Despite business leaders urging a delay following the Awami League government's fall on August 5, no official instructions to postpone have been issued. The Economic Relations Division (ERD) is actively gathering input from various ministries to outline steps for the transition.
Officials involved in the process, speaking anonymously, confirm that preparations are proceeding with the assumption that graduation will occur in 2026. The Ministry of Commerce is drafting policies on subsidies for fisheries and agriculture, while the Finance Division explores alternatives to cash incentives for exporters.
The UN Committee for Development Policy (UNCDP) will meet in November, and if Bangladesh seeks to delay its graduation, it must submit a well-justified application beforehand. Dr. Zahid Hussain, former lead economist at the World Bank, emphasized that claims of incorrect statistics or unpreparedness may not justify a delay.
The LDC Graduation Smooth Transition Strategy (STS), drafted in June, presents a roadmap for transitioning to a more resilient economic model focused on innovation and quality. It outlines five key pillars: ensuring macroeconomic stability, securing trade preferences, improving trade competitiveness, enhancing productive capacity, and strengthening international partnerships.
Bangladesh must address administrative inefficiencies and reduce business costs to mitigate potential export losses, which are projected at 14% post-graduation. The draft strategy highlights the importance of transitioning towards a globally competitive economy that promotes inclusive growth and industrialization.
The STS suggests adopting a "high-road economic development" approach that prioritizes productivity, innovation, and compliance with environmental standards. This strategy aims to build a skilled workforce and enhance brand value in a competitive global market.
While graduation will mark a significant achievement for Bangladesh, it will also mean losing WTO support measures, including duty-free access for about 73% of its exports. This poses a risk, particularly in the EU market, where Bangladesh may struggle to compete with countries like Vietnam that benefit from free trade agreements.
The draft strategy points out that while Bangladesh’s average tariffs may rise from zero to around 11% post-graduation, Vietnam's tariffs are expected to decline, potentially giving it a competitive edge.
To navigate these challenges, Bangladesh must negotiate preferential trade agreements and improve product quality to enhance its global market presence. The current protective tariff regime has shielded local industries but hindered competitiveness, particularly in exports.
In summary, the interim government’s strategy aims to prepare Bangladesh for a smooth transition from LDC status, emphasizing innovation and quality to strengthen its position in the global economy.