///Graduation from LDC will come with its own challenges: Dr Khondaker Golam Moazzem

Graduation from LDC will come with its own challenges: Dr Khondaker Golam Moazzem

2017-03-23T13:24:52+00:00 March 15th, 2017|CPD in the Media, Khondaker Golam Moazzem|

Published in The Financial Express on Thursday, 16 March 2017

BD petitions UN soon for LDC graduation

Two of three qualifying thresholds already crossed

Mehdi Musharraf Bhuiyan

Bangladesh moves to make a strong case to the United Nations (UN) next week for LDC graduation as it wants to avail the next triennial review of eligibility criteria in 2018.

If the move sails through, official sources said, the targeted graduation of the country out of the club of world poor may be accomplished by the year 2024.

Bangladesh has already reached necessary threshold levels for LDC graduation for two major criteria set by the UN and is expected to stand all three tests by next year, they said.

“We have already met the threshold of Economic Vulnerability Index and Human Asset Index while we are expecting to meet the threshold of Gross National Income by next year,” Member of the Planning Commission Prof Dr. Shamsul Alam told FE Wednesday.

A high-level government delegation led by Professor Alam will present the Bangladesh case at the plenary meeting of the Committee for Development Policy (CDP) of the UN in New York which will allow the country to be considered for the next LDC (least developed country) graduation review in 2018.

The delegation to the meeting will also include Secretary of the Economic Relations Division.

As per UN provisions, inclusion and graduation of LDCs are based on three criteria: per-capita gross national income, human assets, and economic vulnerability to external shocks.

To be eligible for graduation from least developed countries, a country must reach threshold levels for graduation for at least two of these three criteria, or its GNI per capita must exceed at least twice the threshold level.

“In the Economic Vulnerability Index, where the score needs to be 32 or less, Bangladesh’s score is 25.03, whereas in Human Asset Index, we have already attained a score of 69.9 — well above the threshold of 66,” Prof Alam said.

The CDP review process takes place every three years and the last review took place back in 2015. However, at the time, Bangladesh had met only one graduation threshold — Economic Vulnerability.

“When it comes to Gross National Income, our GNI per capita is US$ 1156, slightly below the threshold of US$ 1242. However, we are expecting to reach that threshold as well by the time of the next CDP review in 2018,” he added.

“While it is enough to meet the thresholds of just two criteria to be eligible for LDC graduation, we will hopefully go to the 2018 CPD review with all the criteria met,” the PC member said on a note of optimism about making a decisive graduation move this time around.

As per the current provisions, a country needs to be eligible in two consecutive CDP reviews before any recommendation is made.

Therefore, Bangladesh will have to meet these same criteria again in 2021 to be recommended by CDP for graduating from the LDC status.

“We are hopeful that we will receive the final CDP recommendation in the year 2021,” Prof Alam said. “Consequently, with the endorsement from the ECOSOC and approval from the UN General Assembly, Bangladesh will formally graduate from LDC status in 2024.”

Even if Bangladesh graduates by 2024, the country will be able to enjoy LDC preferential treatment up to the year 2027.

Experts have long noted that the loss of LDC status at graduation may give rise to potentially important economic costs due to withdrawal of GSP facilities from the European Union, Canada, Japan, Australia and other markets.

Currently, Bangladesh enjoys a 12 per cent preference margin for its apparel industry under EU’s ‘Everything but Arms (EBA)’ Initiative which gives it a substantial price advantage.

It has also been noted that as Bangladesh is expected to graduate concurrently from both United Nations and the World Bank classifications, options for concessional financing will also dry out.

Professor Alam, however, holds the hope that Bangladesh’s exporters will gain enough capacity within the next ten years to retain their momentum once the GSP facilities are gone.

“In ten years time, we will hopefully diversify our exports and will move for high-end products to retain our competitive edge even without preferential facilities,” he said.

“Graduation from LDC will come with its own challenges,” said Dr Khondaker Golam Moazzem, Director of the Centre for Policy Dialogue, a leading think-tank in the country.

“To overcome those challenges and to ensure a smooth transition, we will need structural transformation of our economy — we need to diversify our export and we need to shift towards more productive and hi-tech manufacturing,” he added.