Delaying LDC graduation amid economic concerns

A strong consensus seems to have emerged among Bangladesh's business leaders and trade bodies that the country's scheduled graduation from the Least Developed Country (LDC) category in November 2026 should be deferred. While such graduation signifies significant socioeconomic progress, a combination of domestic and international economic factors indicate that the export sector is far from ready to make this leap. At a recent seminar in Dhaka, representatives from major trade bodies including the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), the Bangladesh Association of Pharmaceutical Industries (BAPI) and the International Chamber of Commerce-Bangladesh (ICC-B) have all voiced concerns that the economy is simply not prepared for the withdrawal of international support measures. The after-effects of the pandemic, the Russia-Ukraine war, soaring global inflation, high domestic interest rates and the July-August 2024 political upheaval have contributed to a fragile economic situation. Rushing into graduation now, they argue, would be a "suicidal decision" that could jeopardise the very progress that made graduation a possibility in the first place. 

One of the most significant consequences of graduation will be the loss of duty-free access to major markets like the European Union and the UK, which together account for nearly half of Bangladesh's exports. Experts estimate that tariffs could rise by as much as 12 per cent, potentially reducing export earnings by 6-14 per cent. For the crucial ready-made garments (RMG) sector, which generates more than 80 per cent of the country's total exports, this would be a severe setback. Additionally, graduation will end special flexibilities under World Trade Organisation (WTO) rules. For instance, the pharmaceutical sector will lose the right to produce generic versions of patented medicines, which could dramatically increase the cost of essential drugs. A legal adviser and senior researcher at The Third World Network (TWN) highlighted that the price of insulin, for example, could become 11 times more expensive, worsening poverty among households dependent on it. Meanwhile, the introduction of stricter rules of origin would further raise production costs across the board.

Industry leaders made it clear that the real issue is not whether Bangladesh graduates, but how and when it does so. With depleting gas reserve that requires billions in annual imports and a weakened financial sector burdened by a large number of defaulted loans, there is a strong case that the current economic environment does not support a smooth transition. However, it is important to remember that graduation is not a matter of choice once the United Nations Committee for Development Policy criteria are met, as Bangladesh has done in 2018 and 2021, although deferment can be requested in cases of exceptional economic distress. History shows that such requests are granted under extraordinary circumstances. Nepal received flexibility after an earthquake and the pandemic, Vanuatu after a devastating cyclone and Bangladesh itself secured an earlier two-year extension from 2024 to 2026.

Deferring LDC graduation is in no way an admission of failure. It is in Bangladesh's long-term interest to treat LDC graduation not as a ceremonial date on the calendar but as a strategic process tied to national readiness. Extending the timeline by three to five years would be a prudent move to safeguard employment, preserve export earnings and maintain access to affordable medicines. It would also give the government the opportunity to conclude trade negotiations from a position of strength rather than weakness. Given these imperatives, the interim government should heed this unified call from the business community and formally request an extension on LDC graduation in the nation's long-term economic interest.