TDS Desk

Education and Planning Adviser Wahiduddin Mahmud said Bangladesh has no option to defer its graduation from the least developed country (LDC) club.

“Even if we want to, we may not be able to remain in the group of LDCs. Many people don’t know that,” he said.

The eminent economist made the remarks yesterday in Dhaka at a four-day conference organised by the Bangladesh Institute of Development Studies (BIDS).

As per the United Nations schedule, Bangladesh is set to graduate from the LDC status in November 2026.

However, owing to the economic crisis that has been prevalent for nearly two years, the issue of deferring graduation has been coming to the spotlight in recent months, particularly by local businesses.

With the economy in a fragile state due to the fallouts of global inflationary pressure, the Covid-19 pandemic, the Russia-Ukraine war as well as political turmoil and energy shocks on the domestic front, a section of exporters has been putting pressure on the government to shelve any graduation plans.

According to a UN report, trade preferences accorded to Bangladesh as an LDC have played a crucial role in the development of its economy and achievements in trade and social sectors. The loss of these benefits following graduation is expected to dent a lot of businesses by costing the country its trade competitiveness, especially if it fails to secure bilateral agreements with major export destinations.

In November, Finance Adviser Salehuddin Ahmed told the media that they are yet to make a decision on the scheduled graduation.

The United Nations Committee for Development Policy (CDP) reviews the LDC category every three years, assessing the progress of countries across three criteria, namely income, human assets, and vulnerability.

Based on these reviews, the CDP recommends which countries should be classified as LDCs to the United Nations Economic and Social Council (ECOSOC). The final decision is made by the UN General Assembly.

To graduate, a country must meet the threshold for two of the three criteria in two consecutive reviews.

“We have already qualified twice,” Prof Mahmud said, referring to the previous reviews in 2018 and 2021.

If any country files a petition to the CDP’s hearing committee saying that they are unable to graduate or asking to stay in the group of LDCs, it is considered degrading, he added.

“The Maldives and some tiny island nations applied for it, but it was unsuccessful.”

When a country qualifies, it graduates automatically, the adviser explained.

“We need to continue discussions on unilateral concessions with different nations. Japan, Canada and the European Union can be favourable options,” he added.

He also underscored the need for export diversification and economic diplomacy to negotiate in the global market.

Earlier, members of a panel that recently prepared a white paper on the state of the economy also advised the government not to defer graduation.

“Based on the committee’s assessment of data and information, Bangladesh meets the requirements for LDC graduation despite the challenging economic situation,” Debapriya Bhattacharya, who led the panel, said last week.

“So, we don’t see any reason to hold back the graduation process.”

In its report, the white paper committee said recent concerns about inflated economic indicators under the previous Awami League government would have little relevance in the case of LDC graduation.

The UN bodies will only revisit their calculations when a revised data set, including gross national income estimates, is available from government sources.

“Notwithstanding the reservations expressed by certain exporters’ groups, there is hardly any plausible reason, as of now, for Bangladesh to request a deferment of the exit date from the LDC group,” it said.

“Under these circumstances, Bangladesh will be well advised to pursue a substantive and effective LDC graduation strategy. This will require putting forward a transition plan to counteract the negative fallouts of Bangladesh’s graduation out of the LDC group and enable the required structural transformation of the economy.”

The white paper added that postposing graduation will invite political backlash.

According to a triennial review by the CDP in February this year, the current situation remains comfortable despite recent economic and political challenges.

Even the dampened economic performance during the current fiscal year is not expected to bring the country below the stipulated thresholds, it said.

Illusory wealth in big industry balance sheets

Speaking of how Bangladesh can build an egalitarian society after a mass uprising toppled the Sheikh Hasina regime on August 5, Mahmud said that the interim government is facing a huge shortage of resources.

This has made it difficult to increase investment in education, health and human resource development.

“A lot of money has been smuggled out of the country. People’s money is in the banks, but the money has gone out,” he said.

Although there is a lot of money in the balance sheets of some big industrial companies, it does not exist in reality, he said, mentioning the example of Beximco.

“Workers have to be paid. But where will the money come from?” he asked.

It is difficult to build an egalitarian society when contending with such realities.

“Now it has become a moral issue whether to buy dialysis machines or invest in public health,” he said, adding that even seasoned economists and philosophers like Amartya Sen and John Rawls may not be able to come up with a solution for such a moral dilemma.

Indermit S Gill, the chief economist of the World Bank Group, said during a presentation at the event that middle-income countries, which are home to 6 billion people, were caught in a race against time.

“The external environment is making things harder, not easier. To escape the middle-income trap, countries need to undergo two transitions, not one. The transitions are between investment, infusion and innovation.

“To grow quickly, they have to discipline incumbents, reward merit, and capitalise on crises,” Indermit said.

Binayak Sen, director general of the BIDS, delivered the opening remarks.

A total of 30 papers, two keynote addresses and 12 public lectures from Bangladesh and abroad will be presented and delivered at the conference, said Sen.