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    What next after graduating from LDCs

Best of times … Worst of times …
What next after graduating from LDCs

Syed Nasir Ershad

The most encouraging news in the recent times for Bangladesh is the fact that we have graduated from LDCstatus. There is a difference between graduation from LDC to Developing Countries and graduation from Low Income to Lower-Middle Income countries. Bangladesh graduated from Low-Income to Lower-Middle Income group in 2015. And this year (2018) we have graduated from LDC category.The Committee for Development Policy (CDP), a subsidiary body of the UN Economic and Social Council (ECOSOC), is mandated to review the category of LDCs every three years and monitor their progress after graduation.The identification of LDCs is currently based on three criteria: (a) per capita gross national income (GNI), (b) human assets and (c) economic vulnerability to external shocks. The latter two are measured by two indices of structural impediments, namely the human assets index and the economic vulnerability index. (a) Income criterion, based on a three-year average estimate of GNI per capita for the period 2016 is above $ 1,006 for graduation as applied in the 2018 triennial review. (b) Human Assets Index (HAI) based on indicators of: nutrition – percentage of population undernourished; health – mortality rate for children aged five years or under; Maternal Mortality Rate; education – the gross secondary school enrolment ratio; and adult literacy rate. (c) Economic Vulnerability Index (EVI) is based on indicators of: population size; remoteness; merchandise export concentration; share of agriculture, forestry and fisheries; share of population in low elevated coastal zones; instability of exports of goods and services; victims of natural disasters; and instability of agricultural production.In the review process, the CDP determines threshold levels on each of those three criteria to identify the countries for graduation from LDC. To become eligible for graduation, a country must reach threshold levels for graduation for at least two of the aforementioned three criteria.After a country has become eligible for graduation for the first time, an ex-ante impact assessment and a vulnerability profile are produced and delivered to CDP as inputs for its deliberations.To be recommended for final graduation, a country must be found eligible at two successive triennial reviews by the CDP. During review period, the country remains on the list of LDCs and continues to benefit from the special support measures.Currently there are 47 countries listed as LDCs; only 5 successful graduation cases occurred so far (Botswana, Cape Verde, Maldives, Samoa and Equatorial Guinea) all of which are significantly smaller than Bangladesh, both in terms of population and GDP size. Bangladesh met all 3 criteria of graduation in late 2016 for graduation from the list which was confirmed in the nearest possible triennial meeting of CDP in 2018. According to their estimate our per capita GNI stood at $1,274 (more than the minimum requirement of $1,006), Human Assets Index (HAI) score was 73.2 (more than the minimum requirement of66.0) and Economic Vulnerability Index (EVI) value came down to 25.2 (less than the maximum limit of32.0).We should try to understand what differences this graduation make to Bangladesh and put our best efforts to utilize this new status. On the one hand this graduation will abolishour leverage in the preferential trade regime for the LDCs. Current duty-free access of nearly all products to all countries will be phased out gradually after 2024. Almost all concessional development assistances will also be phased out.However, this graduation has given us opportunity to brand Bangladesh in a more positive fashion. This is certainly going to boost our confidence asa nation. More attention of potential investors and trade partnerswill be focused. This will help gain better credit rating and subsequently more commercial borrowing from international capital market with cheaper rate will become available. The booming private sector will have enhanced access to the international capital market and trade.
For a smoother graduation we should improve overall capacity of the economy by doing further development in social sector, building right kind of physical infrastructure and initiating structural diversification. We should also work towards technological up-gradation.Strengthening social institutions and ensuring better governance and rule of lawis very important.New bilateral trade negotiation with major trading partners will have to be done. The economy should gradually move towards reducing capital control. Greater integration with global economy will have to be initiated. Investment in research and innovation will be the key to cope up with the new era. We should try to bring back our great minds from abroad to stay and work for Bangladesh. We should take advantage of the strategic location of Bangladesh in the global map, as geopolitical leverageis vital.

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