Bangladesh has received the final recommendation for inclusion in the list of developing countries after leaving the list of Least Developed Countries (LDCs). This was recommended by the United Nations Committee for Development Policy (CDP) after the triennial assessment on Saturday (April 27) early morning Bangladesh time.
In 2026, Bangladesh will completely withdraw from LDC. The export sector will face the biggest problem after exiting LDCs. Exports may decrease by 5.5 to 14 percent if duties are imposed or increased on products in this sector. This was stated in a report of the Asian Development Bank (ADB).
According to ADB’s report titled ‘Expanding and Diversifying Exports in Bangladesh: Challenges and the Way Forward’ published on Tuesday (April 30), the agency believes that there is no alternative to increasing the country’s export capacity.
According to the report, the duty rate on Bangladesh’s export products may increase after the LDC transition. Exports to Canada may be subject to tariffs of up to 16 percent, India to 8.6 percent, Japan to 8.7 percent and China to 7 percent. Apart from this, many products which are not on India’s priority list for imports may again enter the negative list.
According to ADB, as of the time of writing this report, Bangladeshi products will not receive GSP Plus benefits in the European Union. In light of this facility, non-LDC countries get duty-free access to the European Union. If the GSP Plus facility is not available, the European Union may impose a duty of up to 12 percent on garments made in Bangladesh.
According to the report, even if Bangladesh does not get GSP plus benefits, it will get market benefits in the light of ‘Developing Countries Trading Scheme Enhanced Preferences’ in the European Union market. Most of the products will get duty free benefits. But in that case the rules of origin of goods will be enforced more strictly. Although the rules of origin are not so strict in the case of LDC countries, it will be done strictly in this case.
ADB cited disparity in incentives as the reason for the lack of diversification in the country’s export sector. They said that the incentives that the Bangladesh government has given to the export sector from time to time have been formulated to target the ready-made garment sector in many cases. Many of the benefits offered, including duty-free import of raw materials, bonded warehouse facilities, income tax exemptions or support from the Export Development Fund, were applicable to all sectors. But it has been seen that most of these benefits have mainly been received by the ready-made garment sector. The industry used to get bonded warehouse facilities in the 1990s, but then they were given cash facilities of up to 25 percent.
While the facilities for the ready-made garment sector were rationalized later, bonded warehouse-benefits were not received by other sectors. Exporters other than the apparel sector have paid higher rates of corporate tax till 2023. Even their access to finance was limited. ADB believes that the influence of the garment sector on the business world in the country is so great that they get the bulk of the policy benefits.
