All set to graduate . . .
On Friday, Bangladeshi Prime Minister Sheikh Hasina indicated her country will require extended assistance from OECD countries after it graduates from its UN-designated status of “least developed country” (LDC) to “developing country” in 2026. Four years ago, Bangladesh met the targets for becoming a developing country by making significant strides in reducing poverty, fostering economic growth, enhancing industrial productivity, and improving public education. Bangladesh's ready-made garment sector, accounting for 84 per cent of its total exports, has been a significant driver of economic growth.
Exports expected to drop . . .
Bangladesh’s status change will improve its credit rating and enable the economy to attract more capital from global financial markets. But moving out of LDC status also means losing preferential access to certain export markets. Currently, Bangladesh enjoys duty-free and quota-free (DFQF) access to the EU under the Everything but Arms initiative; Canada under its Market Accessinitiative; and Australia, Japan, South Korea, and the U.K. under similar schemes. In 2021, these countries accounted for approximately 65 per cent of Bangladesh’s total export earnings. The World Trade Organization predicts that after removing the DFQF and other preferential trade terms, Bangladesh’s exports could drop by 14 per cent. Economists worry that this drop could negatively impact the country’s labour force. Coupled with the long-term economic impact of COVID-19, this shift could push more households below the poverty line and reverse the economic growth and poverty alleviation gains that Bangladesh has made in the last two decades.
Helping smooth the transition . . .
Canadian imports have accounted for less than one per cent of Bangladesh’s exports for the last five years, and Canadian exports will not face any market access issues as a result of Bangladesh’s change of status. While a bilateral free trade agreement (FTA) with Canada might not be beneficial to Bangladesh at this stage given this low two-way trade flow, an extended grace period might be. Bangladesh is trying to negotiate FTAs with major regional partners before its ‘graduation date.’ Meanwhile, ensuring the continuation of preferential trade terms from key export markets until at least 2029 is seen by Dhaka as the best course of action for the country.
READ MORE
- Canadian Global Affairs Institute: Don’t graduate – grandfather: Canada, trade and the least developed countries
- The Financial Express: Cabinet approves draft of regional trade agreement policy
- Nikkei Asia: Bangladesh needs preferential trade terms beyond 2026, PM says
