Bangladesh needs to reconsider the time it planned to take to graduate from a least developed country (LDC) to a developing one as the coronavirus pandemic has severely affected the economy, said United Nations (UN) high-ups and economists yesterday.
Although almost all economic indicators were performing strong in case of Bangladesh in the pre-Covid 19 pandemic period up to February this year, the situation started worsening since the outbreak.
Like many other countries, many people have already lost their jobs and production in the factories declined substantially. The economic activities have fallen and disrupted the supply chain abnormally.
So far, some 12 million people became "new poor" in Bangladesh because of the ongoing epidemic. Moreover, the deadly disease exposed the poor state of the healthcare system of the country.
Analysts made the comments at a virtual discussion on "Impact of Covid-19 on Bangladesh's LDC graduation and way forward" organised by UN in Bangladesh and Bangkok-headquartered UN ESCAP.
Experts and economists perceive that the economic situation might worsen further if the virus does not die out soon and so suggest that Bangladesh delay the graduation.
This is because after the graduation, Bangladesh will lose the preferential trade benefits which many developed countries offer in the world markets for the economic emancipation of the LDCs.
The graduation will cause local exporters to count an additional 8.7 per cent in tariffs on shipments to the European Union (EU), Bangladesh's largest trade bloc where 64 per cent of its goods are destined.
Moreover, exports are expected to fall by 5.7 per cent.
Erosion of trade benefits mean losing competitiveness in the world markets which might also affect local investment and job creation. So this is not the time to graduate as Bangladesh needs to enjoy more preferential trade benefits.
Some economists suggested waiting at least 10 more years as Covid-19 has been damaging the global economy severely.
But on the other hand, some economists suggest the UN and developed and developing countries to extend a generous grace period to Bangladesh for 10 more years to enjoy the preferential trade benefits.
Officially, the graduation is scheduled in 2024 and the country will be given three years more as a grace period for preparations.
That means Bangladesh will start facing extra tariffs on exports from 2027. But many want the grace period to be extended for Bangladesh to at least 10 years because of the devastation of Covid-19 on global economies.
Nepal is going to graduate next year despite facing one of the most severe earthquakes in 2015 and Maldives did so despite being hit by a tsunami in 2004.
Bangladesh has the strength to graduate despite the Covid-19 effects but the grace period should be extended so that the country can enjoy the preferential trade benefits.
Among the LDCs, Bangladesh made the highest use of the trade benefits given by the developed and developing countries.
For instance, it utilised 97.5 per cent of trade benefits given by the EU, 93 per cent by Australia, 94 per cent by Japan and more than 90 per cent by Canada.
Bangladesh has been doing extraordinary in socio economic development and poverty reduction but the Covid-19 affected the normal economic growth. So the country should take a break so that it can perform well after the graduation, said the economists.
"This is a watershed moment for humans. Great uncertainty in economy. Bangladesh should reconsider for an inclusive manner in graduation," said Mia Seppo, UN resident coordinator in Bangladesh.
"Graduation is a political decision of the government. But this decision should be taken based on broad analysis like including universal health system," she said.
Nagesh Kumar, director of the UN Economic and Social Commission for Asia and the Pacific (UN ESCAP), said some 12 million Bangladeshis have already entered new poverty due to the pandemic and 132 million in South Asia.
So this is not the time to graduate although Bangladesh outperformed in all the three required criteria set by the UN for graduation, he said.
Moreover, the tax-GDP ratio in Bangladesh is very low at 8 per cent whereas it is 12 per cent in other LDCs and even higher in developed and developing countries.
"Bangladesh should revisit the graduation process by five or 10 years. Bangladesh should take more LDC benefits. Bangladesh should act more realistically. Although the graduation is a political decision," said Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD).
She spoke while presenting a keynote paper at the virtual discussion.
Bangladesh needs to be given some extra time for enjoying the LDC benefits because the local investors invested a lot of money for compliance development, said Mohammad A Momen, a director of the Bangladesh Garment Manufacturers and Exporters Association.
Bangladesh has been contributing extraordinarily in global peacekeeping and facing the Rohingya crisis, he said.
"And we have to develop our backward linkage industries in the garment sector," Momen said.
Deferment of graduation might not be possible but the UN should extend the grace period for Bangladesh, said KAM Morshed, senior director of Brac.
"We should not forget the informal economy which has a contribution of 80 per cent in the GDP," he said.
Bangladesh is still well positioned for the graduation, said Monowar Ahmed, former secretary to the Economic Relations Division, while echoing Morshed's views.
"Bangladesh will move forward with its original plans of graduation," he said.
Bangladesh should save lives first and protect people before going on to think about the graduation, said Mercy Tembon, Bangladesh country director of World Bank.
The human spirit is at the centre of any development, said Subhra Bhattacharjee, head of UN Resident Coordinator's office in Bangladesh, while moderating the discussion.