Wednesday | 15 January 2025 | Reg No- 06
বাংলা
   
Wednesday | 15 January 2025 | Epaper

Bangladesh starts journey to a new birth

Graduation from LDC: a cost-benefit approach

Published : Monday, 22 January, 2018 at 12:00 AM  Count : 1226
Haradhan Ganguly
In March this year the United Nations is going to announce Bangladesh's graduation process from LDC status as the country is maintaining better economic and social indicators for three required trajectories. Bangabandhu in his historic 7th March speech in a thunderous voice declared "this struggle is a struggle for emancipation, this struggle is a struggle for liberation."
Bangabandhu being an architect of a nation gave us statehood. We got liberation in exchange of an ocean of blood and supreme sacrifices. Before that Bangalees had no politically liberated land during their hundreds of thousand years of journey. Now the country is heading towards getting the taste of economic, social and cultural emancipation.
An emancipation from abject poverty, inequality and other social and economic bondages and taboos. So announcement of graduation from LDC status is a second birth for Bangladesh. One was our political liberation. Bangladesh has already been enjoying middle income country status.
In inaugural session of two day meeting of Bangladesh Development Forum ( BDF) which was recently concluded in Dhaka Prime Minister Sheikh Hasina said Bangladesh is ready to stand with developing countries after coming out from the status of the Least Developed Countries ( LDC ) in March next and a strategic preparation has already been taken to face the impact. That means, Bangladesh is to strengthen social protection provision for the extreme poor, building human capital as a pre-requisite for growth and poverty reduction, improving equity, quality and efficiency of health and education services and improvements in nutrition outcomes.
As per the UN provisions, inclusion and graduation of LDCs are based on three criteria: per-capita gross national income, human assets and economic vulnerability to external shocks. Bangladesh has already reached necessary threshold levels for economic vulnerability Index and Human asset Index while it is expecting to meet the threshold of Gross National Income by this year.
The LDC graduation review takes place every three years. As per the current provisions, a country needs to be eligible in two consecutive reviews before any recommendation is made. Therefore, Bangladesh will have to meet these same criteria again in 2021 to be recommended for graduating from the LDC status.
After getting out of the LDC status, our next journey will not to be adorned with bed of roses.  To be in the status of developing country after graduation is a big achievement for us. It proves Bangladesh economy is dynamic and social orders run well. But according to the go of the external economy graduation may give rise to potentially important economic costs due to withdrawal of GSP facilities from the European Union, Canada, Japan, Australia and other markets. Bangladesh is likely to lose about USD 2.7 billion in export earnings every year once it graduates from the LDC bracket where it has been for 43 years.
Upon graduation exports will be subjected to 6.7 percent additional tariff as duty free and quota free benefits from different countries and trading partners will be withdrawn. This information came in a paper prepared by Economic Relations Division on the challenges and opportunities related to access, with shipments under this facility accounting for 72 percent of the total exports in fiscal 2015-16, according to ERD.
Bangladesh enjoys preferential market access to more than 40 countries in varying degrees. Regional trade agreements and bilateral initiatives cover about 90 percent of the total exports and thus preferential market access is of special significance. Of note is the preferential treatment by the EU, where 54 percent of Bangladesh's shipments are headed.
After graduation, Bangladesh's exports will face 8.7 percent tariffs. Undoubtedly upon LDC graduation, products made in Bangladesh will become more expensive to buyers and consumers in key export markets. The United Nations Conference on Trade and Development estimates Bangladesh's exports may decline 5.5 percent to 7.5 percent.
The preference erosion in major exporting countries will thus have implications for export competitiveness and export earnings and consequently GDP, employment and poverty. On the one hand, we lose some opportunities. But on the other hand, new avenues of opportunity will be opened. Alongside increasing domestic resource mobilization, ERD report advised the government to improve road, power and port facilities to offset the effect of lost preferences in export markets.
Heightened efforts are necessary to diversify exports in order to reduce vulnerability of Bangladesh economy. It is not just in export markets as the country will also be hit when it comes to foreign aid. Concessionary financing from the International Development Association, the part of the World Bank that helps the world's poorest countries and multilateral assistance with special benefits will not be available upon the attaining the middle income status.
The benefit of technical cooperation and other forms of assistance such as fund support for scholarship, fellowship, participation for special training as well as for research will be pulled out. Many of the first track projects such as the Matarbari power hub, Dhaka Metro Rail and Karnaphuli River Tunnel will require external borrowing and might not be financed from traditional concessional borrowing.
As per the World Bank criteria, if the country's per capita income remains above $1400 for three consecutive years, the rate of interest would become about 2 percent in contrast to 0.75 percent at present. Bangladesh has a solid track record of prudently managing its public debt service payments, there is a risk that the foreign debt burden may increase due to the phasing out of the concessional facilities.
In this regard our finance minister is also correct. He dismissed the probability of stopping concessional external financing issue. To him, Bangladesh's foreign aid dependence has declined substantially. It accounts for 1.3 percent of GDP. So there will be no problem in implementing programmes for attaining Sustainable Development Goals. Finance minister informed, there are $37 billion of foreign loans in the pipelines.
The current strategy of prudent utilization of concessional borrowing should be emphasized. So activities related to social development, including health and education should remain the core area of the development policy along with increased coverage of the social safety net programmes to address extreme poverty. But our Prime Minister urged the developed countries to be more courteous about a flexible world trade regime to help the developing countries like Bangladesh to achieve their overall development, poverty alleviation and employment generation. Her call in Bangladesh Development Forum's inaugural session must find responsiveness.
Our ERD has already rearranged strategy how to make up loses after graduation. No alternatives are there for export diversification. Here a prudent private sectors' role will be time responsive one.

The writer, a freelance contributor, can be reached at gharadhan@gmain.com






LATEST NEWS
MOST READ
Also read
Stop bloodshed in the war torn country
Will Kurds keep American weapons after Syria withdrawal?
Post Language Movement East Bengal and struggle for rights
Tribute to Comrade Moni Singh
Agriculture: An effective approach of improving condition of disabled people
The environment ready to arrange fair election?
International Monetary Fund: A heartbreaking story!
Political and election culture in Bangladesh
Editor : Iqbal Sobhan Chowdhury
Published by the Editor on behalf of the Observer Ltd. from Globe Printers, 24/A, New Eskaton Road, Ramna, Dhaka.
Editorial, News and Commercial Offices : Aziz Bhaban (2nd floor), 93, Motijheel C/A, Dhaka-1000.
Phone: PABX- 41053001-06; Online: 41053014; Advertisement: 41053012.
E-mail: district@dailyobserverbd.com, news©dailyobserverbd.com, advertisement©dailyobserverbd.com, For Online Edition: mailobserverbd©gmail.com
🔝
close