Senior secretaries identify barriers, suggest ways for post-LDC transition

Infographic: TBS

Senior secretaries of the government stressed the need for export market expansion and product diversification to face challenges after Bangladesh's graduation from least developed country (LDC) status.

At the National Seminar on LDC Graduation held at the Pan Pacific Sonargaon in the capital on Thursday, the secretaries also made various recommendations for filling the infrastructure deficit, simplifying the business process and adopting export-friendly policies.

Chairing a session, Commerce Minister Tipu Munshi said there is a need to move forward with a long-term plan to increase the country's exportable items and also to expand export markets for a smooth transition from LDC status.

"There is huge scope for increasing exports of RMG items and we need to capitalise on this opportunity.

"It won't do to keep the sector dependent on only one commodity," he said.

At the event organised by the Economic Relations Division, Munshi said the government has been working with due priority to sign Preferential Trade Agreements (PTAs) and Free Trade Agreements (PTAs) with different countries to gain various trade related benefits.

Senior Secretary of the Prime Minister's Office Md Tofazzel Hossain Miah, presenting the keynote, cited several issues as key investment challenges, including inadequate infrastructure and the state of the financial market.

He also suggested that economic zones, ports, rail and road and intermodal connectivity infrastructure be developed to meet the challenge of LDC graduation.

At the same time, he placed emphasis on a strengthening of the stock market.

The senior secretary proposed various forms of assistance to Cottage, Micro, Small and Medium Enterprises in the export market and called for sectoral product diversification.

Tofazzel pointed out that 58% of Bangladesh's exports go to the European market and 14% to the US market, saying although there was access to Canada, Japan, Australia and India, these were not being utilised. 

"On graduation from LDC, we will lose duty-  and quota-free market benefits in the European market. We will have to pay a tariff of 9.5% for export, although now we pay no tariff," he said.

"In addition, we will have to pay 17% to the Canadian market, 16.2% to the Chinese market, 8.6% to the Indian market and 8.7% to the Japanese market."

Tofazzel also said Bangladesh is lagging behind close competitors like Vietnam and India in the Global Competitive Index, thus necessitating a focus on enhancing competitiveness.

At the seminar, Commerce Secretary Tapan Kanti Ghosh said discussions are going on with different stakeholders to come up with an effective mechanism for obtaining GSP+ in the EU after 2023 along with favourable Rules of Origin, he said. 

On other challenges, he mentioned the loss of waiver under the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement, phasing out of export subsidies and rationalisation of import duties.

Remedies for domestic challenges

At Thursday's seminar, domestic challenges were also highlighted, with remedies suggested. 

To enhance competitiveness, addressing the skill gap and infrastructure development, alongside mobilising domestic resources, are crucial, Commerce Secretary Tapan Kanti Ghosh said.

Speaking at the opening session, Bangladesh Bank Governor Abdur Rouf Talukder said there will be no foreign exchange crisis from January 2023, as the country's exports and remittances have become surplus compared to imports.

Md Jasim Uddin, president of the Federation of Bangladesh Chambers of Commerce and Industries, said bonded warehouses are now being mulled as tools to increase the import of SME (small- and medium-sized enterprises) products. Such warehouses should be provided through a central mechanism and not through any organisation, he said.

He also said the government is giving special benefits to some companies, but in order to increase exports, such linkages should be given sector-wise instead. 

Dr Nazneen Ahmed, country economist at the UNDP, said Bangladesh is caught between exporting a limited number of products and fixed markets.

A review of exports for the last five years (2017-21) shows that leather goods, furniture and footwear are growing markets in the US and so these should be considered. 

The economist said in terms of RMG, attention should be paid to man-made fibre products, due to its rising demand.

Planning Minister MA Mannan, the chief guest, was present at the session, which was moderated by Prime Minister's Principal Secretary Dr Ahmad Kaikaus.

Tariff rationalisation needed

According to Fatima Yasmin, Senior Secretary of the Finance Division, the National Board of Revenue has drafted a new law on income tax and is currently conducting stakeholder consultation plans to enact by the next fiscal year in order to augment revenue collection.

She said the NBR had expanded the coverage of the Electronic Fiscal Devices (EFD) to increase VAT collection, and accelerated bond automation to stop revenue leakage. 

The secretary said there are proposals to rationalise customs and other duties at the import stage so that local industries are not adversely affected. 

She noted that Bangladesh will not be able to provide cash subsidies after graduation, but emphasised that such payments did not reduce export earnings.

Abu Hena Md Rahmatul Muneem, Chairman of the NBR, said on the occasion that more investment from public and private sectors is required.

The NBR is working to increase revenue generation, but taxpayers' motivation is also important. 

Professor Dr Mustafizur Rahman, Distinguished Fellow of the Centre for Policy Dialogue (CPD), said domestic resource mobilisation has become important to meet development needs and overcome challenges arising after graduation from LDC status.

He said tax exemptions had failed to increase further revenue earnings through further industrialisation, so that needs to be looked into.

State Minister for Planning Dr Shamsul Alam said there is a lack of coordination among the different bodies concerned. 

Speaking on the occasion, Shahriar Alam, State Minister for Foreign Affairs, said Bangladesh can become a bridge between the East and West following its LDC graduation.

The guest of honour at the closing session, UN Resident Coordinator in Bangladesh Gwyn Lewis, said a well thought-out, consultative, time-bound, action-oriented, and implementable smooth transition strategy will be key to ensuring a sustainable LDC graduation. 

Bangladesh is expected to graduate from LDC to middle income country status in 2026 following a five-year preparatory period mandated by the UN.