As per the United Nations Conference on Trade and Development’s (UNCTAD) latest profile, notwithstanding all the positives of the past decades, some deep-seated challenges continue to linger on Bangladesh’s sustainable development prospects, notably the modest progress in terms of export diversification, and the elusive quest for adequate sustainable development finance. These challenges are made even more formidable by the fallout from the pandemic…
The UN agency said that despite Bangladesh’s success in strengthening its overall export capacities, evidence points to limited progress in product diversification as clothing items contribute 85 per cent of gross exports while adding that if there is indeed some untapped scope for product differentiation, alone this is unlikely to provide a decisive spur to an industry that has relied largely on cost- competitiveness and preferential access to developed markets. It further underlined COVID-19 pandemic poses challenges for LDC graduation and added the emergence of the pandemic and the ensuing global recession had interrupted a period of rapid economic growth.
Bangladesh is set to meet the LDC graduation criteria for the consecutive second time and will be recommended for graduation during the upcoming triennial review of the Committee for Development Policy (CDP) of the United Nations in February 2021 even as Bangladesh called upon the international community for continuation of international support measures for an extended period to make the graduation smooth and sustainable.
Bangladesh made this call during a session of the Expert Group Meeting of the Committee for Development Policy, held as part of the preparation for the upcoming triennial review meeting where Principal Coordinator (SDG Affairs) of the Prime Minister’s Office, Zuena Aziz, led the Bangladesh delegation for the online session while Secretary of the Economic Relations Division (ERD), Fatima Yasmin, delivered a presentation during the session highlighting the unprecedented socioeconomic progress achieved by Bangladesh in recent times as well as the latest position of the country regarding graduation.
It was projected during the meeting that since Bangladesh had met all the criteria for LDC graduation for consecutive second time, the country would be recommended for graduation in the upcoming triennial review in February 2021. At the same time, the Bangladesh delegation called for providing extended preparatory period of five years spanning from the year 2021 to 2026.
It may be mentioned here that Bangladesh had met all the criteria for LDC graduation for the first time during the last CDP triennial review held in March 2018 and, as per the provisions of the United Nations, a country must be found eligible in two successive triennial reviews to be recommended by CDP for graduation.
As per the rules of CDP, a country can enjoy three to five years long preparatory period after being recommended for graduation and if Bangladesh gets five-year preparatory period for graduation after being recommended by CDP during the triennial review, it would formally graduate from the LDC status in 2026.
During this preparatory period, Bangladesh would be entitled to enjoy all the international support measures reserved for LDCs. In addition, as per the existing provisions, the country would also remain eligible to enjoy duty-free quota-free access in the European Union market for three more years lasting until the year 2029.
During her country presentation, ERD Secretary mentioned that Bangladesh is going to be recommended for graduation at a time when the whole country is celebrating fifty years of its independence as well as the birth centennial of the Father of the Nation Bangabandhu Sheikh Mujibur Rahman even as the country presentation highlighted the unprecedented progress achieved by Bangladesh in recent years in various macroeconomic and socioeconomic indicators. It also reflected on multifarious measures that have been and will be taken by the Government in partnership with all the relevant stakeholders to best utilise the opportunities that would be created for the country in the aftermath of the graduation.
The country presentation also called on the international community for the continuation of international support measures in the aftermath of graduation as well as for enhancing the flow of development financing to tackle the impacts of climate change and for achieving the Sustainable Development Goals (SDGs).
Senior Government officials were part of the Bangladesh delegation for the meeting. Chair of Committee for Development Policy Jose Antonio Ocampo and other members of CDP praised the unprecedented socioeconomic progress made by Bangladesh in recent years. The identification as well as graduation of LDCs is currently based on three criteria: (a) GNI per capita (b) Human Assets Index (HAI) and (c) Economic and Environmental Vulnerability Index (EVI).
However, even if the country prepares for the much-awaited transition to join the big league of developing nations, things aren’t going to be easy for Bangladesh during this transition period it seems, thanks to the Coronavirus pandemic.
“Yet, the country has so far weathered the crisis relatively well and appears set to record positive GDP growth even in 2020, notwithstanding a sharp slowdown in economic activity,” maintained UNCTAD, which before March 2020, had assessed Bangladesh’s vulnerability profile based on the pre-Covid data of the economy to determine the graduation criteria.
The sudden onslaught of the COVID-19 from March onwards has badly impacted the global economy and also of Bangladesh, leading the UN body to come up with a separate vulnerable profit. It shared the findings with the Government and suggested for addressing some challenges during the transition period for smooth and sustainable graduation.
These challenges are made even more formidable by the fallout from the pandemic, which threatens to leave long-lasting scars on the world economy, making the international environment less conducive even as the emerging mega-trends such as climate change and digitalisation are bound to exert wide-ranging implications for the future development trajectory of developed and developing countries alike.
Estimates of the impact of losing LDC-specific preferential market access range between 7 per cent and 14 per cent of exports, with the bulk of the reduction impinging on textile and clothing exports to developed markets, where changes in tariffs would be relatively more adverse. Similarly, large tariff differentials, coupled with persistent infrastructural and logistics bottlenecks, are bound to entail a serious blow to an industry for which these dimensions represent major drivers of international trade and investment flows.
The UNCTAD’s profile also said if Bangladesh is to continue its remarkable growth performance, the country has to diversify into gradually more complex products while adding that the advent of robotisation and industrial digitalisation also questions the sustainability of Bangladesh’s progress in bolstering its productive and export capacities.
These so-called ‘mega-trends’ – which have in many ways accelerated in the wake of COVID-19 – are expected to trigger far-reaching reconfigurations in existing global value chains, reducing heightened dependence on key suppliers, encouraging reshoring and regional embeddedness, and potentially weakening the importance of low-labour cost competitiveness and unlike in many other countries, in the case of Bangladesh, this resilience appears to be vindicated also in the context of the Coronavirus crisis and ensuing global recession.
“If the outlook in 2020 appears to be reasonably encouraging, however, this might be at least partly due to idiosyncratic factors; the medium-term future remains far more uncertain,” the UNCTAD said adding that with the impact of the pandemic still weighing down economic prospects for 2021, global labour markets are unlikely to rebound quickly, especially in key destinations for Bangladeshi migrants such as the Gulf nations, the United Kingdom, the European Union and the United States.
These prospects loom large on the remittances outlook, it said.
It may be mentioned here that Bangladesh growth performance in the last 10-15 years has been characterised by a considerable investment push, with the investment-to-GDP ratio consistently exceeding 25 per cent of GDP since 2006, and reaching 31 per cent prior to the COVID-19 shock.
There is little doubt that this trajectory is consistent with the economy’s need to redress supply-side bottlenecks, especially in terms of infrastructural provision, UNCTAD maintained while adding that the COVID-19 shock entails an even darker outlook in relation to Bangladesh’s second-largest source of external financial resources, namely official development assistance flows.
Over time, inward foreign direct investment flows have climbed up in absolute terms, but since the early 2000s, they have represented not more than 4 per cent of gross fixed capital formation.
The UN body said in the context of LDC graduation, it is all the more important that phasing out of LDC-specific international support measures does not disrupt the promising trajectory on which Bangladesh has embarked and called for strengthening domestic resource mobilisation, bolstering investments in climate-resilient and digital infrastructures, sustaining investments in human capital, supporting technological upgradation, continuing fostering rural development and adopting a proactive industrial policy framework.
Considering the ramifications, the President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), has reportedly sought 10 years as the transition period for Bangladesh as the domestic economy, employment and export were severely affected by the pandemic.
Going by the observations made by the UNCTAD, some hassles while transiting to the big league of the developing nation seems unavoidable and, Bangladesh would perhaps do well to prepare in advance to face the challenges, that might offer in the days to come.
