[🇧🇩] LDC Graduation For Bangladesh

Saif · Jan 13, 2025

LDC GRADUATION: Bangladesh’s to be or not to be moment

BANGLADESH is scheduled to graduate out of the least developed country status in November 2026. An LDC’s graduation status depends on meeting the threshold in terms of income, human asset and vulnerability (economic and environmental)...

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LDC GRADUATION: Bangladesh’s to be or not to be moment
Anis Chowdhury 14 January, 2025, 00:00

BANGLADESH is scheduled to graduate out of the least developed country status in November 2026. An LDC’s graduation status depends on meeting the threshold in terms of income, human asset and vulnerability (economic and environmental).

A country’s condition is assessed by the Committee for Development Policy of the United Nations triennially. The Committee also assesses whether a country has an adequate strategy for a smooth transition so that it does not face serious challenges when special support measures for LDCs are withdrawn. That is, a graduated country should not fall back into a condition akin to LDCs.

The Committee for Development Policy then recommends to the United Nations Economic and Social Commission whether a country is ready for graduation and when it should occur. A country may request a deferment based on changed circumstances. The Solomon Islands, which was scheduled to graduate in December 2024, has been granted an additional preparatory period of three years on the request of the government.

Bangladesh passed CDP’s triennial graduation thresholds in 2018, 2021 and 2024. This was hailed as a great development achievement.

But it’s the data, stupid

SOME respectable economists and international institutions, including development partners, have highly praised Bangladesh and termed it as a role model. For example, the former UK prime minister Rishi Sunak called Sheikh Hasina a ‘role model’ for growth and said, ‘Sheikh Hasina is an inspiration to us… You are an effective leader in the economy. You serve as a wonderful role model for my two girls’.

However, as the draft white paper on the economy revealed, the fascist regime succeeded in fooling domestic and international observers largely by manipulating data to epic proportions. The white paper struggled to explain how ‘Bangladesh [was celebrated] as one of the fastest growing countries in the world’ and concluded, ‘The excess growth paradox is a figment of statistical manipulation’ (p. 8).

It is pertinent here to note that the Committee for Development Policy uses, as all other international agencies, the data supplied by the country. Supplying data that discredits a regime is just stupid.

Darrell Huff, in his 1954 book, How to Lie with Statistics, showed how manipulating statistics is not as difficult as we might think. Although statistics is about presenting hard numbers, that does not mean that they cannot be skewed or framed in a way to make the data look better to serve a certain purpose. ‘The crooks already know these tricks,’ Huff wrote.

However, Tim Hartford, the author of the 2022 book How to Truth with Statistics, noted, ‘Statistics can be used to deceive, but they are also a vital tool in our quest to understand the world around us, like a telescope for an astronomer’.

Bangladesh’s Shakespearean dilemma

THE white paper has rightly pointed out the weaknesses in Bangladesh’s preparations for a smooth transition out of its LDC status. It notes, ‘One major concern is the lack of adequate preparation in promoting private investment to assist the country in overcoming post-LDC graduation challenges… the country runs the risk of being confronted by slower economic growth, less competitiveness, and an inability to adapt to the changing market dynamics worldwide’ (p. 135).

It also observes, ‘Bangladesh’s external trade faces critical challenges, including a gradual decline in trade orientation, limited export diversification, capital flight concerns, RMG sector issues, tariff liberalisation hurdles, and weak participation in FTAs... Unfortunately, the previous government failed to address these issues effectively, leaving Bangladesh’s external trade sector vulnerable and hindering its path toward sustained, diversified growth’ (p. 168).

The white paper is also aware of the additional challenge posed by Bangladesh’s other graduation, ie, from the World Bank’s list of low-income countries to a middle-income country (MIC) in 2015. Prior to its middle-income graduation, most loans were on highly concessional terms (p. 313). That is no longer the case.

Of course, the country can negotiate for a mix of concessional and the rates applicable for middle-income countries. However, the white paper doubts whether the country has the necessary professional capacity and institutional strength to negotiate complex borrowings (p. 322).

It also expresses concerns about the lack of a robust and credible statistical ecosystem that would be required to monitor the country’s smooth transition, identify lapses in implementation, and respond effectively with agility (p. 357). The paper remains concerned about coordinated implementation of a Smooth Transition Strategy, including the challenge of institutional and policy leadership (p. 380).

Thus, the white paper believes smooth transition ‘will require putting forward a transition plan to counteract the negative fallouts of Bangladesh’s graduation out of the LDC group and enable the required structural transformation of the economy’ (p. 380).

Yet, the white paper concludes, ‘Notwithstanding the reservations expressed by certain exporters’ groups, there is hardly any plausible reason, as of now, for Bangladesh to request a deferment of the exit date from the LDC group’ (p. 380). It posits that this is because, ‘It will not be out of place to mention that the postponement or deferment of Bangladesh’s LDC graduation date is going to invite political backlash from the expected quarters’ (p. 380).

So, the white paper fuzzily concludes, without evidence or explanations, ‘Indeed, even the recent dampened economic performance during the current fiscal year is not expected to bring the country down below the stipulated thresholds. Further, the concern raised recently about the inflated nature of certain critical indicators will have little relevance in this case’ (p. 380).

Way out of the dilemma

SHOULD fear dictate sound public policy making? Clearly not.

Hamlet, in his famous soliloquy, is torn between perception and reality. He feels it is better to die rather than live and mutely bear the pangs that life has sent him. But he does not know what happens after death, so it seems to him that before diving deeper into the regions of the unknown and unseen, it is better to wait and see.

Instead of passive wait-and-see, the interim government can take some active measures. First, in light of massive data fudging and poor preparations by the previous regime and the downgrading of economic outlook by the World Bank and Moody’s, Bangladesh can justifiably request UN bodies such as ESCAP or CDP to do an independent assessment.

Second, it can initiate national dialogue involving all stakeholders, especially the business leaders and workers of the sectors most likely to be affected. The dialogue will discuss preparedness and work out detailed strategies for a smooth transition.

Third, the smooth transition strategy should be complemented by active industry and human resources development policies aimed at dynamic structural transformation of the economy. The interim government needs to give a clear signal that the economy cannot continue to remain in a comfort zone like an infant and never grow to be an adult. So, the government support measures for a smooth transition and economic diversification should have agreed-upon, monitorable performance indicators, as well as gradual but clear end dates.

Fourth, the interim government should request some additional period of preparations — the specific period to be determined by the outcomes of the above processes.

Fifth, the interim government should immediately act to implement reforms of the statistical ecosystem as the white paper recommended. This is critical for monitoring the transition and economic diversification strategies.

These actions will give the newly elected government — likely to be in office less than half a year before graduation — some breathing space for facing the headwinds of graduation. The newly elected government will also inherit well-developed, smooth transition and dynamic structural transformation strategies, including skill development measures.

The authors of the white paper should support the above actions, which will ensure the white paper’s domestic buy-in and will constitute an external validation of their findings, especially by the United Nations.

Anis Chowdhury is emeritus professor, Western Sydney University, Australia. He held senior United Nations positions in New York and Bangkok.

Saif · Jan 23, 2025

Is deferment of LDC graduation a viable option for Bangladesh?

Bangladesh’s best course of action would be to prepare for smooth and sustainable graduation from the LDC group.

www.thedailystar.net

Is deferment of LDC graduation a viable option for Bangladesh?

Visual: Anwer Sohel

As may be recalled, Bangladesh is set to graduate from the Least Developed Country (LDC) category on November 24, 2026. However, some stakeholders in the country argue for a deferment of this graduation for an unspecified period. An objective analysis of the issue and an assessment of the veracity of these divergent views hold practical significance in shaping Bangladesh's stance in this context.

Some clarity in this regard is necessary. While specific criteria exist for including a developing country in the LDC group, it is ultimately up to the concerned country to decide whether it wants to be categorised as such. On the contrary, graduation from the group is contingent upon the LDC meeting the graduation thresholds and fulfilling the graduation procedures. In this sense, inclusion in the LDC group is "voluntary," while graduation is somewhat "mandatory."

To reinforce this point, in 2006, Zimbabwe rejected the UN Committee for Development Policy's (CDP) determination to categorise it as an LDC, stating that it "refuses to be downgraded as an LDC." On the other hand, as noted above, there is a defined procedure for an LDC's graduation. An LDC must meet the criteria for graduation and sustain the record over two successive triennial reviews conducted by the CDP. The CDP then recommends the LDC in question to the UN Economic and Social Council (ECOSOC) for graduation. Based on these recommendations, and following consultations and deliberations, the UN General Assembly (UNGA) makes the final decision regarding the graduation of the concerned LDC and the effective date of the decision. For Bangladesh, the UNGA decided that its graduation would take effect on November 24, 2026 (alongside Nepal and Lao PDR).

It is worth noting that the graduation of LDCs has been deferred in the past, even when eligibility for graduation was met. For instance, the graduation of several Pacific Island LDCs (e.g., Small Island Developing States such as Vanuatu and Kiribati) was deferred multiple times due to their vulnerability to environmental challenges. These countries were eligible for graduation primarily based on the "income-only" criteria. Similarly, Nepal, which first met the graduation criteria in 2015 (three years before Bangladesh), will graduate simultaneously with Bangladesh, as it was not recommended for graduation in 2018 due to the 2017 earthquake.

Understandably, the call for Bangladesh's graduation deferment is being led by the export-oriented RMG sector, which accounts for about 85 percent of the country's total exports. The implications of the loss of preferences for this sector and the country are significant. Since tariffs on apparel items in major markets range from 10-15 percent, the adverse impact of preference erosion on RMG competitiveness will undoubtedly be considerable. Deferment of graduation would allow Bangladesh to continue enjoying various "Special and Differential" treatment provisions in the World Trade Organization (WTO), specifically targeted at LDCs.

Indeed, among the LDCs, Bangladesh has benefited the most from preferential treatment due to its relatively higher supply-side capacities compared to most other LDCs. Not surprisingly, the country also stands to lose the most in the absence of such preferences. WTO estimates (2020) show that of the potential losses from preference erosion (in terms of foregone export earnings) for the 12 LDCs eligible for graduation at the time, 90 percent would be incurred by Bangladesh alone.

While it is conceivable that the government might, at some future point (before the November 2026 deadline), decide to request a deferment of graduation, such a request would need to be strongly justified. The CDP will closely monitor and assess the smooth transition process. Ultimately, the UNGA must be convinced of the validity of the request.

In the end, any request for deferment must also be seen as a "political call" that Bangladesh must weigh carefully. Nepal and Lao PDR are progressing towards graduation without considering deferment, while Bhutan graduated in December 2023 without seeking a deferral. Should Bangladesh choose deferment, it will be the only South Asian country, aside from war-ravaged Afghanistan, to remain an LDC beyond 2026. Is this a position Bangladesh would find acceptable?

In this context, Bangladesh's best course of action would be to prepare for smooth and sustainable graduation from the LDC group. Bangladesh has already developed a "Smooth Graduation Strategy," with concrete recommendations from seven sub-committees, awaiting approval by the National Committee on Graduation. According to the most recent triennial review by the CDP (February 2024), Bangladesh's eligibility for graduation has been reaffirmed, and as noted in the white paper committee report, "there is hardly any plausible reason, as of now, for Bangladesh to request a deferment of the exit date from the group." However, the white paper also highlights concerns about the coordinated implementation of the strategy, including challenges related to institutional and policy leadership. These concerns must be addressed with urgency and within a time-bound framework.

To this end, Bangladesh should focus on necessary reforms and structural transformations to ensure smooth and sustainable graduation. Trade policies, incentives, and import duties should be scrutinised to ensure compliance with global obligations associated with graduation. The country must transition from preference-based competitiveness to one based on skills and productivity. Adequate measures should be taken to ensure compliance with Trade-Related Aspects of Intellectual Property Rights (TRIPS) obligations, the Trade Facilitation Agreement, and other WTO-mandated agreements applicable to non-LDC developing countries. Compliance with International Labour Organization (ILO) conventions and protocols must also be ensured and enforced. Comprehensive Economic Partnership Agreements (CEPAs) should be negotiated, and "offensive" and "defensive" strategies should be designed appropriately in view of this. In the absence of membership in such trading partnerships and groupings, Bangladesh may find itself in a situation where it will need to export on a non-preferential basis, while its competitors, such as India, Pakistan, Vietnam, China and Cambodia, will enjoy preferential access to many markets (thanks to bilateral and regional free trade agreements and CEPAs to which these countries are members).

The global trading landscape is evolving rapidly, with an increased emphasis on greening trade, enhanced compliance requirements, and stricter environmental, gender and labour standards. Many of these requirements are being demanded not only by governments but also by brands, buyers, advocacy groups, and consumers.

Bangladesh's priorities must focus on domestic preparations and the implementation of its smooth graduation strategy. Reforms and structural changes must be implemented, the capacity to access regional and global markets from a position of strength must be enhanced, compliance with the newly emerging global trading regime must be ensured, and triangulation of transport, investment and trade connectivity must be established.

The discussion on deferring Bangladesh's LDC graduation should not divert attention from undertaking the urgent tasks required to address the challenges of smooth graduation and ensure its sustainability. Gaining a few additional years (if at all) must not serve as an excuse to avoid taking the necessary steps. Bangladesh's policy measures and implementation efforts must be aligned with the new and upcoming phase of its journey as a non-LDC developing country.

Dr Mustafizur Rahman is distinguished fellow at the Centre for Policy Dialogue (CPD).

Saif · Jan 24, 2025

WTO to support Bangladesh’s LDC graduation, its DG tells Dr Yunus

World Trade Organisation (WTO) Director General Dr Ngozi Okonjo-Iweala on Friday said the global trade body would help Bangladesh graduate smoothly from Least Developed Country (LDC) and persuade top businesses to shift their supply chains to the South Asian nation. The WTO Director General made t

thefinancialexpress.com.bd

WTO to support Bangladesh’s LDC graduation, its DG tells Dr Yunus
UNB
Published :
Jan 24, 2025 21:19
Updated :
Jan 24, 2025 21:19

World Trade Organisation (WTO) Director General Dr Ngozi Okonjo-Iweala on Friday said the global trade body would help Bangladesh graduate smoothly from Least Developed Country (LDC) and persuade top businesses to shift their supply chains to the South Asian nation.

The WTO Director General made the comments when she met Chief Adviser Prof Muhammad Yunus on the sidelines of the World Economic Forum annual meeting in the Swiss mountain city of Davos.

Referring to Bangladesh’s impending graduation from the LDC category, Dr Ngozi said that the WTO would make sure that the process is smooth.

“We have established principles. We will be working with you,” Chief Adviser’s Deputy Press Secretary quoted her as saying.

The WTO DG also said she was talking with top global businesses and trying to persuade them to relocate their supply chains to Bangladesh as part of global logistic decentralisation.

“I told them, why not Bangladesh? We are doing more pushes to have more supply chains in Bangladesh,” she added.

Chief Adviser Prof Yunus praised the leadership of Dr Ngozi, saying she has brought dynamism to the global trade talks.

Dr Yunus also said Bangladesh is now open for business, after the misrule and oligarchs-linked business deals ruined the country’s economy.

He said Bangladesh can easily be one of the largest manufacturing hubs with millions of young and tech-savvy skilled workers.

The Chief Adviser said the interim government was carrying out vital reforms in the economy and eased congestion in Chittagong Port in an effort to attract more foreign investment.

“We’ve also launched a fight against corruption,” he said, adding people linked with the ruling family were involved in corrupt international deals.

Dr Ngozi said she was impressed by the spirits of the young protesters during the July mass uprising. “They have set an unprecedented example sending the most impactful messages.”

She also praised the leadership of Professor Yunus in bringing stability to the country and putting Bangladesh back on the global map. “You are an image of stability. And stability and calm have returned to Bangladesh.”

During the talks at a Davos hotel, Dr Ngozi urged Bangladesh to ratify the fisheries subsidy agreement. Bangladesh will look into it, the Chief Adviser said.

On Dr Ngozi’s request on the Fish-2 agreement, Ambassador Tareq Md Ariful Islam, Bangladesh’s Permanent Representative to the UN in Geneva, said Bangladesh is constructively engaging in its negotiation.

Dr Ngozi also requested Bangladesh to facilitate other instruments under negotiation at the WTO, including the investment facilitation for development agreement.

Lamiya Morshed, SDGs Affairs Principal Coordinator, also attended the meeting.

Saif · Jan 25, 2025

Defer LDC graduation by 3 years: BCI

The government should take steps to defer Bangladesh’s United Nations status graduation from a least developed country (LDC) to a developing one by at least three years, said the Bangladesh Chamber of Industries (BCI) yesterday.

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Defer LDC graduation by 3 years: BCI

The government should take steps to defer Bangladesh's United Nations status graduation from a least developed country (LDC) to a developing one by at least three years, said the Bangladesh Chamber of Industries (BCI) yesterday.

"We are not ready for LDC graduation right now. Why should we consciously commit suicide?" said BCI President Anwar-ul Alam Chowdhury at a press briefing organised by the BCI in the capital.

He also shared his concerns over the country's economic challenges and business climate.

Chowdhury alleged that the previous Awami League government pursued the LDC graduation based on inflated economic figures in order to portray an achievement.

"If the graduation is not deferred, the economy will face a massive collapse," he said.

The garment and textile sector, which accounts for 40 percent of manufacturing employment and contributes roughly 85 percent of exports, will bear the brunt of the challenges, he added.

Chowdhury said Vietnam would enjoy zero-tariff access to the European Union from 2027, while European importers of Bangladeshi garments would face a 12 percent duty from 2029.

"We strongly believe that the graduation period should be deferred by at least three more years," he said.

Other business platform earlier also recommended the deferment.

But Education and Planning Adviser Wahiduddin Mahmud had pointed out that Bangladesh had no option to adopt the deferment.

Members of a committee which prepared a white paper on the state of Bangladesh's economy also advised the government not to defer the LDC graduation.

About the current economic situation, Chowdhury alleged that the incumbent government was trying to steer the country based on the International Monetary Fund's (IMF) prescriptions.

"It will not suit the nation's existing economic conditions," he said.

Bangladesh Bank has adopted contractionary policies, reduced liquidity, and taken "unfavourable" steps for the economy, industries, and businesses, he said.

"While partial adherence to IMF prescriptions can help meet compliance requirements, full implementation will adversely impact the economy," said Chowdhury.

The BCI president criticised the government for "not prioritising economic reforms".

"High-interest rates, contractionary monetary policies, unresolved energy crises, and potential fuel price hikes clearly show the government's approach is not supportive of industrial growth," Chowdhury said.

He warned that such policies would not only deter new investments but also make survival difficult for existing industries.

On the political front, Chowdhury expressed disappointment over a lack of focus on economic issues.

"The government and political parties have overlooked pressing economic issues and the challenges faced by businesses, diverting their attention to less critical priorities," he claimed.

He also urged the interim government to expedite the electoral process to stabilise the political climate.

Chowdhury pointed to recent statements by Bangladesh Bank Governor Ahsan H Mansur and Finance Adviser Salehuddin Ahmed downplaying the impacts of rising interest rates and VAT hikes, labelling them as "misleading".

He criticised the government's decision to increase reliance on VAT hikes instead of expanding the tax net.

"Such measures are creating confusion among industrial entrepreneurs, who are already grappling with rising costs and operational uncertainties," he said.

Chowdhury also raised concerns about branding entrepreneurs as classified or defaulters without considering the systemic challenges they face.

"The burden of banking irregularities caused by a few individuals or groups is being unfairly placed on the shoulders of all entrepreneurs. Many defaulters are victims of rising operational costs and adverse conditions," he said.

Calling for the introduction of bankruptcy laws, Chowdhury added, "If the government fails to provide protection, entrepreneurs will be forced to shut down their businesses. This gap in legal infrastructure must be urgently addressed."

BCI Senior Vice-President Priti Chakraborty and directors Shahidul Islam, Delowar Hossain, S M Shah Alam, and Zia Hayder were present.