Cutting red tape: Can Bangladesh learn from Argentina’s 'Madman'?

Infograph: TBS

Have you ever heard of a government ministry dedicated solely to tearing down red tape?

While many countries have task forces or councils for deregulation, Argentina's President Javier Milei has taken the concept to an entirely new level.

His Ministry of Deregulation and State Transformation, launched in July 2024, stands as a bold experiment in prioritising economic freedom over bureaucratic complexity.

From 10 December 2023, when Milei took office, to 7 December 2024, his government issued an impressive 672 regulatory reforms – averaging nearly two deregulations per day, weekends included. Of these, 331 regulations were eliminated, while 341 were modifications of existing regulations.

Bangladesh is forecast to surpass Argentina in GDP size by 2039, but the challenge lies in bridging the gap in per capita GDP.

This ambitious effort to reduce Argentina's regulatory burden comes after decades of corporatist policies, making deregulation a cornerstone of Milei's agenda for economic transformation.

According to the Cato Institute, the reforms have already delivered significant impacts: the removal of import licensing resulted in a 35% drop in home appliance prices and a 20% decline in clothing prices; lifting rent control systems tripled the availability of rental apartments in Buenos Aires and reduced rental prices by nearly 50%; and eliminating the yerba mate floor price caused a 25% reduction in its cost.

But the story doesn't end there. The broader economy is rebounding with vigour. In the July to September period, Argentina achieved its first quarter-on-quarter economic expansion since entering a technical recession at the end of 2023.

Argentina's GDP grew by 3.9% in the third quarter of 2024, a sharp recovery from the 1.7% contraction in the previous quarter. While GDP remains 2.1% lower than a year ago, the newfound momentum is undeniable. With inflation cooling and growth accelerating, Milei now approaches this year's mid-term elections with a clear message: Argentina is back on its feet.

Now, let's shift the spotlight to Bangladesh. While Milei's business-friendly reforms are beginning to attract foreign investment commitments, Bangladesh remains mired in red tape. For instance, starting a footwear factory requires 190 documents for 23 licences, and this bureaucratic burden is typical across many sectors – a stark contrast to the global trend of reducing business hurdles.

The comparison between Argentina and Bangladesh is significant due to their economic trajectories. By 2039, Bangladesh's GDP is forecast to surpass Argentina's, making it the 21st largest economy, while Argentina will rank 27th. Yet, in terms of per capita GDP, the story differs: Bangladesh is expected to rank 123rd, while Argentina will hold a more favourable 75th position, according to a long-term forecast by the Centre for Economics and Business Research (CEBR).

Adding another dimension, Bangladesh earned the title of The Economist's Country of the Year for 2024, outshining nations like Syria, Argentina, South Africa, and Poland for its success in toppling a despot and moving towards a more liberal government.

Tough austerity vs. spiralling costs – A tale of two economies

Argentina's inflation has dropped sharply, thanks to aggressive fiscal and monetary policies. Milei's austerity measures, including cutting government spending, reducing subsidies, tightening the money supply, and implementing a significant currency devaluation, are steering the country towards stability.

Milei's efforts to reduce state interference have also played a critical role, including halving the number of government ministries to just nine and cutting thousands of public sector jobs. These drastic steps are part of a broader strategy to reduce government spending by 30% compared to 2023, creating the fiscal surplus necessary to stabilise the economy.

The results are evident as Argentina's inflation saga continues to astonish. For eight consecutive months, Argentina's annual inflation rate has been easing, reaching 117.8% in December 2024 – a significant drop from its peak of 289% in April. Month-on-month inflation offers an even starker contrast: just 2.7% in December 2024, compared to 25.5% a year earlier, according to the National Institute of Statistics and Censuses (INDEC) data. However, this stability comes at a cost: poverty has surged to 53% in the first half of 2024, up from 40% in 2023 – the highest recorded jump in two decades.

Bangladesh, in contrast, is grappling with its own inflationary spiral. With double-digit inflation already straining households, the government has raised VAT and SD on nearly 100 products to meet IMF revenue targets, adding pressure on businesses and consumers alike.

On top of this, a proposed gas price hike looms large. New industrial and captive connections could face a 146% increase, with gas priced at Tk75.72 per cubic metre – a move that risks crippling new investments and industries reliant on gas-powered machinery. Gradual implementation, rather than a sudden increase, could alleviate the blow to industries and households already under strain.

For Bangladesh, inflation remains unrelenting, eroding purchasing power. Food inflation has stayed above double digits for nine consecutive months, reaching 12.92% in December 2024, while general inflation registered at 10.89%.

Bangladesh's GDP plunges: A stark warning for the economy

The broader economic picture is even bleaker, with real GDP growth at just 1.81% for the July-September period of FY25 on a point-to-point basis, marking the lowest in 15 quarters.

Adding to the gloom is the quarter-on-quarter real GDP growth, which has turned negative at -7.58% in the first quarter of the current fiscal year, compared to the last quarter (April-June) of FY24, according to provisional data from the Bangladesh Bureau of Statistics. The nominal GDP size for the first quarter of FY25 stands at Tk12,66,574 crore, down from Tk13,78,361 crore in the previous quarter.

The decline in Bangladesh's GDP is a loud warning for the country's economy. However, despite these grim figures, the interim government's extraordinary banking sector actions have exposed the previous regime's hidden defaults.

Now, the question arises: can Bangladesh be as bold as Argentina in carrying out its reform programmes? For years, red tape and institutional inertia have stifled its economic potential. Milei's playbook demonstrates what is achievable with decisive leadership and unflinching resolve.

Could Bangladesh carve its own path to transformation, unleashing the power of reform to ignite its economy? The answer lies not in repeating what has been done elsewhere, but in pursuing bold, unprecedented initiatives with unwavering commitment.

Sketch: TBS