Despite political challenges, Bangladesh has shown remarkable resilience in its economic growth. Since 2006, the country’s GDP per capita has grown at an average rate of over 4% per year, reaching 6.7% in 2019 and maintaining 6% growth in 2022. However, beneath these positive growth numbers lie structural weaknesses that could hinder the nation's long-term economic potential. Bangladesh currently ranks 108th in the International Property Rights Index and 127th in the Economic Freedom of the World Index, grappling with issues such as political stability, corruption control, and weak property rights. Additionally, the country’s tax-to-GDP ratio remains notably low at 7.5% in 2022, far below the Asia-Pacific average of 19.3%. These figures highlight fiscal policy limitations and underscore the need for comprehensive reforms.
A key area where these challenges intersect is in the proposed “Smoking and Use of Tobacco Products (Control) Ordinance, 2024,” which seeks to ban safer alternatives to traditional smoking, impose a Tk5,000 fine on users, and prohibit the sale of loose tobacco. While the intention behind this policy is to protect public health, it overlooks several critical factors that could undermine its success.
The main flaw in this approach is the lack of infrastructure to combat illicit trade. When Thailand imposed a decade-long ban on safer alternatives, it experienced a $500 million loss in tax revenue, while a thriving black market emerged. This forced the government to reassess its stance. The ban did not eliminate demand; it simply pushed consumers toward unregulated, and often more harmful, sources. This unintended consequence is a risk Bangladesh faces if it follows the path of prohibition instead of developing a more regulated framework.
Instead of banning safer alternatives, Bangladesh could benefit from attracting foreign direct investment (FDI) in risk-reduction products, a sector that holds significant economic potential. By regulating safer alternatives rather than prohibiting them outright, Bangladesh could create jobs, generate tax revenue, support farmers through surplus tobacco exports, and boost foreign currency inflows. This approach has been successfully implemented in over 100 countries worldwide, demonstrating that regulation, not prohibition, can drive both public health benefits and economic growth.
Bangladesh’s Ministry of Health (MoH) has previously embraced risk-reduction strategies in other areas, most notably in AIDS prevention, where the government prioritized safer alternative over moralistic bans. This pragmatic approach could be applied to tobacco control as well. Even Islamic countries, which may face similar cultural considerations, have opted for regulation over outright prohibition. Saudi Arabia, for instance, launched its government-backed nicotine pouch brand, DZRT, as part of its regulatory strategy, aligning public health objectives with economic interests.
A key element of successful regulation lies in implementing progressive taxation policies. Countries that have regulated safer alternatives have done so by imposing lower taxes on less harmful products to encourage their use over traditional cigarettes. This approach not only promotes public health but also generates sustainable tax revenue. In contrast, Bangladesh’s high taxation and prohibitionist stance are likely to keep smokers dependent on traditional cigarettes, fueling illicit trade and failing to generate the potential tax revenue that could be reinvested into public health programs.
By adopting a regulatory framework and differential taxation, Bangladesh could improve fiscal outcomes, reduce the healthcare burden caused by smoking-related diseases, and support legitimate business operations. A regulated environment would allow safer alternatives to be accessible, taxable, and controlled, benefiting farmers, retailers, and consumers alike. This approach would also signal the government’s commitment to both public health and economic progress.
Bangladesh must rethink its approach to tobacco control and move away from prohibition. By focusing on regulation, the country can protect public health, create jobs, attract foreign investment, and generate sustainable tax revenue. As global leaders continue to incorporate risk reduction into their policies, there is no reason for Bangladesh to isolate itself with outdated prohibitionist measures. To ensure the well-being of its citizens and the long-term prosperity of its economy, Bangladesh must embrace a regulated approach to safer alternatives rather than resorting to a direct ban.
The article is an excerpt from a study by Dr Carmelo Ferlito – CEO, Center for Market Education, Malaysia, and International Senior Fellow, Tholos Foundation, USA and Prof Shahriar Kabir, Professor, Department of Economics, Independent University Bangladesh.
