Meeting post LDC graduation challenges

Bangladesh is scheduled to graduate from LDC to a developing country in 2026, as it has fulfilled all three eligibility criterion– 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. Significantly, the extraordinary socio-economic development in the last decade has helped Bangladesh qualify for this graduation. This status will increase value of Bangladeshi brands, Bangladeshi passport, and Bangladesh’s position in different global platforms. The status will lead to enhanced confidence of international financial bodies, improved credit rating and higher FDI. The government is already moving ahead 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 Commerce Secretary Tapan Kanti Ghosh’s speech at a workshop organised by the Economic Reporters Forum (ERF) held ahead of the 12th Ministerial Conference of the World Trade Organization–which begins on November 30 in Geneva, Switze. He stated that the country must be ready to face the challenges of possible erosion in duty-free market access and other trade benefits after the LDC graduation to remain competitive in the global market.

At the MC-12, Bangladesh is expected to highlight a wide range of issues and get results through fruitful bargaining. According to the commerce secretary Bangladesh is expecting positive outcomes from MC-12th. And it will present its position on GSP facilities, TRIPS, intellectual property, and subsidies in the fisheries sector. Striking a positive note, he said that Bangladesh is expected to continue enjoying the LDC benefits even after 2026, adding that Bangladesh will demand the benefits of GSP, GSP Plus, and TRIPS under WTO’s support measures.

Bangladesh and other LDC members of the WTO are expected to push for at least six years to a maximum of nine years for gradually phasing out the trade preferences after graduation from the LDC category. Given the critical importance of the issue the LDCs want to have procedures in place to extend their preferential market access scheme for graduated countries over a period of six to nine years.

According to experts, Bangladesh will face serious challenges the pharmaceutical sector and the garments sector. Currently, pharmaceutical companies do not have to pay for patent costs as per the rules for LDCs. So, Bangladeshis are buying medicine at lower prices, and the sector is booming, extending its operation in various regions through exports. However, after graduating to the next level, companies will have to pay much more than before. Therefore, medicine will become more expensive. The RMG sector now has lower costs due to cheap labour and tax redemption in some countries. But after graduation, Bangladesh might face some more criteria to adjust to improving the working labour situation. This might raise costs. Thankfully, the EU and the United Kingdom have agreed to provide some more time for Bangladesh to adjust to these changes. 

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.