Navigating LDC graduation status and its ripple effects

Bangladesh's dream to achieve “Sonar Bangla” is on the horizon and its recent economic achievements are testimony of its resilience to become a trillion dollar economy. One of the impending challenges in achieving the milestone will be the loss of preferential treatments of Bangladeshis products post its graduation from least developed countries (LDC) as it will lead to higher tariffs and other trade barriers making it harder for the Bangladeshi export sector to compete with other developing countries in the global market.

The country heavily relies on a few key export markets, including the European Union and the United States. The loss of preferential treatment in these markets may increase the cost of doing business, making it difficult for Bangladeshi exporters to compete with their counterparts from other countries.

Other significant challenges that Bangladesh will face post-graduation is the loss of access to concessional financing. Access to concessional financing has played a critical role in supporting Bangladesh's development projects and achieving its progress in human development. Without access to concessional financing, Bangladesh's ability to finance its development projects may be constrained, leading to potential negative consequences for its economic growth.

However, Bangladesh also has significant opportunities to maintain its growth momentum post-graduation. The country can focus on developing its human capital, especially in STEM fields, to promote innovation and productivity. Furthermore, Bangladesh can adopt an export-oriented industrialization strategy to diversify its export base and reduce its reliance on a few key markets.

In order to further accelerate the growth, Bangladesh needs to sign several trade deals mainly with economic powerhouses of the world. China and India being the immediate neighbours should be the first in the list and Japan along with the ASEAN bloc could act as a buffer to save the emerging new sectors like Pharmacy, Electronics, Light Engineering and others.

This approach can be facilitated by economic integration with its neighbours, India and China, which have the potential to provide unique opportunities for trade, investment, and technology transfer. India's "Act East" policy presents an opportunity for Bangladesh to expand its market access to Southeast Asia and beyond. Similarly, China's Belt and Road Initiative (BRI) can help Bangladesh enhance its connectivity and economic integration with its northern neighbours. Chinese investment in infrastructure projects can help reduce transportation costs and increase trade flows, while technology transfer can help modernize Bangladesh's industries.

However, as Bangladesh engages with its neighbours, it must be careful to protect its interests by leveraging its strategic location as a bridge between South and Southeast Asia, Bangladesh must pursue a balanced approach to ensure its interests are adequately protected.

Investment in Green and Blue economy and Digital Transformations will play a critical part to set the new trajectory of economic development which can be achieved by promoting research and development by incentivizing private sector investment in innovative technologies and products. For this, Bangladesh needs to further focus on creating a favorable investment climate to attract foreign companies to invest in the country. This can create jobs, transfer technology and knowledge, and enhance productivity, leading to sustainable economic growth.

The recent formation of panels to start CEPA talks with India is a good start in the direction and hopefully we will witness a fruitful outcome of the long awaited trade deal between both countries. In order to expedite similar talks with other regions a comprehensive framework could be developed and Bangladeshi embassies should engage with the authorities in the host countries to strike trade deals by leveraging its growing huge middle class population and investment opportunities.

The graduation from LDC status presents both challenges and opportunities; and it is akin to changing tyres in Formula1 pit stop, which can make the difference in winning or losing the race depending if the pit crew work proactively and efficiently without losing valuable time on track. Likewise, LDC graduation demands careful planning and coordination between public and private players both home and abroad to ensure smooth transition.

The writer is the founder and CEO of UAE-based consulting firm Green Proposition Consulting. He can be contacted at [email protected]