Graduation from LDC Status: SWOT

Analysis of Bangladesh's International

Trade
Course F-305
International Trade and Finance
DEPARTMENT OF FINANCE
FACULTY OF BUSINESS STUDIES
UNIVERSITY OF DHAKA
Graduation from LDC Status: SWOT Analysis of
Bangladesh's International Trade

Prepared for
Mohd. Anisul Islam
Assistant Professor
Department of Finance
University of Dhaka

Prepared by
Group 11

BBA 26th Batch

Section: C
Department of Finance
Faculty of Business Studies
Universities of Dhaka

Submission Date
Thursday, December 18, 2022
 Group Details
Group 11 (Section: C)
BBA 26th Batch
Department of Finance
Faculty of Business Studies
Universities of Dhaka

ID Name Remarks

26-035 Rifa Tasfia  

26-059 Shimu Saha  
26-072 Tumpa Chowdhury  
26-084 Annanto Ram Rabidas  
26-087 Ajnin Jamal Chowdhury Jinia  
26-119 Rokiya Zaman  
26-134 Shirin Akter  
26-193 Zawadul Ahamed  
 Letter of Transmittal
December 31, 2022

Mohd. Anisul Islam

Assistant Professor

Department of Finance

University of Dhaka

Honorable Teacher:

Subject: Submission of the report on SWOT Analysis of Bangladesh's International Trade

In response to the task assigned to us, the undersigned student of the BBA 26th (C) batch has
prepared the term paper of course F-305. We have used our knowledge and learning from the
classes we attended online & offline of the respective course. We tried our level best for
preparing this report. This report helped us gain more insight and knowledge regarding
international trade & financial aspect of Bangladesh with respect to world trade & how it
contributes to Bangladesh’s graduation from LDC.
We would be very grateful if you give your advice on our effort.

Sincerely yours,
Rifa Tasfia
ID-26-035
Department of Finance
Faculty of Business Studies
University of Dhaka
Email: rifa-2019312679@fin.du.ac.bd
Contact: +8801648959008
On behalf of the members of the Group 11

Acknowledgement
It is a great honour for us, group 11, to submit this term paper to our respected course teacher,
Mohd. Anisul Islam, Assistant Professor, Department of Finance, Faculty of Business
Studies, University of Dhaka. We express our gratitude for assigning us to prepare the term
paper. We couldn’t have completed the term paper without guidance from our course teacher
because we faced several practical challenges. But appropriate guidance and direction by our
course teacher helped us avoid them greatly. All of the efforts ended at the desired point of the
cooperation and hard work, sincerity and seriousness of our group members. So, all of them as
well as our group members deserve a pure compliment. This is a great opportunity for us to make
a report on a topic that we have just learned which will help us to reinforce our learning. We
hope that the experience from making the term paper will help us to pursue our goal in the near
future.
Table of Contents
 Executive summary
Bangladesh is projected to graduate from the Least Developed Country (LDC) category in
November 2026. This report deals with Bangladesh's experience as well as road ahead after the
graduation from LDC classification.

With time, terms of reaching LDC status would establish concrete economic strength, skilled
human resources, and enhanced resilience to economic and environmental contests. Furthermore,
these components generate a reinvigorated image of the country. The capability to graduate from
the LDC list is suggestive of the economic strength and resilience to several kind of financial and
environmental shocks along with the extent and profundity of its social and economic
progression. This graduation from LDC to developing countries draws both advantages and
challenges in international trade. As conducted in this report the SWOT analysis gives a clear
picture of such aspects. The strengths include new market where it possible for corporations with
foreign ownership to establish themselves in developing nations & also makes it possible for
native companies to sell their products on international markets. It also includes economic
strength, capable human resources, higher levels of investment capital. Weaknesses include Low
per capita real income, high population growth & unemployment rate, dependency on a primary
sector & on exports of primary commodities. This also brings a load of opportunities starting
with the reinvigorated image of Bangladesh which will attract more foreign investment as well as
confidence from international doners & Bangladesh would also hold a more prominent position
during negotiations and in global partnerships owing to potentially better deals and policy
initiatives. Bangladesh continues to enjoy preferential market benefits as well. The ensuing
threats & challenges include restricted access to the market, higher interest rates and shorter
terms in financing, changes in tax structure and investment & lack of development funds.

To ensure proper development by facing these challenges the Government may execute bilateral
trade agreements, provide subsidies to the relevant parties, ensure more duty-free market entry,
allow some form of tax exemption for specific industries & continue relationship with the
developed countries like USA, Japan, China & significant others.
 Chapter 1: Introduction

1.1 Origin of the Report

The report is intended for academic purposes precisely. We were authorized by our honourable
course teacher, Mohd. Anisul Islam, to comply with our academic requirement of the F-305:
International Trade and Finance course. According to the instruction, we were authorized to
analyse the implications of graduation from the least developed countries (LDC) from the
perspective of Bangladesh. We have analysed the strengths, weaknesses, opportunities and
threats of graduating from LDC thoroughly in this report.

1.2 Objectives of the Report

 To recognize the implications of various theoretical knowledge of international
economics in practical situations.
 To understand the results of graduating from LDC from the Bangladesh’s aspect.
 To understand the underlying factors affecting the trades and other aspects of Bangladesh
as it graduates from LDC.

1.3 Methodology
 We have used several reliable sources on the web for data collection

 Then we categorized the report into different chapters casing all the requirements

1.4 Limitations of the Report

 Lack of expertise in interpreting intricate problems of the real world.
 The short period of time to implement the report was another constraint to preparing it.
 Chapter 2: Overview
2.1Developing country & LDC and their differences
Developing country: Developing countries are countries that have not attained a considerable
level of industrialization compared to their population and have a standard of life ranging from
moderate to low. There is a correlation between low income and rapid population growth.
According to United Nations, there are 152 ‘developing’ countries in the world as of 2020. These
countries are located in Africa, Asia, Caribbean and the Latin America. Some examples of
developing countries are Bangladesh, Fiji, Brazil, India, Burundi, Indonesia, Laos, Mali,
Botswana, Ethiopia, Cambodia, Maldives, Bhutan, and Liberia.

Characteristics of developing countries: Low per capita income, high population growth, mass
poverty, unemployment, illiteracy, lower living standards, socio-political variability, low access
to finance, underutilization of resources, excess dependency on agriculture, dualistic economy,
technical backwardness, lack of infrastructure, lower productivity, low saving, high
Consumption, lack of good governance, etc.

Least developed country: Less developed countries are low-income states that face many
structural and infrastructural obstacles in their pursuit of sustainable development. They have
poor human resource development levels and are susceptible to socioeconomic and
environmental shocks. According to United Nations, there are 46 least developed countries
falling into this category as of 2020.Some examples of least developed countries are Nepal,
Nigeria, Chad, Haiti, Kiribati, Sudan, Yemen, Uganda, Zambia, Somalia, Togo, Senegal, and
Tuvalu.

Characteristics of less developed countries: Low per capita income and widespread poverty,
shortage of capital, low levels of production, population explosion and high dependency, large
unemployment, predominance of agriculture, unproductive investment, and others are
characteristics of the least developed countries.
2.2Motivations behind becoming developing country

There are a few selective main factors that motivate Bangladesh becoming developing country;

1. It helps people escape poverty

Development is crucial for our nation in the first place because it helps our citizens escape
poverty.

Poverty rate in Bangladesh is 84.20%. Living on less than $5.50 USD per day is considered to be
extreme poverty, which affects 689 million people worldwide. Countries' economy expands and
living standards rise as a result of this development. More individuals are able to support
themselves, their families, and live dignified lives as a result, which lowers the percentage of
poverty.

Living in poverty is difficult. People who live in poverty frequently don't have access to
excellent education, healthcare, or housing, and they frequently face discrimination. For a nation
to end the cycle of poverty for its citizens and bring a sizable portion of the populace out of
squalor, development is essential.

2. Public Health Is Improved by Development

The fact that development enhances public health is a second factor in the importance of
development for a nation like ours.

A nation's healthcare system improves as it grows. This is due to increased government funding
for healthcare. The population's quality of life as well as the nation's ongoing economic progress
depend on expanding access to high-quality healthcare.

Poverty and health are intimately related. People who are unwell are frequently let go from the
workforce. People who have to take care of ailing family members frequently cannot work.
Poverty reduction is definitely imp
acted by developing a nation's healthcare system.

Development is crucial for our country because it has been demonstrated that it will lead to better
public health.

3. Development Leads to Better Economic Opportunities

The fact that development increases people's economic options serve as a third factor in the
importance of development for our country.

The more a country develops the more jobs are created. This makes it possible for more people
to find high-quality, reliable employment and support themselves and their families. It has been
demonstrated that greater economic opportunities lessen the likelihood of conflict as well as
crime and violence. Better jobs are also associated with higher life quality for individuals.

Everyone aspires to reach their full potential. Development may be extremely important as
evidenced by the rise in economic opportunities it gives to a nation.

4. Development Increases Access to Quality Education

The fact that development enhances the educational system is another factor in the importance of
development for nations.

Education systems are superior in more developed nations. This is so because development
boosts government revenue while education costs money. This implies that they have more
money to devote to schooling. The link between increased development and better education is a
fundamental reason why it’s crucial for practically all countries. Literacy rate in Bangladesh is
now 74.66 percent, according to the preliminary report of "Population and Housing Census
2022".

A nation's economic standing is also enhanced by a more educated populace since more highly
trained professions may be filled and more inventive enterprises can be started. This is why
development is so important.
5. Development Reduces Child Mortality

One of the most important measures of a country's prosperity is child mortality. Development is
essential since it lowers the death rate among children.

In addition to being morally correct, lowering child mortality boosts a nation economic. Less
children are born to mothers as infant mortality declines. They can now take part in the
workforce more actively as a result. Families with fewer children have more money to spend and
rely less on healthcare services, which lowers the overall population dependent on the healthcare
system. The current infant mortality rate for Bangladesh in 2022 is 22.614 deaths per 1000 live
births.

Bangladesh must continue to develop if it is to lower the rate of child mortality. This is a key
factor in why it is crucial for our country.

7. Development Reduces Inequality

Developed countries have lower inequality. Another justification for the significance of
development for a nation is this.

The developing world is home to all of the world's most unequal nations. All of the nations that
are the least unequal are also among the most developed. Inequality declines when nations
experience increased prosperity. This is a significant advantage of development and
demonstrates how important it is for all nations.

For our country, inequality is a serious problem. It fosters hostility and instability, is a major
factor in crime and armed conflict, and slows our nation's economic expansion. High inequality
is a moral shortcoming for our nation and a sign that it cannot provide for the needs of all of its
people.

8. It Creates a Better Quality of Life

A final reason why development is important for our country is because it creates a better quality
of life for people.
People are more likely to live longer and happier lives in industrialized nations. They also
generally have better occupations, are more economically productive, live in nicer homes, and
have access to better healthcare and education.

All countries strive for development – many do it to offer a better quality of life for their people.
This is why development is vital for our country.

2.3Background
Despite being a nation that was in deep poverty in 1971–1972, Bangladesh was able to join the
LDC group by 1975 and advance because it made good use of the early foreign aid that was
available, increased agricultural productivity, allowed the use of surplus labor for industries and
services, gradually transitioned towards a market economy in the areas of infrastructure
development and service promotion, encouraged the emergence of entrepreneurial spirit, and
more.

Bangladesh made progress in 2015, as evidenced by the achievement of MDG goals. This was
made possible in part by two factors in particular: With the independent Bangladeshi
Constitution, which Bangabandhu finalized on November 4 and which the Jatiya Sangshad
adopted in December 1972—as the basis for its economic policies; and demographic transition at
lower income levels—a feat accomplished by Bangladesh that is regarded as exceptional by
many economists.

When asked what his top priority was for carrying out the First Five-Year Plan, Bangabandhu
responded to reporters, "I have no 'number one' priority, but I have a joint first priority—food
self-sufficiency and population control."

Since 1975, not long after gaining independence, Bangladesh has been a member of the LDC
group. For a nation emerging from de facto colonial domination and with essentially little in the
national coffers, it was not surprising. However, Bangladesh's economy has grown steadily over
the past 50 years, with the advantages trickling down to all aspects of life. Along with the
expansion, there has been a notable decrease in poverty, an increase in employment, improved
basic infrastructure, and more access to health and education. The development of the
agricultural and service industries has given the economy stability and resiliency. Bangladesh is
now food self-sufficient after years of being in a chronic food deficit. The nation's industrial
sector has also experienced fast growth, which has allowed it to quickly treble its yearly export
revenues. It is doing well socially as well. In comparison to many poor nations, Bangladesh's
social indicators—including gender equity, women's empowerment, mortality rate, life
expectancy, immunization, and access to water and sanitation—are noticeably better.

Prior to the timeframe set by the Millennium Development Goals, it has already achieved gender
parity in primary and secondary schools and universal primary school enrollment. Just before the
COVID-19 epidemic ravaged the nation in 2019, poverty has decreased from 48.5% in 2000 to
20.5%. The average lifespan has risen to 72.6 years. Through smart macroeconomic
management, adequate policy support, and large expenditures in infrastructure and human
development, its governments have throughout time helped to foster this shift.

Bangladesh had been making enough progress on all three parameters before the deadly
Coronavirus spread across the country to qualify for graduation. The pandemic affected people's
lives and means of subsistence, yet the Bangladeshi economy continued to grow. The most
recent data show that its performance is far above the minimal standards needed. For example,
Bangladesh’s per capita GNI is now US$1,827 (S$2,499), far ahead of the requirement of $1,222
(S$1,671); the HAI score is 75.4, against the graduation threshold of 66.0; and an EVI score is
only 27.0, much below the EVI graduation threshold of 32.08. For the second time in a row, the
nation has satisfied all three requirements to leave the LDC category. For the first time in 2018,
it achieved graduation requirements. Bangladesh should be removed from the list of LDCs,
according to the CDP. Bangladesh and a few other LDCs were recommended for graduation in
June of this year, and the recommendation was approved by the ECOSOC10; it will now be
referred to the UNGA for final approval during its upcoming session in September 2021.
Bangladesh and the other three LDCs on the list have been granted five years to make the shift
because to the terrible effects of the COVID-19 pandemic. So, the graduation of Bangladesh will
now take place in 2026 instead of 2024.
 Chapter 4: SWOT Analysis of Bangladesh's International
Trade

4.1 Strength:

New Market: Transforming into a developing nation Bangladesh will obtain advantages like
seizing new market. This graduation not only makes it possible for corporations with foreign
ownership to establish themselves in developing nations, but it also makes it possible for native
companies to sell their products on international markets. This increases the size of their
consumer base, which in turn results in the creation of new goods and services as well as the
viability of investing in innovation. This is especially true for the smaller enterprises that are
located in emerging nations.

Economic Strength: The gross domestic product (GDP) per person in developing countries is
typically quite low. Agriculture is typically the most important sector of their economy for them.
They have not yet arrived at the point of economic maturity. However, it is a significant step up
from the least developed countries. People in Bangladesh will have the strength and confidence
to believe that their economy is stronger than it was in the past thanks to the foreign investments
that will flow into the nation since Bangladesh is a developing country. This will lead to an
increase in investments made within the nation. Additionally, people will be encouraged to take
initiatives for their new firms in the rising economy as a result of the vastly increased number of
opportunities. The economic power of the nation will increase as a direct result of this
development.

More capable human resources: There will be a higher employment rate because investments
made within the country will make the economic power of the country stronger, which will lead
to a stronger job market. This increase in employment will make it easier for Bangladesh to
increase its investment in the education of the nation. Because of this graduation, there will be a
more competent pool of human resource available. Moreover, the people of the country will be
able to study the techniques used by the foreign firms that will be drawn to the country as a result
of the LDC's graduation. These corporations will be attracted to the country because of the LDC.

Higher Levels of Investment Capital: Bangladesh's graduation from the LDC will allow the
country to attract fresh investment since it will demonstrate that the government offers
opportunities for investors to make a profit from their investments. When new capital enters a
country that is still in the process of economic development, it drives an upward productivity
cycle that stimulates the country's overall economy. An influx of foreign capital can also
stimulate the banking sector, which can lead to an increase in the amount of money loaned out to
investors and consumers.

4.2 Weaknesses:

Low per Capita Real Income: A lower standard of life and an overall lower income are both
indicators of a low per capita income in a country or any specific geographical region. Despite
having graduated from the LDC, Bangladesh still has a lower income per capita than most other
countries. With such a smaller income, it is not possible to immediately make bigger investments
or saves due to the fact that the income is lower. Therefore, the nation will not be able to take
advantage of the chances that will arise as a result of the country's transition into a developing
state.
High Population Growth Rate: Tough Opportunities will present themselves to Bangladesh as
a result of its status as a developing country. It will not have the resources to deal with that
situation. According to the graph that follows, the population growth rate is approximately
1.04%. This is because the birth rate is high, while the death rate is low. The end outcome of this
is that Bangladesh has a higher population than the country's resources are able to support,
leading to overpopulation.
High Rates of Unemployment: A rising nation has to have a talented employee group in order
to seize the possibilities and combat the risks they face. However, Bangladesh still has a greater
unemployment rate, and this may continue to leave a poor impression on international investors.
In addition, a greater unemployment rate results in a lower savings rate, and because of a lower
saving rate, investments will not be made in the amount that is required. Because of this, it is
widely acknowledged that this is a significant vulnerability of the country.
Dependence on Primary Sector: Nearly half of Bangladesh's workforce was engaged in
agriculture at the turn of the 21st century, indicating that agriculture continues to play a
significant role in the country's economy. Rice is the most important agricultural product,
although other important agricultural products include jute and tea, both of which are vital
sources of foreign exchange. Although a nation's primary sector is vital to its existence, it does
not contribute significantly more to the national GDP. Even though Bangladesh is entering new
markets, the country will not be able to make a significant profit from these opportunities.
Dependence on Exports of Primary Commodities: Bangladesh has an unhealthy reliance on
the goods of its basic industries. Garments account for more than 80 percent of the country's total
revenue from exports. However, if for any reason this industry were to fail, it would create a
significant problem for the nation as a whole. A new market necessitates the introduction of
novel, technologically advanced items. However, Bangladesh's export is dependent on products
that are simple to replicate and can be readily replaced by other companies.

4.3 Opportunities:
The graduation from LDC to DC will help Bangladesh depict a better image globally from 2026.
After graduating from LDC, the sovereign credit rating of Bangladesh will be higher. A credit
rating is an evaluation of the credit risk of a prospective debtor, predicting their ability to pay
back debt and an implicit forecast of the likelihood of the debtor defaulting. Good credit rating
indicates stable economic environment, political stability, market stability, confidence about
payback etc. When our credit rating will go up it will be attracted more foreign investor to
invest our country. International donors like World Bank, Asian Development Bank gets higher
confident while they lend money to Bangladesh. There is also an adverse criticism of lending
money for development whatever. Bangladesh’s credit rating will also improve which will help
secure commercial loans at flexible terms from the international market. Graduating LDC status
would tangibly convey economic strength, more capable human resources, and increased
resilience to economic and environmental shocks. Financing both debt and equity would be more
accessible and compliant as the country would be perceived by debtors and investors as more
capable of returning loans and generating returns. The image and branding of the country will
improve as graduation indicates the strength and capacity of Bangladesh economy. This will
attract foreign investment.

Foreign Direct Investment is another term which we can use in opportunity purpose of
Bangladesh graduation from LDC. A Foreign Direct Investment is an investment in the form of a
controlling ownership in a business in one country by an entity based in another country. It is
thus distinguished from a foreign portfolio investment by a notion of direct control. When
Bangladesh will be graduated from LDC it will give a signal to outer world of better
environment of investment. For example, country like Switzerland has political stability and so
they can attract billions of dollar investment from other foreign countries. On the other hand,
country like Myanmar which is LDC country and there exists a political unrest from military
power taking issue. A better outlook creates more attractive opportunities in terms of Foreign
Direct Investment (FDI) for external stakeholders since the economy would be perceived as
more capable and amicable for a profitable business. FDI is an important driver of development
and innovation, and graduating LDC status would theoretically attract more of it. Considering
Bangladesh has seen varying sums of FDI in the last 10 years, a stable increase is more likely to
transpire upon graduation from LDC status. In 2021, FDI inflow increased by 13% with a
corresponding tripling of international project financing deals, somewhat proving increased
confidence due to Bangladesh’s rapid and effective control of the pandemic and resilience in
times of crisis. Increasing FDI has been linked with overall economic benefits for developing
countries. Studies show that higher FDI leads to technology spillovers in the sense that cleaner
technologies and know-how are transferred and human capital formation in the form of more
effective and efficient workflows. Moreover, linkage with foreign investors directly enhances
trade integrations internationally and allows for a more competitive business environment in the
country. Apart from this, Bangladesh would also hold a more prominent position during
negotiations and in global partnerships owing to potentially better deals and policy initiatives.
Bangladesh continues to enjoy preferential market benefits known as the Generalized System of
Preferences (GSP), which includes Duty-Free and Quota-Free (DFQF) access for exports to
international development partners of the World Trade Organization. 

4.4 Threats
Bangladesh could lose some 14% or $5.73 billion worth of export earnings a year in 2026
following graduation to LDC status. On the graduation time line being 2026 and stated that the
LDC advantages that Bangladesh enjoys currently will be reaped off gradually at various times.
Bangladesh should prepare for the new challenges in the global competitive market for the
export-oriented products of Bangladesh.
However, challenges may arise since several international support measures (ISMs) which will
be withdrawn once Bangladesh becomes a non-LDC. Among these include withdrawal of duty-
free quota free market access for Bangladeshi products, and other special and differential
treatments.  The major challenges for graduating LDCs come in the form of losing various
international support measures (ISMs).
For Bangladesh, trade preference is considered to be the most useful ISM. Bangladesh has so far
quite successfully utilized some of the ISMs compared to the other LDCs. The Generalized
System of Preferences (GSP) by several countries provided duty-free quota-free (DFQF) market
access for Bangladeshi exports. Under the “Everything but Arms” (EBA) initiative, the EU,
which is the largest market for Bangladesh’s apparel export, grants DFQF. Therefore, the loss of
DFQF market access will have negative effects on Bangladesh’s exports. Although this is a
noteworthy achievement for Bangladesh, graduating LDC status brings more tangible challenges
than benefits. As part of the LDC bloc, the country currently enjoys support measures that can
broadly be categorized into three areas – international trade, development assistance, and support
in international forums. Upon graduating LDC status, the country would lose access to these
comforts leading to potential issues in trade, financing, and development support.

Among the LDC specific funds, Green Climate Fund (GCF) is specifically important for
Bangladesh as the country is vulnerable to the impact of climate change. Despite being a
negligible emitter of greenhouse gases, Bangladesh bears a heavy brunt from the impacts of
climate change, and the unavailability of GCF could hamper its adaptation measures. Moody’s
currently rates Bangladesh as Ba3, considered a ‘junk’ status or ‘high-yielding’, which is
considerably below investment grade. This outlook is likely to shift upward based on the fact that
LDC graduates are seen as less risky. However, any upgrade in the credit rating would be reliant
on factors like real GDP growth, public debt level, effective governance and overall potential to
repay debts. Moreover, graduation also means that Bangladesh will not be eligible for support in
the form of concessional loans (low interest rates with longer repayment periods) and grants
from development funds. This directly increases the cost of borrowing since non-concessional
loans are more stringent, have less favorable conditions, and have shorter payment
periods. Bangladesh is already facing increased cost of borrowing from its biggest multilateral
lenders.

Now we focus in deeper in some sector related with trade and their upcoming opportunities and
threats related with this LDC graduation.

Pharmaceuticals: Under WTO rules, TRIPS agreement opportunity is provided to LDC

countries. The Agreement on Trade related aspects of Intellectual Property Rights is an
international legal agreement between all the member nations of the World Trade Organization.
For example, one company invented a formula of any drugs or vaccine, as we are a LDC listed
country so we can copy their formula and make similar drugs into our country without any
copyrights or patent right.

Bangladesh is going to loss these opportunities because of graduating from LDC list. So, there
can a shock from this medicine sector as Bangladesh was able to use these opportunities more
than 70%. Many counties sometimes could not take LDC advantages properly like Nepal failed
to take LDC advantage when exporting in India, Angola failed to take advantages from oil export
in China.

The pharmaceutical industry, capable of serving 97% of the local demand, would lose TRIPS
access in 2026 upon graduation although the initial agreement was supposed to last till 2033
under a “special transition period”. The pharmaceutical industry would be adversely affected as
TRIPS allows them to manufacture patented drugs without paying royalty fees. The nullification
would also carry considerable burdens for exporting industries reliant on the TRIPS agreement.
Bangladesh exports its pharmaceutical products to more than 100 countries, of which one-third
are LDCs. So, the loss of LDC-specific S&DT under the WTO’s TRIPS agreement may hinder
the development of the pharmaceutical industry in Bangladesh. Bangladesh would get patent
exemption on pharmaceutical products till 2033 as per the TRIPS agreement with the WTO
(World Trade Organization), as it is a least developed country. But Bangladesh is going to
graduate from LDC by 2026, Bangladesh is likely to lose the patent exemption facility 7 years
before the expiration date. This may stop the development of the pharmaceutical industry in
Bangladesh. As a result, manufacturing of many types of generic medicine is likely to cease. If
domestic manufacturers want to maintain production of these medicines, they may have to pay
royalties on patents. The overall price of medicine in Bangladesh may increase. Otherwise
companies will face patent violations and exports will be severely hampered.

Among the industrial sectors of Bangladesh, the pharmaceutical sector is advancing with the
times. According to the Bangladesh Association of Pharmaceutical Industries (BAPI), more than
1,200 pharmaceutical products have been registered for export in Bangladesh in the last two
years. According to the Bangladesh Export Promotion Bureau, in the 2018-19 fiscal year,
Bangladesh have exported medicines to a total of 147 countries, including Myanmar, Sri Lanka,
Philippines, Vietnam, Afghanistan, Kenya and Slovenia where 60.32% of the exports went. The
remaining 39.6 percent to developed countries such as the US, Canada, Germany, and Australia.
In FY 2018-19, Bangladesh exported a total of 130 million worth of medicines, which increased
to 136 million in FY 2019-20. From 2014-15 to 2019-20, Bangladesh’s pharmaceutical exports
have doubled at an average rate of about 12 percent per year. According to Research and
Markets Bangladesh’s exports will increase to 450 million dollars by 2025. Besides meeting the
demand for medicines in the country, Bangladesh is also earning a lot of foreign exchange
through exports. Although the pharmaceutical industry plays a small role in the country’s GDP,
it is hoped that if Bangladesh can sustain this growth, the contribution from this sector to GDP
will increase even further in the future. However, to maintain the growth of the country’s
pharmaceutical industry, Bangladesh can make a very fast progress in pharmaceutical industry
by 2026 and demand of this medicine exist all over the world. So, if Bangladesh can solve
these challenges related to pharmaceutical industry it will be next sector of Bangladesh to take a
long jump in development.

Leather industry: For Bangladesh, leather is a high priority industrial sector and footwear
exports, an extreme focus area. Bangladesh has, just few decades since Independence, made
significant gains from the leather trade, progressing from the status of an exporter of 90% plus
raw hides and skins to that of an exporter and predominantly leather product manufacturer. The
demand for leather products on the global market is constantly increasing. According to Grand
View Research, the global market size of leather in 2020 was $304.12 billion, which is expected
to grow at a CAGR of 5.9 percent from 2021 to 2028. According to Globe News wire, despite
the epidemic, the market size of global footwear was $364.2 billion in 2020, which is expected to
reach $440 billion by 2026. As a result, Bangladesh also has a golden opportunity to uplift its
position in the global market. Global exports of all leather goods, including shoes and leather
goods, amount to $240 billion. If Bangladesh can capture even 10 percent of this global leather
market, it will be possible to build a business worth $24 billion. It is notable that China, the
world's largest footwear manufacturer, is now withdrawing from the global leather goods market.
And Bangladesh is ready with huge potentials to attract foreign investments in the sector.
According to a report, China's annual leather footwear production had dropped by 5.29 per cent
in 2012 and 7.45 per cent in 2013. While asked about the reasons for China's focus shift,
Bangladesh Footwear and Footwear Accessories Association (BFFAA) said labor cost in China
has gone up. In consequence the Bangladeshi manufacturers are seeing brighter prospects for the
leather sector after the readymade garment industry because of a policy shift in China, the
world's largest economy. If Bangladesh graduated to developing countries, Bangladesh has to
diversify its trade basket for export. Here this leather industry can play a significant role for our
economy.
RMG: As now Bangladesh is a LDC listed country, it is enjoying Duty Free Quota Free (DFQF)
access in many developed countries means getting access without paying tariffs and other taxes.
Moreover, under Generalize System of Preferences (GSP) Bangladesh gets a huge market in EU
market (Canada). There is another scheme called EU’s GSP+ scheme, for entering in this scheme
Bangladesh have to fulfill some conditions like stop child labor, registered trade unions etc. So,
there is a big change that Bangladesh’s RMG sector can get shock for this graduation by losing
almost $2.5 billon export earnings.

RMG sectors earning is also criticized many times. As China’s RMG sector was number 1
position on their export basket and they intentionally shifted their investment in other
industrialized sectors. Here Bangladesh gets a large market of export. Now this RMG sector is a
labor-intensive industry, raw materials of cloth come from foreign and sells system is almost
foreign based. As Bangladesh has cheap labor now but after graduation RMG owners has to pay
high to their labor considering increases of per capita income and standard of living.

Bangladesh criticized in demographic dividend which is connected to RMG sector. Demographic

divided is the economic growth potential that can be result from shifts in a population’s age
structure mainly when the share of the working-age population (15 to 64) is larger than the non-
working-age share of the population (14 and younger, and 65 and older). In early 1970’s decade
there was a population boom, population increases very rapidly. Children born that time now
their age group belongs to 15-64 years range who are mainly productive this time. After 1970’s
birth control system introduced which reduce population exploration. Demographic divided
advantages do not long forever. When this population (15-64 ranges) will be out of productive
level our labor supply will be reduced. Bangladesh failed to turn this huge population into human
resources and not properly involve them in industrial sector.

Chapter 5: Challenges & Impact of graduating from LDC to

Developing Country
5.1 Challenges
In November 2026, Bangladesh is scheduled to leave the Least Developed Country (LDC)
category. The nation has been in the category for 46 years. Afterwards, in 2018, it completed all
three requirements [Gross National Income (GNI), Human Assets Index (HAI), and Economic
and Environmental Vulnerability Index (EVI)] as determined by the Committee for Development
Policy (CDP), an organization of the United Nations, and has been given the go-ahead to
graduate.

If a country were to graduate from the LDC category, it would send a clear message that the
economy was strong, that human resources had improved, and that the country was more
resilient to environmental and financial shocks. A refreshed brand awareness for the nation is
what these elements intangibly produce.

Although Bangladesh's graduation from the LDC classification is notable, it provides more
practical obstacles than rewards. The country now benefits from support measures since it is a
member of the LDC bloc in international commerce, development aid, and assistance in
international forums. These benefits would be lost after the nation graduated from LDC status,
which might negatively affect trade, funding, and development aid. These are the primary topics
on which we will concentrate for clarity-

1. Opportunities missed in trade: Following its transition to LDC classification,

Bangladesh could lose almost 14% of its annual export profits, or USD 5.73 billion. As a
typical result of this graduation, the loss of emerging prerogatives and preferences will
hurt Bangladesh's exports, especially of clothing, to the European and North American
markets. Due to the interruption of duty-free and quota-free international trade, it is
predicted that Bangladesh may incur a deficit of 8–10% of its gross export revenues, or
close to USD 2.5 billion annually. In addition, once Bangladesh leaves the LDC category,
the duty-free trading privileges it presently enjoys under the Generalized System of
Preferences (GSP) of the World Trade Organization (WTO) will be reduced. Due to
Bangladesh's graduation, the WTO agreement that provides for a unique and unequal
treatment for LDCs to encourage LDCs to improve their involvement in international
commerce will no longer apply to the country.
2. Restricted access to the market: The only LDC that can supply over 98 per cent of its
domestic consumption for pharmaceutical goods is Bangladesh, which has a demand for
pharmaceutical items worth USD 3 billion. With roughly 150 nations receiving their
pharmaceutical exports, it made USD 169 million in 2020–2021. The country's
pharmaceutical industry has advanced significantly due to the Trade-Related Intellectual
Property Rights (TRIPS) waiver for medicines. After graduation, the public health
industry will no longer be free from patent licensing requirements, which could impede
the expansion of this sector. Subsidies now given to the agriculture industry cannot be
maintained because of Bangladesh's obligation to meet the WTO's agricultural
requirements after graduation.
3. Higher interest rates and shorter terms in financing: Bangladesh will no longer be
eligible for concessional loans (loans with reduced interest rates and extended repayment
terms) and funds from development programs. As a result, borrowing becomes more
expensive because non-concessional loans have stricter requirements, fewer favourable
terms, and shorter payback terms. The cost of borrowing from Bangladesh's largest
multilateral lenders has already soared. Over the following three years, from 2022 to
2025, 33% of the World Bank's $6.05 billion loan will be based on market rates (non-
concessional conditions). During the preceding three-year tenure, this proportion of the
loan was only 13.7%. Repayment terms for JICA loans have been shortened to 30 years
from 40 years. As the nation advances, it is anticipated that additional international
financiers will soon follow suit. Even though Bangladesh reduced its dependency on
concessional loans to 48% in 2018, this element must still be closely monitored.
4. Changes in tax structure and investment: Bangladesh must impose WTO-compliant
import taxes for domestic income. This suggests decreased import tax collection from
commodities with previously higher import rates and more incredible prices connected
with comparable sectors because they would now compete with goods from foreign
marketplaces with lower tariffs (leading to more market entry). Despite the mathematical
assumption that domestic income tax revenue will stay the same, tax structures may
increase in an unfavourable scenario if the nation needs help paying its non-concessional
foreign debt obligations. With these adjustments, tax income would rise for the
government on the one hand, but citizens would have less money to spend and would
 choose to save more. If this is the case, investment in manufacturing and services would
fall, stifling economic expansion.
5. Lack of development funds: As Bangladesh departs the LDC union, it will forfeit funds
totaling 700 million USD over time. Graduating would prevent the nation from receiving
Official Development Assistance (ODA), made up of foreign grants, development
funding, and other pertinent technical and infrastructural assistance from international
partners. Since Bangladesh has been able to sustain GNI levels, it would suggest less
need for development money when it is considered a developing country. Due to the
limited resources available to international development organizations, monies would
inevitably be allocated to countries with a greater need for them. As a result, after
Bangladesh leaves the LDC group, it may be increasingly more challenging to get
financial and technical support. Bangladesh would lose access to the Green Climate Fund
(GCF), a program that helps adjust to and reduce climate change's effects. However, the
results would be catastrophic if the government suddenly scarce development in areas of
low development resources, such as healthcare and education for the low-income group.
Therefore, to maintain a consistent flow of funding to these regions, the government
would have to negotiate favorable conditions with donor organizations. Also, when
Bangladesh's gross national income per person (GNI/capita) went up in 2015, the
International Development Association (IDA) changed a favorable loan structure with a
0.75 per cent service charge, a 0.25 per cent commitment charge, and a 0.25 per cent
commitment fee into a flat 2.62% interest rate and rate for other orders, and the payment
period and grace period were shortened to match. This is a clear example of how quickly
loan structures can turn against Bangladesh as it moves up the ladder.

Bangladesh needs to focus on a knowledge-based economy if it wants to stay competitive and

keep its economic growth rate steady after 2026. It should also take advantage of demographic
dividends, use local resources, create a business-friendly environment, switch to making high-
value goods, support export-oriented industries, and improve regional and global connectivity. In
the next few days, the nation must make preparations to seize the chances presented by the
difficulties. Bangladesh might fall into the "middle-income trap" without specialized and well-
defined roadmaps for dealing with post-graduation issues and post-pandemic economic recovery.
5.2 Impact of moving from Least developed country to developed country

Bangladesh is ready to move from least developed country to developed country by November,
2026. The benefit it is going to get is worth less than the expenses it needs to bear. The main
focus here is to analyze the impact of the graduation on the sectors like textile, education, trade,
economy and overall lifestyle of the country citizen. Bangladesh has already proved an
improvement in the three indexes all at once for the first time ever.

The certification came from the Committee for Development Policy (CDP). The three indexes
are GNI (Gross National Income), HAI (Human Assets Index), EVI (Economic and
environmental Vulnerability Index). The threshold rates are $1,230, 66, 32.

The benefit from the graduation starts with more Foreign Direct Investment (FDI). The countries
will extend their investment in our country as the economic stability would increase. But there
are dark sides too. As the country moves from least developed to developed country it would
lose all the benefits that are attached to the prior state.

The educational sector would lose the benefit of getting free access to the foreign academic help.
The copyright problem would incur and the country would have to face the regulations that are
related to developed country policy.

The direct link with the LDC countries facilitated bloc among nations but after the graduation it
would not last. So, the country would face consequential lose as of trade. Another burning issue
is the country would lose the position of being large supplier and some subsequent policies
would come along with it to worsen the situation. Basically, the facilities that the country was
enjoying would lose the validity.

5.2.1 The positive impacts

Our country will get several facilities when it reaches the stage of being developed country. Our
country looks forward to increased economic benefit. Sovereign credit rating would increase as a
result of being graduated to DC. It shows a stable country economic situation where foreign
countries feel safe to come here and trade with us. The benefits are increased as the loan donator
feels that we have the eligibility to pay back the loan that has been given some other facilities are
also availed. The facilities include-

 Increase of foreign direct investments

 Infrastructural development
 Economic development
 Credit rating increases
 Domestic tax collection increases
 DC bloc trade facilities
 Direct link of trade increases trade relations

As a country the facilities of graduation is immense. The indexes have been proving an
accelerated growth that would further be enhanced through the graduation facilities. When the
trade relationship increases and some country gets together, they create blocs that are beneficial
for all the members and the other developed countries will create such opportunities for
Bangladesh as well.

5.2.2 The negative impacts

Where we can see progress there are also some negative impacts included. The facilities that the
country was enjoying beforehand would be lost. The country might increase trade and other
benefits but would lose some support like-

 The loan easy criteria would be lost

 The educational facilities would be lost
 The subsidies would be cancelled
 Duty-free quota free access reduces
 GSP export facility reduces
 The country would face regulations.
 Raw materials import duty would increase
 15–64-year-old human resource is not highly skilled
5.3 Evaluation of impacts
When a country remains in a least developed stage it gets some extraordinary facilities that gives
smooth transactions overall. If we look at Nepal, we can see that their friend country is India
where they export most of their products. But when it graduates from the state it receives no
special benefit.

However, Bangladesh exports mostly in European countries and avails up to 70% facilities from
being a LDC country. This benefit would be lost. But the brighter side is if our country can
actually perform well and make it a lucrative destination for foreign investment our economy
would surely change.

The planning for upcoming graduation would have positive impact on our economy, financials
and lifestyle upgrading. Our eligible age group that works for the benefit of our nation would be
more skilled and increase the productivity. The country would be more inclined to be
independent and would use the resources wisely.

Although we have negative impacts included, a positive mind map would create a better
Bangladesh when we update from Least developed country to a Developed country.

Recommendations
As noted above, after graduating from least developed country to developed country Bangladesh
will face some challenges. To ensure proper development by facing these challenges the
following activities may be taken by the government and other relevant parties.

 Government may execute bilateral trade agreement in the form of Free trade agreement
(FTA), Preferential trade agreement (PTA), Comprehensive economic partnership
agreement to tackle the challenges.

 For ensuring export, government may provide subsidies to the relevant parties under
different name who are not directly related to export as government can't provide
subsidies directly to exporters.

 Government may work to ensure more duty-free market entry.

  For raising export related industries government may allow some form of tax exemption
for some specific industries.

 To increase productivity and efficiency government may provide assistance to stated

industries by purchasing capital machinery and may provide training to employees.

 To ensure foreign investment in Bangladesh government should opt to create better

business environment domestically.

 To ensure continuous growth in the economy government may raise tax revenue and
people may be encouraged for higher Savings and investment.

 Government should continue relationship with the developed countries like USA, Japan
to ensure continuous monetary assistance.

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