Good governance most critical to graduation from LDC status

FE Report

Good governance is most critical in ensuring Bangladesh's sustainable graduation from the least-developed country (LDC) status, experts said Saturday, as it entails challenges in aid and trade.

LDC graduation is not the end of the road, rather it is a milestone, they observed. It does not ensure structural transformation. Therefore, qualitative transition is very important.

Their views came at a Public Dialogue on 'Bangladesh's Graduation from the LDC Group: Pitfalls and Promises' held in Dhaka Saturday.

Country's leading think-tank Centre for Policy Dialogue organised the event for deliberations on the pros and cons of the status change as Bangladesh is poised to say goodbye to world's poor-country club.

Experts at the dialogue observed that the role of government is critical to ensuring smooth graduation from the LDC status through creating enabling environment for investment, economic diversification and use of LDC-specific external assistance.

Analysing data from the peer economies which are on the path to LDC graduation, Dr. Debapriya Bhattacharya of CPD observed that Bangladesh is found to be weaker in attracting FDI, labour productivity and export diversification compared to co-graduating countries.

"However, it has a strong manufacturing sector and robust economic growth compared to others," the economist said about the positive factors that count in determining a country's status in the community of nations.

Noting that the countries which have already graduated from the LDC status have exhibited slowing economic growth, falling shares of ODA and remittances thereafter, the CPD Distinguished Fellow called for structural shift towards high value-added industries, strengthening governance, mobilizing domestic resources, developing infrastructure and investing in human development.

Mentioning that Bangladesh is currently enjoying preferential market access in a large number of developed countries,

experts also warned that export earnings may drop in the aftermath of graduation following the loss of preferential-trade benefits.

"After graduation, Bangladesh's export will face an additional 6.7 per cent tariff in these markets, which could result in an export loss of around $2.7 billion. United Nations Conference on Trade and Development (UNCTAD) estimates that exports may fall by 5.5 per cent to 7.5 per cent," said Mia Seppo, UN Resident Coordinator in Bangladesh.

In this context, he called for formulating a comprehensive exit plan to effectively offset the withdrawal of trade supports from developed economies.

"While fulfilling the criteria of LDC graduation is a moment to celebrate, we should still be mindful of inequality prevailing in the country," said Prime Minister's Foreign Affairs Adviser Gowher Rizvi.

"And global experience shows that when growth rate increases, remedy for inequality becomes much more difficult," he noted about the flipside of the growth in the event of not maintaining a balance in redistribution of its benefits.

The foreign affairs' adviser also pointed out that despite recent reduction in poverty rate, the country is far from eradicating the curse of poverty.

"We know our effort to eradicate poverty has been quite impressive, but we have not been able yet to eradicate poverty," Mr Rizvi told the meet.

He added: "No country which has corruption has been able to eradicate poverty...

Therefore, we must be mindful and careful about the question of governance so that this achievement does not get compromised."

Professor Rehman Sobhan, Chairman of the CPD, said the main transition point really depends on the quality of governance and the nature of the institutional arrangements.

He noted that Bangladesh is already endowed with strong entrepreneurial capability, dynamic and competitive working-age population, capable and hardworking farmers and a large number of migrants spread across the world.

"Now, we need appropriate policies to incentivise those farmers, those entrepreneurs, those working population and those migrants to be part of the development process," said the economics professor.

According to a World Bank assessment, Bangladesh has become a lower-middle- income country in terms of Gross National Income per capita (GNI), joining those with annual incomes of $1,046 to $4,125.

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