On way to a developing country

Bangladesh is working towards becoming a developing country by 2026 through fulfilling certain conditions as per guidelines set by the UN Conference on Trade and Development (UNCTAD).

What seemed like an impossible dream even ten years back now seems to be on the way to becoming a reality. We have come a long way since 16 December, 1971, but we have to go many more miles before we can obtain the coveted certificate from the UN. And sincere, concerted efforts of all are what the country needs at the moment to reach the milestone beckoning in the distance.    

In a bid to ensure a smooth transition from LDC to a developing nation the country has to make sure that private investment and revenue earning as per the conditions entailed by the UN increases many folds.

Also, improvements in other vital areas will have to be achieved, such as, increased productivity in the manufacturing sector and development of the human capital and digital infrastructure.              

The UNCTAD report titled the Least Developed Countries Report 2021 was launched virtually on Monday. It has mentioned some conditions that LDCs will have to fulfil in order to become eligible for the desired status.

This is in line with the United Nations Committee for Development Policy (CDP) decision taken in the second round of review that says Bangladesh is going to graduate to the developing nation status by 2026 after fulfilling the three criteria, namely, gross national income per capita, human assets index and economic vulnerability index.

There are propositions for improving the taxation system for strengthening domestic resource mobilisation, and emphasis has been given on boosting revenue earning. Private sector investment has to increase as it is relevant for Bangladesh to ensure smooth graduation to the desired level. The country will have to continue to invest in human capital through improving access to education, technology and science.

The ravages of Covid-19 and its long-term consequences have been taken into cognisance by UNCTAD along with the climate change impact on many vulnerable countries. It needs no emphasising that the Covid-19 pandemic has raised the necessity of a process of Global Value Chain (GVC) restructuring, bringing renewed urgency to supplier diversification and dependability. Therefore, for a successful LDC graduation, Bangladesh will have to belligerently pursue GVC diversification, as increased tariffs from LDC preferential treatment loss and domestic infrastructural constraints pose a threat to continued export revenue and investment flows.

 It has been observed in the report that in order to mobilise sufficient development funds, LDCs need to make their fiscal capacities stronger, increase domestic resource mobilisation and improve the effectiveness of public expenditures. One important condition for LDCs to fulfil would be to mobilise additional resources equivalent to 41.6 per cent of GDP until 2030.  

In a world dominated by technology of all kinds, trailing behind other developing nations would only spell disaster for Bangladesh. Through adoption of time-befitting technology, the country's youth would be able to contribute to the overall development of the nation.

Therefore, to stay in the race, Bangladesh will need to harness technological advancements to adjust its existing GVC linkages and thereby strengthen its production and export capacities, connectivity and logistics through system-wide reform. The strategic industrial, trade and structural policies are needed for longer-term benefits.  

The graduation to the next level will come with some forfeiture, such as, it is likely to reduce inflow of external finance and at the same time duty-free trade benefits will also reduce. Hence, Bangladesh has to march forward strategically to ensure structural transformation.

Eminent economists say that in the case of export, we have to think about product diversification and value addition instead of depending on duty-free benefits. As the flow of concessional foreign financing and grants will reduce and interest rate might increase two to three per cent, to keep up the present development spree, the international community and donors will have to redistribute their investment schedule.

However, according to the report, Bangladesh can expect some concessions in accessing development finance but for mobilising resources and retaining the growth momentum, Bangladesh has to double its share of manufacturing.