Home ›› 01 Jan 2022 ›› Opinion
Bangladesh will graduate from the LDC category in 2026 after an extended preparatory period of five years (the standard period is of three years) to enable them to prepare for graduation while planning for a post-Covid-19 recovery and implementing policies and strategies to reverse the economic and social damage incurred by the Covid-19 shock. In this article we would like to discuss what is LDC, how and why a country has been determined as LDC by whom, when a country graduates from the LDC list, what is the graduation process, what is the role of graduating country, UNCDP, UNGA, ECOSOC and other developing partners to ensure smooth transition of an LDC Graduating country etc. in brief in this article.
The least developed countries (LDCs) are low-income countries confronting severe structural impediments to sustainable development. They are highly vulnerable to economic and environmental shocks and have low levels of human assets. The least developed countries are among 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.
There are currently 46 countries on the list of LDCs which is reviewed every three years by the Committee for Development (CDP). LDCs have exclusive access to certain international support measures in particular in the areas of development assistance and trade. Development of LDCs is a global concern, because they constitute 13 per cent of global population but owns only 1.3 per cent of global GDP. Their participation in international trade is less than one per cent. Therefore they have potentials to increase GDP growth, international trade participation and poverty alleviation through proper utilization of resources and good governance.
The concept of global initiative for poverty alleviation started in 1969 at 24th Session of UNGA, global leaders recognized the need for united effort for poverty alleviation. After a rigorous negotiation and intellectual analysis finally 26th UNGA endorsed a list of 25 least developed countries as LDC in 1971. This list of LDCs enlarged in different numbers and different times, some of the LDCs like Botswana (graduated from LDC status in December 1994), Cape Verde (graduated in December 2007), Maldives (graduated in January 2011), Samoa (graduated in January 2014), Equatorial Guinea (graduated in June 2017) and Vanuatu (graduated in December 2020) are already being graduated from the list and few others delisted for other issue. Finally, the current list of LDCs beholds 46 countries with graduation plan including Bhutan (2023), Angola (2024), Solomon Island (2024), São Tomé and Príncipe (2024), and Bangladesh (2026) etc.
Current criteria for LDC Graduation are GNI per capita should be $ 1,222 or above, Human Asset Index should be 66 or above and Economic Vulnerability Index should be 32 or below. Bangladesh’s performance during 1st review in 2018 was $1272 (GNI Per capita), 72.8 (HAI) and 25 (EVI) respectively. During the 2nd triennial review in 2021 Bangladesh’s performance was $1640 (GNI Per Capita), 75.3 (HAI) and 27.3 (EVI) respectively. That means economic vulnerability index performed poorer in 2021 than that of in 2018. It could be due COVID crisis, Bangladesh economy is now more vulnerable than that of in 2018. Therefore government of Bangladesh applied not to be graduated in the previously scheduled 2024 and CDP considered it to be graduated two years later in 2026.
This graduation will introduce Bangladesh as a developing country around the globe as a result Bangladesh’s credit rating will be increased, it will be more reliable to the foreign investors as an investment destination, Bangladesh will get more emphasis in several multilateral platforms. But at the same time this graduation will lift most of the LDC centric benefits what Bangladesh is getting now. This is the point of anxiety to many experts. But government centric experts or ruling party activists became successful to publicise that, Bangladesh should not be worried about the LDC centric benefit withdrawal rather celebrate the graduation with maximum satisfaction.
The reality is that, all the LDC centric benefits will not be withdrawn at a time soon after the LDC graduation of Bangladesh. Market preferences will be withdrawn after three years of graduation. That means when Bangladesh finally graduates in 2026 then market access preferences will be withdrawn by 2029. Few LDC centric benefits like UN Technology Bank’s support will remain for five years after graduation. EU agreed to continue the benefits for three years after the graduation. But ultimately Bangladesh will lose its LDC centric benefits and it will adversely affect our export earnings. According to a recent study of CPD it could result in reduction of Bangladesh’s export earnings from 8 per cent to 10 per cent each year its monetary value could be $2.5 billion after graduation.
There is no scope to debate that, Bangladesh economy will have to face a shock due to withdrawal of LDC benefits after three years of graduation. Pro or anti-government is not the case here, it is the reality. Therefore today is the right time for the government to take prior preparation so that this shock will not be a deep one. Government should plan for a smooth transition to make the shock lighter and make the economy resilient enough to absorb the stated shock. Government’s transition strategies should aim to ensure that development efforts are not disrupted by graduation. There should be a Transition Strategy Paper which should focus on expected implications of loss of LDC status and associated special support measures.
Transition Strategy Paper should present a comprehensive and coherent set of specific measures in accordance with the priorities of the graduating country, taking into account its specific structural challenges, vulnerabilities and strengths. This strategy paper should be strictly implemented after graduation takes place. Besides the LDC Graduation Strategy paper Bangladesh should actively be exploring alternative trading arrangements through bilateral (and regional) free trade area agreements. Bangladesh should also focus on entrepreneurship development and employment generation initiatives to fight with unemployment challenges. Special attention should be given to the exportable product and market diversification to cope with change in global economic order etc.
Other important areas for making the transition smoother could be technology upgradation for productivity and product quality improvement; skills development through re-skilling and up-skilling of labour forces for keeping them productive with change of technologies due to upgrading industrial machineries from 3rd to 4th industrial revolution. Sincere achievement of Sustainable Development Goals could be complementary for smooth LDC Graduation of Bangladesh economy; therefore SGD’s should be incorporated in the Transition Strategy Paper with due importance. Finally we would like to urge the government to take all possible adverse effects of the LDC graduation seriously and adopt a comprehensive Transition Strategy Paper and ensuring smoother transition through its honest and sincere implementation.
The writer is a development researcher
