[🇧🇩] LDC Graduation For Bangladesh

[Saif]

IP portfolio based industrial economy in post-LDC Era

Graduation from the least developed country (LDC) category and the loss of trade preferences have made competitiveness a critical strategic imperative for Bangladesh. Due to sustained economic growth, Bangladesh has reached a stage where it is set to graduate from LDC status. However, such graduati

thefinancialexpress.com.bd

IP portfolio based industrial economy in post-LDC Era

Graduation from the least developed country (LDC) category and the loss of trade preferences have made competitiveness a critical strategic imperative for Bangladesh. Due to sustained economic growth, Bangladesh has reached a stage where it is set to graduate from LDC status. However, such graduation raises several concerns, as Bangladesh will no longer qualify for several trade and borrowing benefits, among others. For example, Bangladesh will lose duty-free and quota-free (DFQF) access and Generalised System of Preferences (GSP) benefits in major markets such as the European Union (EU), Canada, the United Kingdom (UK), Australia, and Japan. Some estimates suggest that up to 73 per cent of Bangladesh's trade currently benefits from LDC-specific preferences; hence, losing them risks a significant decline in exports.

Therefore, how to overcome these challenges and sustain economic growth poses significant challenges. This article suggests that along with graduating from LDC status, Bangladesh also needs graduation from a labour-based, imitation- and replication-based value-addition strategy reliant on imported technology. Such a transition has the potential to help Bangladesh offset the loss of trade benefits enjoyed during the LDC era. The more important is, it is likely to propel Bangladesh onto a highly scalable growth path toward achieving high-income status.

WEAKENING INDUSTRIAL HEALTH AND JOB LOSS: It's worth noting that even before LDC graduation, Bangladesh's industrial economy has started to suffer from weakening health. Although commonly cited issues such as energy shortages, tax burdens, and others are highly important, they could be addressed through sincere and local measures. Besides, there is a global trend toward technology adoption that poses a far more difficult challenge. For example, according to a study around 2010, generating $1 million in apparel exports required roughly 220 workers. However, producing $1 million in ready-made garment (RMG) exports in Bangladesh currently requires roughly 90 workers, reflecting a significant decline in labour intensity over the past decade. For this reason, total direct employment in the RMG sector has stood at around 4 million workers, even as total export volume has tripled over a 15-year period.

On the other hand, Bangladesh's manufacturing sector lost 1.4 million jobs over a decade despite achieving an average annual industrial growth rate of 10 per cent. Among other factors, technology upgrading has been a major reason for this reality.

STRATEGY OF INDUSTRIAL ECONOMY: In serving the domestic market, import substitution is the dominant strategy. Bangladesh's industrial economy is based on the imitation and replication of foreign products by factory-floor local labour, using imported intermediary components and foreign capital machinery. On the other hand, the export-oriented RMG sector's value addition is also based on factory-floor labour, which makes copies of foreign clients' designs using imported capital machinery.

COMPETITIVENESS THROUGH PRODUCTIVITY IMPROVEMENT: One of the strongest arguments for countering the challenges of the post-LDC era has been productivity improvement. For example, if Bangladesh's exports to a market face an additional 10 per cent duty after LDC graduation, competitiveness could be maintained by lowering production (and shipping) costs by a similar percentage through productivity improvement.

So far, to address productivity, Bangladesh has been pursuing production technology upgrades, as suggested by the Nobel Prize-winning economic theory of Robert Solow. The adoption of improved production equipment often leads to shorter production times, improved product quality due to precision operations, reduced material wastage, and increased output per worker. Such improvement in the productivity of all production factors taken together is termed an increase in total factor productivity. A study indicates that by adopting modern time-saving machines, RMG firms have achieved productivity increases ranging from 35 per cent for woven shirts and trousers to 150 per cent for jackets. However, such an approach to productivity improvement reduces local value addition from labour and increases spending on imported capital machinery. Hence, the benefits of labour productivity improvement migrate out of the country.

On the other hand, the learning-by-doing benefit observed by Nobel laureate economist Kenneth Arrow, complemented by the human capital theory of another Nobel laureate, Gary Becker, does not offer scalable and sustainable productivity growth, as the import of increasingly sophisticated production equipment and intermediary components keeps automating away the benefits of learning by doing.

As a result, the conventional, technology-import-driven approach to productivity improvement, supported by Nobel Prize-winning economic theories, does not appear to offer a recipe for crafting a sustainable and scalable path for addressing the challenges of the post-LDC era. The underlying reason is that unlike in the industrial economies of advanced countries, productivity improvement through technology in Bangladesh increases imports of capital machinery and lowers value addition, resulting in job losses. However, if those technologies were developed by Bangladesh, the loss of low-paying factory jobs could have been outweighed by the creation of higher-paying jobs in the research, development, and precision manufacturing of those machines.

On the other hand, all these productivity improvement theories overlook the option of improving products and lowering their costs through the addition of ideas, resulting in evolution. Perhaps this role of technology in improving competitiveness is lost in the Solow Residual, which attributed as much as 80 per cent of growth in the US economy from 1909-1949 to technological progress. It is worth noting that during that period, US firms were making remarkable progress in driving the evolution of products through incremental advancement and reinvention.

Therefore, we should look beyond conventional, technology-import-driven productivity improvement in an imitation- and replication-based industrial economy to sustain and scale up growth in the post-LDC era.

INTELLECTUAL PROPERTY PORTFOLIO STRATEGY: As explained, in addition to improving replication or production machinery, technological advancement plays a significant role in economic growth by driving the inventions, innovations and their evolutions. For example, the invention of the light bulb as a substitute for the oil lamp, and its continued advancement, contributed to economic growth in the USA. Bangladesh has the option to pursue a similar approach.

A huge portfolio of products produced by Bangladeshi firms consists of imitations of foreign products. Despite their success in imitation and replication, these firms have not yet attained the competence to make these products better and cheaper through evolution by the development of intellectual property (IP) portfolios and their integration into those products. It appears that driving the evolution of products and production processes through their own IP will open a far more scalable path to improving competitiveness than improving total productivity of the factories through the import of advanced production machinery. However, to leverage this opportunity, both firms and academic institutions should improve their competence base, and the government should establish a supportive policy framework.

As explained, Bangladesh needs to find a way to improve quality and reduce costs to offset the challenges of the post-LDC era. At the same time, the industrial economy must have a highly scalable path to improving competitiveness while creating high-paying jobs for graduates. It seems that moving from machinery-import-driven productivity improvement to an IP-portfolio-based approach to drive the evolution of products and production machinery will offer a sustainable and scalable path to improving competitiveness while creating high-paying jobs for graduates.

M. Rokonuzzaman, Ph.D is academic and researcher on technology, innovation, and policy.​

 

[Saif]

Bangladesh's LDC graduation comes with a bill

Bangladesh is slated to graduate from the UN's least developed country (LDC) category on 24 November 2026, with adverse implications arising from the loss of international support measures, particularly the erosion of market access preferences for its all-important export-oriented apparel sector. B

thefinancialexpress.com.bd

Bangladesh's LDC graduation comes with a bill

Bangladesh is slated to graduate from the UN's least developed country (LDC) category on 24 November 2026, with adverse implications arising from the loss of international support measures, particularly the erosion of market access preferences for its all-important export-oriented apparel sector. But this is happening alongside the country's middle-income graduation, which will make LDC graduation harder to sustain.

LDC status itself does not have direct implications for a country's terms of external borrowings, except for access to concessional funds from a few dedicated sources, such as aid for trade for LDCs and LDC-focused climate funds. Still, middle-income graduation does. Borrowing terms hinge primarily on a country's status according to the World Bank's income categories. Unlike the UN's LDC criteria, the Bank's income categories rest exclusively on per capita gross national income. Moving from a lower to a higher category has significant implications for the concessionality of borrowings.

This matters for Bangladesh because its low domestic resource mobilisation makes borrowing terms particularly important. Bangladesh graduated from the low-income category to the lower-middle-income category in July 2015. This meant that the country would gradually lose access to the most concessional terms of the World Bank's soft loan window, the International Development Association, which then offered a service charge of only 0.75 per cent, a grace period of up to 10 years and a repayment period of up to 40 years.

Since then, the share of non-concessional loans in Bangladesh's total loan portfolio has been rising and is expected to keep climbing as the country's per capita income increases. So borrowing terms are expected to become more stringent in the coming years. Indeed, some recent loans carried annual interest rates as high as 2-4 per cent, with much shorter grace and repayment periods - the 2016 US$11.38 billion loan from Russia, for example, was incurred at an effective interest rate of about four per cent per annum.

The change in borrowing terms is also important because Bangladesh needs to borrow increasingly larger amounts overseas to address the challenges of LDC graduation. Shifting from preference-driven competitiveness to skills, productivity, technology and structural change-driven competitiveness requires the country to mobilise more investible resources from domestic sources and through foreign borrowings.

Not surprisingly, Bangladesh's external debt-servicing obligations have been rising. According to the Economic Relations Division, the country's external debt servicing rose to US$4.5 billion in the 2025-26 financial year, a significant rise on what it was only a few years ago. The Finance Division projects about US$7.6 billion by 2028-29. Debt-servicing obligations will keep growing as grace periods on several large infrastructure loans end and repayments begin.

The challenge of larger foreign borrowings at higher costs is underpinned by Bangladesh's low domestic revenue mobilisation capacity. At around 8 per cent, Bangladesh's revenue-to-GDP ratio remains one of the lowest in the developing world. Almost the entire annual development program must be financed from borrowings, either domestic or external.

Successive governments in Bangladesh have attempted to raise the revenue-to-GDP ratio through a wide range of measures, with little success. The government is undertaking further initiatives to the same end, a number of them articulated in its 2026-27 budgets. These include institutional reforms such as separating the revenue authority's policy and implementation functions, reducing tax expenditure by rationalising subsidies as well as modernising and digitalising tax collection through e-submission, incentivising cashless QR-based transactions and ensuring interoperability of systems.

But raising the revenue-to-GDP ratio will hinge largely on effective changes in tax-related administrative and governance structures, reduced corruption and a broader revenue base.

Bangladesh has asked the United Nations to extend its preparatory period for LDC graduation. The Committee for Development Policy has backed an extension, though it favours a shorter one than the three years Dhaka sought, and the General Assembly is due to decide before 24 November. If an extension is granted, it will help Bangladesh implement its Smooth Transition Strategy. Regardless of the outcome, Bangladesh must focus on raising domestic resource mobilisation and prudently managing external sector borrowings as part of its strategy to make LDC graduation sustainable.

If Bangladesh is to contain debt-servicing pressure and avoid the middle-income trap, it will need to significantly raise the efficiency of all government operations, both recurrent and developmental.

Good governance, transparency, accountability and zero tolerance of corruption must inform all public expenditures. A lack of these was a key reason for the inordinately high non-performing bank loans - about 32.8 per cent of all outstanding loans - and associated problems afflicting the financial sector and the overall economic performance of Bangladesh. Ensuring good value for money in implementing projects financed mostly by borrowing, maintaining exchange rate stability and prudently managing external debt ought to be given top priority by Bangladesh's policymakers.

Bangladesh's capacity to manage LDC graduation will depend critically on how successfully the country navigates the challenges of middle-income graduation.

Prof Mustafizur Rahman is Distinguished Fellow at the Centre for Policy Dialogue, an independent economic think tank in Dhaka, Bangladesh. The piece is excerpted from www.eastasiaforum.org​

 

[Saif]

Bangladesh expects LDC deferment decision this month

Bangladesh expects a decision this month on its request for a three-year extension of the preparatory period for graduation from the least developed country (LDC) category, Commerce Minister Khandakar Abdul Muktadir said yesterday.

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Bangladesh expects LDC deferment decision this month

Star Business Report

FILE VISUAL: ANWAR SOHEL

Bangladesh expects a decision this month on its request for a three-year extension of the preparatory period for graduation from the least developed country (LDC) category, Commerce Minister Khandakar Abdul Muktadir said yesterday.

“We are expecting the decision on the LDC graduation deferment within the next week. If it is delayed for any reason, the final decision will come within this month,” he said at a seminar on Bangladesh’s LDC graduation trajectory and challenges at the Economic Reporters’ Forum (ERF) office in Dhaka.

The seminar was jointly organised by the ERF and the Bangladesh Foreign Trade Institute (BFTI).

The G-77 group of developing countries has proposed deferring Bangladesh’s graduation, while the European Union (EU) has supported the country’s request for a three-year extension.

Following Bangladesh’s request, the UN Committee for Development Policy (CDP) recommended an extension but did not specify a timeframe. The UN Economic and Social Council (ECOSOC), however, has recommended that the UN General Assembly (UNGA) grant Bangladesh a three-year extension.

As part of its preparations for graduation, Bangladesh has signed trade agreements with major partners, including Japan and South Korea, to help retain duty-free market access after leaving the LDC category. Negotiations on a trade agreement with the United Arab Emirates are expected to be completed next month.

Bangladesh also expects to conclude negotiations on trade agreements with Oman, Singapore, New Zealand and eight to 10 other countries by the end of this year or next year as part of its preparations for a smooth transition.

The minister expressed hope that negotiations on a free trade agreement with the EU, Bangladesh’s largest export destination, would be completed before the country’s scheduled graduation in 2029. Both sides have already appointed chief technical officers for the negotiations, he said.

Bangladesh has also shared a time-bound action plan with the EU outlining its preparations for a smooth transition, as the country expects to secure a three-year extension, he added.

The country is also working to join the Regional Comprehensive Economic Partnership (RCEP), a major regional trade agreement. The RCEP has established a working group to assess Bangladesh’s application to join the trade bloc.

BFTI Chief Executive Officer Mostafa Abid Khan said more than 93 percent of Bangladesh’s exports would not be affected during the first two years after graduation.

Major trading partners and blocs, including Canada, Japan, the UK and the EU, which together account for more than 86 percent of Bangladesh’s exports, have agreed to continue duty-free market access for three years after graduation, he said.

Abid Khan urged Bangladesh to sign trade agreements with major trading partners to preserve duty-free market access after graduation and avert a potential 26 percent fall in exports.

Bangladesh, Nepal and Lao PDR are scheduled to graduate from the LDC category on November 24 unless the UNGA grants an extension.

Bangladesh and Nepal have sought an extension of the preparatory period before graduation. Such an extension would give them more time to prepare for the loss of LDC-specific trade preferences and other support measures.

After coming to power in February this year, the BNP government sent a letter to the chair of the CDP requesting that Bangladesh’s preparatory period be extended until November 24, 2029. The letter said the country needed more time to prepare for competition in international markets after graduation.

The UN has also established a working group to review and update its support framework for countries graduating from the LDC category. The Working Group on Smooth Transition for Graduating LDCs will be led by the permanent representatives of Angola and Finland, according to a ministerial declaration of the 81st UNGA.​

 

[Saif]

https://www.newagebd.net/post/trade-commerce/318693/govt-targets-trade-deals-reforms-for-post-ldc-era-commerce-minister

Govt targets trade deals, reforms for post-LDC era: commerce minister

Staff Correspondent . Dhaka

Commerce minister Khandakar Abdul Muktadir addresses a seminar jointly organised by the Economic Reporters’ Forum and the Bangladesh Foreign Trade Institute at the ERF auditorium in Dhaka on Monday. | Press release.

Commerce minister Khandakar Abdul Muktadir said on Monday that the government planned concluding trade negotiations with around 10 countries by 2027, negotiate a free trade agreement with the European Union and simplify business procedures to prepare Bangladesh for the post-LDC era.

Reliable energy supplies, investment and access to international markets are central to preparations for losing preferential treatment after graduation from the least developed country category, he added.

The minister made these remarks while speaking as chief guest at a seminar jointly organised by the Economic Reporters’ Forum and the Bangladesh Foreign Trade Institute at the ERF auditorium in Dhaka.

BFTI chief executive officer Mostafa Abid Khan presented keynote highlighting the tentative impact of LDC graduation on the economy of Bangladesh, at the event chaired by ERF president Doulot Akter Mala.

The minister said Bangladesh had sought a three-year postponement of its graduation because preparations for the economic and financial challenges were inadequate.

‘We have wasted considerable time,’ he said, adding that graduation had been politically glorified while its economic and financial implications were sidelined.

He said that a time-bound plan for using the proposed extension had been shared with the EU.

Negotiations or preparatory work for trade agreements involved Oman, Singapore and New Zealand, among other countries, while the EU remained a priority, he added.

He also said that a chief negotiator had been appointed for discussions with the 27-member bloc, and preparations were underway for the first technical round, although its date had not been fixed,

Muktadir said his target was to complete free trade agreement negotiations with the EU before graduation, while preparations for its Generalised Scheme of Preferences Plus would continue.

He also said procedural work was underway for Bangladesh’s accession to the Regional Comprehensive Economic Partnership.

On domestic reforms, the minister cited an average of 355 days required to complete initial business formalities up to obtaining an import registration certificate and opening a machinery import letter of credit.

Planned reforms included a single online trade licensing portal, full digitisation of company registration services, licence validity of three to five years and coordinated inspections to reduce harassment, he said.

Muktadir hoped to overcome lengthy licensing and approval procedures by 2027.

He identified gas shortages and inadequate strategic reserves as further obstacles, saying insufficient LNG storage left Bangladesh exposed to international supply disruptions.

The government was pursuing additional floating LNG terminals, domestic gas exploration and rooftop solar generation, he said.

Muktadir expressed optimism that a decision on Bangladesh’s request to delay graduation would come within October, ahead of the scheduled November 24 graduation.

Presenting the keynote paper, Mostafa Abid Khan showed that Bangladesh continued to meet all three graduation criteria despite weaknesses in investment, savings and export diversification.

Citing Bangladesh Bureau of Statistics estimates, he said that private investment fell from 24.52 per cent of gross domestic product in the financial year 2021–22 to 22.48 per cent in FY2024–25.

The paper identified losing preferential market access, restrictions on export subsidies and intellectual property obligations as the principal graduation challenges.

Based on the FY2024–25 export structure, it estimated unchanged market-access conditions for 93.6 per cent of exports during the first two years after graduation and 90.3 per cent during the first three years.

ASM Moinul Haque, executive member of the ERF delivered vote of thanks at the event.​