Apparel Online Bangladesh Magazine August Issue 2018 | Page 25

BANGLADESH INSIGHT
LDC to Developing Nation:
What does Bangladesh’s
economic progress mean for
the apparel industry?
Bangladesh is a major user of duty-free and quota-free market access, with
shipments under this facility accounting for 72 per cent of the total exports in
fiscal 2015-16.
E
conomic development is a matter
of pride and joy for any nation,
or is it not so? Going by the popular
sentiment amongst the Bangladeshi
entrepreneurs and businessmen,
especially in the readymade garment
sector, one may have some doubts!
At a time when Bangladesh is making
rapid progress towards attaining
the developing nation status from
its current Least Developed Country
(LDC) position, speculations are
rife on its economic implications,
especially for the country’s flourishing
apparel manufacturing and exporting
sector. Given Bangladesh’s rate of
progress, the country is expected to
graduate from the LDC status by 2024.
So what does it mean for the apparel
industry? As per experts, though this
is a healthy indicator of the country’s
socio-economic progress, making it to
the league of the developing nations
would come at some cost, the cost
of losing the trade benefits that it
currently enjoys. Shorn of these trade
privileges, Bangladesh is bound to
lose its competitive edge given many
of its competitors, including Vietnam,
continue to still capitalise on many
trade privileges, which are unlikely to
be abolished anytime soon.
“We are
assessing our
challenges and
opportunities
after graduation
under the
high-powered
taskforce headed
by the Prime
Minister’s office.”
– Kazi Shofiqul Azam
As per media reports, United Nations’
Resident Coordinator in Bangladesh
Mia Seppo recently maintained that
the country’s exports on graduating
to developing nation status will face
an additional 6.7 per cent tariff,
which could result in an estimated
export loss of about US $ 2.7 billion
in a year.
As an LDC, Bangladesh currently
enjoys 12 per cent preference margin
for its apparel exports to its biggest
export destination Europe under the
European Union’s Everything but
Arms (EBA) Initiative.
To record this, as per reports, at
present, Bangladesh is a major user
of duty-free and quota-free market
access, with shipments under this
facility accounting for 72 per cent
of the total exports in fiscal 2015-
16. Upon graduation from the LDC
status, exports will be subjected to
additional tariff as duty-free and
quota-free benefits from different
countries and trading partners will be
withdrawn. With this, the preferential
market access to more than 40
countries in varying degrees that
Bangladesh currently enjoys would
be gone after becoming a developing
nation. And lastly, as per the United
Nations Conference on Trade and
Development, Bangladesh’s exports
may decline from 5.5 per cent to 7.5
per cent after achieving the status of
a developing nation. This list is quite
unnerving to say the least, and more
so if one is into apparel exports.
Well-aware of the connotations of
losing the LDC tag, the Bangladesh
Government is now getting into the fire-
fighting mode and why would it not?
After all, the RMG export accounts for
more than 80 per cent for the country’s
foreign currency earnings. Large-scale
employment generation is not to be
forgotten either.
So, if the Government on one hand
is reportedly working on signing
new preferential and free trade
agreements with major trading
partners, it is also planning to push
for enjoying LDC-related benefits
for an extended period through
various platforms. “We are assessing
our challenges and opportunities
after graduation under the high-
powered taskforce headed by the
Prime Minister’s office,” reportedly
underlined Secretary of the
Economic Relations Division, Kazi
Shofiqul Azam while speaking to
the media. He further added that
the taskforce will recommend action
plans for off-sett ing any probable bad
impact on overseas trade.
As per media reports, Bangladesh is
all set to push ahead for getting the
LDC-related benefits for an extended
period by co-hosting an international
event on ‘Supporting Smooth
Transition of the LDCs towards a
Sustainable Graduation’ during the
upcoming ‘High Level Political Forum’
at New York.
Led by Finance Minister AMA
Muhith, a high-level delegation from
Bangladesh would reportedly attend
the event, which coincidentally comes
just months after Bangladesh fulfilled
the criteria for LDC graduation during
the latest triennial review of the UN’s
Committee for Development Policy.
Even the country’s Commerce
Minister has jumped into allaying the
fears of the garment exporters. “After
graduation from the LDC, we will
go for Free Trade Agreements with
other countries. By 2021, our export
will cross US $ 60 billion and we will
work to achieve the goal,” reportedly
underlined Commerce Minister
Tofail Ahmed while attending the
National Export Trophy 2014-15
distribution ceremony in Dhaka
recently. Going by the Government’s
proactive approach in protecting the
country’s trade interests, losing the
LDC tag may well not be the end of the
glorious run for the country’s apparel
exports, one may hope.
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