Thorough exercise to outline a meaningful LDC graduation
The development journey of Bangladesh reached a new height when the country became formally eligible to leave the Least Developed Country (LDC) league in 2018. Three years back in 2015, the country also elevated to the category of Lower-Middle Income Country (LMIC) from Lower-Income Country (LIC) category. While the LDC criterion is set by the United Nations (UN), lower or middle-income status is set by the World Bank. No doubt, both types of status have varying significance for Bangladesh and change in these statuses reflect the onward journey of the country with many opportunities and challenges. The book titled Navigating New Waters: Unleashing Bangladesh’s Export Potential for Smooth LDC Graduation tries to explore these opportunities and identify the challenges in the external trade front of the country.
Edited by Dr Mohammad Abdur Razzaque, it primarily focuses on export trade as it is critical for the country’s employment and revenue generation. The editor argues: “For Bangladesh, the most important change that LDC graduation is likely to bring will be associated with preferential market access for exporters. Within the set of LDC-related privileges, Bangladesh has primarily benefited from unilateral trade preferences granted by many developed and developing countries under their respective Generalised System of Preferences (GSP) schemes. Amongst the least developed countries (LDCs), only Bangladesh has been able to utilise the trade preferences in a commercially meaningful way, although such utilisation has largely been limited to some important markets. Currently, Bangladesh enjoys preferential market access in at least 46 countries. Almost three-quarters of Bangladesh’s export earnings are sourced from the countries that offer tariff preferences.” (P. 3-4)
Divided into three thematic parts, the first part of the book deals with the preparation of LDC graduation. The authors highlight some of the longstanding challenges facing the country’s export sector and try to shed light on the possible effects of graduation from the perspectives of the private sector. They rightly say: “Graduation from the group of LDCs also means a substantial loss of policy space in supporting the private sector. Having recognised their supply-side constraints and weak economic capacities, LDCS are often exempted from making commitments and implementing provisions of stringent agreements. WTO members are also generally reluctant about raising concerns or lodging official complaints about individual LDCs’ policy support measures that would otherwise be deemed inconsistent or non-compliant with international trade rules and regulations. As an LDC, Bangladesh has made significant use of such policy space in supporting the private sector. LDC graduation will require making the necessary adjustments for the conformity with WTO agreements” (p-67). In fact, over the years, the country’s private sector has enjoyed many waivers in international trade. Some sectors have taken the advantages of the waivers and also earned additional benefits in the domestic market and avoided fare competition. These discourage efficiency and compel consumers to pay excessive prices. LDC graduation is likely to address the issue in the near future, and the beneficiary sectors will face some shocks initially. In this connection, the book presents several existing direct policy supports which will be curtailed or lessened due to LDC graduation.
The second part focuses on export promotion during post-graduation period and analyses the country’s current bilateral trade relations with four major trading partners. These are the European Union (EU), the United States (EU), India, and China. While the first two partners are two major export destinations of Bangladesh, last two partners are two major sources of import.
The authors of these chapters identify scopes of engagement with these partners ‘in the light of LDC graduation realities.’ For instance, analysing the apparel exports to the EU and policy options for adapting to competitive challenges, the relevant chapter of the book finds ‘that graduation from LDC status is likely to dent Bangladesh’s competitiveness in the EU.’ It is not unlikely that readymade garment (RMG) industry, the leading export item and disproportionately subsidised over the decades, will face the significant blow. To counter the possible setback, the authors outline some strategies. These include: securing a favourable trading arrangement with the post-Brexit UK, industrial up-gradation for moving up the global value chain, ensuring compliance as expected from credible suppliers for global consumers and attracting foreign direct investment in the RMG sector. In a similar vein, the book suggests exploring a free trade agreement (FTA) deal with the United States as an option to ensure market access along with other options like conditional non-reciprocal market access. Again, the authors argue: “To improve export market prospects, reinvigorated policy initiatives, including consultations with India, will have to be undertaken to address non -tariff barriers (NTBSs) and non-tariff measures (NTMs) including the recent imposition of anti-dumping duty on Bangladesh’s jute product” (p-189). Finally, the book suggests a comprehensive bilateral framework for cooperation with China in the medium and long run.
The final part presents the export potential of leather, plastic, furniture, pharmaceutical, jute, and services and outlines ‘the policy support needed to expand exports from those sectors.’ This part of the book also identifies a number of difficulties and limitations of these sectors.
Regarding leather sector, it says: “Despite its long presence, strong backward integration, and good product quality, Bangladesh has not been able to realise much of the potential of the leather sector. The decline in exports after the relocation of tanneries of Savar has become a cause for concern. This call for revisiting the leather-sector specific policies as well as other general factors affecting overall exports competitiveness.” (p-262)
Again, the book rightly points out, though very briefly, the environmental issues associated with the production and recycling of post-use plastic products. Environmental hazard originating from plastic is a growing concern globally, and it will be a big challenge for Bangladesh to unleash the export potential of plastic goods. On pharmaceuticals, the book argues that despite a dynamism in the industry, the sector is far from realising its export potentials and entirely focusing on the local market. Observing a rosy potential of jute and jute goods exports in the global market, the researchers stress on active promotion of the diversified and high-value-added goods rather than traditional items. It is also interesting to note that they recommend reviving the Bangladesh Jute Mills Corporation (BJMC), the public entity designated to deal with production and exports of jute goods.
An important addition in the book is a dedicated chapter on services exports which is side-lined over the years. The country’s trade in services is growing, and Covid-19 has already shown that services will be more critical in the near future.
The book is an outcome of rigorous exercise by a group of economists and analysts. They are: Ahsanuzzaman, Parvez Abbasi, Hamim Akib, Abu Eusuf, Emran Hasan, Nafiz Ifteakhar, Mahfuz Kabir, Rabiul Islam Rabi, Jillur Rahman, Mahtab Uddin, and Mohammad Abdur Razzaque. The work has been completed under a project of Bangladesh Enterprise Institute (BEI), a Dhaka-based think-tank. Dr Razzaque, the editor, is a professional economist who started his carrier as a teacher at the Economics department of Dhaka University and later joined the Commonwealth Secretariat and served in various capacities there for more than a decade. Having strong command on international trade and development economics, Dr Razzaque is now research director of Policy Research Institute of Bangladesh (PRI) and chairman of Research and Policy Integration for Development (RAPID). In the overview, he argues: “Bangladesh is likely to graduate in 2024 and in a number of instances there are provisions for a transition period of varying years. Therefore, there are several years in hand to prepare for a graduation process, thereby containing any adverse consequences while building the overall economic resilience through improved competitiveness. A renewed focus on developing productive capacities in the export sector and promoting its external competitiveness, thus now constitutes one major broad policy priority.” (p12)
Nevertheless, the graduation path of Bangladesh is now facing some uncertainties due to the outbreak of deadly coronavirus (Covid-19). A debate is already there on whether the country should lobby for deferment of graduation. Economists and experts are placing their arguments and analyses in the debate. It is, however, yet to get any space at the policy agenda. The policymakers need to take the debate seriously. For them, the analysis and suggestions in the book, though completed before the pandemic, will be a guideline to set a revised strategy on LDC graduation during the post-Covid period.