LDC THOUGHTS

The changing economic environment and perspectives

associated with LDC graduation can open up new
windows of opportunities that can actually help

GRADUATION OF Bangladesh to take necessary steps with a fresh

endeavor to become an upper middle-income country
by 2031 and high-income country by 2041.

Faiaz Mahmood
BANGLADESH:
CHALLENGES &
OPPORTUNITIES
Table of Contents
1. Least Developed Countries (LDCs): A Brief Introduction ................................................................... 2
1.1 Definition ............................................................................................................................................ 2
1.2 Historical Origins: ............................................................................................................................... 2
1.3 Overview ............................................................................................................................................. 2
1.4 LDC Identification Criteria & Indicators ............................................................................................ 2
1.4.1 LDC Criteria ................................................................................................................................ 2
1.4.2 Application and Indicator Selection ............................................................................................. 3
1.5 The Indicators: Details ........................................................................................................................ 3
I. Income ............................................................................................................................................... 3
II. Human Assets ................................................................................................................................... 4
III. Economic Vulnerability .................................................................................................................. 5
1.6 Graduation from the LDC category .................................................................................................... 6
2. Bangladesh: Graduation From LDC ......................................................................................................... 7
3. Graduation From LDC: Challenges ........................................................................................................ 10
3.1 Key Policy Challenges for Transition ............................................................................................... 10
3.2 Challenges for Bangladesh after Graduation .................................................................................... 10
4. Graduation from LDCs: Opportunities ................................................................................................... 11
5. Challenges and Opportunities in Agriculture: ........................................................................................ 12
6. Conclusion: ............................................................................................................................................. 12
7. Bibliography: .......................................................................................................................................... 13

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 1. Least Developed Countries (LDCs): A Brief Introduction
1.1 Definition
The least developed countries (LDCs) are defined as low-income countries that are
suffering from long-term impediments to growth. They have low levels of human resource
development and are vulnerable to both socio-economic, and environmental shocks.
The Least Developed Countries (LDCs) is a list of developing countries that, according to
the United Nations, exhibit the lowest indicators of socioeconomic development, with the lowest
Human Development Index ratings of all countries in the world. The concept of LDCs originated
in the late 1960s and the first group of LDCs was listed by the UN in its resolution 2768 (XXVI)
of 18 November 1971.

1.2 Historical Origins:

The origins of the LDC category date to the first session of the United Nations Conference
on Trade and Development (UNCTAD I), held in Geneva in 1964, when member countries
recognized that international policies and measures for promoting economic development needed
to take into account individual country characteristics. Special attention was to be paid to the less
developed among them [the developing countries], as an effective means of ensuring sustained
growth with equitable opportunity for each developing country.
In 1969, the United Nations General Assembly acknowledged the need to alleviate the
problems of underdevelopment in the less developed countries to enable them to draw full benefits
from the Second United Nations Development Decade (IDS-II).2 It requested the Secretary-
General to carry out a comprehensive examination of the special challenges of these countries and
to recommend special measures to tackle their problems. Subsequently, the Assembly invited the
relevant entities, including the Committee for Development Planning (the predecessor of the
current Committee for Development Policy (CDP), to give high priority to the identification of
such countries and to report back on their findings.

1.3 Overview
LDC criteria are reviewed every three years by the Committee for Development Policy
(CDP) of the UN Economic and Social Council (ECOSOC). Countries may "graduate" out of the
LDC classification when indicators exceed these criteria in two consecutive triennial reviews. The
United Nations Office of the High Representative for the Least Developed Countries, Landlocked
Developing Countries and Small Island Developing States (UN-OHRLLS) coordinates UN
support and provides advocacy services for Least Developed Countries. The classification (as of
June 2017) applies to 47 countries.

1.4 LDC Identification Criteria & Indicators

1.4.1 LDC Criteria
The Committee for Development Policy (CDP) is mandated by the General Assembly
(GA) and the Economic and Social Council (ECOSOC) to review the list of LDCs every three

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years and to make recommendations on the inclusion and graduation of eligible countries using
the following criteria:
A. Income
B. Human Assets
C. Economic Vulnerability
1.4.2 Application and Indicator Selection
▪ Countries are eligible to enter or leave the LDC category if they meet the defined inclusion
or graduation thresholds of the criteria. The graduation thresholds are set higher than the
thresholds for inclusion. This asymmetry aims to ensure that graduation is sustainable.
▪ Each of the three criteria is measured using key indicators which reflect long-term
structural handicaps. These indicators are chosen on the basis that they are
methodologically robust, maintain stability of the criteria, ensure equal treatment of
countries over time, and are frequently updated for all countries. They are periodically
revised to reflect improved data availability and insights from new research.

1.5 The Indicators: Details

I. Income
Gross national income (GNI) per capita
Rationale
▪ GNI per capita provides information on the income status and the overall level of
resources available to a country

Thresholds

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 ▪ The inclusion threshold is set at the three-year average of the level of GNI per capita,
which the World Bank defines for identifying low-income countries. At the 2018 review

it was $ 1,025.
▪ The graduation threshold is set at 20 per cent above the inclusion threshold. At the 2018
review it was $ 1,230.
▪ The income-only graduation threshold is twice the graduation threshold. At the 2018
review it was $ 2,460.
Methodology
▪ GNI is calculated from national accounts data converted into USD using the World Bank
Atlas method (to reduce impact of short-term exchange rate fluctuations)
▪ GNI per capita is derived by dividing GNI in USD by the annual population of a country
Data sources
▪ GNI per capita is calculated by the United Nations Statistics Division on the basis of its
National Accounts Main Aggregates Database
▪ Population data are taken from the United Nations Population Division
II. Human Assets
Human Assets Index (HAI)
Rationale
▪ The HAI is a measure of level of human capital
▪ Low levels of human assets indicate major structural impediments to sustainable
development
▪ A lower HAI represents a lower development of human capital

Thresholds

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 ▪ Since 2015 the CDP uses absolute thresholds for the HAI to determine inclusion and
graduation eligibility.
▪ The inclusion threshold has been set at 60.
▪ The graduation threshold has been set at 10 percent above the inclusion threshold at 66.
Composition
▪ The HAI is composed of 5 indicators
grouped into a health and education sub
index
▪ Original values for each HAI indicator are
converted into index numbers using a max-
min procedure

III. Economic Vulnerability

Economic Vulnerability Index (EVI)
Rationale
▪ The EVI is a measure of structural vulnerability to economic and environmental shocks
▪ High vulnerability indicates major structural impediments to sustainable development
▪ A higher EVI represents a higher economic vulnerability
Thresholds
▪ Since 2015 the CDP uses absolute thresholds for the EVI to determine inclusion and
graduation eligibility
▪ The inclusion threshold has been set at 36
▪ The graduation threshold has been set at 10 per cent below the inclusion threshold at 32.
Composition
▪ The EVI is composed of eight indicators, grouped into various sub-indices
▪ Original values for each EVI indicator are converted into index numbers using a max-min
procedure

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1.6 Graduation from the LDC category
Identification of Eligible Countries
▪ The CDP reviews the list of LDCs and makes recommendations for inclusion in and
graduation from the category every three years
▪ These recommendations are not exclusively based on the criteria scores, complementary
country-specific information (DESA impact assessment, UNCTAD vulnerability profile)
and the views of the government are also taken into account
▪ The graduation thresholds, as determined by the CDP, must be met for any two of the three
criteria in two consecutive triennial reviews
▪ Alternatively, the GNI per capita of the country is at least twice the graduation threshold
in two consecutive triennial reviews (income-only criterion)

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2. Bangladesh: Graduation From LDC
Bangladesh was categorized as an LDC in 1975. In recent years, Bangladesh is widely
recognized as a remarkable achiever in the field of socio economic development. Successful
attainment of the Millennium Development Goals (MDGs) layers the solid foundation for its
higher future development goals. Country’s poverty rate was reduced to 23.2% in 2016 while it
was 31.5 percent in 2010. Over the time, the extent of extreme poverty declined from17.6 percent
to 12.9 percent. The GDP growth picked up around half a percentage point to 7.28 percent in FY
2016-17 from 7.11% of previous fiscal year and is projected to grow at 8.0% by 2020. Moreover,
all important economic indicators are showing positive trends ensuring to graduation from LDC.
Bangladesh with current development trends met the GNI, HAI and EVI with high probability of
graduation in the Committee for Development Policy (CDP)’s triennial review in 2018 and will
meet the subsequent triennial review in 2021. It is expected that Bangladesh will graduate from
the LDC category by fulfilling all the three criteria. Following a three years transition period after
2021, Bangladesh hopes to graduate officially from LDC category in 2024.

An infographic view of all relevant details are as follows:

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3. Graduation From LDC: Challenges
3.1 Key Policy Challenges for Transition
Along with the graduation, Bangladesh will face a number of new challenges, majority of those
are listed below:
1. Preferential Market Access: As an LDC, Bangladesh receives preferential treatment that
has been categorized into following four important groups:
a) World Trade Organization (WTO) provisions for providing Special and
Differential Treatment (SDT) for LDCs;
b) Autonomous, non-reciprocal initiatives through Generalized System of Preferences
(GSP) schemes of various countries;
c) Preferential market access initiatives that are part of various regional trade
agreements (RTAs) and special provisions for members that are LDCs, such as the
South Asian Free Trade Area (SAFTA), the Asia and Pacific Trade Area (APTA)
and Bay of Bengal Initiative for Multi-Sectoral Technical and Economic
Cooperation (BIMSTEC) Free Trade Area; and
d) Bilateral trade initiatives like the trade relations between India and Sri Lanka and
India and Bhutan.
2. Official Development Assistance (ODA): Official Development Assistance
(ODA) still plays a significant role for Bangladesh, particularly in infrastructure and
capacity building. But, many development partners are shifting their priorities and
modalities in the light of macro-economic and social progress achieved in the country,
which results gradual increase of loan and decrease of grants. The shares of grants and
loans in the total disbursed foreign aid was 90.5 percent and 9.5 percent in FY 1971-72
which stood at 12.5 percent and 87.5 percent respectively in FY 2016-17. The share of
bilateral aid has been decreased from 85.7 percent in FY 1971-72 to 31.9 percent in FY
2016-17, whereas share of multilateral aid has been increased from 14.3 per cent in FY
1971-72 to 65.4per cent in FY 2015-16. Bangladesh has already committed development
finance under Scale-up Facility of WB in 2017which has increased interest rates than the
IDA credits.

3.2 Challenges for Bangladesh after Graduation

1. Special Market Access Provisions under different regional trade initiatives:
After graduation, the withdrawal of DFQF treatment will enhance competitive pressure on
Bangladesh’s export products. Besides, special preferential access from different countries
and trading partners will be reduced after transition period starts. Undoubtedly, upon LDC
graduation, products made in Bangladesh will become more expensive to buyers and
consumers in key export markets.
2. Special treatment regarding WTO related obligation: Bangladesh exports will
face an additional 6.7% tariff, which could result in an estimated export loss of around $2.7
billion (8%of 2015 exports). UNCTAD estimates that exports may fall 5.5% to 7.5%.

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 3. Increased contribution to international organizations: Graduation from LDC
category will nearly double Bangladesh’s assessed contribution to the United Nations
regular budget and other UN related organizations, operations, funds and programs.
4. ODA and other forms of bilateral and multilateral development financing:
Concessionary financing from the IDAs and multilateral assistance with special benefits
will not be available after having MIC status. Although, there are opportunities to explore
concessional financing from bilateral countries, the credits from those nontraditional DPs
are usually coupled with conditions.
5. Technical co-operation and other forms of assistance: As an LDC, Bangladesh
enjoys various international organizations fund support for scholarship, fellowship,
participating in special training programmes, various meetings and workshops, conducting
research, policy analysis and advocacy, and support for relevant inter-governmental
processes. These benefits will be withdrawn after graduation.
6. Other Challenges: Although the nation has demonstrated significant success in
disaster management, natural disaster will remain an uncertain variable. Undernourishment
could also remain a concern after graduation.

4. Graduation from LDCs: Opportunities

Graduating from LDCs is a global recognition that Bangladesh as a nation has made good
economic and social progress – our efforts being appreciated. Second, though caveats are there,
it’s a signal to investors that our economy is performing. Thus, we can expect an increase in
Foreign Direct Investment (FDI). Expected increase in investment, if translated into better
manufacturing sector may create more job opportunities for people. As Bangladesh will be no
more eligible to receive the export preferences at least from forty countries, business rules will be
more stringent, compliance requirement would be higher – but there are opportunities here – our
businessmen will be more innovative, more dynamic to maintain their profit margin, subsequently
businesses will be more capable, competitive and, will generate more employment.
There will be improved service delivery by the government in search of mobilized funds
through domestic revenue. LDC graduation will push policymakers to think alternatively, sharpen
their ideas, negotiation skills and execute plans in an efficient manner. At the same time, if
efficiency does not take place, the government of Bangladesh will face more cost to manage and
complete a development project in future than now. Therefore, it is expected that the Bangladesh
government will thrive to bring efficiency in project negotiation, management and its
implementation. Several stakeholders suggest that the improvement to Bangladesh’s image on the
world stage from graduation would give it a better credit rating, allowing it to borrow more cheaply
on world markets. Moody’s rating agency currently ranks the country as Ba3, which is below
investment grade and assigns Bangladesh’s bond the ‘high-yield’ or ‘junk’ status, although the
outlook is stable.

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5. Challenges and Opportunities in Agriculture:
Agriculture is the single largest producing sector of the economy of Bangladesh. Food
security and poverty alleviation is mostly lies with these macroeconomic based activities. As stated
in the vision 2021in line with the election manifesto of the present government that Bangladesh
has to reduce the import dependency, and again become self-sufficient in food production by the
year2013. By the year 2021, malnourishment would be reduced by 85%, and Bangladesh will
become food exporting country. The major focus for graduating from LDCs will center on
consolidating and expanding the productivity gains already achieved in food grain production as
well as designing policies, strategies and actions to accelerate the crop diversification and
commercialization process by increasing local and export market
opportunities by the farmers and other stakeholders. Further attention will have to be given to
reduce knowledge gaps as a means to sustain production and dealing with emerging issues arising
out of globalization and trade. The development vision of agricultural research would be to
generate demand-led green and climate-smart technologies/information suitable for highly
productive high value intensive agriculture. The development vision of agricultural extension
should be to continue improved technological support, technical know-how, where possible input
support and updated information to the farmers, in order to contribute in national economic growth.
The goal is to ensure national and household food security, increasing farmer’s income and
creation of employment opportunities at farm and home level.

6. Conclusion:
Challenges are integral for any development process. It derives from time, people, policy
and/or circumstances. Provided these issues are critically analyzed and strategically planned for,
most can indeed be turned into opportunities for the development progress. There is no obvious
single solution or silver bullet to transform the socio-economic and governance systems of a
country in a manner to convert the challenges into opportunities for sustainable economic and
social development. The changing economic environment and perspectives associated with LDC
graduation can open up new windows of opportunities that can actually help Bangladesh to take
necessary steps with a fresh endeavor to become an upper middle-income country by 2031 and
high-income country by 2041.

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7. Bibliography:
1. LDC Wikipedia: https://en.wikipedia.org/wiki/Least_Developed_Countries [11:19 PM; 4th April, 2018]

2. Who Are LDCs: https://www.itu.int/en/ITU-D/LDCs/Pages/Who_Are_LDCs.aspx [11:20 PM; 4th

April, 2018]

3. Least Developed Country Category: https://www.un.org/development/desa/dpad/least-developed-

country-category.html [11:30 PM; 4th April, 2018]

4. Least Developed Country Category: Bangladesh Profile*:

https://www.un.org/development/desa/dpad/least-developed-country-category-bangladesh.html [8:39 PM;
4th April, 2018]

5. LDC category – Graduation prospects after the 2015 triennial review:

https://www.un.org/development/desa/dpad/least-developed-country-category/ldc-data-retrieval.html
[8:39 PM; 4th April, 2018]

6.Bangladesh Development Forum 2018:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=5&cad=rja&uact=8&ved=0ahU
KEwjcgtmD56DaAhXEro8KHQWKBf4QFghGMAQ&url=http%3A%2F%2Fbdf2018.erd.gov.bd%2Fw
p-content%2Fuploads%2F2018%2F01%2FBDF18-LDC-Transition-Turning-Challenges-into-
Opportunities.pdf&usg=AOvVaw20sXBx-G5HoPGv5AeAbaAp [8:22 PM; 4th April, 2018]

7. CDP Handbook 2015:

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=2&cad=rja&uact=8&ved=0ahU
KEwjWnYCuhaHaAhWBQY8KHYciCQsQFggrMAE&url=https%3A%2F%2Fwww.un.org%2Fdevelop
ment%2Fdesa%2Fdpad%2Fwp-
content%2Fuploads%2Fsites%2F45%2Fpublication%2F2015cdphandbook.pdf&usg=AOvVaw3tAf7CZE
nvSX4WDhzwaUnD[10:31 PM; 4th April, 2018]

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