LDC Graduation of Bangladesh: Challenges and Opportunities
The Author is Chief Executive Officer of the
Institute of Chartered Accountants of
The United Nations held the first conference on the Least Developed Countries (LDC) in 1981 to highlight LDCs special economic needs and to generate international attention for socio-economic development of the LDCs. Since then, the UN has been holding Conference on LDCs in every 10 years, progressively adopting a Progamme of Action for next decade. The last Conference on LDCs (LDC-IV) was held in Istanbul in 2011 and the Istanbul Programme of Action (IP0A) was adopted for the period of 2011–2020. The overarching goal of the IPOA is to overcome the structural challenges faced by the LDCs in order to eradicate poverty and achieve internationally agreed development goals. It specifically aims to enable half of the LDCs to meet the criteria for graduation within the period of 2011-2020. As Bangladesh is an LDC, this IPoA has big relevance to our journey toward the developing status. The Committee for Development Policy (CDP), a subsidiary body of the UN Economic and Social Council, is mandated to review the category of LDCs every three years and monitor their progress after graduation from the category. The concept of LDCs originated in the late 1960s and the first group of LDCs was listed by the UN in its resolution 2768 (XXVI) of 18 November 1971.
The identification of LDCs is currently based on three criteria: per capita gross national income (GNI), human assets and economic vulnerability to external shocks. The latter two are measured by two indices of structural impediments, namely the human assets index and the economic vulnerability index:
- Income criterion, based on a three-year average estimate of GNI per capita, based on the World Bank Atlas Method (under $1,035 for inclusion, above $ 1,242 for graduation as applied in the 2015 triennial review)
- Human Assets Index (HAI) based on indicators of: (a) nutrition: percentage of population undernourished; (b) health: mortality rate for children aged five years or under; (c) education: the gross secondary school enrolment ratio; and (d) adult literacy rate.
- Economic Vulnerability Index (EVI) based on indicators of: (a) population size; (b) remoteness; (C) merchandise export concentration; (d) share of agriculture, forestry and fisheries; (e) share of population in low elevated coastal zones; (f) instability of exports of goods and services; (g) victims of natural disasters; and (h) instability of agricultural production.
The Committee for Development Policy (CDP), a subsidiary body of the UN Economic and Social Council, is mandated to review the category of LDCs every three years and monitor their progress after graduation from the category. If the two consecutive triennial reviews meet the threshold of at least two of the three criteria, then a country can normally qualify for graduation from the LDC status.
The reviews were held in 2015 and 2018 At the request of the Government of Bangladesh, the Secretariat of the Committee for Development Policy (CDP) travelled to Dhaka from 9 to 12 October 2017 to discuss our potential graduation preparation from the LDC category. The Secretariat of the CDP met with officials from various Ministries, the Bureau of Statistics and the Prime Minister’s Office, as well as with representatives from the private sector.
According to its preliminary calculations, the CDP Secretariat indicated that Bangladesh would, for the first time, meet the threshold for graduation at the next triennial review which was to be held in March 2018. Therefore, Bangladesh might have good chance to be recommended for graduation at the triennial review in 2021.
It was also mentioned that if Bangladesh attained any two criteria, for example, EVI and HAI in 2021, Bangladesh would go up the developing country status in 2024 after having additional three years’ transition period. However, some of the LDC-specific facilities may remain available for another three years till 2027. Accordingly Bangladesh attained all three criteria again in 2021 and was recognised to be a developing economy.
Because of the pandemic situation faced by Bangladesh, specially the impact of it on the economy, the Govt. of Bangladesh requested the UNCDP to extend the transition period for five years in place of
The review result for Bangladesh done in 2015 marked remarkable progress and stood as follows:
|Per Capita Income||Average of US$ 1,242 From 2011 to 2013||US$ 1,190||Not achieved|
|Economic Vulnerability Index (EVI)||32 or below||25.1||Achieved|
|Human Asset Index (HAI)||66 or above||63.8||Not achieved|
Source: CDP, UN
It is evident from the above table, Bangladesh attained the economic vulnerability index (EVI) with the score of 25.1 against the required threshold of 32. Again for the second time, Bangladesh attained all the eligibility criteria at a time in 2018 which are tabled below:
|GNI Per Capita||US$ 1,2 30 or above||US$ 1, 274|
|Economic Vulnerability Index (EVI)||32 or below||25.2|
|Human Asset Index (HAI)||66 or above||73.2|
|GNI Per Capita||Average of US$ 1,230 or above||US$ 1,827|
|Economic Vulnerability Index (EVI)||32 or below||27.27|
|Human Asset Index (HAI)||66 or above||75.33|
the three years for sustainability purpose.Special Facilities for LDCs All LDCs, including Bangladesh, are entitled to enjoying some differential and preferential facilities in the area of international trade, development assistance, including development financing and technical cooperation; and in general support and other forms of assistance. Among the preferential facilities, Special and Differential Treatments for LDCs under the WTO agreements are the most important given our export-led economy. Under these, LDCs enjoy preferential market access including special and differential treatment from some WTO obligations (other than preferential market access), and trade-related capacity-building. Preferential market access for goods and services
Various preferential market access facilities are available for LDCs, which include:
- Duty-free & quota-free (DFQF) market access facilities;
- GSP facilities;
- Special market access facilities for LDC members in various RTAs (Regional Trade Agreements), like SAFTA, APTA; and
- Preferential market access for trade in services under LDC Services Waiver.
Special and Differential Treatment under WTO Agreements In the WTO system and Agreements, out of 140 Special and Differential Treatments (S&DTS) that are available for developing countries and LDCs,
15 are exclusively for LDCs. These S&DTs can be grouped into five main categories:
- increased market access;
- safeguarding of the interests of LDCs;
- increased flexibility for LDCs in rules and disciplines governing trade measures;
- extension of longer transitional periods to LDCs; and
- provision of technical assistance.
Trade-related capacity- building
An important initiative in support of the LDCs is the Enhanced Integrated Framework (EIF), the successor of the Integrated Framework (IF). The EIF is a multi-donor programme which supports LDCs to increase their participation in the international trading system. It focuses on three main activities, viz., mainstreaming trade into national development strategies; setting up structures needed to coordinate the delivery of trade-related technical assistance; and building capacity to trade, including addressing critical supply-side constraints.
Possible Impact on Bangladesh’s Export
Currently Bangladesh has been enjoying DFQF facilities in all developed countries except the USA. However, the greatest benefit comes from the EU market. Along with developed countries, many developing countries, including India, China, South Korea also provided DFQF market access to LDCs, including Bangladesh, for a wide range of products. Among the developing countries, India has provided DFQF market access to Bangladesh for all products except drug and tobacco under SAFTA. As such, around 70% of Bangladesh’s export is done under the DFQF facilities.
After graduation from the LDC status, Bangladesh will no longer be entitled to availing the LDC-specific S&DTs, including the DFQF market access facilities. As a result, export of Bangladesh may certainly face some strain, particularly in the EU market.
Possible Alternatives and Way Forward
This article was first published by Chartered Accountants Ireland at the following URL: https://www.icab.org.bd/publication/news/4/5/details