Bangladesh

LDC graduation: Bangladesh to face substantial losses

Finds govt strategy paper; decision on graduation to come soon
LDC graduation: Bangladesh to get duty benefits beyond 2026

The decision on whether Bangladesh will graduate to the developing country bracket in 2026 will be taken shortly, said the finance adviser to the interim government yesterday.

The issue will be discussed with other important persons including the chief adviser in the cabinet soon, said Salehuddin Ahmed, finance adviser, at a discussion organised by the Economic Relations Division (ERD) at the InterContinental Hotel in Dhaka.

"I will not say more as you will learn about it within a few days," he said, adding that there are some challenges in graduation.

Although Bangladesh passed all three UN criteria to become a developing nation in 2021, the country can choose to delay graduation from the least-developed country (LDC) bracket, said a finance ministry official.

At the meeting, Mohammad Abdur Razzaque, national consultant on LDC graduation, presented a study on Bangladesh's strategy for a smooth transition.

LDC graduation could lower exports by 14.3 percent in a year as the country's shipments would be subjected to a 6.7 percent tariff, as per the study.

Different studies have suggest that Bangladesh's trade losses might be even larger, Razzaque said.

The estimated export loss to the EU range between 5 percent to 19 percent if Bangladesh gets a standard Generalised System of Preferences.

The projected tariff rates for apparel exports to the EU, Canada and Australia are 9.5 percent, 17 percent, and 5 percent respectively.

The largest decline in exports is for the textile and apparel sector, estimated at 14.7 per cent, followed by food and leather.

The impact of garment export shocks could slash GDP by 0.39 to 1.17 percent and employment by 0.41 to 0.88 million, according to the study.

The poverty rate could increase by 0.14 percentage points and depress labour returns by 5.5 percent. It will also have an impact on household consumption.

The strategy paper also said recent unfavourable macroeconomic developments add to longstanding economic challenges and vulnerabilities for Bangladesh.

These include a weakening balance of payments situation reflected in a decline in foreign reserves and persistent domestic inflationary pressures that further strain the economy.

Apart from the above, external shocks are occurring with greater frequency, complicating development efforts.

Geopolitical tensions, the US-China trade war, the pandemic and the Ukraine war have disrupted global trade and affected a developing region like Bangladesh.

"These combined factors underscore the uncertainties and difficulties Bangladesh faces in its graduation journey," the strategy paper said.

Bangladesh's journey towards LDC graduation also gives credence and thrust to the reform agenda of the interim government, said Lutfey Siddiqi, special envoy on international affairs to the chief adviser.

Recently, exports from three sectors including jute, furniture and light engineering declined because of the government's decision to cut down the incentive on export receipts, said Syed Nasim Manzur, president of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh.

He also suggested a rethink and not jumping into the decision to proceed with the LDC graduation.

Ichiguchi Tomohide, the chief representative of JICA Bangladesh, suggested the creation of a single ministry in investment, to make at least three economic zones fully functional, a real one-stop service centre, incentives for some sectors like automotive, the introduction of customs in the economic zones and a national single window.

Bangladesh can be a role model for other LDCs, said Taffere Tesfachew, member of the UN Committee for Development Policy and the Rapporteur for Bangladesh.

The UN will hold a meeting in New York on December 17 on LDC graduation and some important decisions may come from this meeting.

Lamiya Morshed, principal coordinator to the SDG; M Siraz Uddin Miah, principal secretary to chief adviser; Gwyn Lewis, UN resident coordinator in Bangladesh; and ERD Secretary Md. Shahriar Kader Siddiky also spoke.

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LDC graduation: Bangladesh to face substantial losses

Finds govt strategy paper; decision on graduation to come soon
LDC graduation: Bangladesh to get duty benefits beyond 2026

The decision on whether Bangladesh will graduate to the developing country bracket in 2026 will be taken shortly, said the finance adviser to the interim government yesterday.

The issue will be discussed with other important persons including the chief adviser in the cabinet soon, said Salehuddin Ahmed, finance adviser, at a discussion organised by the Economic Relations Division (ERD) at the InterContinental Hotel in Dhaka.

"I will not say more as you will learn about it within a few days," he said, adding that there are some challenges in graduation.

Although Bangladesh passed all three UN criteria to become a developing nation in 2021, the country can choose to delay graduation from the least-developed country (LDC) bracket, said a finance ministry official.

At the meeting, Mohammad Abdur Razzaque, national consultant on LDC graduation, presented a study on Bangladesh's strategy for a smooth transition.

LDC graduation could lower exports by 14.3 percent in a year as the country's shipments would be subjected to a 6.7 percent tariff, as per the study.

Different studies have suggest that Bangladesh's trade losses might be even larger, Razzaque said.

The estimated export loss to the EU range between 5 percent to 19 percent if Bangladesh gets a standard Generalised System of Preferences.

The projected tariff rates for apparel exports to the EU, Canada and Australia are 9.5 percent, 17 percent, and 5 percent respectively.

The largest decline in exports is for the textile and apparel sector, estimated at 14.7 per cent, followed by food and leather.

The impact of garment export shocks could slash GDP by 0.39 to 1.17 percent and employment by 0.41 to 0.88 million, according to the study.

The poverty rate could increase by 0.14 percentage points and depress labour returns by 5.5 percent. It will also have an impact on household consumption.

The strategy paper also said recent unfavourable macroeconomic developments add to longstanding economic challenges and vulnerabilities for Bangladesh.

These include a weakening balance of payments situation reflected in a decline in foreign reserves and persistent domestic inflationary pressures that further strain the economy.

Apart from the above, external shocks are occurring with greater frequency, complicating development efforts.

Geopolitical tensions, the US-China trade war, the pandemic and the Ukraine war have disrupted global trade and affected a developing region like Bangladesh.

"These combined factors underscore the uncertainties and difficulties Bangladesh faces in its graduation journey," the strategy paper said.

Bangladesh's journey towards LDC graduation also gives credence and thrust to the reform agenda of the interim government, said Lutfey Siddiqi, special envoy on international affairs to the chief adviser.

Recently, exports from three sectors including jute, furniture and light engineering declined because of the government's decision to cut down the incentive on export receipts, said Syed Nasim Manzur, president of the Leathergoods and Footwear Manufacturers & Exporters Association of Bangladesh.

He also suggested a rethink and not jumping into the decision to proceed with the LDC graduation.

Ichiguchi Tomohide, the chief representative of JICA Bangladesh, suggested the creation of a single ministry in investment, to make at least three economic zones fully functional, a real one-stop service centre, incentives for some sectors like automotive, the introduction of customs in the economic zones and a national single window.

Bangladesh can be a role model for other LDCs, said Taffere Tesfachew, member of the UN Committee for Development Policy and the Rapporteur for Bangladesh.

The UN will hold a meeting in New York on December 17 on LDC graduation and some important decisions may come from this meeting.

Lamiya Morshed, principal coordinator to the SDG; M Siraz Uddin Miah, principal secretary to chief adviser; Gwyn Lewis, UN resident coordinator in Bangladesh; and ERD Secretary Md. Shahriar Kader Siddiky also spoke.

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