Bangladesh export to face 6.7pc more post-LDC tariff: CPD

16 Mar 2017, 20:40

Online Desk

Dhaka: Centre for Policy Dialogue (CPD), a civil society think tank, on Thursday said Bangladesh's exports will face an additional 6.7 percent tariff on an average once it graduates from the LDC status permanently, resulting in an estimated export loss by US$ 2.7 billion in the preference-offering countries.

The CPD stressed the need for designing a well-craft graduation strategy to face the reality beyond 2027 when Bangladesh will face MFN tariff (lowest possible tariff among WTO members) in exporting its goods.

 "Currently, Bangladesh enjoys preferential market access, to varying degrees and extent, in markets of more than 40 countries. Unless Bangladesh manages to renegotiate through bilateral agreements or as part of regional trade arrangements, it’ll have to face MFN tariff rates in exporting to those markets beyond 2027," CPD Distinguished Fellow Prof Mustafizur Rahman said at a dialogue in the city.

The CPD arranged the dialogue titled 'Bangladesh and the LDC Graduation Challenges' at Lakeshore Hotel in the city.

Mustafizur presented the keynote paper on Pathways to Bangladesh Graduation from LDC Group: Prospects, Challenges and Sustainable Graduation Strategy.

Citing Unctad estimates, Bangladesh export may fall by 5.5-7.5 percent as a result of loss of preferential access, he said.

Noting that Bangladesh will permanently come out of the LDC group in 2024, he said, "If Bangladesh is able to sustain the graduation thresholds for the next two triennial reviews in 2021 and 2024 and moves out of the LDC group, it graduation will be irreversible."

Bangladesh's LDC graduation will be taking place in the backdrop of an earlier graduation in 2015 from low income to lower middle income country (LMIC) status, CPD Distinguished Fellow added.

He said Bangladesh will, however, continue to enjoy the benefits from ongoing preferential treatment as an LDC for an additional three years till 2027.

Mentioning that Bangladesh has the next 10 years to prepare for sustainable graduation beyond 2027, he said its needs to design a forward-looking smooth graduation strategy to face any possible setbacks in the graduation and the reality of the post-preferential market access regime after 2027.

Mustafizur said Bangladesh will need to continue the momentum to improve further from the graduation thresholds which will give the country a comfort zone from any possible setback.

The experience of a number of graduated LDCs shows that in spite of having crossed the thresholds once, vulnerabilities continue to persist and these then could lead to deferment of the final gradation, he mentioned.

As a graduated LDC, Bangladesh will need to adjust to the new realities as borrowing cost of oversees development assistance will significantly rise when it starts to receive increasingly more oversees development assistance (ODA) on shorter maturity terms and at higher lending rates, he said.

About the strategies for sustainable graduation, CPD Distinguished Fellow said technology upgradation, skills endowment and higher competitive strength in all the areas, Bangladesh will need to put high priority to policymaking and policy implementation.

"To improve productivity scenarios across all sectors, incentives, fiscal and monetary policy, targeted allocation and appropriate utilization of resources, and high quality of implementation will need to be geared up," he went on.

The CPD stressed the need for product and market diversification, including intra-readymade garments diversification, taking advantage of the increasing South-South Trade opportunities and non-LDC specific preferential arrangements, he said.

Addressing the dialogue, former caretaker government adviser Prof Wahiduddin Mahmud said Bangladesh export base is quite vulnerable and very narrow and limited to RMG. It is enclave economy that shows the disadvantages for Bangladesh in diversification of export, he said.

He said Bangladesh will have to have resilient industrialisation to face external shocks as well as to shift from a replication mood –-replicating in un-skills and low productivity in RMG industry and replicating low technology in small industries, he said.

"There’re two challenges here (sustainable graduation). One challenge is to negotiate externally for trade, because you won't have any LDC preferences. Other challenge is to look at (increase and diversify) our entire production base," the noted economist said.

Presided over by CPD Chairman Prof Rehman Sobhan, the dialogue was addressed, among others, by State Minister for Foreign Affairs Md Shahriar Alam, First Vice President of the Federation of Bangladesh Chambers of Commerce and Industry Md Shafiul Islam and Director of GEMCON Group Kazi Anis Ahmed.