Bangladesh cannot unilaterally defer its LDC graduation timeframe: Zahid

Former lead economist of the World Bank Bangladesh Office Zahid Hussain has said Bangladesh cannot unilaterally defer its LDC graduation timeframe.

"The United Nations Committee for Development Policy [UN-CDP] had recommended Bangladesh's graduation from the LDCs in 2021. While not automatically enforcing graduation, this recommendation is seen as largely mandatory since the UN General Assembly tends to follow the CDP's recommendations," he said in a recent interview with BSS at his residence while sharing his insights on the country's graduation from the Least Developed Countries (LDCs) category. 

Zahid noted that several countries that faced setbacks during the graduation process were granted an extended preparatory period before graduation. 

This provides them with additional time to address any concerns or challenges identified. Bangladesh has already availed of a two-year extension. 

Addressing reservations from the business community about Bangladesh's LDC graduation slated for 2026, Zahid clarified that once a country qualifies for graduation, the responsibility falls on them to ensure that all concerns are adequately addressed. 

As Bangladesh prepares for its graduation in 2026, it is imperative for the country to address the concerns of the business community and ensure a smooth transition. 

The renowned economist shared these perspectives, providing a comprehensive view of the challenges and opportunities that lie ahead for Bangladesh from LDC graduation. 

Elaborating on the matter, Zahid said, "Now, I think there is limited scope for deferring the country's graduation through changing data and statistics. There is also less scope for bringing down the statistics below the threshold level on per capita income, human development, and vulnerability indices," he said.
 
Bangladesh is the first country recommended for graduation by meeting all three criteria, Zahid said, adding, "We'll have to accept that we'll graduate and act on tackling the possible impact on our competitiveness. We should be prepared." 

In the last Ministerial Conference of the World Trade Organization (WTO) held in Abu Dhabi, the ministers decided to allow the continuation of the LDC trade benefits to the graduating LDCs for three more years. 

The European Union (EU) will continue the LDC trade benefits for Bangladesh up to 2029, offering a three-year grace period to the graduating LDCs. 

A few other countries like Canada, the UK, and Australia will also continue the LDC trade benefit for Bangladesh even after graduation. 

When asked about the 'middle-income trap' that many apprehend Bangladesh is already in, Zahid said if political stability and structural economic reforms are not ensured, then nothing will get us out of the trap. 

"We'll have to bring about necessary changes in three areas in particular- in export diversification, investment and skill development. We have a big opportunity ahead of us, which is the new economic policy of US President Donald Trump," Zahid said. 

Under this circumstance, the multinational companies that have businesses in China are searching for alternate places to relocate their businesses, like Vietnam, Indonesia, and the Philippines, he noted.
 
Zahid said many are also talking about Bangladesh on the global stage, but Bangladesh is still not fully ready in terms of investment climate like addressing complexities in getting visas, readiness of the economic zones, and complexities of business regulation, money repatriation, and so on. 

"If we can become fully ready, then there could be a quantum jump in FDI, and thus, the door of immense opportunities would be opened," he hoped. 

As Bangladesh approaches this crucial transition, Dr Zahid said the government's proactive stance on economic zones is a laudable step. Instead of an ambitious plan to establish 100 economic zones, the focus has shifted to creating five well-equipped zones urgently.
 
"This strategic move aims to provide the necessary facilities and regulatory reforms to foster a 'plug-and-play' environment for investors," he added.

Zahid observed that by streamlining business regulations and ensuring the readiness of these special economic zones (SEZs), Bangladesh can hope to attract significant foreign direct investment (FDI) and boost the country's economic prospects.

Zahid acknowledged the issues raised by the business community and their concerns over the current business environment. The state of the financial sector and the inconsistent supply of gas and electricity are two major factors contributing to low business confidence to some extent, he said.
 
The former World Bank lead economist further highlighted the challenges related to the supply of LNG. He said the government faces difficulties in maintaining a sustainable supply while selling LNG below the buying price.
 
In the new Monetary Policy Statement (MPS), Zahid said some forward guidance is likely to come regarding the way the central bank would run its policy and programs. 

"With the unveiling of the FY26 budget in June this year, he said, all will be able to know in which way the economic policy and management will move forward and then the cloud in the sky will clear." 

Asked whether the government's economic reform agenda is getting less importance than other reform agendas, he said the government certainly has the realization that they would have to carry out economic reforms, and there is no doubt in this regard. 

"But, despite having a strong will, they often couldn't translate those into actions as the initiatives should have to come from the administration itself and from the concerned ministries," he said.