State of Bangladesh: BTTI Assessment Report

Executive Summary

The Bangladesh Think Tank Index (BTTI) stands at 51.5/100 (Grade: C), indicating that Bangladesh is a developing economy facing structural challenges. This composite score is derived from 33 sector analyzers across 8 policy dimensions, weighted by strategic importance to Bangladesh's development trajectory.

The estimated year-over-year change is +0.5 points, reflecting incremental progress in infrastructure and human capital, partially offset by governance stagnation and external headwinds.

Key strengths: Social Inclusion, Infrastructure & Connectivity, Economic Resilience.

Key weaknesses: External Resilience, Governance & Institutions, Industrial Diversification.

Dimension Analysis

Economic Resilience (60.5/100, weight: 15%)

Bangladesh's economy continues to demonstrate resilience with GDP growth of 4.2%, though below the 8th Five Year Plan target of 7-8%. Foreign exchange reserves provide 3.9 months of import cover (target: 6 months). The banking sector remains burdened by an NPL ratio of 9.6%, well above the 5% prudential threshold. Tax revenue mobilization at 7.4% of GDP is among the lowest in the world, severely constraining fiscal space. Export concentration risk persists with non-RMG exports at just 16% of total.

Human Capital (60.4/100, weight: 15%)

Human capital development shows mixed progress. Public education spending at 1.8% of GDP falls far short of the 4% benchmark. Physician density of 0.72 per 1,000 population is below the WHO minimum of 1.0. Child stunting at 28.0% remains a generational challenge. Female labor force participation at 38.5% lags the 60% target. Learning poverty at 57.0% indicates that most children cannot read and understand a simple text by age 10.

Infrastructure & Connectivity (60.7/100, weight: 12%)

Infrastructure has seen notable gains with 99.5% electrification, one of South Asia's success stories. However, internet penetration at 76.5% limits digital transformation potential. Logistics costs at 20.0% of GDP erode export competitiveness. The renewable energy share of 5.4% is critically low given climate vulnerability.

Governance & Institutions (40.8/100, weight: 13%)

Governance remains Bangladesh's most significant structural constraint. The average WGI score of -1.38 (on a -2.5 to +2.5 scale) places Bangladesh in the bottom quartile globally. The Corruption Perceptions Index score of 28.0/100 reflects persistent institutional weaknesses. Government effectiveness (-1.2), regulatory quality (-1.4), and rule of law (-1.15) all score negatively.

Social Inclusion (61.5/100, weight: 12%)

Social inclusion efforts are constrained by limited fiscal space. Social protection spending at 2.5% of GDP covers only a fraction of the vulnerable population. The poverty rate stands at 18.7%, with significant spatial disparities between western and eastern divisions. Financial inclusion at 53.0% of adults with accounts has improved with mobile financial services but lags regional peers.

Environmental Sustainability (50.3/100, weight: 10%)

Environmental sustainability presents growing risks. Forest cover at 14.5% is far below the 25% target. Renewable energy contributes just 25.0% of the mix. Annual mean PM2.5 of 77.0 ug/m3 is over 5 times the WHO guideline of 15 ug/m3, causing an estimated 80,000-120,000 premature deaths annually. Municipal waste collection covers only 55.0% of generated waste.

Industrial Diversification (23.5/100, weight: 10%)

Industrial diversification is critical for post-LDC competitiveness. Non-RMG exports represent only 16% of total exports. Pharmaceutical exports at $220.0M show promise but remain small relative to potential. ICT exports at $800.0M are growing but face infrastructure and talent constraints. Tourism arrivals at 0.32M are negligible for a country of 170 million.

External Resilience (46.2/100, weight: 13%)

External resilience faces headwinds as LDC graduation approaches in 2026. Reserve coverage at 3.9 months remains below the 6-month comfort level. Remittances at 6.1% of GDP provide a crucial buffer. With only 2 FTAs in force, Bangladesh is poorly positioned for the post-preference trade environment. FDI at 0.43% of GDP is among the lowest in emerging Asia.

Peer Comparison

The BTTI enables comparison with regional peers using equivalent composite methodology:

• Malaysia: 70.0/100
• Thailand: 65.0/100
• Vietnam: 55.0/100
• India: 52.0/100
• Bangladesh (Bangladesh): 51.5/100
• Sri Lanka: 50.0/100
• Cambodia: 40.0/100
• Myanmar: 30.0/100

Bangladesh ranks 5 of 8 among the selected peer group.

Vietnam (55) represents the near-term benchmark. Closing the gap requires sustained reform in governance, revenue mobilization, and industrial diversification.

Top Policy Priorities

1. [CRITICAL] Revenue mobilization

Tax-to-GDP at 7.4%, among lowest globally. Expand tax base, digitize collection, reduce exemptions.

Estimated BTTI impact: +15 basis points on composite score.

2. [CRITICAL] Anti-corruption institutions

CPI score 28.0/100. Strengthen ACC independence, judiciary reform, e-procurement expansion.

Estimated BTTI impact: +13 basis points on composite score.

3. [CRITICAL] Banking sector cleanup

NPL ratio at 9.6%. Enforce provisioning, restructure SOCBs, strengthen BB supervisory capacity.

Estimated BTTI impact: +12 basis points on composite score.

4. [CRITICAL] Export diversification

Non-RMG export share at 16%. Invest in pharma, ICT, shipbuilding, leather SEZs.

Estimated BTTI impact: +11 basis points on composite score.

5. [HIGH] Education investment

Education spending at 1.8% of GDP. Double allocation, focus on STEM and TVET.

Estimated BTTI impact: +10 basis points on composite score.

6. [HIGH] Trade agreement expansion

Only 2 FTAs. Negotiate with ASEAN, Japan, UK. Build trade negotiation capacity for post-LDC era.

Estimated BTTI impact: +9 basis points on composite score.

7. [HIGH] Learning quality reform

Learning poverty at 57.0%. Teacher training, curriculum modernization, EdTech.

Estimated BTTI impact: +8 basis points on composite score.

8. [HIGH] Renewable energy transition

Renewable share at 5.4%. Solar/wind auctions, grid modernization, phase out rental power plants.

Estimated BTTI impact: +8 basis points on composite score.

9. [HIGH] Social protection expansion

Social protection spending at 2.5% GDP. Consolidate 100+ programs, implement national social registry, expand coverage.

Estimated BTTI impact: +7 basis points on composite score.

10. [HIGH] Air quality management

PM2.5 at 77.0 ug/m3 (WHO guideline: 15). Brick kiln conversion, vehicle emission standards, industrial relocation.

Estimated BTTI impact: +6 basis points on composite score.

Risks and Outlook (2026-2030)

LDC Graduation (2026): Bangladesh faces the loss of preferential trade access (EU EBA, DFQF) worth an estimated 12% tariff advantage on RMG exports. Without proactive FTA negotiations and export diversification, this represents the single largest economic risk in the medium term.

Climate vulnerability: As one of the most climate-vulnerable nations, Bangladesh faces annual GDP losses of 2-9% from floods, cyclones, and sea level rise. Adaptation investment and renewable energy transition are existential priorities.

Banking sector fragility: The elevated NPL ratio, concentrated in state-owned commercial banks, poses systemic risk. A comprehensive bank recapitalization and governance reform program is overdue.

Demographic dividend window: With 65% of the population of working age, Bangladesh has approximately 15-20 years to capitalize on its demographic dividend. This requires massive investment in education quality, skills training, and productive job creation.

Digital transformation: The convergence of mobile financial services, e-governance, and ICT exports presents a significant opportunity to leapfrog traditional development constraints. However, this requires broadband infrastructure, digital literacy, and regulatory modernization.

Methodology

The BTTI is computed from 33 sector analyzers grouped into 8 weighted dimensions. Each dimension score (0-100) is derived by normalizing key indicators against Bangladesh-appropriate benchmarks drawn from the 8th Five Year Plan, Vision 2041, SDG targets, and international best practices. The composite score is a weighted average with weights reflecting strategic importance: economic resilience and human capital (15% each), governance and external resilience (13% each), infrastructure and social inclusion (12% each), environmental sustainability and industrial diversification (10% each).

Peer country scores are estimated using equivalent methodology applied to World Bank, IMF, UNDP, and Transparency International data.

Bangladesh Think Tank Index (BTTI), produced by the BDPolicyLab (bdpolicylab.com). Data sources: World Bank WDI, IMF Article IV, Bangladesh Bank, BBS, NBR, EPB, UNDP HDR, WHO GHO, UNESCO UIS, ILO ILOSTAT, Transparency International, IRENA, ADB.