Post-LDC challenges for Bangladesh economy
About 90 per cent of Bangladeshs total exports go to the export markets under different
preferential market access facilities
Md. Joynal Abdin
Bangladesh became a member of the least developed country (LDC) club in 1975. As a newly emerged independent country Bangladesh had to face many socioeconomic as well as geopolitical challenges at that period (soon after the independence). But gradually we achieved remarkable progress in many fields and emerged as one of the fastest growing economic power in Asia. Continuous progress of Bangladesh economy is an example to the entire world. But we are supposed to achieve even more if political chaos, greed and immaturity is not there. Frequent change of political ideology made us bound to radical shift towards multidimensional economic paradigm. Besides shortcomings of infrastructure, industrial utility, absence of united political will towards a particular system of economy, nationalization, privatization, this form of government, that form of government etc. so on and so forth Bangladesh achieved the millennium development goals (MDGs) with significant performance in many arena. It is mainly because of our general peoples wills to prosperity, integrity and hardworking in home and in abroad as an expatriate labor. Bangladeshi expatriate workers and women workers in readymade garment (RMG) sector are the significant contributors of this wonderful achievement.
Bangladesh reduced poverty rate into 23.2 (up to 2016) whereas it was 31.5 in 2010. At the same period extreme poverty rate declined into 12.9 from 17.6 in 2010. Per capita income of Bangladesh increased into USD 1610 in 2016-17 fiscal years. Hopefully Bangladesh could be considered to graduate from the list of LDC in upcoming triennial review meeting of the Committee for Development Policy (CDP) in this year.
Second review of the same committee could be in 2021 then we will be observed for another 3 years i.e. up to 2024 to be finally graduated from the LDC club. This graduation is so much expected and welcoming for the whole nation. It will increase value of Bangladesh brands, Bangladeshi passport, and Bangladeshs position in different global platforms. Therefore every Bangladeshi is expecting this graduation as soon as possible. But before go for final celebration of this achievement we should conduct an impact assessment study by an impartial body to identify possible impact of LDC graduation on Bangladesh economy during next decade. Few impact of LDC graduation on Bangladesh economy could be as follows:
1. Loosing preferential market access / preference erosion: Bangladesh exported USD 34.83 billion in last fiscal year. About 90 of Bangladeshs total exports go to the export markets under different preferential market access facilities in EU (under EBA), Canada, Japan and the US, under their respective GSP schemes. Bangladesh also enjoys preferential market access in such other industrialized countries as Australia and in some developing countries, such as China, India and the Republic of Korea, under RTAs and bilateral initiatives. All these schemes are non-reciprocal in the sense that Bangladesh is not expected to offer preferential access to products originating in the preference-giving countries in response to the offer made to her as an LDC. Since developed country markets account for about 90 per cent of Bangladeshs total exports, preferential market access in these countries is of special significance to Bangladesh. Besides GSP or EBA Bangladeshi export items are enjoying duty free and quota free market access under the following trade regime:
a. Special and Differential Treatments (SDT) for LDCs under different agreements of WTO
b. Preferential market access for LDCs under different regional trade agreements like SAFTA, BIMSTEC, APTA etc.
c. Preferential market access for LDCs under different bilateral trade agreements.
The above mentioned discussion made it clear that, Bangladeshs export items enjoys preferential market access in different parts of the world under different trade regime. If 90 of our export items loose preference then Bangladesh export performance may be adversely affected. Therefore fact findings studies should be conducted to identify the financial value of preference erosion in USD, what could be its spillover effects on Bangladeshs investment environment especially to attract FDI, what could be ways forward to minimize adverse affects of preference erosion on Bangladesh economy.
2. Impact of Reciprocal Trade Regime Offerings: Currently Bangladesh is a member of nine (9) RTA or FTAs namely, Asia-Pacific Trade Agreement (APTA), Bangladesh-Sri Lanka Free Trade Agreement (Proposed), Bangladesh-Turkey FTA (Proposed), Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) Free Trade Area, Pakistan-Bangladesh Free Trade Agreement (Negotiations launched: 2003), Peoples Republic of China-Bangladesh FTA (Proposed), Preferential Tariff Arrangement-Group of Eight Developing Countries (D-8), South Asian Free Trade Area (SAFTA), Trade Preferential System of the Organization of the Islamic Conference (OIC PTA). An LDC country is allowed not to offer reciprocal trade preference to its counter parts. But Bangladesh has to offer it while graduating from LDC. In such case signing free trade agreement could be more costly for Bangladesh after graduating from LDC list.
3. Paradigm shift in Official Development Assistance: Bangladesh received official development assistance from development partners 90.5 as grant and only 9.5 as loan in 1971-1972 fiscal years. Foreign grants and soft loans played a vital role in infrastructure and other development activities in Bangladesh. Still official development assistance (ODA) is a significant source of funding in various mega project of Bangladesh. Development partners are shifting their mode of financing with the wheel of local economic development. Grant amount is decreasing and loan amount is increasing day by day. For example Bangladesh received only 12.5 grants and 87.5 loan in last fiscal year. Soon after the graduation Bangladesh will be completely out of grant assistance facility everything has to be bearded by local resources or go for foreign loans and repayment with interest. So it may have another adverse affect on development motion of Bangladesh.
4. Other challenges: Besides the above mentioned challenges Bangladesh may face challenges in getting aid for trade, implementing IP laws, paying more subscription fee to international platforms like UN, unavailability of technical cooperation in terms of development assistance etc.
Finally; we can state that, Bangladeshs graduation from the list of LDC is a good news for us, but could we please recheck statistical figures that we are producing now, is there any methodological errors, could we conduct an impact assessment study to identify post graduation adverse affects on Bangladesh economy, could we please evaluate economic value of those prospective adverse affects whether we could survive and prosper further or bounced back to the LDC club again. It is better to graduate later than bouncing back to the same pavilion again.
We have to develop 100 SEZ, Deep Sea Port, Increase efficiency of existing sea ports, generate more power, develop internal road networking, offering load shedding free electricity connection to the mass people yet. Lots of mega projects are yet to develop. Internal resource mobilization, confidence building of local investors and attracting foreign investors to invest here in Bangladesh is yet pending. So graduation without preparation could be more painful for us if sustainability is not sure.
The writer is Executive Director, DCCI Business Institute (DBI)
