Businesses demand LDC graduation delayed by 3-5 years over trade risks

Bangladesh's leading business bodies have urged a three to five years of delay in the country's planned graduation from the Least Developed Countries (LDCs) status, warning that a premature transition could hurt exports, raise borrowing costs, and strain key industries.

"Our entrepreneurs and business chambers strongly support graduation. However, we stress the need for a 3-5 year extension [for the graduation]," said Md Mahbubur Rahman, president of International Chamber of Commerce (ICC) Bangladesh, at a joint press briefing today.

While business organisations previously made separate appeals to postpone graduation, this is the first time 16 leading bodies jointly made the demand at the briefing titled "LDC Graduation: Challenges Ahead" held in Dhaka.

They urged the government to secure trade deals with the European Union, the United Kingdom, the Association of Southeast Asian Nations (Asean), and Gulf countries to offset US tariff shocks, while promoting export diversification in pharma, IT, leather, agro-processing, and light engineering.

They also called for investment in human capital for Industry 4.0 – automation, AI, and advanced manufacturing – attracting quality FDI that brings technology and sustainability rather than just cheap capital, and strengthening governance and climate resilience to maintain competitiveness in a turbulent global economy.

Bangladesh is scheduled to graduate in November 2026 after meeting all three UN criteria – Gross National Income, Human Assets Index, and Economic Vulnerability Index – through two consecutive reviews.

Business leaders described the milestone as a "matter of national pride" but cautioned that the transition must be carefully managed.

Participants at the briefing included representatives from the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), Bangladesh Garment Manufacturers and Exporters Association (BGMEA), Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), Metropolitan Chamber of Commerce and Industry (MCCI), and Foreign Investors' Chamber of Commerce and Industry (FICCI).

Trade risks, end of concessional finance

Mahbubur Rahman warned that the loss of preferential trade terms could hit exports hard. "EU, UK, and other key export destinations may impose tariffs of up to 12%, risking a 6-14% drop in exports unless Bangladesh secures GSP+ or free trade agreements."

The RMG industry, which accounts for more than 81% of Bangladesh's export earnings, would be particularly exposed due to stricter Rules of Origin requirements, higher compliance costs, and rising competition, he said.

After LDC graduation, Bangladeshi products will face tariffs of up to 18% in Canada and 12.8% in Japan, which are currently duty free, he said, warning the shift will affect financing and multilateral trade privileges.

"Concessional loans will be replaced by market-based borrowing, raising debt-servicing pressures. Bangladesh will also lose access to World Bank IDA soft loan facilities," Rahman said. Other losses include special WTO benefits, export subsidies, and relaxed TRIPS patent rules.

Pharma industry at risk

The pharmaceutical sector, supplying 98% of domestic demand and exporting to over 150 countries, currently relies on the TRIPS waiver that allows generic production of patented medicines until 2033.

Without an extension, the industry could lose competitiveness, raising drug prices sharply, Mahbubur Rahman said.

"Blockbuster medicines for cancer and viral infections could skyrocket in cost," he said. Monthly treatment with the cancer drug Imatinib could rise from $30-$40 to $2,000-$3,000, while HIV antiretrovirals could jump from $100-$150 annually to $10,000-$12,000. Biotech drugs such as Trastuzumab could increase more than tenfold.

Current economic challenges

Business leaders highlighted electricity and gas shortages, global trade tensions, declining foreign investment, external debt stress, rising distressed loans, logistics bottlenecks, currency devaluation, and climate pressures. 

They also pointed to economic strain following the July 2024 uprising.

The taka has weakened about 45% since 2021, increasing import costs and inflation. Net FDI fell 13% in 2024 to $1.27 billion, far below Vietnam's $38 billion. 

Distressed loans reached Tk7.56 trillion, reflecting financial sector stress, they said. Financial sector fragility could restrict credit, stifle growth, and undermine investor confidence.

ICC Bangladesh president said power cuts, gas shortages, and rising energy costs are disrupting industrial production, while congested roads, customs delays, and port bottlenecks push logistics costs to about 16% of GDP, well above the global average. 

"High logistics costs erode trade competitiveness and slow industrial operations," he added.

7 countries delayed graduation

At the briefing, business lobbies noted that seven countries – the Maldives, Vanuatu, Samoa, Equatorial Guinea, Nepal, Solomon Islands, Myanmar, and Timor-Leste – delayed graduation despite meeting criteria.

These examples show countries often seek more time to prepare for post-LDC challenges, especially when facing political or external shocks or lacking infrastructure, they said.

Naser Ezaz Bijoy, CEO of Standard Chartered Bank and former FICCI president, urged an extension citing global supply chain reconfiguration (such as US tariffs), political transitions, economic headwinds, and climate vulnerabilities. 

Mahmud Hasan Khan Babu, BGMEA president, added, "RMG is currently the biggest beneficiary, but post-LDC, it will become the biggest loser."

Dhaka Chamber echoes call

Meanwhile, the same demand was echoed at an event organised by the Dhaka Chamber of Commerce and Industry (DCCI) on the same day.

At the event, Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue, said a delay request can be made, but UN approval is uncertain. 

"Bangladesh meets graduation indicators, so preparations for post-graduation challenges cannot be set aside. Neglecting them could complicate the situation," he warned.

Monzur Hossain, member of the General Economics Division of the Planning Commission and chief guest at the event, said the government still plans to proceed with graduation and will hold a high-level stakeholder conference next month. 

"While delaying graduation may be beneficial, it should involve all relevant parties," he added.