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SYDNEY, April 7 (IPS) – Bangladesh is scheduled to graduate from the least developed nation (LDC) standing in November this yr after greater than half a century. Bangladesh joined the UN membership of LDCs in 1975 and persistently met all three commencement standards – per capita Gross Nationwide Revenue (GNI), human asset and financial vulnerability – since 2018.
Nevertheless, there may be resistance and the present authorities has requested the UN for a delay. This isn’t stunning given the seize of the state by the enterprise class, particularly the ready-made clothes (RMG) sector. In FY 2024-25 alone, the RMG sector obtained greater than USD 1.3 million (BDT 16 crore) in money subsidies and tax concessions regardless of the Interim Authorities’s effort to steadily part out money incentives.
RMG’s dominance and failure to diversify
Bangladesh is certainly a number one, typically the best, person of Responsibility-Free Quota-Free (DFQF) amenities amongst LDCs, largely driving its RMG sector progress via the European Union (EU)’s Every part However Arms (EBA) scheme. This reliance on preferential entry has made Bangladesh a dominant exporter amongst LDCs.
Nevertheless, the RMG sector’s dominance additionally made Bangladesh highly vulnerable. Within the late Seventies when the RMG sector began its journey, it accounted for lower than 5% of Bangladesh’s whole exports. By the top of the Nineteen Nineties, this proportion had reached about three-fourths. After greater than 4 many years, since 2013, it has been hovering between 80-85%, in accordance with the Bangladesh Garment Manufacturers and Exporters Association (BGMEA).
Bangladesh’s heavy reliance on a single export merchandise makes its export basket one of the least diversified among the many international economies. That is starkly totally different from South Korea, a rustic from which Bangladesh obtained technical help to usher in its RMG sector. South Korea’s textile trade accounted for 33.3% of exports in 1970; it declined to 22.6% within two decades in 1990 as the economy diversified. By 1975 South Korea became a major exporter {of electrical} equipment and home equipment, transport tools and numerous different manufacturing merchandise.
Bangladesh’s vulnerability doesn’t come up solely from its export product focus. Bangladesh’s export market can also be not diversified with close to 60% going to the EU and UK with apparel comprising more than 90%. The USA, which doesn’t present any LDC associated preferential market entry, accounts for about 16% Bangladesh’s exports.
Right here, too, Bangladesh’s expertise differs from that of South Korea. With the diversification of the economic system, South Korea’s exports by vacation spot additionally grew to become much less concentrated. For instance, whereas round 63% of South Korea’s export went to Japan alone in 1960, the mixed market share of Japan and the USA fell to around 56% by 1975.
The South Korean State’s autonomy from teams with a vested curiosity is effectively documented. Thus, its insurance policies have been pushed by broader nationwide curiosity. Then again, Bangladesh’s coverage house has been captured by the RMG sector.
Undoubtedly, the preferential therapy by the state helped the RMG sector broaden quickly; however on the excessive price of failure to diversify. Professor Munir Quddus of Prairie View A&M College and President, Bangladesh Growth Initiative (BDI) in contrast the RMG sector’s help atmosphere with Leather-based exports to display the RMG sector’s state seize. His findings, summarized under, are revealing:
The standard justification for such preferential therapy is that RMG is the “largest export sector and international alternate earner”. However the argument is perverse. Given a few of these subsidies have been in existence for almost 50 years, prudent policymaking calls for that it’s excessive time to redirect scarce sources to help different probably dynamic export sectors.
Getting used to state help, the RMG sector ignored the necessity for elevating productiveness. The sector’s common labour productivity is lower than Bangladesh’s competitor international locations besides Cambodia. The sector’s compliance with the environmental and labour requirements has also come under scrutiny. Nevertheless, it appears by changing into too huge via state help, the sector’s demand can’t be ignored.
The cosy relationship between the RMG sector leaders and the fallen kleptocratic regime is well-known. The regime allowed them to flourish via mortgage defaults and state subsidies and in return the business leaders were cheering on the fascist regime hoping to see its continuation. Understandably, they have been fearful that they won’t get pleasure from the identical crony relationship with the Interim Authorities led by Nobel Laureate Professor Muhammad Yunus; thus, they cried foul and campaigned for a postponement of LDC commencement.
LDC commencement as structural transformation
The Interim Authorities accepted the White Paper’s suggestion and considered the LDC commencement momentum as a chance to speed up structural transformation of the economic system. Regardless of bureaucratic inertia, it did achieve bettering enterprise atmosphere, reminiscent of vital reductions in instances to acquire enterprise licenses/certificates/permits, simplifications of customs procedures and fast-tracked implementation of nationwide logistic and nationwide tariff insurance policies. It additionally recognized the bottlenecks for potential sectors, reminiscent of prescribed drugs, leather-based & footwear, electronics, gentle engineering and fishing & agro-based industries and took measures to take away or ease them.
Little doubt so much nonetheless must be carried out as a part of an ongoing strategy of reform and coverage adjustment. However that can’t be used as a justification to request a delay on the premise that the preparation is insufficient, significantly when Bangladesh’s macroeconomic efficiency is much better than probably the most LDCs, together with Nepal and Lao Individuals’s Democratic Republic (Lao PDR), the 2 international locations scheduled to graduate together with Bangladesh.
Due to the macroeconomic administration of the Interim Authorities which succeeded in preventing a total collapse of the economy; it restored self-discipline within the monetary and banking sector, rebuilt the nation’s international alternate reserves, stabilized the alternate price and earned the arrogance of worldwide monetary leaders to re-open commerce financing and preserve international funding inflows. It earned the diaspora neighborhood’s confidence leading to elevated remittances. The Interim Authorities concluded Economic Partnership Agreement (EPA) with Japan in report time, making certain duty-free market entry for 99.9% of its merchandise. It additionally initiated EPA talks with different main commerce companions, together with the EU.
Commencement delay: Unhealthy sign for LDCs and win for vested curiosity
The UN-DESA makes use of three standards for LDCs – GNI per capita, human asset index (HAI) and financial vulnerability index (EVI). Its analysis in February 2025 exhibits that Bangladesh is in a a lot better place than Nepal and Lao PDR when it comes to GNI per capita and EVI. Bangladesh with greater GNI per capita is economically much less weak than Nepal and Lao PDR, each of which endure from extra disadvantages of landlockedness.
Bangladesh’s economic system is projected to develop at a sooner price (round 5.0%–5.1% in FY 2005-26 and 5.7% in FY 2026-27 according to the ADB) than each Nepal and Lao PDR regardless of barely elevated inflation charges. Bangladesh additionally performs higher in logistics, ranked 88th out of 139 international locations by the World Bank in comparison with Nepal’s rank of 114th and Lao PDR’s one hundred and fifteenth. Bangladesh additionally has higher productive capability in accordance with the UNCTAD’s productive capacity index.
Bangladesh will proceed to get pleasure from DFQF market entry for 3 extra years after its commencement as endorsed by the WTO. Australia and Canada indicated prolonged intervals of DFQF entry till no less than 2034. The UK will enable 92% Bangladesh merchandise duty-free entry after 2029. Due to this fact, a delay for a greater performing Bangladesh will probably be a foul sign for the LDCs aspiring to graduate from LDC standing.
It is going to additionally imply a win for the vested curiosity teams and stalling of the momentum in the direction of accelerated structural transformation. The state seize by the RMG sector has already turn into clear; a extremely skilled and profitable central financial institution governor has been changed with a failed (loan defaulter) garment sector businessperson with no background in banking or worldwide macroeconomics. The Transparency Worldwide Bangladesh views “such a call dangers turning the central financial institution as soon as once more into an instrument of enterprise lobbies depending on defaulted loans and political connections, slightly than safeguarding nationwide curiosity, as was the case in the course of the authoritarian kleptocratic regime”.
Bangladesh will probably be higher off spending its diplomatic efforts to safe GSP+ amenities within the EU and EPA with its buying and selling companions as an alternative of lobbying for a LDC commencement delay. It ought to fear extra about EU’s new, stricter and obligatory Environmental, Social, and Governance (ESG) laws. Whereas ESG failure may cost Bangladesh 30% of EU exports, strict compliance can operate as powerful catalysts for production upgrading and accelerating structural transformation whereas obtain sustainable improvement targets (SDGs).
Anis Chowdhury, Emeritus Professor, Western Sydney College (Australia). He held senior UN positions in Bangkok and New York and served as Particular Assistant to the Chief Advisor for Finance (with the standing and rank of State Minister) within the Professor Yunus-led Interim Authorities. E-mail: [email protected]
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