Originally posted in The Daily Star on 31 October 2026
On Thursday, the United Nations General Assembly (UNGA) approved a three-year extension for Bangladesh to prepare for graduation from the Least Developed Country (LDC) category, rescheduling it for November 24, 2029. Now the country has more time to strengthen its preparations to continue retaining international support and trade benefits that LDCs get. However, time extension alone cannot overcome the economy’s weaknesses if it doesn’t employ targeted, tough measures. The country must use this opportunity to implement meaningful reforms.
The Committee for Development Policy (CDP) reviews the LDCs’ progress every three years against three criteria: per capita gross national income, the Human Assets Index (HAI), and the Economic and Environmental Vulnerability Index (EVI). A country must meet the required thresholds in two consecutive reviews to be considered for graduation. Bangladesh first met the graduation criteria in 2018, and again in 2021. The CDP subsequently recommended Bangladesh for graduation. Given the economic and development losses caused by the Covid pandemic, the UN granted Bangladesh, Lao PDR and Nepal an exceptional five-year preparatory period to prepare for a smooth transition. A UNGA decision in 2021 set Bangladesh’s graduation date at November 24, 2026. Thursday’s decision extends the preparatory period for Bangladesh and Nepal by three more years.
The extension gives Bangladesh an opportunity to address gaps in its preparations and implement plans to meet the challenges that will follow graduation. During the preparatory period, some international support and trade benefits associated with the LDC status may continue under the applicable rules, but their nature and duration will vary across markets. The country should engage early with its major trading partners to clarify tariffs, rules of origin, and post-graduation market access arrangements. This is essential to remain competitive in the global market. Preferential access can help, but it cannot indefinitely offset high logistics costs, unreliable energy, slow customs procedures, low productivity, or limited product diversity. Bangladesh needs to improve port and transport efficiency, reduce production delays, strengthen labour and environmental standard compliance, and help firms shift towards higher-value product manufacturing. Exporters should also be provided with support to meet rules of origin and technical requirements at lower costs.
Trade agreements are one part of this adjustment. Bangladesh has signed a few trade agreements, among which the Economic Partnership Agreement with Japan and the Comprehensive Economic Partnership Agreement with South Korea are positive steps. It should pursue more such agreements with key trading partners based on careful assessments of the markets, sectors and terms involved. Besides tariffs, these deals should also cover services, investment, customs, standards, rules of origin, digital trade, and technology cooperation. Of course, the success of these trade agreements will depend on the actual export growth, use of preferences, investment, technology transfer, and local firms’ participation.
In this context, the need for diversifying exports beyond ready-made garment (RMG) products cannot be stressed enough. Bangladesh should expand production and exports of pharmaceuticals, leather goods, processed agricultural products, light engineering goods, and information technology services as well. This will require compliance with international standards, a skilled workforce, reliable energy, improved transport, and lower business costs. Access to finance and technology can help small and medium-sized enterprises enter new markets.
To this end, the commerce ministry should take the lead in formulating a national plan, in collaboration with the finance ministry, the National Board of Revenue (NRB), export agencies, businesses and workers, to address reciprocal tariffs and other trade barriers imposed by the trading partners. The plan should identify the products, firms and jobs most at risk and guide negotiations to secure predictable access to key markets. Before signing any trade agreement that includes tariff reductions, the government should assess its impact on local industries, employment, consumers and public revenue, and negotiate appropriate transition periods and/or safeguards. If energy, transport, ports, customs and finance are expensive, exporters cannot reduce costs on their own. The government should improve these services and give firms better access to finance, technical advice, worker training, and quality certification. With this support, businesses can upgrade machinery, adopt energy-efficient technology, reduce waste, improve productivity, and develop products for a wider range of markets.
Bangladesh also needs to reform import taxes. The government depends heavily on these taxes, but high duties and additional charges can raise the cost of raw materials and machinery for exporters, increasing production costs and making it harder to compete abroad. Tariffs should be rationalised gradually and predictably under a clear medium-term plan that removes unnecessary layers and aligns duties more closely with production and export competitiveness needs.
However, sudden cuts could create a revenue shortfall. The government must strengthen income tax and VAT collection, broaden the tax base, and improve tax administration to ensure that reduced reliance on trade taxes does not undermine essential public spending. It should also promptly refund import duties paid on materials used to produce exported goods and make bonded warehouse facilities easier for exporters to access, allowing them to import eligible inputs without paying duties upfront.
Bangladesh’s financing landscape will change as the country graduates and becomes a developing country. Some LDC-specific funds and flexibilities will become less available. Financing terms are already tightening. Bangladesh will need to rely more on domestic revenue and efficient public investment. It should exercise caution with external borrowing. Commercial borrowing from global markets may be available to finance projects with clear economic returns. But this will require strong project appraisal, debt management and transparent disclosure.
The country also needs a dedicated climate finance strategy to secure concessional funding for adaptation, resilience, and loss and damage, while strengthening project preparation and meeting the funders’ requirements. Linking climate plans, budgets, and investment priorities can direct resources to vulnerable communities and essential infrastructure.
Preparing for stricter intellectual property rules is also critical. As the Trade-Related Aspects of Intellectual Property Rights (TRIPS) flexibilities for LDCs are phased out, the pharmaceutical industry and other sectors may face new legal and compliance requirements. Bangladesh should strengthen IP administration, trade law expertise, and research and development. It should also promote innovation and technology transfer, protect public health, and ensure access to affordable medicines. A phased plan will be required to give firms and public institutions time to adapt.
The extension for Bangladesh’s LDC graduation preparatory period comes at a time when the country is facing difficulties in several areas. Macroeconomic stability should be the top priority now. Controlling inflation, increasing revenue collection, managing external shocks, and improving banking sector governance are essential to improve investment and production. Overcoming these challenges requires deep reforms. The country should also implement its smooth transition strategy to sustain export competitiveness, employment and development as LDC-related support and flexibilities are gradually phased out.
Dr Fahmida Khatun is an economist and distinguished fellow at the Centre for Policy Dialogue (CPD). Views expressed in this article are the author’s own.
