5% of Bangladesh’s total trade. The development of trade with India is still hampered by domestic political discussions, including those regarding gas exports and transit trade.

State control of the economy, once tight, has been peaceful in recent decades. The banking sector experienced a gradual relaxation of control, and has consequently been growing in recent years. However, the state-owned commercial banks (SCBs) still undermine the efficiency of the system. According to the International Monetary Fund, private banks grew rapidly in fiscal year 2008, and their financial soundness strengthened. However, the SCBs, which account for over 30% of total banking sector assets, remain mostly dilapidated, with negative capital and high (30%) non-performing loan ratios. The caretaker government accelerated economic and sectoral reforms in several areas where previous governments had difficulty moving forward for political reasons. Examples include completing the privatization of the Rupali Bank, and approving corporatization of the remaining three state-owned commercial banks. The Grameen Bank and local savings societies play an important role in rural areas by extending microcredit loans to the poor. They often offer better loan repayment terms than do the state-run banks.