Issue 24

May 2025

We are living through a period of profound economic transformation—where global trade is no longer dictated solely by market efficiency, but increasingly shaped by politics, protectionism, and uncertainty. In this issue of Policy Insights, we explore how Bangladesh, a country that once rode the wave of globalization to redefine its development story, must now recalibrate its strategies to stay competitive in a fragmented and polarized world.

We begin with a deep dive into the strategic role of trade policy in shaping Bangladesh’s development trajectory. From its early missteps in import substitution to the export-driven reforms of the 1990s, trade has been both the lever and lifeline of economic progress in Bangladesh. But today, tariff distortions and conflicting incentives threaten to stall diversification and growth unless addressed with clarity and resolve.

Foreign Direct Investment (FDI) remains one of the most underleveraged tools in Bangladesh’s development toolkit. While peer economies like Vietnam and Indonesia have soared on the wings of FDI, Bangladesh continues to underperform. The challenge, as we explore, lies not in global supply but in domestic readiness—streamlining regulation, opening markets, and sending clear signals to investors that the country is ready for business.

Currency policy often lurks in the background of economic debates, but as our third feature shows, it deserves a front-row seat. The shift toward a more flexible exchange rate is already unlocking gains in exports and remittances. The lesson is simple: when markets are allowed to function, incentives align, and growth follows.

As global geopolitics increasingly shape economic outcomes, Bangladesh must not stand idle. Economic diplomacy is no longer a luxury—it is a strategic necessity. Whether navigating post-LDC graduation realities or positioning in the global value chain realignment, Bangladesh needs a proactive, skillful approach that blends diplomacy with market ambition.

The recent eruption of U.S. reciprocal tariffs has thrown a spanner into the rules-based trade system. Bangladesh, unfairly lumped in with larger surplus nations, now faces steep tariff penalties. Yet, as we argue, this may be less a death knell and more a negotiating window—if policymakers move quickly, strategically, and with a firm grasp of the evolving trade terrain.

Finally, with the FY2026 Budget on the horizon, there’s no better time to confront the domestic cost of protectionism. Tariff structures built to nurture infant industries have matured into entrenched burdens on consumers. The long-awaited National Tariff Policy offers a roadmap to rationalization—if the political will can match the policy promise.

Together, these pieces are a call to action. Bangladesh stands at an inflection point. Its future will not be determined by the forces around it, but by the courage of its response. Reform is no longer optional. It is the only path forward.