The Centre for Policy Dialogue organized a dialogue on Bangladesh and the LDC Graduation Challenges on on 16 March 2017 at Lakeshore Hotel in Dhaka. CPD Distinguished Fellow Professor Mustafizur Rahman presented the keynote at the dialogue.
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Published in The Daily Star on Friday, 17 December 2016
Prepare for challenges in post-LDC era: analysts
Bangladesh must take adequate preparation and come up with a well-thought-out strategy for its life as a developing country from 2024 onwards, experts said.
The country is on course to joining the group of developing countries in 2024, after being an LDC since 1975.
After the graduation, the country will get three years to adjust to the modalities of being a developing country, after which its quota-free and duty-free access to developed economies, eligibility to low-cost financing along with other benefits will come to an end.
“We actually have before us a ten-year gap,” said Rehman Sobhan, chairman of the Centre for Policy Dialogue, at a discussion styled ‘Bangladesh and the LDC Graduation Challenges’, organised by the think-tank at the capital’s Lakeshore Hotel yesterday.
“And in this 10 years, if we do not shape us then we should be facing not just a variety of economic problems but a variety of social and political problems as well, which may become even more unmanageable.”
For instance, Bangladesh now gets 15 percent tariff benefit over developing countries in terms of market access to the developed countries; this benefit will be lost upon graduation.
So entrepreneurs should use the time to enhance their export competitiveness such that they can compete even after the end of the tariff benefits, he said.
As Bangladesh does not have enough natural resources, it can learn from Japan, South Korea and other countries and turn its huge population into a resource.
“Invest in quality education. We should see our people as resource and invest in them,” he added.
In a paper presented at the event, CPD Distinguished Fellow Mustafizur Rahman said Bangladesh might be included in the graduation list in next year’s review by the United Nations.
The Committee for Development Policy (CDP), a body of the UN Economic and Social Council, is responsible for reviewing the status of LDCs and monitoring their progress following graduation from the category.
The CDP reviews a country’s position based on three criteria: gross national income per capita calculated based on three-year average, human asset index (HAI) and economic vulnerability index (EVI).
A country has to pass the threshold in two of the three criteria.
Bangladesh will be considered for graduation because of passing the threshold in HAI and EVI, Rahman said, adding that the third threshold is expected to be conquered by the time of 2021 review.
“As a whole, our analysis shows that Bangladesh will be able to strongly come out of the LDC category by 2024 — it is a matter of pride.”
But, there are challenges, he said, citing the end of preferential market access for Bangladesh’s products and increased cost of foreign loans as examples.
At present, Bangladesh enjoys preferential access of varying degrees to markets of more than 40 countries.
The country’s exports will face an additional 6.7 percent tariff once it graduates from the LDC status. Export may fall by 5.5 to 7.5 percent as a result of withdrawal of preferential access, he said.
“So, we have to adopt a strategy for smooth graduation during this period. And all, including government, private sector and civil society, have important roles in this respect.”
Rahman suggested product and market diversification, and increasing regional cooperation for market access, particularly to India and China.
“Time has come for Bangladesh to selectively venture into bilateral and regional trade and investment agreements keeping the development of supply and value chains in the purview.”
Rahman stressed the need for adequate preparation before final graduation.
“Because, once Bangladesh has graduated there is no going back,” he added.
Bangladesh should take preparation so that it can negotiate to be part of various bilateral and regional agreements and reap benefits from that, said Wahiduddin Mahmud, a former adviser to the caretaker government.
Heavy dependence on apparel makes Bangladesh’s export prospect vulnerable.
“It is very narrow. The industrial base dependent on garments is also narrow,” he said, while calling for strengthening production base and improving efficiency.
A comprehensive transition strategy should be taken, said Md Shahriar Alam, state minister for foreign affairs, adding that a countrywide assessment of the implications on the various sectors of the economy upon graduation and erosion of market access will be helpful.
However, the government will try to retain preferential market access beyond graduation and the foreign affairs ministry has already started working on it, he said.
The cost of doing business should be cut to encourage investment and business activities, said Kazi Anis Ahmed, director of Gemcon Group.
Excessive rent-seeking and bureaucratic obstructionism discourage investment and private sector growth.
“This has to be addressed,” Ahmed said, adding that the cost of capital should be low and power and gas should be available.
The government is working on easing the bureaucratic red tapes, said Abul Kalam Azad, chief coordinator of Sustainable Development Goals Affairs.
“We have changed the red tape to white tape,” he added.
The cost of land is a big concern for investors, said Shafiul Islam Mohiuddin, vice-president of the Federation of Bangladesh Chambers of Commerce and Industry.
Published in The Financial Express on Friday, 17 December 2016
Country’s LDC graduation
Experts focus on readiness to face hurdles
FE Report
Bangladesh needs to take adequate preparation to face the challenges of losing various facilities, including preferential market access, soft loans, and lesser aid etc, as it is supposed to graduate from the least developed country (LDC) status by 2027.
The country has immense potentials to graduate to a developing one by meeting the three criterions. But to make the graduation sustainable it needs to achieve momentum by addressing a number of issues, speakers said at programme in the capital on Thursday.
The Centre for Policy Dialogue (CPD) organised the dialogue -‘Bangladesh and the LDC Graduation Challenges’ – with its Chairman Prof Rehman Sobhan in the chair.
Speaking on the occasion State Minister for Foreign Affairs Shahriar Alam, MP, said Bangladesh has already attained the human assets index (HAI) and economic vulnerability index (EVI) threshold levels, and attaining the income threshold is a just a matter of time.
He said everyone is concerned about what will happen to the preferences, mainly the special and differential treatments that Bangladesh enjoys as an LDC, after the graduation.
“What I can say is Bangladesh is ready to face the challenges. We from the government are trying our best to retain all the facilities even after the graduation.”
Mr Alam said Bangladesh needs to carryout an in-depth assessment to check how resilient the country’s economy is to external shocks.
He opined that the country’s infrastructure readiness has to be of high quality to meet various business needs in the days to come.
“Probably Bangladesh’s graduation is going to be the most balanced one in the history,” the state minister added Chief Coordinator for Sustainable Development Goals (SDG) Affairs in Prime Minister’s Office (PMO) Abul Kalam Azad said Bangladesh will graduate to developing country status by meeting all the three criterions.
He said the government has taken various steps and provided a friendly environment to ensure private sector’s growth.
“We’ve changed red-tape into white-tape. By this we’ve tried to loosen the tape, although we could not eliminate the tape exactly. We did it by adopting national integrity strategy,” he noted.
Former Caretaker Government Advisor Prof Wahiduddin Mahmud said though the graduation (from LDC) will trigger some sacrifices in terms of preferences and also bring some challenges, all need to support the process.
He said as an LDC Bangladesh did not get any extra foreign aid. Rather, it received much lower foreign aid than the developing countries in terms of per capita.
“We have to change our efforts and mindset from trying to exploit the benefits of LDC status to shift to non-LDC mode in international negotiations for benefiting from global economic order.”
Mr Mahmud said Bangladesh’s strongest position in the threshold is EVI, because of the size of population and economy.
“If you have a large economy, you can diversify it, you have large domestic market and you can withstand external shock.”
Mr Mahmud pointed out that Bangladesh is vulnerable because of its huge population and land scarcity, for which it cannot export other than labour-intensive manufacturing goods, like – agriculture products.
Terming apparel sector as an enclave industry he said it is not easy for an economy to depend on one product only.
“We have to strengthen our production base, and should not depend on low-wage sectors. Rather, we should go for better technology and better productivity,” he added.
Prof Rehman Sobhan said Bangladesh is getting 10 more years for finally graduating from LDC, and during this period many advantages that the country has been enjoying will be lost. After that the country will enter into bilateral and other mega trade regimes, which are emerging.
“Entering into these bilateral and mega agreements is desirable, if you negotiate well. But the whole nature of these agreements is that it imposes considerable reciprocal obligations as well. This is not a free lunch,” he warned.
Vietnam had to pay heavily during entering into TPP deal, Mr Sobhan noted.
He also underscored the need for export diversification instead of depending on a small product basket.
“We have not even built base for moving out from ready-made garment industry to a whole range of labour-intensive industries, late alone higher level industrialisation.”
The CPD chairman termed the next ten years, before the graduation, very important for taking necessary preparations as well as raising capability and competitiveness for cutting costs.
He also advocated for giving equity shares to workers in the industries to share their generated profits with them.
First Vice-President of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Shafiul Islam Mohiuddin said the cost of doing business is still very high in the country.
Urging the government to meet the infrastructure needs he said energy and power is a major concern for growing private sector investment.
Mr Mohiuddin asked what the price of liquefied natural gas (LNG) will be and when it will be available in large volume.
CPD Distinguished Fellow Mustafizur Rahman in his keynote speech said Bangladesh’s LDC graduation will be a success story, not only for the country but for the development partners also.
He said the country is well positioned for graduation, but a number of challenges will commence.
From LDCs’ specific preferential treatment it will be entitled for most favoured nation (MFN)-based market participation, and from highly concessional aid it will transit to blended finance, he opined.
“If Bangladesh’s graduation is to be sustainable, it has to be with momentum. So, we need adequate preparedness before final graduation,” he further added.
CPD Executive Director Fahmida Khatun moderated the dialogue. Bangladesh Investment Development Authority (BIDA) Chairman Kazi M Aminul Islam, BUILD Chairman Asif Ibrahim, GEMCON Group Director Dr Kazi Anis Ahmed, and BGMEA former director Arshad Jamal also spoke, among others, in the programme.
Published in The Daily Star on Friday, 17 December 2016
Shahriar: We’re on right track to graduate from LDC
Mahmud Hossain Opu
CPD Distinguished Fellow Professor Mustafizur Rahman made the keynote presentation on the topic of LDC graduation.
Bangladesh is in the advanced stage and on the right path of graduation from the least-developed country to a developing one.
State Minister for Foreign Affairs Md Shahriar Alam said this at a dialogue titled “Bangladesh and the LDC Graduation Challenges” organised by the Centre for Policy Dialogue on Thursday at Lakeshore Hotel in Gulshan.
“We need to ponder over crucial points after graduating from LDC as it may lead to many difficulties,” said Shahriar.
He stressed the need for focusing on new areas of export including manufacturing, agricultural and so on.
The state minister said: “We have good opportunity to utilise our demographic dividend by ensuring proper education and skill development.”
CPD Distinguished Fellow Professor Mustafizur Rahman made the keynote presentation on the topic of LDC graduation.
According to the keynote paper, Bangladesh has already exceeded the graduation threshold at human asset index and economic vulnerability index. The country also has a good possibility to meet the income criteria too by 2018, according to the CPD analysis.
Thus Bangladesh will become a developing country from the least-developed country criteria by the next year, added Mustafiz.
“Bangladesh will face decline in exports by 5.5% to 7.5% if the country loses duty-free access in the market upon its graduation from the club of the least-developed countries.”
The country will lose market privileges, and so, it has to enhance capacities, he suggested.
CPD recommended focus on a longer-term development pathway rather than just achieving graduation by meeting statistical eligibility indices.
Economic infrastructure is needed to be reformed, said Mustafiz.
Bangladesh has to address both product and market diversification which are very critical for smooth graduation, according to the think-tank.
A total of 48 LDCs are entitled to a total of 136 support measures including special treatment on official development assistance, climate finance, preferential market access and rules of origin, patent flexibilities and aid for trade.
Bangladesh is projected to graduate in 2024 meeting all three criteria – income criteria, Human Asset Index (HAI) and Economic Vulnerability Index (EVI), according to the UNCTAD report.
An LDC can graduate if it meets two of the three criteria, or riding on the income criteria if the country’s income doubles.
Even if Bangladesh graduates from the LDCs in 2024, the country will still enjoy the same privileges under the current arrangement tilL 2027 to facilitate a smooth transition.
Bangladesh will be one of the three countries if it meets all of the three criteria accomplished by the other two – Djibouti and Yemen.
The graduation process will start in 2018, and Bangladesh will need to meet the criteria again in 2021 to avail the final recommendation.
Prof Wahiduddin Mahmud, former advisor to the caretaker government, attended the programme as a special guest at the programme.
Md Shafiul Islam Mohiuddin, first vice-president of Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), shared his view as special commentator.
Dr Kazi Anis Ahmed, director, GEMCON Group, offered comments as a discussant.
CPD Chairman Prof Rehman Sobhan chaired the session.
Centre for Policy Dialogue Executive Director Fahmida Khatun moderated the discussion.