The recent decision by the Bangladeshi government to ban safer alternatives to traditional tobacco products, stands in complete contrast to the global trend. While this policy aims to protect public health, it carries significant economic implications, including the loss of foreign direct investment (FDI) and tax revenue opportunities.
Bangladesh has experienced impressive economic growth in recently, with the provisional estimate for FY 2023-24 showing a GDP growth of 5.82%, slightly higher than the 5.78% recorded in FY 2022-23. During this period, per capita GDP is estimated at $2,675, and per capita national income stands at $2,784, compared to $2,643 and $2,749 in the previous fiscal year. The size of GDP in current market prices for FY 2023-24 is Tk50,48,027 crore ($459 billion), up from Tk44,90,842 crore ($452 billion) in FY 2022-23.
While Bangladesh is showing promising progress, attracting FDI is vital for Bangladesh’s further economic development, especially in emerging sectors like safer alternatives to traditional cigarettes. The government’s decision to ban safer alternatives undermines the potential of this industry to drive job creation, boost tax revenue, and improve public health.
The global market for safer alternatives is expanding rapidly, with over 100 countries across the globe, already adopting a regulatory based framework to manage safer alternatives. These markets offer significant opportunities for foreign investment, job creation, and economic growth. In Bangladesh, regulating this industry could generate jobs in manufacturing, retail, and distribution, while providing farmers with new markets for tobacco exports with the surplus production. Additionally, a regulated market would allow the government to capture much-needed tax revenue, helping fund essential services.
Instead of embracing this growth sector, Bangladesh's ban pushes the country away from a potentially lucrative market. The safer alternatives industry offers a pathway to foreign currency inflows, which is crucial for a developing economy like Bangladesh. By prohibiting safer alternative, the government is missing this opportunity, ultimately limiting job creation and the inflow of foreign capital.
One of the primary concerns with banning safer alternatives is the inevitable rise of the black market. Thailand’s decade-long ban on safer alternatives resulted in a $500 million loss in tax revenue, while a thriving illicit trade flourished. The same fate could be waiting for Bangladesh, where a ban will not eliminate demand but will push consumers toward unregulated sources. The growth of illicit trade undermines public health efforts, deprives the government of tax revenue, and makes space for illegal activities.
The example of Australia further highlights the dangers of strict tobacco regulations. Despite some of the highest tobacco taxes globally, the country has seen a surge in illicit tobacco and vape imports, depriving the government of billions in tax revenue. An estimated 20-25% of all tobacco consumed in Australia is illicit, and 92% of vapers source products illegally. By banning safer alternatives, Bangladesh risks facing these same issues, leading to a loss of tax revenue and increased public health risks.ii
Bangladesh can learn from these global best practices by adopting a regulatory framework that balances public health concerns with economic opportunities. A well-regulated market for safer alternatives can encourage smokers to switch to less harmful products, reduce the burden on healthcare, and provide a source of tax revenue for the government. Countries such as Indonesia, Malaysia and Saudi Arabia should be looked at for inspiration, as Bangladesh can learn from their practices that invite investments for products which are better and safer, embracing risk reduction as both - a public health initiative and a sound investment opportunity
The ban on safer alternatives in Bangladesh represents a missed opportunity for economic growth. By prohibiting these products, the government risks stifling job creation, reducing FDI, and losing valuable tax revenue. Instead of relying on prohibition, Bangladesh should consider adopting a regulatory approach that allows for the legal sale of safer alternatives. This would not only protect public health but also drive economic development by creating jobs, attracting foreign investment, and generating sustainable tax revenue. With the right regulatory framework, Bangladesh can ensure that public health and economic progress go hand in hand.
