LDC graduation: Sophie’s Choice?

As fog gives way to mist, Bangladesh's exit strategy from the group of the least developed countries (LDCs) is gradually acquiring a veneer of intelligibility. On 12 January 2021, Bangladesh government expressed its desire to leave the category two years later i.e., in 2026 – instead of 2024 – in anticipation that the country will achieve the eligibility criteria for graduation during the upcoming review by the United Nations' Committee for Development Policy (UN-CDP).

What was once considered to be a Hobson's Choice – a choice between one thing or nothing – later turned out to be a Morton's Fork where either action leads to the same bad outcome. Now it seems, the country is moving up to a Sophie's Choice – a difficult situation in which one must choose between two equally deserving alternatives. Let me clarify.

Since Bangladesh successfully met all the three eligibility criteria for leaving the LDC group in 2018, concerned (and often uninitiated) quarters got divided into two polarised groups. The first group celebrated the occasion and looked forward to getting a confirmation of it in 2021, coinciding with the 50th anniversary of the country's independence. Conversely, another group agitated against such a trajectory of LDC graduation arguing that the country is not ready for such a transition and cannot afford to forgo the trade preferences and other privileges currently enjoyed by Bangladesh as an LDC. Both groups perceived the binary choice in absolute terms.

In other words, at the initial stage of the LDC graduation debate in Bangladesh, it was perceived that either the country has to fully exit from the group now or never. From this perspective, the strategy was conceived as either all of it or nothing. This form of articulation very much sounds like a Hobson's Choice.

Then the pandemic Covid-19 came as a game-changer. In view of the disastrous impact on the physical well-being as well as on employment, income and poverty, all concerned were ready to give a second thought to the prospect of early exit from the LDC group. The international development community was also amenable to a flexible timeline given that the negative consequences of the scourge on development would be longer than the pandemic itself.

On the other hand, deferment of the final go to LDC graduation would mean loss of a unique opportunity to celebrate the golden jubilee of national independence with such an international recognition of our development achievements. But such a decision would deprive the country from the much-needed international support measures for post-pandemic recovery.

One could readily see that both the options (as broadly understood) are almost equally daunting for Bangladesh. It seemed that the country is faced by a Morton's Fork as either option leads to prejudicial outcomes.

Meanwhile, it has become progressively obvious that Bangladesh is going to meet all the three eligibility criteria for LDC graduation for the second time (2021) – notwithstanding the adverse impact of the pandemic on the economy. Admittedly such an assessment was underpinned by the structural indicators defining the LDC category and lack of real-time data regarding impact of Covid-19 on Bangladesh's development variables.

It was almost as in the film Sophie's Choice (1982) – directed by Alan Pakula, adapted from William Styron's novel by the same name. Phenomenal actress Meryl Streep has immortalised the character of "Sophie" Zofia Zawistowski who has to make a very difficult choice between two equally repugnant options.

In the context of the pandemic and other structural difficulties, "to be or not to be" was almost equally difficult for the country.

In this context, the Bangladesh government decided to embrace UN-CDP's highly possible positive recommendation regarding the country's LDC transition next month with a proviso. The country requested for an additional two years (2024/25 and 2025/26) to prepare for a full exit from the category – which was quite a reasonable demand.

And such entreaty was not unprecedented. The Maldives successfully deferred the graduation from 2008 to 2011 following the tsunami in 2004. Similarly, Nepal, after the devastating 2015 earthquake, successfully convinced the UN-CDP to postpone graduation until 2021. The small islands developing states (SIDS) in the Pacific, e.g. Kiribati and Tuvalu routinely ask for such leeway. Curiously, almost all other Asian candidate countries such as Nepal, Myanmar and Laos have also asked for latitude similar to Bangladesh. However, one should not miss the fact that Vanuatu, another small island country in Pacific, decided to go ahead with LDC graduation in December 2020.

The new dilemma

Thus, UN-CDP may positively consider the request for extra two years by the graduating LDCs. But having locked-in into a new exit timeline for LDC exit, Bangladesh has embarked on a novel Sophie's Choice where both the options are equally desirable (instead of being equally detrimental).

The first area of actions relates to the country's preparation for the next five to six years for "graduation with momentum", while the other field concerns securing post-graduation international support measures for ensuring sustainable transition. Will Bangladesh be able to deal with this double whammy effectively?

One of the prime tasks of the lead time to LDC graduation has to be to create cushion for the shocks of withdrawal of LDC preferences. In this connection, the country is rightly concerned about the loss of duty-free and quota-free (DFQF) market-access for apparels and other textile products – its major export products. However, attention to other non-trade areas is quite wanting. These include potential loss of preference in the areas of operationalisation of intellectual property rights (not only for pharmaceutical products), according agricultural subsidies and extending trade-related industrial support measures to our infant industries.

Indeed, a significant area of concern should be the diminished access to concessional finance, further constrained by parallel transition of the country from the group of low-income countries (LICs) to low-middle income countries (LMICs). Possibly the most disastrous would be forfeiture of eligibility of Bangladesh to LDC-dedicated windows of climate finance. It will also be interesting to observe how the country links up its external finance resource requirement to the hosting cost of the Rohingya refugees.

As mentioned earlier, on the flip side of LDC graduation strategy rests the tasks for crafting a smooth post-graduation life. Efforts are underway to secure trade-related preferences for the graduated LDCs in the World Trade Organizations (WTOs).

However, experience of the predecessors suggests that development of productive capacity propelled by economic diversification and productivity growth play the most critical role in enhancing the prospect of sustainable transition. The defining factors to this end are strengthened domestic resource mobilisation, foreign direct investment, reforms of business supporting institutions etc.

Effectively bridging the two ends of a seamless path, apparently divided in two parts, will demand high-level of coordination among different entities of the government – beyond the Prime Minister's Office (PMO), External Relations Divisions (ERD), Ministry of Foreign Affairs (MOFA) and Ministry of Commerce. Coordination among different overseas outposts of the government, especially among those in New York, Geneva and Brussels will be instrumental in this regard. No less critical will be the servicing the need for coordination among the policy actors, economic actors and knowledge actors at home.

Incidentally, Bangladesh has acquired great global prominence in drafting development plans and programmes radiating high degrees of enthusiastic ambitions. It is now to be tested to what extent the country demonstrates competence and capability to match its actions with action plans as it tries to befittingly touch the finishing line of the LDC transition. Indeed, the country may very well prove that the Sophie's Choice in this case had been a false choice.

Dr Debapriya Bhattacharya is a Distinguished Fellow, Centre for Policy Dialogue (CPD) and Member, United Nations Committee for Development Policy (CDP).