‘LDCs struggle to boost global trade share’

Economists on Sunday said the collective trade share of the Least Developed Countries (LDCs) is yet to increase in global trade over the last 10 years, which was expected to double.  

The trade share of the LDCs is still below one percent in the global market, they said.  

They made the observation during a breakout session of the 5th South Asian Network for Economic Modelling (Sanem) Annual Economists' Conference 2020 at the Brac Centre in the capital. 

"The LDCs' trade share in the global market is declining because of the trade war between the US and China, Brexit, collapse of the multilateral trade negotiations under the World Trade Organisation, and global economic slowdown," said Sunera Saba Khan, research economist of Sanem, in her paper "Boosting LDCs' Participation in Global Trade: The Way Forward". 

The growing protectionism in the leading developed countries, China's Belt and Road Initiative and the emergence of mega-trading blocs are also hindering trade opportunities of the LDCs, she said.

She also said the LDCs' trade remains highly concentrated on a few export products.

"The LDCs are facing some challenges in trade – logistics, infrastructure, graduation from LDC to developing country status, debt and financing. The key development challenges are the need to increase production with a view to increasing exports, value addition, addressing structural bottlenecks, accessing more markets, and integrating further into the world trading system," explained Sunera.  

The way forward involves working on expanding production to raise exports, engaging in trade expansion through formation of regional agreements, and taking advantage of the European Union's Everything but Arms scheme, she said.

The researcher pointed out some institutional initiatives required to boost LDCs' trade volume in global exports – controlling corruption, ensuring rule of law, voice and accountability, government effectiveness, political stability, and regulatory quality. 

"According to the Istanbul Declaration and Programme of Action, the LDCs' export share was expected to double during 2011-2020 but that could not happen," said Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue. He chaired the session. 

According to the United Nations Conference on Trade and Development, the Istanbul Programme of Action (IPoA) was taken up by the international community in order to guide national development policies in the LDCs.

The IPoA aims to assist in combating the structural challenges that the LDCs encounter to eradicate poverty, achieve sustainable development goals and graduate from the LDC status.

The IPoA has five specific objectives and one of those is "to achieve sustained, equitable and inclusive economic growth in the LDCs to at least the level of seven percent per annum by strengthening their productive capacity in all sectors through structural transformation and overcoming their marginalisation through their effective integration into the global economy, including through regional integration." 

Professor Mustafizur said the regional integration and cooperation is very important to strengthen the global integration and presence. 

He also mentioned that the trade facilitation is not just road connectivity but is also logistic connectivity, foreign direct investment connectivity and trade connectivity. 

"These are very important to the South Asian Association for Regional Cooperation if we really want to be integrated. It is also important for Bangladesh as we graduate from the LDC status to developing country," added Mustafizur.

"Positive impact of regional integration and free trade income inequality is accompanied by employment for low-skilled labourers. It is also economic for low income countries", said Mukesh Kumar Kella, a PhD scholar at the Institute of Business Management in Pakistan, in the video presentation of his paper titled "Trade facilitation and regional integration in South Asia".

"Regional integration is being considering a successful development strategy. It influences economies of scale, market expansion, technology diffusion and productivity," he added.

During the session, papers titled "Convergence Potentials in Saarc and Asean Economies", "Does Export Orientation Influence Innovation?" and "Does Export Orientation Influence Innovation? Empirical Evidence at the Firm Level" were presented by Sunetra Ghatak, research fellow at the National Institute of Public Finance and Policy in New Delhi, and Farhan Khan, research assistant at Sanem. 

Mahtab Uddin, a Dhaka University lecturer in economics, was also a discussant.