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Graduation from LDC: What are the 
benefits?

The graduation is so much expected and 
welcoming for the whole nation. It is a 
global recognition that Bangladesh as a 
nation has made good economic and social 
progress. It is definitely a signal to both local 
and foreign investors that our economy 
is performing. Thus, we can expect an 
increase in FDI in the days to come which 
will create more job opportunities. It will 
also increase value of Bangladeshi brands, 
Bangladeshi passport, and Bangladesh’s 
position in different global platforms.

Challenges to be faced by the economy 
of Bangladesh

1. Special Market Access Provisions 

under different regional trade 
initiatives

 

The preferential treatment is unilateral 
decisions of duty-free access for 
exporters from the LDCs to pay lower 
tariffs or to have duty-free and quota-
free (DFQF) access to the developed 
and developing countries’ markets. 
After graduation, the withdrawal 
of DFQF treatment will enhance 
competitive pressure on Bangladesh’s 
export products. Besides, special 
preferential access from different 
countries and trading partners will be 
reduced after transition period starts. 
An LDC country is not allowed to 
offer reciprocal trade preference to 
its counter parts. In such case, signing 
free trade agreement could be more 
costly for Bangladesh after graduating 
from LDC list.

 Currently Bangladesh is a member 

of nine RTA or FTAs namely, Asia-
Pacific Trade Agreement, Bangladesh-
Sri Lanka Free Trade Agreement 
(Proposed), Bangladesh-Turkey FTA 
(Proposed), Bay of Bengal Initiative for 
Multi-Sectoral Technical and Economic 
Cooperation Free Trade Area, Pakistan-
Bangladesh Free Trade Agreement 
(Negotiations launched: 2003), 
People’s Republic of China-Bangladesh 
FTA (Proposed), Preferential Tariff 
Arrangement - Group D-8, South Asian 
Free Trade Area, and Trade Preferential 
System of the Organization of the 
Islamic Conference. 

2. Special treatment regarding WTO 

related obligation

 

Bangladesh is getting special benefit 
from the EU since 1976. These laid 
the foundation for the launching of 
the GSP. It is non-reciprocal and non-
discriminatory system of preferences 
in favor of the LDCs. In terms of 
country’s total export, 24% goes to 
EU market and of them, 90% is RMG. 
Bangladesh could face an additional 
6.7% tariffs on an average, after its 
graduation from the LDC, resulting in 
an export loss between 5.5% - 7.5% 
(UNCTAD, 2016), which is estimated 
to be around $2.7 billion (8% of 2015 
exports). But there is a possible chance 
of taking the advantage of GSP plus 
facility which is currently exploited 
by 13 countries. The countries are 
Armenia, Bolivia, Cape Verde, 
Costa Rica, El Salvador, Georgia, 
Guatemala, Mongolia, Pakistan, 
Paraguay, Peru and the Philippines.

3. Increased contribution to international 

organizations

 

Graduation from LDC category will 
nearly double Bangladesh’s assessed 
contribution to the UN regular budget 
and other UN related organizations, 
operations, funds and programs.

4. ODA and other forms of bilateral and 

multilateral development financing

 

Concessionary financing from the 
IDAs and multilateral assistance with 
special benefits will not be available 
after having developing country 
status. Total ODA (gross) disbursed in 
2015 was $131.4 billion (OECD) with 
ODA/GNI ratio at 0.30%; bilateral 
ODA counting for 72% and the LDC 
and LMIC share being 25% and 
21.70% respectively. In other words, 
LDCs do appear to have a slight edge 
when it comes to ODA. If we examine 
the geographical distribution of ODA, 
we find that the following countries 
were the top ten beneficiaries in 2015 
(in absolute, USD terms): Afghanistan, 
India, Vietnam, Ethiopia, Indonesia, 
Pakistan, Syria, Kenya, Jordan, and 
South Sudan.

 

Foreign grants and soft loans played 
a vital role in infrastructure and 
other development activities in 
Bangladesh. Still ODA is a significant 
source of funding in various mega 
projects of Bangladesh. Development 
partners are expected to shift their 
mode of financing with the wheel of 
domestic economic development. 
Grant amount is decreasing and loan 
amount is increasing day by day. 

Bangladesh is getting special benefit from the EU since 1976. These laid the 

foundation for the launching of the GSP. It is non-reciprocal and nondiscriminatory 

system of preferences in favor of the LDCs. In terms of country’s total export, 24% 

goes to EU market and of them, 90% is RMG.

EXPERT’S INSIGHT