Bangladesh could incur losses of $7bJahangir Shah Dhaka
Published: 07 May 2023, 18:29
People cross a road at night, in Dhaka, Bangladesh, 22 May 2022.
Bangladesh would face huge losses in export revenue in 2027 after graduating from the Least Developed Country (LDC) status. In monetary terms the value will be US $7 billion, which is equivalent to Tk 740 billion (Tk 106 for each dollar).
Currently, around 75 per cent products of Bangladesh are exported under preferential market access in one way or another. The country will lose this preferential market access gradually after graduating from the LDC status.
This was observed in a report of General Economics Division (GED), a wing of planning ministry.
It is being assumed that the readymade garment sector will be hit the hardest after graduating from the LDC status. The access to the US and European markets will be affected the most. Currently, over 80 per cent of Bangladesh’s export income is generated by the RMG industry.
The GED report said Bangladeshi products get access to the markets of different countries paying a minimum or no duty at all. Of the total amount of export each year, 72 per cent products enter the markets of European Union (EU) under the Generalised System of Preferences (GSP). The GED report, as an example, said that if the Bangladeshi products had not received preferential access facility in 2018, the RMG sector would have incurred a loss of US $1-4 billion. It is being said that the volume of export will soar until 2027. At the same time, the price of dollar will also increase. The loss would be $7 billion if the preferential market access facility is withdrawn by then.
The export sector will bear the brunt of graduation from LDC status, say the economists. They also said Bangladeshi products do not get any such facility in the markets of the US while the preferential access to the markets of the European Union (EU) will remain in place until 2029. But the competitors like India and Vietnam would get more benefits from that market. As a result, the export from Bangladesh is likely to decrease.
Khandaker Golam Moazzem, research director of Centre for Policy Dialogue (CPD), recommended four things to mitigate the loss. Speaking to Prothom Alo he said, “We do not have any preferential access to the US market. But there is a growth in export of apparel there and we have retained the market share. We have to use that experience. Besides, the exporters could retain the market by cutting prices and curbing profits.”
The other three recommendations are: taking a look at the FTA, PTA and economic partnership; drawing in foreign investment and improving the quality of products.
Who's doing what?A national committee headed by the principal secretary to the prime minister has been constituted to face the challenges of graduation from LDC. Besides, steps have been taken to conduct research identifying seven sectors. There is a project ‘support to sustainable graduation project’ for this.
Currently, Bangladesh Investment Development Authority (BIDA) is working on attracting foreign investment; Prime Minister’s Office on internal investment and export diversification; Ministry of Commerce on preferential market access and World Trade Organisation issues; Ministry of Industries on intellectual property law and facilities and Economic Relations Division is working on sustainable development strategies.
An ERD official told Prothom Alo, “It is necessary to learn about the background and what to do before tackling any challenge, and ERD is doing that. We hope the work will be completed by 2024.”
Sources said commerce ministry started working on preferential market access with negotiation underway at various forums including World Trade Organisation to extend market access at various countries including the European Union members.
Besides, the ministry also prepared a list of 10 countries aimed at signing free trade agreement (FTA). These countries are: Singapore, Indonesia, India, Nepal, Sri Lanka, Japan, USA, Canada, China and Malaysia. Commerce ministry would conduct a study on the possible benefits of signing FTA with these countries.
Priority to 4 sectors to attract FDILast month, BIDA held a meeting on how to attract foreign direct investment (FDI) after Bangladesh gradates out of the group of least developed countries (LDCs). Presided over by BIDA executive chairman Lokman Hossain Miah, representatives of all relevant offices were present at the meeting. The meeting discussed how to attract foreign investment in several sectors, including agro processing, information technology, light engineering and ceramics. Sources said a study will be carried out on incentives, including tax incentives, to attract FID in those sectors.
This report appeared in the print and online edition of Prothom Alo and has been rewritten in English by Shameem Reza and Hasanul Banna