The Committee for Development Policy (CDP), a United Nations Panel, meeting at the UN headquarters in New York has formally announced that Bangladesh now has the eligibility to graduate to the status of a developing country from that of a least developed country (LDC). This has apparently been agreed upon because Bangladesh has met all the three criteria for the first time to be acknowledged as a developing country. The CDP has conveyed its decision to Bangladesh's Permanent Representative to the UN Masud Bin Momen. It may be added that two other countries -- Myanmar and Laos -- have also become eligible to leave the LDC bloc.
This decision coincided with the 98th birth anniversary of Bangabandhu Sheikh Mujibur Rahman - the Father of the Nation. It could not have come at a better time.
It has been a gradual journey since 1972 but has been a fitting riposte to the observation made at that time by the former US Secretary of State Henry Kissinger that Bangladesh was a "bottomless basket" and would remain so in the future.
The three criteria used for assessing this change are Gross National Income (GNI) per capita, Human Assets Index (HAI) and Economic Vulnerability Index (EVI). According to the UN's graduation threshold, the GNI per capita of a country has to be $1,230 or above. Bangladesh's GNI per capita, according to this panel, is now $1,272. In terms of the HAI, a country must have a score of 66 or above. Bangladesh's score is now 72.8 -- well above the threshold. The HAI, it may be noted, is an indicator of nutrition, health, adult literacy and secondary school enrolment rate. In the context of economic vulnerability index (EVI), a country's score has to be 32 or below. Bangladesh's score is 25 in the EVI, an indicator of natural and trade-related shocks.
Bangladesh, according to the World Bank, is the only country to have met all the three criteria at the same time for becoming eligible to graduate from the LDC bloc.
It is understood that the CDP will review Bangladesh's progress in 2021, and the country's official graduation from the LDC category will take place after a three-year transition period. If the country maintains its position in all the three categories for the next six years, it will eventually graduate from the LDC bloc. There will be two more reviews in 2021 and 2024 to ensure graduation from the LDC list. This means that the graduation process has begun and progress on the three criteria will have to be sustained to make sure that we eventually become a developing nation in 2024. We have already reached the Low Middle-Income threshold and can then slowly evolve into a Middle-Income country.
ISSUES TO BE ADDRESSED: However, it is also clear that we need to address several issues that exist within this evolving paradigm.
There have been several intensive discussions and seminars that have been convened in this regard by economists in Dhaka. They have correctly drawn attention of the relevant authorities to different important aspects through the media.
Zahid Husain of the World Bank office in Dhaka has commented that "We need to make much more progress in reducing the percentage of undernourished population to increase our achievement on the Human Assets Index. Reducing undernourishment is much more challenging than reducing the percentage of population in poverty." He has further indicated that we still have considerable challenges on the economic vulnerability front. Reducing export concentration has proven to be difficult. He has observed that "Our dependence on garments continues. Our exports of goods and services have also been very volatile. Trade policy, logistics and business regulations reforms will be critical for export diversification and stability." He has also noted that one of the major challenges will be to maintain stability of agricultural production not only because availability of farmland is decreasing but also because adverse effects of climate change are getting more noticeable. This last factor has assumed a critical dimension because natural disasters are likely to lead to an increase in the proportion of homeless population. Bangladesh, all agree, has comparatively done well till now in coping with natural disasters but this might shift towards the wrong end if we do not get urgent and adequate support for adaptation and mitigation measures required due to climate variability.
LDC GDADUATION PROCESS: It may be recalled that the United Nations initiated the process of granting LDC status in 1971 to 17 countries. Now, the total number of LDCs is 47. Five countries have so far graduated from such designated LDC status: Botswana in 1994, Cape Verde in 2007, the Maldives in 2011, Samoa in 2014, and Equatorial Guinea in 2017. The UN reviews the list of LDCs every three years and makes recommendations on the inclusion and graduation of eligible countries. The UN undertook their last review in 2015 when three countries, including Nepal and Bhutan, became eligible for graduation from the LDC bloc.
It is, however, quite clear that Bangladesh's graduation will have some implications for its economy and also its regulatory regime. This will apply to challenges that exist within different sectors of our economy - banking, trade (export diversification) and areas related to technical cooperation.
In this context it has been pointed out that once the country gets out of the LDC bloc in 2024, it will have to overcome hurdles that will appear because of our losing duty-free and quota-free market access to the European Union under the Everything but Arms initiative. We might, according to some economists, be given a three-year transition period but that is not certain. To this one also needs to add the possible uncertain impact that might appear due to Brexit. A study carried out by the Economic Relations Division in December 2017 has suggested that Bangladesh might lose close to $2.7 billion in export earnings every year once it graduates from the LDC bracket. This has persuaded the relevant authorities at the Prime Minister's Office and in the Ministries of Commerce, Finance, Planning and Industry to urge the private sector to give importance to the diversification of exports in the following sectors - agriculture and agricultural processed goods, pharmaceuticals and leather.
In the similar vein, the benefits of technical cooperation and other forms of assistance such as fund support for scholarship, fellowship, participation for special training as well as for research are likely to be reduced. The scope of the credit accessibility might also be diminished.
EXISTING SHORTCOMINGS: We will have challenges in the future. However, while we focus on the future, we also need to address the existing shortcomings.
The last few weeks has seen the media reporting positive and negative aspects within our economic matrix-
(a) that our export earnings from Readymade Garments (RMG) has increased by 8.3 per cent or US Dollar 584.87 million in the October to December quarter of 2017 compared to the similar period in 2016. Total earnings from the RMG sector during this period stood at US Dollar 7,628.6 billion. The second significant development in this sector was that 88 per cent of Alliance factories had been certified as having become compliant with required safety standards. The third satisfactory aspect in this sector was that apparel export to non-traditional markets was on the rise. This was taking place despite difficulties associated with the question of rules of origin.
(b) that our earning from remittance sent to Bangladesh by expatriate workers constitutes 7.24 per cent of our gross domestic product (GDP) but is not growing in the expected manner due to recruitment-related problems being faced in the Middle East. Lower wages compared to that given to workers from Sri Lanka and India (due to lower technical skills) are also creating difficulties.
© that higher import against comparatively lower exports had resulted in trade deficit soaring by 92 per cent to US Dollar 10.12 billion during the July- January period of the current financial year compared to US Dollar 4.84 billion for the same period in the same fiscal period the previous year. This has partially resulted in our foreign exchange reserve slipping below US Dollar 32 billion.
(d) that the ambitious revenue collection target set by the relevant authorities for this year was not proceeding as planned. The National Board of Revenue (NBR) has apparently collected TK 1,104.79 billion (1,10,479 crore), a 15.37 per cent revenue growth during the first seven months of this fiscal year but this did not match the collection target set for them.
(e) that the volume of non-performing loans (NPLs) in the country's banking system jumped 19.51 per cent or Tk 121.31 billion in 2017 despite close monitoring by the Bangladesh Bank. On December 31, 2017, it stood at Tk 743.03 billion. This was despite stronger recovery drives by the commercial banks and re-scheduling of loans.
(f) that, according to annual development programme (ADP) evaluation report prepared by the Implementation Monitoring and Evaluation Department (IMED) under the Planning Ministry, use of foreign aid in development projects has gradually slowed down because of corruption, lack of capacity, skills and absence of transparency.
A GLIMMER OF HOPE ON THE HORIZON: Despite some of the above constraints, the Deputy managing Director of the International Monetary Fund (IMF) Tao Zhang has stated that macro-economic performance in Bangladesh is set to remain robust in the coming year and inflation will remain broadly stable. There is a glimmer of hope on the horizon. However, Daisaku Kihara from the IMF has called for strengthening of internal control, compliance and risk management to avoid financial scams in the banking sector. It has also been urged that judicial reforms should be implemented to expedite loan recovery through enhancing banking sector regulation and supervision, in particular for the state-owned commercial banks.
As a Bangladeshi I feel proud that we are graduating successfully from the LDC bloc. Prime Minister Sheikh Hasina and the private sector entrepreneurs deserve credit for this progress. It has been an uphill task. We are slowly inching forward. But we need to remember that political stability, transparency in decision-making, accountability in implementation of projects and curbing corruption are essential. We have a large population and any further progress has to be sustainable and inclusive. We need investment - both local and foreign. We also have to address the issue of labour-intensive manufacturing in an evolving world which is slowly embracing technology and automation.
Muhammad Zamir, a former Ambassador is an analyst specialized in foreign affairs, right to information and good governance, can be reached at
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