High tariff could knock exports as B'desh graduates from LDC

FE Report
Bangladesh could face an additional 6.7 per cent tariffs on an average after its graduation from the least-developed country, resulting in an export loss of US$ 2.7 billion annually, an economist has estimated.
Around 8.7 per cent of the possible tariffs would come into force from the European Union alone, followed by 3.9 per cent with non-EU and 7.3 per cent with Canada.
The revelation came Saturday at a public dialogue on "Bangladesh's Graduation from the LDC Group: Pitfalls and Promises" organised by the private think-tank Center for Policy Dialogue in Dhaka.
"The estimated export loss of $ 2.7 billion (was) equivalent to about 8.7 per cent of its global exports in the fiscal year 2015," Mustafizur Rahman, distinguished fellow at the Center for Policy Dialogue (CPD), said, adding the UNCTAD also estimates the export decline in the range of 5.5 per cent to 7.5 per cent.
He presented the keynote paper in the second session of the dialogue.
Unless Bangladesh manages to renegotiate through bilateral agreement or as part of regional trade arrangements, it will face MFN tariff rates following LDC graduation or reduced preferential margins under standard GSP scheme in the EU market, Mr Rahman said.
He recommended that Bangladesh should take the reviews supposed to be taken place in 2018 to 2030 seriously and penetrate its policy according to the challenges emerging from the reviews.
Some graduate countries have sought extension and Bangladesh should remain engaged with the development partners with regard to market access while diversifying its financing sources, he added.
A B Mirza Azizul Islam, former advisor to the caretaker government, chaired the session.
Foreign secretary Md Shahidul Haque was the guest of honour, which was also attended by World Bank Bangladesh lead economist Zahid Hussain and Swedish ambassador to Dhaka Charlotta Schlyter.
CPD research director Khondaker Golam Moazzem also presented another paper titled "Business as usual trend of structural transformation: Can it ensure graduation with momentum?"
Bangladesh will lose international support in certain areas, like concessional ODA (official development assistance), erosion of trade preferences, special treatment for intellectual property obligation and technical assistance, Mr Islam said.
That would happen at a time when global environment is becoming "less hospitable" if not entirely hostile to free trade, immigration, climate change and also official development aid, he said.
World Bank's Hussain, said, "There are a lot of uncertainties with regard to what will happen and what will need to be done to face the erosion of preferences."
Terming the erosion out of the two risks that might come with
The LDC graduation involves risks, though Bangladesh will get breathing space until 2027.
The cost of financing will also increase in the next two years with the graduation from concessional finance, he said, adding there would also be opportunities with many different windows of financing sources.
He raised the question of how to face the new challenges emerging from the technological transformation, particularly with the arrival of automation and use of robot and whether Bangladesh is prepared enough to handle that kind of challenge.
Mr Islam suggested increasing investment, particularly the private sector investment, which remains stagnant at 22 per cent of the GDP and FDI, saying the proportion of FDI is the lowest in the country.
Terming the recent developments in the financial sector 'worrisome', he said, "We must deal with these as soon as possible and ensure that the credit flow going to the private sector is actually utilised for productive investment rather than unproductive activities."
Though the country exports about 1,300 items, some 80 per cent contribution comes from one sector, he said, placing importance on looking into the problems whether it is on the demand side or supply side and export diversification.
Bangladesh performed poorly in export diversification compared to India, Indonesia, Pakistan and Vietnam, Mr Moazzem said while presenting his keynote paper.
Bangladesh needs to undertake time-bound measures to develop a strong foundation for structural transformation focused on raising productivity to reduce the productivity gap with its peer competing countries.
The graduation would not be an unmixed blessing for Bangladesh as the majority of the LDCs suffer severe transformation deficits, he said, adding the country had experienced slow progress in structural transformation over the past decades.
While the share of agriculture in GDP has significantly decreased, that of total employment did not decrease so much, he said.
Major actions are required in three areas-micro-economic management, setting sectoral priorities and strengthening institutional governance, he said, suggesting measures for encouraging higher investment and foreign direct investment towards export-oriented manufacturing through transfer of better technology and managerial skills to encourage structural change.
He also recommended the modernisation of service sector in terms of both technology and skills.
One of the challenges, the foreign secretary said, is to keep the country stable politically, economically, culturally and socially.
Noting that the climate change is happening fast, he said businesses should take the issue seriously.
Regarding humanitarian crisis, he said that it has an impact on politics, economy and the stability of the country and region.
The sessions' recommendation also included improving ease of doing business, improvement of governance, enhance productivity through enhancing enrollment and the expansion of higher education in line with the demand.
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