The newly elected BNP government has not wasted time over requesting the UN to defer the process of country’s LDC graduation. Notably, the country was scheduled to graduate from the Least Developed Country (LDC) category on November 4, 2026 following completion of the 5-year preparatory period granted for transition by the UN after it made recommendation for Bangladesh’s graduation in 2021. In the beginning, LDC graduation was a prestige project for the government of the time. The immediate-past interim government led by Dr Yunus, on the other hand, was actually seeking to defer the graduation till 2030. In this connection, it was coordinating with other graduation candidates like Nepal and Laos to delay the process. It is worthwhile to note that the country’s business community, particularly the apparel sector and the pharmaceuticals industry, has been against the graduation schedule and made representations to the interim government for deferment of the graduation for six years to avoid the shock the economy would be exposed to following graduation.
For graduation would result in the apparel exports’ losing duty /quota-free trade access to the EU and other key markets according to the ‘Everything but Arms (EBA)’ initiative under the Generalized System of Preference (GSP) for LDCs. Once graduated, the exporters would be subjected to nearly 12.5 per cent tariffs in the EU market and lose about USD 8 billion worth of business annually. Add to that the stricter post-graduation compliance obligations regarding labour rights, environmental standards and intellectual property (IP) rights. Mention may be made here that the post-graduation withdrawal of the World Trade Organization (WTO)’s waiver on Trade-Related Aspects of Intellectual Property Rights (TRIPS) would severely affect the country’s pharmaceutical sector. At present, the temporary waiver being enjoyed by the pharmaceutical companies courtesy WTO’s flexibility on patent rules has enabled them (drug companies) to produce generic versions of life-saving drugs at affordable prices. But once TRIPS waiver is over and patent protection rights are in place, many drugs, especially, those for the cancer and HIV patients will go beyond the purchasing power of even the rich patients, let alone the low-income ones.
So, if the apparel sector’s case for graduation deferment is about saving 80 per cent of the country’s total export income, then the drug sector’s is about protecting the nation’s public health. If the UN Committee for Development Policy (CDP), to which Bangladesh government has sent the letter requesting three years’ deferment of the graduation time line, responds positively, the local industries in question might get the breathing space to prepare themselves for graduation. Meanwhile, they would be able to develop the infrastructure to manufacture active pharmaceutical ingredients (APIs) locally. (An API is the component of the prescription medication that produces its intended health effects). Also, if the asked for time extension is granted by the UN body concerned, the extra time will help the new government prepare better through meeting current economic challenges including high inflation rate (over 9 per cent), improving forex reserves, addressing banking sector volatility, etc.
Another area to address is dealing with the high tariff and other compliance conditions imposed by the US. However, the arguments put forward by the present government supporting graduation deferment cover the disruptions caused to preparatory work by COVID-19, the Russia-Ukraine war, risks to macroeconomic stability, the recent political instability, especially in the wake of the student-led mass upsurge of July 2024, etc. These are evidently cogent reasons expressed by the government to justify its request for LDC deferment. Nevertheless, the government would be well advised to submit a technical report to the UN’s review committee concerned with convincing explanations in favour of LDC graduation deferral. Meanwhile, Myanmar, Timor-Leste and the Solomon Islands could defer LDC graduation citing their compelling circumstances. That should place Bangladesh’s case on a firmer ground.
https://today.thefinancialexpress.com.bd/editorial/bangladeshs-case-for-ldc-deferral-1771857768