UN support for LDC review: Helpful, but won’t guarantee deferment, say economists

The United Nations (UN) will support an assessment of Bangladesh's readiness to graduate from least developed country (LDC) status, which economists say would be helpful for, but not guarantee, a deferment of the transition.

The review is expected to start within a month and conclude by mid-January 2026, according to UN Under-Secretary-General Rabab Fatima, who is also the UN high representative for LDCs, and developing landlocked and small island states.

According to the Chief Adviser's Office, the assessment will be carried out by an international consultant alongside a Bangladeshi expert to ensure a comprehensive and balanced evaluation.

The UN move follows a formal request from the interim government, Fatima said during a meeting with Chief Adviser Prof Muhammad Yunus at his hotel in New York on Monday.

Regarding the move, Mustafizur Rahman, distinguished fellow of the Centre for Policy Dialogue (CPD), said the first deferment of the graduation, until 2026, came in an assessment in 2021.

A transition period of three years was granted, but it was extended to five years due to the severe fallout from the Covid-19 pandemic.

Mustafizur Rahman said a UN team is scheduled to visit Bangladesh in November this year to assess the state of the economy, and Bangladesh should then raise its voice in favour of its demand for the deferment for a specific number of years.

For instance, earlier a Smooth Transition Strategy (STS) was formulated as part of the government's preparation guideline for LDC graduation.

Here, Bangladesh can argue with the UN that the country's progress in readiness as per the STS is still not satisfactory due to last year's political transition and uncertainties in some economic areas.

This is the right time to raise the demand for the deferment of LDC graduation, Mustafizur Rahman also said.

But if the focus is on the three indexes on which the country has been assessed for graduation, the demand for a deferment will be weakened as Bangladesh has already proved that it is in a strong position for graduation.

LDC graduation was deferred for the Solomon Islands based on the argument that the country was vulnerable to climate change, while the same happened for Angola with the argument being a significant fall in oil prices, he said.

So, there is no harm for Bangladesh if it gets a few more years before making the status graduation, the trade analyst also said.

However, Bangladesh should always focus on the progress of readiness as per the STS guidelines, he said.

The independent review by the UN is not a guarantee for deferment, but it will be helpful, said Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID).

The government requested the UN to reassess the state of the country's economy as local businesses, especially exporters, are raising concerns over the scheduled status graduation to a developing nation in November next year.

Businesses have been demanding a deferment of at least six years as their competitiveness in international markets will erode following graduation.

"Let us see what the review finds, and it can be helpful for making the decision," Razzaque told The Daily Star over the phone.

However, if Bangladesh wants the deferment, it can also approach Nepal, another South Asian nation set to graduate, as this country also faced a political transition.

If Bangladesh and Nepal jointly apply to the UN for the deferment, then the international community will consider it carefully, he said.

Three countries — Bangladesh, Nepal, and Lao PDR — are scheduled to graduate from the LDC grouping.

But at the end of the day, Bangladesh will have to go to the United Nations General Assembly if it wants the deferment, added Razzaque.

There is no such instance in the history of LDC graduations of any independent assessment being conducted just prior to the transition, said another noted economist asking not to be named.

All the previous assessments were conducted independently, so there is nothing to be reassessed for any reason, he also said.

The country's exports, which currently enjoy duty-free access to the European Union, are expected to face tariffs of up to 12 percent from 2029, when a three-year grace period on preferential treatment ends.

Shipments to Canada and Japan will also face higher tariffs, while manufacturers of pharmaceuticals will need to comply with international patent laws, which could push up medicine prices.