For years, Bangladesh has been approaching a crossroads in its development journey. Having met the criteria for graduation from Least Developed Country (LDC) status in 2018, the government found itself in a conundrum. While graduation symbolises progress and economic maturity, it also threatens to remove trade preferences amid declining foreign reserves, stagnating exports, reduced incentives, and supply chain weaknesses. External shocks, including the Russia-Ukraine war, Middle East tensions, and global inflation, have further complicated this decision.

Despite these challenges, the Bangladesh government has made the courageous decision that graduating from LDC status will strengthen the nation's long-term economic prospects. Rather than postponing, Bangladesh has chosen to face these challenges, refusing to bow to external pressures and signalling confidence in the country's resilience and capacity for adaptation.

However, Bangladesh's transition differs from that of other graduating countries. With around 84 percent of exports concentrated in the ready-made garments (RMG) sector, the nation faces a concentrated risk profile. Unlike other graduating LDCs with more diversified export portfolios, Bangladesh must navigate this transition while protecting its dominant industry and accelerating diversification efforts. This reality demands an exceptional level of preparation and coordinated action.

With LDC graduation, 74 percent of Bangladesh's exports will face market access changes. The EU will enforce stricter trade regulations, such as double transformation rules of origin and an automatic safeguard clause. While GSP+ is an option, it requires compliance with 32 international conventions, and Bangladesh may not qualify since exports exceed the 37 percent threshold. Although GSP benefits in the EU will remain until 2029 and market access to the UK and Australia will continue, trade relationships with Canada, Japan, China, South Korea, and SAFTA countries remain uncertain.

Unlike Vietnam and Cambodia, which have secured favourable regional and bilateral agreements, Bangladesh must now accelerate its trade diplomacy efforts to mitigate the impact of lost preferential access.

The decision to graduate comes at a time when foreign reserves have plummeted, exports have stagnated, and export incentives have been reduced by 60 percent. Many small and medium-sized factories that relied on these benefits have closed, exposing weaknesses in competitiveness due to rising costs. To ensure the sustainability of these businesses post-graduation, the government must implement support mechanisms such as technical assistance programmes, access to affordable financing, and productivity enhancement initiatives to help offset the removal of tax advantages and preferential market access.

The RMG sector, accounting for a major percentage of national export earnings, requires special attention. The WTO and UNCTAD reported a 5 percent decline in the global clothing trade in 2024, signalling tough times. While Bangladesh saw export growth earlier this year, a two-year comparison shows stagnation.

To protect this industry, steps must be taken to enhance competitiveness through technology upgrades, skill development, and product diversification. The government and industry stakeholders should collaborate to counter falling export prices and rising production costs. Despite meeting graduation criteria in 2018, Bangladesh has made limited progress in areas such as trade logistics, energy supply, and customs efficiency. Business costs remain high, and planned economic zones are not yet fully operational.

With graduation imminent, these infrastructure and policy bottlenecks must be addressed urgently. The government should create a task force to fast-track projects that impact export competitiveness, including power generation, transportation networks, and port facilities. Since GSP+ is unlikely to offer relief, securing bilateral trade agreements is imperative.

Bangladesh must overcome regulatory and structural challenges to make itself attractive for such agreements. This requires reforms to investment policies, intellectual property protection, customs procedures, and digital trade frameworks. A negotiation team with private sector representation should be established to pursue these agreements.

The author is a former director of the Bangladesh Garment Manufacturers and Exporters Association