LDC to Developing Nation: What does Bangladesh’s economic progress mean for the apparel Industry

by Apparel Resources

18-July-2018  |  6 mins read

Economic development is a matter of pride and joy for any nation, or is it 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 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 the competitive edge given many of its competitors, including Vietnam, continues to still capitalise on many trade privileges, which are unlikely to be abolished anytime soon.

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.

Sample 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to additional tariff as duty-free and quota-free benefits from different countries and trading partners will be withdrawn.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 on 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 on becoming 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 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-setting any probable bad impact on overseas trade.

As per media reports, Bangladesh is all set to push 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 through different ways and means, 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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