Home ›› 16 Jan 2022 ›› Opinion
When Bangladesh was included in the LDC group in 1975 by the United Nations (UN), it had all the elements of a newly independent nation with 83 per cent poverty rate. Five decades later, Bangladesh has changed its fate to the surprise of many, and in fact, established itself as one of the fastest growing economies in the world. Notable improvement in Per Capita Gross National Income (GNI), Human Assets Index (HAI), Economic and Environmental Vulnerability Index (EVI) obliged the UN authority to recognise Bangladesh as a developing country effecting from 2026.
As far as the vision of the current government is concerned, Bangladesh aspires to become a higher middle-income country by 2031 and a developed country by 2041. Prior to achieving these two prestigious statuses, Bangladesh must achieve the Sustainable Development Goals (SDGs) by 2030. So, creative plans need to be undertaken to address LDC graduation challenges at first. There are many challenges lying ahead centering LDC graduation. International trade, for instance, is one area where Bangladesh has yet to reap the full benefits from. Export earnings and foreign remittance have become key driving forces of Bangladesh economy in the last decade, without an iota of doubt.
After 2026, Bangladesh will lose eligibility for availing the Trade-Related Intellectual Property Rights (TRIPS) waiver on pharmaceuticals. In addition to fulfilling domestic demand, pharmaceutical products are generating huge export earnings from 150 countries. Moreover, existing subsidies related to agriculture products will be lifted by the WTO after being a developing country. Official Development Assistance (ODA) facilities from the world’s developed countries will have been stopped for Bangladesh after graduation. The developed countries provide 0.15-0.20 percent of their GNI in the form of ODA to LDCs. Developing Bangladesh after 2026 will not be eligible for grants and soft loans from the development partners that Bangladesh had been receiving since 1971.
The much-discussed GSP facilities, provided by the European Union countries, will be withdrawn, despite their earlier assurance of extending the facility up to 2027. Being an LDC, Bangladesh is currently enjoying the Everything but Arms (EBA) facility of GSP. After graduating to a developing country in 2026, Bangladesh will deserve GSP+ facility. But, grabbing GSP+ facility will be tough for Bangladesh based on requirements set by the EU authority. In 2015, the EU introduced a preferential market scheme for the non-LDC Low-Income Countries (LICs) and Low-Middle-Income Countries (LMICs), called 'Special Incentive Arrangement for Sustainable Development and Good Governance', better known as GSP+. Bangladesh exported 62 per cent of its apparels to the EU and the UK and almost 56 per cent of all exports. If export earnings come down following LDC graduation, Bangladesh will clearly be in trouble.
In absence of EBA facilities, the exports of Bangladesh would face 8.7 per cent duty on average due to the loss of duty-free and quota-free market access. It is estimated that shipments would drop at the rate of 5.7 per cent per year. Only, GSP+ facility is capable of keeping Bangladesh in competitive markets. To qualify for GSP+ scheme, Bangladesh has to ratify 27 international conventions and has to fulfill the 'vulnerability' criteria as set by the European Union. Since Bangladesh's exports to the EU expanded from $2.5 billion in 2000-01 to about $23 billion in 2018-19, the EU markets have to be kept hold by taking GSP+ facility, requiring Bangladesh to make massive efforts. The EU delegation has, in the meantime, expressed dissatisfaction over labor rights prevailing in Bangladesh. Even though a few months back, EU delegation told that GSP+ is not a picnic which became the lead news of a business daily. Hence, there are no other alternative avenues but to develop labour related laws with ensuring its strict enforcement if Bangladesh wants to avail of GSP+ facility.
In order to experience the continuation of the upward trend of economic growth post 2026, Bangladesh has to design a visionary roadmap to grapple with a myriad of challenges. Signing the agreement on free trade or preferential trade (FTA/PTA) with many countries has become the need of the time. FTA or PTA will help Bangladesh which will have lost GSP facility, to move ahead economically. PTA with Bhutan has been done already and FTA with the Eurasian Economic Union (EAEU) is under way. Bangladesh mainly targeted to trade with Russia alongside Belarus, Kazakhstan, Armenia, and Kyrgyzstan under FTA deal where 19 sectors have been given utmost priority. Besides, talks on trade pacts with India, Indonesia, Malaysia and Sri Lanka are likely to advance soon. There need to be developed relations with regional countries to avert future trade challenges. Regional connectivity is one of the issues that really assist Bangladesh to generate revenue in many ways.
If Bangladesh joins the block of Regional Comprehensive Economic Partnership (RCEP), Bangladesh never loses 12 per cent of its exports to RCEP, as stated in an UNCTAD report published recently. Export Promotion Bureau (EPB) revealed that Bangladesh exported goods worth $ 3.90 billion in FY 2020-21. According to UNCTAD projection, Bangladesh will lose exports of $ 468 million in case of trade benefits accrued to the RCEP members. Most RCEP members are important for Bangladesh in respect of bilateral trade. Such as RCEP members- Vietnam, Thailand, Indonesia and Myanmar are emerging export destinations for fastest growing economy- Bangladesh.
Scouring the ocean for resources has been a reality and priority for many nations in the world. Bangladesh has already latched onto the concept of 'Blue Economy'. Nevertheless, marine connectivity with island nations helps Bangladesh to generate benefits and revenues that may be useful in offsetting LDC graduation challenges to a great extent. Foreign remittance helped markedly the war-ravaged Bangladesh with around $ 800 million GDP size in 1972. The importance of foreign remittance has not diminished, rather increased rapidly. So much so, that today foreign remittance serves as a potent force for the Bangladesh economy, which is why the arrangement for sending more Bangladeshi workers abroad is a top-priority task. In the short run, foreign remittance would be the only source for enhancing foreign exchange reserves of Bangladesh after LDC graduation. The need for looking for new markets and resolving long pending issues related to Bangladeshi expatriates must also not be overlooked. It is therefore manifest that Bangladesh will face a good number of challenges for LDC graduation.
However, a nation which has always demonstrated resilience against all headwinds it faced will also not be floundering for long. Evidences abound to suggest that Bangladesh will successfully get over all the challenges of LDC graduation and soon become a stable, peaceful and prosperous developing nation after 2026.
The writer is an economic affairs analyst and PhD Research Fellow. He can be contacted at mazadul1985@gmail.com.
