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The Boon and Bane of LDC Graduation: The Bangladesh Experience

SINGAPORE, Feb 22 2021 (IPS) - Bangladeshis at the present time share a modicum of justifiable pride in the fact that the world merits this country worth watching in terms of its economic potentials. To my mind , we have reached this stage for the following reasons: First, effective utilization of early foreign assistance; second a steady ,albeit sustained, move away from a near -socialistic to an open and liberal economy; third , a shift from agriculture to manufacturing as land-space shrank to accommodate urbanization; fourth , an unleashing of remarkable entrepreneurial spirit among private sector captains of industry, as evidenced in the Ready Made Garments industry: fifth, the prevalence of a vibrant civil society intellectually aiding the social transformation with its focus on health, education, and gender issues: and finally ,a long period of political stability notwithstanding the traditional predilections of Bengali socio-political activism.

Dr. Iftekhar Ahmed Chowdhury

The philosophical underpinning behind the concept of ‘Least Developed Countries’ (LDCs) devised at the UN in the 1960s was to identify a set of States whose impediment to development was structural, and not due to their own faults. Hence the idea that the global trading system needed to be adjusted by providing these nations ‘special and differential treatment’, such as entailed in non-reciprocal preferential market access. This would, hopefully, create for them a level playing field. Bangladesh joined the Group in 1975, immediately following its UN membership. The conditions for joining the list of LDCs or graduating from it , are determined by the Committee for Development Policy (CDP) based on certain criteria. Out of original 48 six countries have already graduated: Botswana, Cape Verde, Maldives, Samoa, Equatorial Guinea, and Vanuatu. Nepal and Bangladesh are in the cusp of graduation.

Graduation is for Bangladesh a mix of boon and bane. It is a boon because it is an acknowledgment of progress, a major milestone in the nation’s development journey. It would improve the country’s global image which should give it better credit ratings. This would allow it to borrow more cheaply on the world market. It is a bane because it would ultimately lose all the preferences accorded to LDCs in global trade such as under the European Union’s Everything but Arms (EBA) initiative. However, Bangladesh has not quite optimized on those advantages.

Incidentally, as chair of the WTO Committee of Trade and Development, as also of the LDC Group in Geneva in the late 1990s and early 2000, and also as Special Advisor to Secretary General Rubens Ricupero of the United Nations Conference on Trade and Development (UNCTAD), I was involved with the related deliberations with the European Union. Bangladesh has always played a leadership role on behalf of the LDCs in all multilateral negotiations, both at the WTO in Geneva and at the United Nations in New York. Sometimes these involved not only tough deliberations with developed countries and ‘economies in transition’ (former socialist countries) , but also with developing member-States of the Group of 77 (because it entailed the sharing of the cake).Bangladesh’s graduation will in many ways deprive the LDCs of this capacity. Across the diplomatic scene, Bangladesh could also depend on the support of fellow-LDCs on a broad range of issues. I would gratefully recall the contribution in this regard of the so-called “Utstein Sisters” of Europe (named after a venue in Northern Europe where they met), five women Development Cooperation Ministers, including Evelyn Herfkens of the Netherlands and Claire Short of the UK. They were ardent advocates of LDC aspirations, and were instrumental, among other things, in the WTO’s acceptance, unlike in the case its predecessor, the General Agreement on Trade and Tariff (GATT), of the broad principle that trade is a key tool of development.

Following graduation, Bangladesh will need to negotiate a continuation of international support measures to render the graduation process smooth and sustainable. If needs be, even after the grace period of quota-free duty- free market access vis-à-vis Europe till 2029. Though in Brussels the EU could cut Bangladesh some slack because of its performance, at the WTO, Bangladesh, will be well advised to attempt a norm setting exercise with regard to graduating countries with the new Director General, Dr Ngozi Okonjo-Iweala, who is empathetic, as well as with the membership. This will take some skillful diplomacy. But I would like to strongly underscore that negotiations are but the tip of the ice- berg. The main challenge would lie in tackling the fundamentals beneath. For instance, in addressing domestically the 27 requirements, including corruption, non-compliances, and other inadequacies, across the governance spectrum to achieve GSP -plus status. Also, to derive other global market benefits.

Comparative advantages would have to be transformed into competitive advantage. Low-wages will tend to perpetuate poverty. So wage-rise, an essential tool for poverty mitigation, would need to be carefully calibrated with the increase in productivity. Economy should diversify, particularly into services, which do not face goods tariff and hence less affected by loss of preferences. The Internet sector, on which the government is prudently laser-focused, can help Bangladesh leapfrog into economic modernity. The pharmaceutical industry should seriously reflect on how to navigate WTO regulations on Trade in Intellectual Property, or TRIPS. Mutually rewarding arrangements with other Asian economic powerhouses are called for. For instance, Free Trade Agreement with a country like Singapore could, and I use the word ‘could’ advisedly, unlock potentials, but that would require further serious study and examination.

Throughout my negotiating career I had felt that preferences tend only to prolong pain. There are no such things as friends in the marketplace. The sooner we start to confront the real world of competition the better off we are. Indeed, if we can play our cards right, the graduation could be our ‘’break-out” moment to reflect on reforms, on raising productivity and on boosting growth. Efforts must be directed towards moving up the value chain by attracting quality FDI. From my current perch in the corporate sector in Singapore, I see Vietnam as an example worthy of emulation.

So, to conclude, graduation is inevitable if progress is the goal, as it must be, and indeed desirable, just as, in our individual lives, coming of age, that is of turning 21, is. Readiness is key. From what I see, there is nothing like the last minute in speeding up requisite preparations. Doubtless, there is much work to be done. But we must bear in mind that if there is a hill to climb, waiting will not make it any smaller!

Dr Iftekhar Ahmed Chowdhury is the Honorary Fellow at the Institute of South Asia Studies, NUS. He is a former Foreign Advisor (Foreign Minister) of Bangladesh and President & Distinguished Fellow of Cosmos Foundation. The views addressed in the article are his own. He can be reached at: isasiac@nus.edu.sg

This story was originally published by Dhaka Courier.

 


  
 
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