Seeking ADB support for facing post-LDC graduation challenges

Bangladesh is scheduled to graduate from LDC to a developing country in 2026, as it has fulfilled all three eligibility criteria– per capita income, human assets index and economic vulnerability index. This indeed is a matter of great pride for the country which became independent 50 years back. The extraordinary socio-economic development in the last decade has helped Bangladesh qualify for this graduation. This status will increase the value of Bangladeshi brands, Bangladeshi passports, and Bangladesh’s position on different global platforms.

The status will lead to enhanced confidence in international financial bodies, improved credit rating and higher FDI. The government is already moving ahead in developing many mega projects including special economic zones and high-tech parks. In this new reality, many foreign entrepreneurs will surely take advantage of these modern infrastructures. However, many observers believe that the real challenges will come after Bangladesh officially becomes a developing country. And to meet those post-LDC graduation challenges the country must be fully prepared.

This was reflected in Finance Minister AHM Mustafa Kamal’s request to the Asian Development Bank (ADB) to provide more support to Bangladesh in facing the post-LDC graduation-related challenges. The minister made the request when ADB Country Director for Bangladesh Edimon Ginting paid a courtesy call on him at his secretariat office in Dhaka recently.

The minister said that Prime Minister Sheikh Hasina has been working tirelessly to turn Bangladesh into a hunger- and a poverty-free prosperous developed country by 2041 and also to materialise the dream of building ‘Sonar Bangla’ as dreamt by Father of the Nation Bangabandhu Sheikh Mujibur Rahman.

Kamal wholeheartedly appreciated the role of the ADB in the country’s socio-economic development, especially in overcoming the adverse impacts of the Covid-19 pandemic.

After graduation, Bangladesh will have to go for blended finance that includes loans from development institutions and other sources with a high-interest rate and shorter repayment period. In our current annual budgets, the contribution of foreign assistance is around 15 per cent, which is really not that much significant considering the huge size of Bangladesh’s budget but it will have an impact on our development budget. We believe that the government should focus on ensuring development and the growth of investment, employment, individual income and productive capacity. It also needs to start communicating with other nations to manage their export-import-related relations to cover the limitations. Bangladesh has to engage in bilateral FTA discussions with significant trade partners to offset risks posed by the graduation to a developing country. To meet the challenges, Bangladesh also requires economic diversifications, technological advancements and increased labour productivity.

Bangladesh must take some urgent steps to face the challenge of LDC graduation. These would entail economic diversification, technological upgradation and improvement of labour productivity. It must give focus on domestic market expansion and consolidation.

The revenue–tax/GDP ratio needs to go up, and policy reforms and investments will also be needed for greater ease of doing business. There must also be a focus on improving competitiveness, keeping in view competitive advantages such as wage levels and the faster processing of investment proposals. Moreover, the productivity of all sectors—agriculture, industry and services—must be increased.

Apart from free trade agreements and an increase of Tax to GDP ratio, Bangladesh needs to improve the quality of education through the modernization of tertiary education, link education and industries, and put emphasis on skills development, in a bid for increasing our productivity. It is also important to ensure good governance with accountability and acceptance of responsibility. This extends to the need for strengthening institutional arrangements for administration by government ministries. It must also focus on strengthening the Implementation, Monitoring and Evaluation Division (IMED) for public investments, ensuring zero cost increase, time overruns, and above all on control of corruption to maintain quality control of such investments.