Bangladesh has been a member of the least developed countries (LDCs) ever since its emergence as an independent country. It has given leadership to the group which has been helpful in negotiations to extract concessions and economic assistance from developed countries. But LDC is not status with which Bangladesh wants to be associated forever. Its goal of sustainable economic development meant it is keen to graduate beyond LDC and become a developing country.
Recent achievements of Bangladesh in attaining most of the targets of Millennium Development Goals (MDGs) raised hopes that the country would become a developing one very soon. The economic indicators seemed to be favourable in this respect. True, it would lose the benefits accorded to a LDC in trade and aid but the newly-acquired strength as a developing country is expected to compensate for this.
The recently published report by United Nations Conference on Trade and Development (UNCTAD) titled 'LDC Report 2014 - Growth with Structural Transformation: A Post-2015 Development Agenda' has observed that Bangladesh is not going to be a developing country any time soon. The reasons given are that Bangladesh is lagging behind in all the three important indicators which matter in graduating out of LDC status. Despite progress made in various socio-economic sectors Bangladesh will need at least 10 more years before becoming a developing country.
The LDC Report has pointed out that to get out of LDC status a country has to show improvement in all the three indicators earmarked for this. These are: growth in per capita income, human resource development (human asset index), economic vulnerability. The per capita income for three consecutive years on average has to be US$ 992. Beyond that the figure has to reach US$ 1242, a progress that has to be shown for two consecutive periods in six years.
One year is given as grace period. All in all, achievement on the basis of this indicator over a period of nine years qualifies a country to become a developing one. This is problematic, to say the least. For a LDC to maintain rise in per capita income steadily is a hard task to perform. In spite of all the socio-economic progress made in recent years Bangladesh achieved US$ 900 as per capita income in 2013. This means the country is still short of the target by $ 342 even after the grace period of one year is added.
By the light of human development (human asset index) Bangladesh scores 54.7 percentage point. The recent achievement in the field of education has not been widespread. The rate of literacy is still very low. Among other factors that contribute to human development are health services which at present do not reach all, particularly the poor. Political and economic empowerment that promote human development leave much to be desired. Inequality of opportunity and asymmetrical access to resources make for uneven human development.
Applying the indicator of economic vulnerability Bangladesh has scored 32.4 percentage points. However, one may question this conclusion because Bangladesh steered clear of the economic turmoil that ensued after the 2008 financial crisis. With the help of good economic management, both by the government and the private sector, the country has stayed the course in posting steady growth rate. Its GDP (gross domestic product) growth has not been spectacular but it has not regressed either. Economic vulnerability due to occasional political disturbance and natural disaster has, however, been a problem. Among demographic cohorts the vulnerability of the poor is the most acute.
Employment generation has been slow and inadequate. Emphasis on urban manufacturing has neglected up gradation of agriculture which employs 54 per cent of population. Since the sector contributes only 17 per cent of GDP this means that people are engaged in low productivity jobs. Besides, employment in agriculture becomes uncertain in times of natural disasters.
Bangladesh may attain the status of a middle income country in the near future. That will not, however, qualify it to rise above the LDC category. It will have to satisfy the criteria of human asset development and economic vulnerability, too. Based on recent achievements, it can be said that the prospect for the third criteria appears bright. The same cannot be said about human asset index and per capita income. Growth in population is depressing improvement in both.
The UNCTAD Report has stressed that graduating beyond LDC requires structural transformation, combining increases in labour productivity within sectors and a shift of labour from low productivity to high productivity sectors. Structural transformation is needed to enhance labour productivity across the sectors. This is the key to increasing growth and per capita income.
To assist the LDCs' progress towards sustainable development goals, UNCTAD proposes a post-2015 development agenda comprising both domestic and international policy measures. Domestically, the LDCs will have to focus on resource mobilisation, rapid industrialisation and prudent macro-economic policies. According to UNCTAD resource mobilisation requires a strategic and selective approach to domestic investment and foreign direct investment. It has recommended that industrial policy should follow a dual track - developing sectors of current comparative advantage and at the same time anticipating and promoting changes in comparative advantages. As international measures, the Report has stressed donors' fulfillment of their long-standing commitments on the quantity and the terms of aid to LDCs.
Bangladesh has been pursuing an export-led strategy for economic development. The garment sector, which accounts for 80 per cent of the country's exports, has been the key focus of industrial policy. The policy should pay attention to other sectors as well. Diversification will not only increase export earnings but will also be a hedge against risk.
The UNCTAD Report has observed that the international community must learn from the failures of most of the poorest countries to meet the MDG despite registering strong economic growth, a phenomenon the report has described as the 'LDC paradox'. The report has said the LDCs are the battleground on which the post-2015 development agenda will be won or lost. The 'LDC paradox' arises from the failure of the countries in the cohort to achieve structural changes despite having grown vigorously as a result of strong export performance and rising foreign investment.
Like most other LDCs Bangladesh also presents a 'paradox'. Most of the achievements made are not sustainable in the absence of structural change. The fault lies in not making right policy decisions. The silver lining in this lies in the possibility of rising to the occasion. The strong private sector that Bangladesh has can cajole the policy makers to introduce necessary reforms.  Â
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Graduating beyond LDC
Hasnat Abdul Hye | Published: December 09, 2014 00:00:00 | Updated: November 30, 2024 06:01:00
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