Quitting LDC status: Govt writes to UN on 15 Nov

The government has decided to move out of the least developed country (LDC) status and will inform the United Nations (UN) of this decision officially on 15 November.

If everything goes right, the UN's Committee for Development Policy (CDP) at its plenary session in February next year is expected to suggest that Bangladesh deserves to graduate to a developing country.

After a three-year transition period, Bangladesh will be recognised as a developing country in the UN's General Assembly in 2024.

According to the government's policy making sources, the CDP wrote to the Bangladesh government, asking it to inform by 15 November whether the country wants to move out of the LDC status. When the Economic Relations Department (ERD) sent a summary to the prime minister on the matter, she gave a directive to begin the graduation process.

The issue was discussed at a meeting of the ERD's Project Implementation Committee on the "Support to Sustainable Graduation" project last week, several officials present at the meeting confirmed to The Business Standard.

Bangladesh will present the issue of its transition to a developing country at a virtual meeting with the CDP, a subsidiary body of the UN's Economic and Social Council (ECOSOC).

In the process of graduating to a developing country, the least developed countries have to pass two assessments of the UN every three years where three indexes are evaluated. If a least developed country does well in two out the three indexes, it becomes eligible for the LDC graduation.

The three indexes are: the per capita Gross National Income (GNI), the human assets index and the economic and environmental vulnerability index.

In the first evaluation in 2018, Bangladesh met all three indexes.  The second assessment will be done at the CDP's plenary session in February.

After a consultancy meeting to be held virtually on 15 November, a group of CDP experts will meet on 8-15 January next year. Experts nominated by the CDP-- 28 in number--will review Bangladesh's position on the indexes at the meeting. If the country passes the assessment, the CDP will recommend Bangladesh's name to the ECOSOC for the country's graduation. The ECOSOC will forward it to the UN General Assembly.

Post-graduation shock absorption measures

As a least developed country, Bangladesh now enjoys duty-free export facilities, low-interest foreign loans and grants from developed and developing countries. The country's pharmaceutical sector is also getting an exemption from the Agreement on Trade-Related Aspects of Intellectual Property Rights Other initiatives (TRIPS) which will continue for the LDCs until 2033.

But, these facilities will no longer be available after the LDC graduation.

To deal with the post-graduation shocks, LDC countries, including Bangladesh, will propose maintaining the Generalised System of Preferences (GSP) facilities for another 10 years at the World Trade Organisation (WTO) ministerial conference to be held in June next year.

At the same time, they will also seek exemption from intellectual property rights for medicine till 2033 and 10 years for other cases.

Bangladesh hopes that the WTO meeting will reach a positive decision on these issues.

Despite risks, the issue of shifting from LDCs is a "significant achievement" for the country's economy, according to the General Economics Division (GED) of the Planning Commission.

According to a recent report by GED titled "Impact Assessment and Coping up Strategies of Graduation from LDC Status for Bangladesh", Bangladesh's GSP facilities in the European Union will continue till 2027. However, GSP benefits, offered by other countries, will be cancelled immediately after the announcement of the country's graduation to the developing country status.

As a result, it is possible that Bangladesh may face massive losses in exports. One of the measures that Bangladesh has taken to tackle the possible blow is the signing of bilateral free trade agreements (FTAs) with various countries and regional alliances. The government has also given much importance to diversifying both export products and markets.

Dr Shamsul Alam, member of the GED, told The Business Standard, "Some of the existing benefits will end if we want development."
Foreign investment will go up if the country's capacity increases, so will the revenue-to-GDP ratio. If the tax-to-GDP ratio is increased from the current 10% to 12%, the country will not face any major problem even after its LDC graduation, he added.

Mentioning various initiatives being taken to offset possible losses in exports after the graduation, Commerce Secretary Zafar Uddin told TBS that LDC countries, including Bangladesh, will take a strong stance at the next WTO ministerial meeting to maintain the GSP facilities for 10 years even after the graduation.

"We hope that the developed countries will give some concessions to the LDCs, considering the long-term response to the ongoing Covid-19 situation. We are trying to strike free trade agreements with various countries so that exports are not harmed after the graduation," he added.

Bangladesh has already proposed signing an FTA with the United States. The FTA with Japan is expected to be finalised this year too. Efforts are also underway to sign an FTA to enjoy duty-free access to various countries, including China, Vietnam, Malaysia and Thailand.

Md Hafizur Rahman, director general of the commerce ministry's WTO cell, told TBS that the United States, the European Union and Japan have agreed in principle to the proposal to exempt the pharmaceutical sector from the intellectual property rights till 2033. They will discuss the issue separately with the LDC group.

The report of the Committee for Development Policy (CDP) also recommends that this facility be continued for LDC countries, including Bangladesh. Hafizur Rahman added, "All in all, we hope that this facility will continue in the field of pharmaceuticals."

A 10-member taskforce has been working on Bangladesh's LDC graduation process since 2015. The chief coordinator of SDG Affairs of the Prime Minister's Office is the president of this taskforce. The secretaries of the ministries concerned are involved in this.

A core group on LDC transition has been formed with representatives from seven ministries and departments to assist the task force with various information and views. The group includes representatives from the Federation of Bangladesh Chambers of Commerce & Industries, the Bangladesh Association of Pharmaceutical Industries, the Bangladesh Garment Manufacturers and Exporters Association and other related sectors, including the leather industry.

The "Support to Sustainable Graduation" project has been formulated to provide technical and secretarial support to the taskforce and core group. Under the project, there is a separate committee named "Project Steering Committee" chaired by the ERD secretary, the Project Implementation Committee and the Project Implementation Unit, headed by the project director.

In addition to liaising with the UN agencies – the CDP and the ECOSOC, these committees are working on identifying potential economic risks in the post-graduation time and determining measures to overcome those risks.