BANGLADESH MOVES FROM LDC TO DEVELOPING COUNTRY

INTRO
1. Over the last few years, anticipation that Bangladesh would become a
developing country by 2021 has grown. a formal announcement was
made on March 20 about Bangladesh’s graduation into the developing
country category. Amid all this discussion on poor and middle-income
countries, many are wondering what will happen when Bangladesh
sheds its LDC status and becomes a developing nation.

2. There are three criteria a country must fulfil before graduating from low-
income country status to developing country status. The first one is
having a Gross National Income (GNI) per capita of $1,242.
Bangladesh’s current per capita income is $1,610. The second one is
Human Assets Index (HAI), which has to be 66 or above. Bangladesh’s
HAI is 72.9. And the last one is having an Economic Vulnerability Index
below 32. Bangladesh’s EVI is 25. Having fulfilled all three criteria, the
country now awaits a formal approval for inclusion in the list of
developing countries. Bangladesh will formally become a developing
country with the approval of United Nations Economic and Social
Council.

Dr Khondaker Golam Moazzem, the research director at Centre for Policy

Dialogue, said that getting out of the LDC list meant that nobody would be able to
consider Bangladesh a weak nation. “It is a matter of pride for any country. Once
this feat is achieved, a sense of relief will be created in the country,” he added.
Moazzem noted that as a developing country, Bangladesh’s importance will
increase in the international arena. The world considers the economic basis of
developing nations as strong. This will help mitigate Bangladesh’s economic risks,
meaning the risks taken into account while investing in private and public sectors
will go down to some extent. “This will help boost the chance of foreign
investment while international agencies will be interested to give loans,” he noted.
Challenges for Bangladesh as a developing country

Economists say Bangladesh will have to face a number of challenges after

shedding its LDC status. Failures to meet the challenges will give rise to fears
that Bangladesh will lag behind. They say internal social and political problems
have to be resolved. Any kind of political and social instability can undermine
progress. Moazzem cited several African countries that lagged behind due to
social and regional problems despite being on the path of development. He said:
“There has to be more industrialization in Bangladesh. Both production and jobs
have to be increased. For this, more industries have to be set up and internal
resources have to be increased.” Inclusive development, good governance, and
dispelling social discrimination are important along with speeding up revenue
collection and increasing GDP growth, he said. The CPD director also mentioned
the risks Bangladesh will face after becoming a developing country: “The interest
rates on loans from various countries and international agencies will rise. Grace
periods will be shortened or will be unavailable. The period for paying back loans
will be reduced. “These will push up foreign loan related costs. The export market
will shrink to some extent. There could be risks, particularly with new products.
For the old products, the cost for entering export market will rise. All sorts of duty
facilities may end. New conditions may be added in the export market. Foreign
funds for NGO will go down; the funding will stop.”

Ways forward

Atiur Rahman said that although the announcement would come in March,
Bangladesh needs to complete a number of tasks by 2028. “We have to improve
our human resources within these nine or ten years,” he said. “We need to amend
our policies to survive in the global market and we have to be ready to do so.”
The former central bank governor continued: “Coordination has to be increased
with various countries and international organizations. Our policymakers have to
gain maturity for that. Competence in negotiation with other countries has to be
achieved. “We also have to be alert to sure that no economic [or political]
instability hits the country in the coming years.” Meanwhile, Bangladesh will
continue to enjoy the facilities it has been getting as a LDC until 2027 after
becoming a developing country.

"Our dependence on garments continues. Our exports of goods and services have also been very
volatile. Trade policy, logistics and business regulations reforms will be critical for export
diversification and stability."One of the major challenges will be to maintain stability of
agricultural production as availability of farmland is decreasing. Besides, adverse effects of
climate change are getting more noticeable, he noted.

Besides, it has to be ensured that natural disasters do not lead to an increase in the proportion of
homeless population. Bangladesh has done well in coping with natural disasters but this should
never be taken for granted, added the WB lead economist.The UN gave LDC status to 17
countries in 1971. Now, the total number of LDCs is 47.Five countries have so far graduated
from LDC status: Botswana in 1994, Cape Verde in 2007, the Maldives in 2011, Samoa in 2014,
and Equatorial Guinea last year.

The UN reviews the list of LDCs every three years and makes recommendations on the inclusion
and graduation of eligible countries. The UN did the review the last time in 2015 when three
countries, including Nepal and Bhutan, became eligible for graduation from the LDC bloc.
Bangladesh's graduation will have some implications for its economy.

Once the country gets out of the LDC bloc in 2024, it will probably be given a three-year
transition period before it loses duty-free and quota-free market access to the European Union
under the Everything but Arms initiative for LDCs, according to the CDP.

The benefits of technical cooperation and other forms of assistance such as fund support for
scholarship, fellowship, participation for special training as well as for research will be pulled
out. The scope of the credit accessibility will also be reduced. According to a study by the
Economic Relations Division in December last year, Bangladesh is likely to lose about $2.7
billion in export earnings every year once it graduates from the LDC bracket.

POST-LDC CHALLENGES FOR BANGLADESH

Bangladesh became a member of the least developed country (LDC) club in 1975. As a newly
emerged independent country Bangladesh had to face many socioeconomic as well as
geopolitical challenges at that period (soon after the independence). But gradually we achieved
remarkable progress in many fields and emerged as one of the fastest growing economic power
in Asia. Continuous progress of Bangladesh economy is an example to the entire world. But we
are supposed to achieve even more if political chaos, greed and immaturity is not there. Frequent
change of political ideology made us bound to radical shift towards multidimensional economic
paradigm. Besides shortcomings of infrastructure, industrial utility, absence of united political
will towards a particular system of economy, Bangladesh achieved the millennium development
goals (MDGs) with significant performance in many arenas. Bangladeshi expatriate workers and
women workers in readymade garment (RMG) sector are the significant contributors of this
wonderful achievement.
Bangladesh reduced poverty rate into 23.2% (up to 2016) whereas it was 31.5% in 2010. At the
same period extreme poverty rate declined into 12.9 % from 17.6% in 2010. Per capita income of
Bangladesh increased to USD 1610 in 2016-17 fiscal years. Hopefully, Bangladesh could be
considered to graduate from the list of LDC in upcoming triennial review meeting of the
Committee for Development Policy (CDP) in this year. Second review of the same committee
could be in 2021 then we will be observed for another 3 years i.e. up to 2024 to be finally
graduated from the LDC club. This graduation is so much expected and welcoming for the whole
nation. It will increase value of Bangladesh brands, Bangladeshi passport, and Bangladesh’s
position in different global platforms.
Therefore every Bangladeshi is expecting this graduation
as soon as possible. But before going for final celebration of this achievement we should conduct
an impact assessment study by an impartial body to identify possible impact of LDC graduation
on Bangladesh economy during next decade. Few impact of LDC graduation on Bangladesh
economy could be as follows:
1. Loosing preferential market access / preference erosion: Bangladesh exported USD
34.83 billion in last fiscal year. About 90% of Bangladesh’s total exports go to the export
markets under different preferential market access facilities in EU (under EBA), Canada,
Japan and the US, under their respective GSP schemes. Bangladesh also enjoys
preferential market access in such other industrialized countries as Australia and in some
developing countries, such as China, India and the Republic of Korea, under RTAs and
bilateral initiatives. All these schemes are non-reciprocal in the sense that Bangladesh is
not expected to offer preferential access to products originating in the preference-giving
countries in response to the offer made to her as an LDC. Since developed country
markets account for about 90 per cent of Bangladesh’s total exports, preferential market
access in these countries is of special significance to Bangladesh. Besides GSP or EBA
Bangladeshi export items are enjoying duty free and quota free market access under the
following trade regime:
 Special and Differential Treatments (S&DT) for LDCs under different agreements of
WTO
 Preferential market access for LDCs under different regional trade agreements
like SAFTA, BIMSTEC, APTA etc.
 Preferential market access for LDCs under different bilateral trade agreements.
The above mentioned discussion made it clear that, Bangladesh’s export items enjoys
preferential market access in different parts of the world under different trade regime. If
90% of our export items loose preference then Bangladesh’s export performance is likely
to be adversely affected. Therefore fact finding studies should be conducted to identify
the financial value of preference erosion in USD, what could be its spillover effects on
Bangladesh’s investment environment especially to attract FDI, what could be ways
forward to minimise adverse affects of preference erosion on Bangladesh economy.

2. Impact of Reciprocal Trade Regime Offerings: Currently Bangladesh is a

member of nine (9) RTA or FTAs namely, Asia-Pacific Trade Agreement (APTA), Bangladesh-
Sri Lanka Free Trade Agreement (Proposed), Bangladesh-Turkey FTA (Proposed), Bay of
Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free
Trade Area, Pakistan-
Bangladesh Free Trade Agreement (Negotiations launched: 2003), People’s Republic of China-
Bangladesh FTA (Proposed), Preferential Tariff Arrangement-Group of Eight Developing
Countries (D-8), South Asian Free Trade Area (SAFTA), Trade Preferential System of the
Organization of the Islamic Conference (OIC PTA). An LDC country is allowed not to offer
reciprocal trade preference to its counter parts. But Bangladesh has to offer it while graduating
from LDC. In such case signing free trade agreement could be more costly for Bangladesh after
graduating from LDC list.
3. Paradigm shift in Official Development Assistance: Bangladesh received official
development assistance from development partners 90.5 % as grant and only 9.5% as loan in
1971-1972 fiscal years. Foreign grants and soft loans played a vital role in infrastructure and
other development activities in Bangladesh. Still official development assistance (ODA) is a
significant source of funding in various mega project of Bangladesh. Development partners are
shifting their mode of financing with the wheel of local economic development. Grant amount is
decreasing and loan amount is increasing day by day. For example Bangladesh received only
12.5% grants and 87.5% loan in last fiscal year. Soon after the graduation Bangladesh will be
completely out of grant assistance facility, everything has to be bearded by local resources or go
for foreign loans and repayment with interest. So it may have another adverse affect on
development motion of Bangladesh.
3. Other challenges: Besides the above mentioned challenges Bangladesh may face
challenges in getting aid for trade, implementing IP laws, paying more subscription
fee to international platforms like UN, unavailability of technical cooperation in terms
of development assistance etc.
. We have to develop 100 SEZ, Deep Sea Port, Increase efficiency of existing sea ports, generate
more power, develop internal road networking and offer load shedding free electricity
connection to the mass people. Lots of mega projects are yet to be materialised. Internal resource
mobilisation, confidence building of local investors and attracting foreign investors to invest here
in Bangladesh is still pending.

CONCLUSION
Bangladesh reduced poverty rate into 23.2% (up to 2016) whereas it was 31.5% in 2010. At the
same period extreme poverty rate declined into 12.9 % from 17.6% in 2010. Per capita income of
Bangladesh increased to USD 1610 in 2016-17 fiscal years. Hopefully, Bangladesh could be
considered to graduate from the list of LDC in upcoming triennial review meeting of the
Committee for Development Policy (CDP) in this year. Second review of the same committee
could be in 2021 then we will be observed for another 3 years i.e. up to 2024 to be finally
graduated from the LDC club. This graduation is so much expected and welcoming for the whole
nation. It will increase value of Bangladesh brands, Bangladeshi passport, and Bangladesh’s
position in different global platforms. Therefore every Bangladeshi is expecting this graduation
as soon as possible. But before going for final celebration of this achievement we should conduct
an impact assessment study by an impartial body to identify possible impact of LDC graduation
on Bangladesh economy during next decade.