Tougher tasks ahead
Bangladesh's image will shine out amidst the global community on the back of the United Nations recommendation for its status graduation from a least-developed country to a developing nation.
But there will be some challenges for the economy after it achieves the new status, said experts.
So, the country should give its all-out efforts to tackle the challenges during the transition period and help the economy grow after 2026, they said.
The Committee for Development Policy (CDP) recommended the graduation on Friday.
In view of the Covid-19 pandemic's impact on the economy, the committee recommended that Bangladesh get five years to prepare for the transition instead of three.
Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, said three major challenges would await the country when it turns into a developing nation.
"We will lose global supports for different arenas. Duty-free and quota-free markets will not be available for us. We will have to make a transition from preferential market access-driven competitiveness to productivity-driven competitiveness," he said.
The flexibility of intellectual property rights under the provision of the World Trade Organisation will be reduced, the trade expert said.
"This will have an adverse impact on, among others, the pharmaceutical industry. So, we will have to strengthen our domestic compliance," he said.
Subsidies and cash incentives can no longer be disbursed among different sectors when Bangladesh becomes a developing nation.
"This means the flexibility of policy space will be reduced as well. The country should take initiatives to resolve the challenges within the next five years."
"We will have to strengthen the competitiveness, productivity and the environment of the ease of doing business in tandem."
The connectivity triangulation -- transport, investment and trade -- will have to be improved a lot, Rahman said, adding that the potentiality of economic zones should be utilised properly.
"Our access to the regional and sub-regional market is still low. So, we should improve our integration to the arenas as the 21st century is considered as the Asian century."
Rahman backed the signing of trade deals with neighbouring countries. The commerce ministry should form a dedicated negotiation cell to address the issues, he said.
The graduation benefits are cited to include an improved country image and higher investment rating by international agencies, which may attract larger foreign direct investment, said Selim Raihan, executive director of the South Asian Network on Economic Modeling (Sanem).
"LDC graduation, however, is not a panacea. There are several risk factors for Bangladesh," he said.
The loss of exports in markets where Bangladesh enjoys duty-free access as an LDC, can be sizeable.
Many of the prospective benefits will not be "automatic" as the country has quite a lot of works to do to materialise those benefits, Prof Raihan said.
In contrast, almost all possible losses would be "automatic" as soon as the country graduates, he said.
The country has to prepare itself over the next five years to counter these challenges, he said.
The fight against Covid-19 for an economic and social recovery is a daunting task, he said.
"The country's investment environment needs major development. Also, the changing global and regional scenarios appear to be much more challenging," he said.
All these suggest that Bangladesh has to put in some extraordinary efforts in its economic and social development process in the days to come, Raihan said.
Zahid Hussain, a former lead economist at the World Bank's Dhaka office, said this was an international recognition of Bangladesh's development progress based on a more comprehensive assessment of development than just per capita income.
It considers human capital and vulnerability in addition to per capita income, he said.
There may be some impact on access to concessional finance from bilateral donors, but the magnitude of this impact is unlikely to be large, although it could still be significant for some specific causes, such as building resilience to climate change and aid for trade, he said.
"We need to prepare hard both on the demand and supply sides," Hussain said.
On the demand side, alternative ways to maintaining trade preferences granted to Bangladeshi suppliers will have to be opened, he said.
These include inking free trade agreements, finding ways of accessing multilateral economic cooperation arrangements such as the Regional Comprehensive Partnerships (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and increasing trading opportunities through greater market access under WTO provisions.
This will require a great deal of homework led by the Ministry of Commerce, involving relevant experts, as well as smart economic diplomacy, he said.
On the supply side, improving competitiveness will be most critical, he said, adding that this meant increasing the productivity of business enterprises and labour as well as the efficiency of the trade logistics system.
Much faster progress on structural reforms in all these areas will be needed to be pursued with urgency, Hussain said.
"We now need to work hard and quickly to build up our internal capacity to harness the benefits and positive outcomes of the graduation," said Nihad Kabir, president of the Metropolitan Chamber of Commerce and Industry, Dhaka.
"We need to swiftly build up our negotiation skills and capacity, with a dedicated trade cadre and the involvement of specialists in commerce and foreign affairs," she said.
One immediate step, which can be highly beneficial in coordinating all the actions and research needed throughout government and private sectors, is to have an office of a trade negotiator, akin to the US trade representative, at the Prime Minister's Office, added Nihad.
"This office could bring in academics, practitioners, experts from Bangladesh, and overseas under one umbrella."
The MCCI president stressed on development of a fully accessible associated database and data analytics skills.
KAS Murshid, director-general of the Bangladesh Institute of Development Studies, said the government would have to take up several initiatives to reform the financial sector in the lead up to graduation.
The banking sector and tax collection should be given importance to make the economy more vibrant, he said.
"Political will is paramount to do so," he said.
Asif Ibrahim, chairman of the Chittagong Stock Exchange, said LDC graduation now posed both opportunities and challenges.
"Erosion of preferential market access for our exports will be our biggest challenge. However, graduation is a seal of approval for international investors and will create opportunities for FDI inflow."
The country must fast-track necessary policy reforms and expedite the infrastructure projects to attract international investors while working on improving export competitiveness on an urgent basis, Ibrahim said.
"The UNCDP's recommendation is the best news of all," said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association.
"This gives a breathing space to the country to be prepared," she said.
Rizwan Rahman, president of the Dhaka Chamber of Commerce and Industry (DCCI), said a lot of opportunities would be opened for business due to graduation.
The country, however, will initially face some challenges, but it will benefit from the graduation in the long run, he said.
"The DCCI has already started work to tackle the challenges," he noted.
Abdul Matlub Ahmad, a former president of the Federation of Bangladesh Chambers of Commerce and Industry, said Bangladesh had worked hard to attain the developing country status to gain enormous benefits in the future.
He said Bangladesh would be able to successfully manage all challenges to graduate the economy to the next level.