Addressing post-LDC graduation challenges

The United Nations Committee for Development Policy (UNCDP) has recommended Bangladesh for the developing country status. On the basis of fulfilling the criteria set by the UN, CDP sent proposal to United Nations Economic and Social Council (ECOSOC) for concrete decisions. To snatch the status of developing county, per capita Gross National Income (GNI), Human Assets Index (HAI), Economic and Environmental Vulnerability Index (EVI) are considered. Currently, per capita income in Bangladesh $1,827 (requirement being $ 1,230), HAI 75.4 points (requirement being 66 points or above), EVI 27 points (requirement being 32 points or below). It can be mentioned here that ECOSOC, upon satisfaction over CDP review, will place a resolution to General Assembly of United Nations scheduled to be held in September this year.

The United Nations normally gives three years to a country to get prepared ahead of graduating to a developing country. However, the Covid situation has helped Bangladesh gain two more years. Ultimately, Bangladesh is going to get into the bracket of developing country status in 2026.

In respect of country rating, Bangladesh’s position would be displayed in a competitive row. This graduation message has already spread worldwide and has helped enhance Bangladesh’s brand image. From now on, foreign investors are likely to show enthusiasm to pour

capital on businesses with high confidence on the basis of country rating. As a result of FDI inflow, tax- to- GDP ratio is expected to reach new heights. It is our big achievement since independence. The country’s hardworking people deserve appreciation for this achievement.

Bangladesh, over the last decade, has made tremendous progress on its economic front. Export earnings increased from $15.57 billion to $40.54 billion. Foreign currency reserve has risen from around $7 billion to $ 46 billion. Poverty rate has reduced from around 48.9 percent to 20.5 percent. The overall economic scenario has been changed in apparently the twinkling of an eye.

Shortly after becoming an independent country, Bangladesh had been enjoying trade-related facilities. Bangladesh, for the last fifty years, has the least-developed country status. According to World Trade Organization (WTO) provision, every LDC has the right to get required trade-related facilities.

In light of WTO provision, Bangladesh had been enjoying Generalized System of Preferences (GSP) facilities provided by European Union 28 counties. The GSP facilities was made debut in 1971 in the aim of stand by vulnerable developing economies. There are three types of GSP- Standard GSP, GSP + and EBA (Everything but Arms). Bangladesh had been enjoying EBA under GSP facilities provided by EU markets. The Everything But Arms ( EBA) grants full duty-free, quota-free access to all products except arms and ammunition from countries classifies by UN as LDC’s. There are Currently 49 EBA beneficiaries.

Bangladesh is the biggest beneficiary of EBA followed by Cambodia. The 28-country of EU is widely known as the largest export destinations of apparel products produced in Bangladesh. The EU countries account for 58 percent of the Bangladesh’s total exports and 64 percent of total apparel exports.

It is worth mentioning here that after LDC graduation, Bangladesh will not be allowed duty free quota free access (DFQF) to EU markers under GSP facilities. Then, Bangladesh would experience 8.7 per cent duty on average.

It is estimated that shipments are set to drop at the rate of 5.7 percent per year. In order to mitigate a wide range of export losses, Bangladesh has to qualify for the GSP+ scheme. GSP+ scheme is a special incentive arrangement for Sustainable Development and Good Governance for vulnerable developing countries.

It is important to note that GSP+ system grants full removal of tariffs on over 66 percent of EU tariff lines. To grab GSP+ facility, Bangladesh has to ratify 27 international conventions set by the European Union earlier.

Unfortunately, Bangladesh is still far away in terms of ratifying international conventions.

But, the move for improving labour condition and workers’ rights is under way. Shortly, Bangladesh is set to be emerged as labor friendly economy if ongoing reform activities remain running. Following a series of incidents in the recent years in Bangladesh, the EU delegation has so far expressed grave concern over labor issues. Briefly saying, there is no alternative to make sure better working environment that requires ratifying 27 international conventions.

The United States of America (USA) is ranked 2nd in terms of importing Bangladesh-made apparel products. Bangladesh now needs to discuss with USA regarding reopening GSP facilities that were introduced on November 25, 2013 through historic Trade and Investment Cooperation Forum Agreement ( TICFA).

A major three key features of TICFA are labour condition, compliance and intellectual Property Rights (IPR). Much-desired TICFA was cancelled following Rana Plaza collapse that killed more than 1100 people, mostly garment workers. Considering Post-LDC graduation challenges, the need for revive TICFA is a must. TICFA will pave ways for stronger engagement between the parties to resolve some crucial trade issues like GSP restoration and duty-free quota-free (DFQF) access of Bangladesh exportable to US market.

If Bangladesh can expand GSP facilities in US market through TICFA, it would hardly face trade-related challenges in the years to come.

If Bangladesh could join the Regional Comprehensive Economic Partnership (RCEP) bloc like Vietnam and Cambodia, it would definitely gain the ability to address post-LDC graduation challenges. RCEP is a free trade area of 15 economies.

There is a provision of duty-free access to member countries in the RCEP deal that was signed in 2020. Bangladesh might consider joining RCEP through diplomatic channels. Besides, Bangladesh had better begin the race for signing preferential trade agreement (PTA) or free trade agreement (FTA) with friendly countries as soon as possible.

Vietnam - known as competitor of Bangladesh- moved for PTA or FTA signing soon after getting in the category of developing country. In addition to the FTA deal, Bangladesh has to give full attention to the affairs of regional connectivity. To get GSP+ facilities from the EU, the state has to scale up required functions for addressing 27 international conventions.

The writer is an economic affairs analyst