The task before Bangladesh’s policymakers is to make the best use of the next five years to ensure that the country’s LDC graduation takes place with momentum and that graduation is sustainable
The die has been cast!
Finally, a timeline has been set for Bangladesh’s graduation out of the group of least-developed countries (LDCs).
The United Nations Committee for Development Policy (CDP), which is tasked to assess the eligibility of LDCs for graduation, has in its meeting on February 22-26 recommended to the the United Nations Economic and Social Council Bangladesh’s graduation out of the LDC group to take place in 2026.
This recommendation is in keeping with the Bangladesh government’s request for deferment of the graduation, earlier scheduled for 2024, by two years.
The request for deferment, which was made at the meeting on January 15 between Bangladesh officials and the CDP, was because of the challenges faced by the country on account of the ongoing pandemic and in anticipation of the additional time required to address the embedded vulnerabilities.
The task before Bangladesh’s policymakers in this backdrop is to make the best use of the next five years to ensure that the country’s LDC graduation takes place with momentum and that graduation is sustainable.
No doubt, Bangladesh’s LDC graduation should be seen as a reason for national celebration.
It is a recognition of the formidable achievements of Bangladesh in terms of key socioeconomic indicators, which are captured in the three graduation criteria: GNI per capita, Human Asset Index and Economic Vulnerability Index.
Indeed, one of the distinctive features of Bangladesh’s graduation eligibility in 2018 was that it was attained with a significant comfort zone as far as the graduation thresholds were concerned.
Analysis carried out at the Centre for Policy Dialogue (CPD) indicated that under normal situation the comfort zone would be further consolidated and expanded as the country moved towards the final graduation timeline of 2024.
Although the ongoing pandemic is leaving its mark on a number of sub-indicators of graduation criteria, not to mention the lack of real-time data that makes any measurement difficult, there is every indication that given the graduation criteria Bangladesh should be on course in terms of meeting all eligibility criteria when the time comes.
However, graduation will entail significant challenges for the Bangladesh economy.
What is important to keep in mind is that the three graduation criteria are limited in scope and coverage and do not capture many of the factors that drive the structural transformation of an economy which is required for the sustainable development of any country.
Thus, the next five years should be taken advantages of by Bangladesh to address the embedded structural weaknesses and build a competitive, skill-endowed and productive economy.
Bangladesh will need to make the best use of this time to reduce the vulnerabilities, which have been accentuated by the pandemic, strengthen adjustment capacities given the loss of international support measures (ISMs) and reap the benefits of the emerging regional and global opportunities by building the required supply-side capacities.
Bangladesh’s success in taking advantage of the ISMs in place for the LDCs would by implication also imply that implications of the loss of these support measures will also be most acutely felt by the country.
For example, of the anticipated export loss of about $6 billion originating from the loss of preferential market access, estimated by the WTO Secretariat, about 90 per cent will be borne by Bangladesh.
The impacts of the loss of ISMs will be felt in various ways: higher tariff rates to be faced by Bangladesh’s exports, particularly in case of export of garment items (expected to rise by 9 per cent), adverse impact on the country’s pharmaceutical sector because of loss of flexibilities concerning intellectual property rights and loss of policy space in areas of incentives, subsidies and various supports which Bangladesh is currently allowed to provide as an LDC.
Bangladesh will need to chalk out a road map given the emerging challenges and in anticipation of its journey as a non-LDC developing country where reciprocity, competitive strength and compliance adherence will constitute the rules of the game.
Bangladesh will need to vigorously pursue negotiating bilateral and regional comprehensive economic partnership agreements to attract investment and create the needed supply-side capacities and to take advantage of preferential market access.
However, as against non-reciprocal preferences that have until now been the dominant norm of partnerships, reciprocity will be the new norm and the new normal.
This will mean pursuing needed domestic reforms and undertaking appropriate preparation for tough negotiations.
In this connection, policymakers should think seriously about establishing a negotiation cell, similar to the WTO Cell, preferably in the commerce ministry.
An effective triangulation of trade, investment and transport connectivity will be needed to take advantage of the initiatives currently pursued by the government to establish multimodal connectivity and to set up special economic zones.
Productivity enhancement, effective institutions and the ability to translate comparative advantages into competitive strength will be required to lay the foundations of sustainable LDC graduation.
As we celebrate this important milestone in the year of the 50th anniversary of our independence, let us also keep in mind the need to get on, in all earnest, with the attendant tasks that sustainable LDC graduation requires of us.
The author is a Distinguished Fellow at the Centre for Policy Dialogue