Apparel diplomacy for the post-LDC era

The recommen-dation of the United Nations' Committee for Development Policy (CDP) for Bangladesh's graduation out of the Least Developed Country (LDC) status is both a matter of pleasure and of pride for every patriotic person of the nation. After the committee's recommendation for Bangladesh to become a developing nation, the proposal now will be sent to the United Nations Economic and Social Council (ECOSOC) for its endorsement in June this year. The UN General Assembly is scheduled to finally approve the proposal in September.

In the recommendation, three eligibility criteria for graduation such as per capita income, human assets, and economic and environmental vulnerability were considered, all of which Bangladesh met in the second triennial review of the LDC category by the CDP. We all know that our Readymade Garments (RMG) industry, which accounts for more than 83 percent of the country's total export earnings, has largely contributed to this graduation. So this is especially a happy occasion for all the apparel entrepreneurs, workers and professionals in the country.

However, the growth of our RMG industry has been accelerated by the fact that Bangladesh as an LDC enjoys duty-free market access to the European Union (EU)—which accounts for more than 60 percent of our total apparel exports—under the EU's Generalised Scheme of Preferences (GSP).

After graduating to a developing country status from an LDC, Bangladesh will no longer be eligible for the GSP facilities. But Bangladesh will have the opportunity to continue to enjoy duty-free access to EU countries if it can attain the GSP Plus. In order to be awarded the GSP Plus status, a country must fulfil two criteria set by the EU—namely, products that qualify for GSP Plus must be in the top seven largest exports from the country (apparel is the largest in Bangladesh), and the three-year average of exports of that product cannot exceed 6.5 percent of the total import of that product into the EU. Here, Bangladesh faces an issue, as its apparel export to the EU already accounts for about 9 percent of the latter's total apparel import from the world.

Therefore, Bangladesh needs "apparel diplomacy" to negotiate with the EU and convince them that this threshold should be extended to 12-13 percent, given that the apparel sector is the lifeline of Bangladesh's economy and also considering the EU market's importance to the industry as a whole.

In view of the impact of the Covid-19 pandemic on our economy, the UN's CDP has recommended that Bangladesh be provided with a five-year time till 2026, instead of the usual three years, to prepare for the transition. In these five years, Bangladesh will remain eligible to get duty-free access to the EU under the GSP. During this transition period, we need to continue our apparel diplomacy to confirm the GSP Plus for the post-LDC period.

It would not be an exaggeration to say that Bangladesh currently possesses some of its finest and talented apparel diplomats led by the Senior Foreign Secretary who himself has proved his mettle in the field. What we need is close collaboration between the industry and the government to secure Bangladesh's interests in the changing apparel landscape. It's worth mentioning here that the export threshold was extended from 4 percent to 6.5 percent when Pakistan was awarded with the GSP Plus. So, I believe with the industry insights, expertise of our civil servants, and the vision of the government, Bangladesh is well-placed to pursue the required apparel diplomacy for securing the extension of the threshold to around 12-13 percent.

Forming a joint taskforce with the Ministry of Foreign Affairs, Ministry of Commerce, and Bangladesh Garment Manufacturers and Exporters Association (BGMEA) would be really effective to perform the required apparel diplomacy for attaining GSP Plus.

Nevertheless, our RMG industry can no longer just depend on the two traditionally preferred business markets: the USA and the EU. While we need apparel diplomacy to keep the benefits of the traditional markets alive, we should also explore and exploit non-traditional markets like Japan, South Korea, Russia, Latin American countries, and even China and India. 

The recommendation for Bangladesh's graduation came at a time when the country is ready to celebrate the 50th anniversary of its independence and the 100th birth anniversary of the Father of the Nation, Bangabandhu Sheikh Mujibur Rahman. So, it's a moment to celebrate and also an occasion for making our footings stronger. Further strides in the economic journey of any country come with certain conditions. We can no longer expect to rely on favourable or subsidised trading terms—we have to learn to evolve, adapt and survive among the fittest. We need to develop an industry that is fit-for-purpose for the years ahead. It's time to pursue active apparel diplomacy from both our government and representative trade bodies to ensure the continuation of a fruitful relationship with our largest apparel trading partners.

Faruque Hassan is the Managing Director of Giant Group. He is also former Senior Vice President of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).