FE Today Logo

LDC graduation

Pursue free trade deals to offset loss of benefits: PC

Commission foresees 'tough' days ahead

Syful Islam | February 19, 2019 00:00:00

The Planning Commission (PC) foresees tough days for Bangladesh's economy after the nation graduates from the least developed country (LDC) status by 2024.

Still, the Commission said the economy could thrive, helped by various international support measures offered by developed countries to the poorer nations.

Within three years of graduation, the country will lose its access to highly concessional sources of financing and preferences given in the form of duty-free and quota-free access to the developed markets where most of Bangladeshi goods are exported.

The preferences and concessions will change "drastically" when the country officially becomes a developing country, the Commission said.

The views came in an inception report titled "Impact assessment and coping strategies of graduation from LDC status for Bangladesh," prepared by the General Economics Division (GED) under Planning Commission.

The report highlighted Bangladesh's export success in readymade garment (RMG), which was driven by trade preferences, especially in the European market.

"Having very successfully utilised the benefits from international support measures, their absence (in) post graduation has the potential of leaving a major dent in the country's internal and external balances, unless suitably addressed well ahead of the impending event," it noted.

However, the report said there is no country in the world like Bangladesh whose export income is almost totally dependent on a single product.

The report suggested that the country must prepare itself for the alternative market access arrangements through bilateral free trade and regional free trade initiatives.

High-middle income countries in the region and in the world have gone through this process, thus Bangladesh cannot be left behind, it added.

Referring to the nation's traditional reliance on multilateral and bilateral sources for external financing on concessional terms, the report said as a developing low-middle income country Bangladesh is no longer a country that can avail soft loans only, rather needs to take out mixed concessional and non-concessional loans.

The inception report argued that the country would also need to increase its reliance on the international capital market to meet its growing financing requirements.

On the macro-economic front, the report suggested that particular attention has to be paid to the domestic resource mobilisation, strong balance of payments with exchange rate stability, and infrastructure development in the context of overall investment planning.

It also suggested pursuing debt management strategy with focus on ODA (overseas development assistance), commitments and cost of bilateral and multilateral financing, and financial sector development with focus on strengthening of the banking sector and bond market development.

The inception report also suggested full activation of the strategies for outward-orientation of trade policy in order to ensure export-led or trade-led growth.

"Policies that ensures export competitiveness on the one hand, and restores the balance of incentives between production for exports and import to substitute production for sale in the domestic market, on the other have to be put in place," it said.

The report suggested addressing investment climate-related challenges including behind-the-border issues to strengthen competition, strengthening infrastructure, improving trade logistics to reduce cost of trading, acquiring technology and skills, and strengthening labour productivity.

[email protected]

Share if you like