The issues of good governance, continuation of the democratic process and political stability are the main challenges for Bangladesh to graduate from the least-developed country (LDC) bracket, Centre for Policy Dialogue (CPD) Chairman Rehman Sobhan said today.

Sobhan was speaking at a public dialogue on “Bangladesh’s graduation from the LDC group - pitfalls and promises” at a hotel in Dhaka.

Gowher Rizvi, foreign affairs adviser to the prime minister, diplomats, economists, researchers and analysts from home and abroad participated in the dialogue.

Bangladesh’s graduation from LDC to a developing country is different from its peer countries like Bhutan and the Maldives, said the chairman of the private think tank.

For instance, the Maldives is a country of single driver of the economy: tourism.

But, Bangladesh is different as there are several major key drivers of economy, including a thriving entrepreneurial class that has developed a competent garment sector and a strong small and medium enterprises base, Sobhan said.

Bangladesh has a strong and dynamic workforce, mostly from rural areas, which have been contributing to productivity.

“Such a huge labour force is not available in Bhutan.”

Migrant workers are another important factor in Bangladesh’s economic development, Sobhan said, adding that one will be hard-pressed to find someone in the rural areas who do not have any relative working abroad and sending remittance.

The farmers are also contributing to the economy, as 45 percent of the country’s population still live in the villages, Sobhan said.

The non-governmental organisations have also played an important role in the development process. “Bangladesh is not just a middle-income country, but the sky is the limit,” Sobhan says.

Bangladesh is on the way to graduate to a developing country from the LDC in 2024 and then it will get another grace period for preparation which means the country will finally be graduated to a developing country from 2027 onwards, said Debapriya Bhattacharya, distinguished fellow of the CPD.

Bangladesh’s graduation is expected to be a landmark success in contemporary development experience, Bhattacharya said, adding that the country is one of the LDCs to meet all three graduation criteria at the time of graduation. The three are the income criterion of gross national income (GNI) per capita, the human assets index and the economic vulnerability index.

Bangladesh has strong and improved GDP growth, declining foreign aid and increasing but low foreign direct investment (FDI).

Manufacturing sector is stronger in Bangladesh than other graduating countries both in terms of share of total value added and share of employment over both 2005-09 and 2010-14 periods, the fellow said.

Bangladesh will lose its preferential trade benefit, duty-free market access, loss of concessional loan from development partners after the graduation of the country to a developing country from an LDC, the fellow said.

The time when the country is graduating from the LDC to a developing country is not in favour of the country as Bangladesh has been facing the challenges of Rohingya crisis and unfavourbale global and regional condition. Bangladesh will also need to address the issues of income disparities and gender inequalities, he said.

Regarding the trade preference erosion, UN Resident Coordinator in Bangladesh Mia Seppo said after graduation, Bangladesh exports will face an additional 6.7 percent tariff which could result in an estimated export loss of around $2.7 billion which is 8 percent of total export of the country in 2015.

UNCTAD estimated that exports may fall by 5.5 percent to 7.5 percent after the graduation, Seppo said.

Bangladesh as an LDC is a major user of duty-free market access, she said adding that in 2016, the value of export from the country to preference granting countries was $24.7 billion, which accounted for 72 percent of the country’s total export. Regional trade agreements and bilateral initiatives cover about 90 percent and thus preferential market access is of special significance, she said.

“We will graduate to a developing country in 2021, but technically it will happen in 2024. We should not be unmindful about inequality. We have to do much about governance. Eradication of poverty is impressive in Bangladesh, but it still remained,” said Rizvi.

Mustafizur Rahman, another distinguished fellow of the CPD, suggested for technology upgradation, skills endowment, productivity enhancement and higher competitive strength, saying in all these areas Bangladesh will need to give high priority by appreciate policymaking and high quality implementation.

Bangladesh needs to look for more macroeconomic stability, look into agricultural sector, look for increase in productivity, upgrade the skills and trainings to the workers and SME development after the graduation, said Khondaker Golam Moazzem, research director of the CPD.

Zahid Hossain, the lead economist of World Bank, Bangladesh, suggested for engaging more female workers in the production cycle. Currently, of the total workforce, female participation is 36 percent. If the current 36 percent participation can be improved to 48 percent to 50 percent, the GDP will grow 0.7 percent to 0.8 percent more, he said.

Giving the share of the value addition to the people, investing in the workers for higher productivity, incentivising the entrepreneurs and creating appropriate business environment and sustainable financial sector, creating genuine partnership with the NGOs rather than making them a competitor, and sustainable balance of payment are some other major challenges for Bangladesh on the way to graduation to the developing country from an LDC.