UN adopts resolution on Bangladesh’s LDC graduation

The United Nations General Assembly (UNGA) has adopted a resolution on allowing Bangladesh to move into the developing country grouping from the least developed country (LDC) category.

Bangladesh will officially gain the status of a developing country in 2026 with the approval of the UNGA as the UN has given the country five years, instead of three, to prepare for the graduation.

The UNGA adopted the resolution during the 40th plenary meeting of its 76th session following a recommendation of the Committee for Development Policy (CDP) for Bangladesh's graduation from LDC. On the day, two other countries – Nepal and the Lao People's Democratic Republic –also got clearance for LDC graduation.

Finance Minister AHM Mustafa Kamal has termed the UN recognition as "a historic achievement" in the development journey of Bangladesh which was included in the LDC category more than four decades ago.

Foreign Minister Abdul Momen called it a "joyful occasion" and emphasised the need for increasing productivity, marketing, skills, and homework to meet the post-LDC graduation challenges.

Mentioning the UN approval as a "matter of pride", economists, businessmen and analysts have called for taking prompt measures to prepare for post-transition trade challenges.

The LDC group, including Bangladesh, will meet at the 12th Ministerial Conference of the World Trade Organisation slated for 30 November this year with proposals to continue the GSP facility for 6-9 years after LDC graduation and to continue the various facilities enjoyed by LDCs for 12 years or for a fixed period post-LDC graduation.

The experts suspect the meeting may not yield positive decisions, and so Bangladesh must look for ways to increase exports by facing various obstacles – including the loss of duty-free access to various markets following the advancement from the LDC status to the developing country grouping, the reduction of import duties in the interest of signing free trade agreements, and the shrinking of opportunities to provide cash assistance on exports.

In order to retain competitiveness in post-graduation export trades, it is necessary to facilitate imports, diversify export products as well as attract foreign direct investment through the improvement of the business environment.

Dr Debapriya Bhattacharya, distinguished fellow at the Centre for Policy Dialogue (CPD), and a member of the United Nations Committee for Development Policy (CDP), told The Business Standard, "We are only emphasising securing more market access and some waiver for the pharmaceutical industry. But we are not paying much attention to the positive international support measures that are necessary for the diversification of the economy, for enhancing labour productivity, and bringing down the cost of business.

"It is high time we moved into concrete policymaking and saw how it is related to our other ambitions such as achieving the SDGs by 2030, and becoming a higher income country by 2041."

Dr Mostafa Abid Khan, trade policy analyst and trade negotiator, told TBS that retaining market access will be the major challenge for the country after the LDC graduation. "Bangladesh is trying to retain the GSP facility even after the graduation. Even if the country attains success in this regard, it will not benefit from this for a long time. So, we need to focus on improving our skills."

In order to meet the post-LDC graduation challenges, efforts must be made to ensure quality education, eliminate infrastructural bottlenecks, rationalise the tariff structure, and attract FDI through business facilitation.

Terming the UN recognition as a major achievement, Md Jashim Uddin, president of the Federation of Bangladesh Chamber of Commerce and Industry (FBCCI), said the graduation will open up some possibilities besides bringing in some challenges.

"The challenges will be easier to address if we can increase export diversification and investment."

Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry (DCCI), told TBS that the government should continue its efforts to continue the tariff facility on garment exports as well as enjoy the WTO drugs patent waiver until 2033.

"At the same time, special attention should be paid to diversify export products and markets. Attracting FDI and strengthening local industries are also important."

Government initiatives

Several committees under the Prime Minister's Office are working to identify and address the challenges likely to be induced by the LDC graduation.

In addition, the government has undertaken the Support to Sustainable Graduation Project involving a cost of Tk134 crore to conduct various research concerning the graduation. Involving various business organisations, the PMO is looking for ways to address potential trade challenges.

On 13 September this year, a meeting presided over by Dr Ahmad Kaikaus, principal secretary to the prime minister, decided to conduct a study to find out which non-RMG products could be manufactured in Bangladesh at competitive prices while maintaining international standards.

Even though various RMG products are manufactured worldwide with man-made fibre, such products are not produced in Bangladesh due to a lack of backward linkage industries and required technologies. Against such a backdrop, the PMO has decided to look for ways to attract foreign and local investment and also to provide necessary policy support in this area.

Besides, there are many foreigners working in senior and mid-level management in the export-oriented garment industry of Bangladesh. The PMO has decided to conduct a separate study to find out how to create skilled managers in the country by reducing foreign dependence. 

Being a least developed country, Bangladesh is providing various subsidies, incentives and policy assistance in the agricultural sector. The government has decided to conduct a separate study to find out the possible impact on agriculture and ways to deal with it in order to reduce or withdraw this assistance after the LDC graduation.

Commerce Secretary Tapan Kanti Ghosh told reporters on Tuesday that the economy of no other LDC is as diversified as that of Bangladesh. "But, our main problem is the dependence on a single product in terms of exports. More than 80% of the country's export income comes from readymade garments.

"Many industries of the country are in a strong position. We produce huge quantities of cement but exports are not at the desired level. We have four years before the final graduation. Export products will be diversified by this time."

He said the Ministry of Commerce would organise a series of workshops with stakeholders this December to rationalise tariffs. Duty-free benefits will be available in the European Union and the United Kingdom until 2029, he said, adding discussions are underway to ensure that the benefits continue in these markets.

"The European Union, the United States, India and China are important export markets for Bangladesh. Exports to the United States and India were growing at a satisfactory rate in the first four months of the current fiscal year. If the GSP facility does not continue after the LDC graduation, FTAs will be signed with the major export markets of Bangladesh. Necessary preparations are underway to this end," he added.

It is notable that Bangladesh is the lone country to acquire the eligibility for graduation after fulfilling all the three criteria set by the UN. This outstanding feat of Bangladesh will brighten further the image of the country in the global arena and thus expedite the development spree.

When the UN included Bangladesh in the LDC group in 1975, the country's poverty rate was 83 per cent. The rate of poverty declined over the years and it was 20.5% in FY20 before the pandemic devastated jobs and income opportunities for many.

Earlier, by the end of February this year, Bangladesh became qualified to graduate into a developing nation from an LDC and United Nations Committee for Development Policy (UN CDP) recommended the graduation of Bangladesh.

Bangladesh is now scheduled to officially become a developing country in 2026 as the UN committee recommended that the country should get five years, instead of three, to prepare for the transition due to the impact of the Covid-19 on its economy.

The country has met, for the second time, all the three eligibility criteria for the graduation involving per capita income, human assets index (HAI), and economic and environmental vulnerability index (EVI).

The UN CDP in its second triennial review assessed the economy of Bangladesh and found a strong fulfillment of all three required criteria for the graduation.

Bangladesh was well ahead in the gross national income (GNI) criterion and its per capita income was $1,827 in 2019 against the threshold of $1,222.

In the HAI criterion, the country's score stood at 75.4 points, well above the requirement of 66. In the EVI, a country's score has to be less than 32. Bangladesh's score was 27.3.