THE World Bank measures per capita national income using the Atlas method. The total national income (GNI) of a country in local currency is converted into US dollars. In this case, the average exchange rate for three years is adjusted, accounting for inflation and fluctuations in the exchange rate. There is often a difference between the calculations of the Bangladesh Bureau of Statistics and the World Bank regarding per capita income, inflation, and GDP growth.
To determine the amount of loans to be provided to a country, the World Bank divides countries into four categories based on per capita income within total national income (GNI): low-income (at least $1,045), lower-middle-income ($1,046鈥�$4,125), upper-middle-income ($4,126鈥�$12,745), and high-income (above $12,746). As of the current estimate (May 2024), Bangladesh, with a per capita income of $2,784, is classified as a lower-middle-income country.
There are widespread questions about the transparency of the Bangladesh Bureau of Statistics data. A joint survey titled 鈥楿ser Satisfaction Survey-2024鈥� conducted by the BBS in collaboration with the Bangladesh Institute of Development Studies (BIDS) reveals that 鈥榓pproximately one-third, or 33.16 per cent, of total users do not consider BBS inflation-related statistics to be reliable. Additionally, 27.44 per cent of users believe that the reliability of this information is low.鈥� If the new government undertakes an initiative to refine BBS鈥檚 data systems, it could result in a decline in several key economic indicators for Bangladesh. As part of a transparent approach to LDC graduation, the first step should be to ensure the accuracy and transparency of economic indicators and statistical data.
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BANGLADESH鈥橲 new status will significantly enhance its global branding, making the country more attractive to investors. Its strengths in areas such as GDP size, export capacity and population size compared to other LDCs position it as a promising investment destination. This will boost Bangladesh鈥檚 creditworthiness, reflected in improved credit ratings, and open up more opportunities to secure commercial loans from international markets at competitive interest rates. Enhanced global branding will also enable the country to mobilise resources through sovereign bonds, while the private sector can tap into global financial markets to raise capital.
However, the major impacts of Bangladesh鈥檚 graduation will need to be carefully measured over time, as the full effects on the economy, trade, and development will only become clear in the years following the transition.
Bangladesh is the second-largest global exporter of apparel (7.9 per cent). In terms of tariff exemptions for least developed countries, Bangladesh benefits the most individually (67 per cent). In European countries, Bangladesh enjoys a 12 per cent preferential margin on sales, which is a significant price advantage.
According to a World Trade Organisation survey, LDC graduation will have the greatest impact on Bangladesh鈥檚 exports, with an estimated potential loss of 14.28 per cent. This means that after LDC graduation, Bangladesh will face reduced duty-free access, and our products will become less competitive in terms of pricing.
Bangladesh is the second-largest global exporter of apparel (7.9 per cent) and also the largest individual beneficiary of tariff exemptions for LDCs (67 per cent). European countries receive a 12 per cent preferential margin on sales, which offers a notable price advantage. According to a WTO study, LDC graduation will have the most significant impact on Bangladesh鈥檚 exports, and it is expected that the country could lose 14.28 per cent of its export earnings (Daily Star, June 29, 2024).
In other words, after LDC graduation, Bangladesh鈥檚 duty-free benefits will decrease, and our products will lag in price competitiveness. Among the markets, the highest tariffs on Bangladeshi exports will be in India after LDC graduation. According to an ADB policy brief, after LDC graduation, Bangladeshi businesses will face an 11.6 per cent tariff rate on exports to the European Union, while the rate in neighbouring India will be 22.7 per cent.
LDC graduation will certainly bring some opportunities, but most of them are honorary and largely symbolic. When one in every four people in the country still lives in poverty, such 鈥榟onour鈥� has little meaningful impact on their daily lives. Real progress must address the socio-economic challenges that continue to affect a large portion of the population.
We still need to offer tariff exemptions to the ready-made garment industry to facilitate imports. If exports fall by 14 per cent and we lose the 12 per cent margin benefit in the EU, what will the people do with so-called honour?
LDC graduation reflects economic progress in terms of GDP growth and per capita income and signals improvements in human resource development. It also indicates progress toward reducing economic and environmental vulnerability. However, if there is a tendency to manipulate figures to achieve these goals, it can cause serious damage. Bangladesh faces skill shortages, high educated unemployment and illegal migration, which directly contradict the official numbers on human resource development. Likewise, banking fraud, non-performing loans, deficit budgets, domestic and foreign government debt, low tax revenue and inadequate social safety spending undermine the claim that economic vulnerability is decreasing. Moreover, issues like poor waste management, river and air pollution, deteriorating agricultural land health, the invasion of plastic, and shrinking forests show no significant progress on the environmental front in Bangladesh.
Bangladesh鈥檚 development does not reflect improved income, poverty reduction or better living standards for its citizens. Instead, it points to extreme income inequality (Gini coefficient 0.49 per cent or more). Despite a per capita income of $2,824, workers in the export sector still do not earn a monthly base wage of $100 in dollar terms. The growth in development indicators does not represent an actual improvement in social conditions.
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THE potential list of benefits Bangladesh may lose after LDC graduation could be as follows:
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Export and trade
Tariff preferences: Loss of duty-free and quota-free market access in key markets like the EU. The risk of losing initiatives like Everything But Arms (EBA) and the US Generalised System of Preferences (GSP).
Export subsidies: Gradual phasing out of export subsidies that are allowed for Least Developed Countries (LDCs).
Increased competition: Bangladesh will face heightened competition from other developing countries, reducing its export competitiveness due to pricing pressures.
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Intellectual property rights
Patent protection: Bangladesh will be subjected to stronger enforcement of international patent laws under the TRIPS agreement, leading to higher costs for importing patents, technology and pharmaceuticals. Innovation costs: Increased costs associated with innovation and stricter compliance with intellectual property laws. The country will also face restrictions on the use of pirated software, free printing of books and research papers, and unauthorised use of intellectual property, increasing statutory costs for any form of intellectual property.
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Financial assistance
Soft loans: Access to concessional loans and grants from international financial institutions such as the World Bank, IMF, JICA, and ADB will diminish, increasing the burden of foreign debt and interest rates for the country.
Reduction in ODA: Official Development Assistance (ODA) may reduce as donors prioritise other least developed countries.
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Market access
Access to free markets: Loss of preferential market access could make Bangladeshi products more expensive and less competitive in the international market.
Trade negotiations: Without special assistance provided to LDCs, Bangladesh鈥檚 international trade negotiations will become more challenging.
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Education and research
Funding cuts: International funding for educational and research programmes will decrease. Even the costs for journals and publications will rise for Bangladeshis. To advance research, subsidies will be necessary; without this, the already fragile research sector will fall further behind.
Scholarship programmes: Bangladesh will lose eligibility for LDC-specific scholarships and educational support programs.
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Agriculture
Subsidies: Reduced support for agricultural technology and intellectual property, along with less financial assistance from international organizations.
Market access: Loss of preferential treatment in agricultural exports, impacting competitiveness. Even without anti-dumping measures, after LDC graduation, Bangladesh may face a 22.7 per cent tariff on jute and agricultural products exported to neighbouring India.
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Pharmaceutical industry
Generic drug production: Stricter patent laws could affect the production of generic drugs, leading to higher healthcare costs domestically. The export market for drugs and pharmaceuticals will face increased price competition.
Research and development: Increased costs for research and development, as well as higher expenses to comply with international standards.
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Other sectors
Infrastructure development: Concessional funding for infrastructure projects will decrease, and rising interest rates on foreign loans could slow the pace of development.
Climate change funds: Access to climate change adaptation funds and other environmental grants specifically available to LDCs will be reduced. Bangladesh will need to secure a greater portion of its own funding.
Social protection programmes: International support for social safety nets and poverty alleviation programs will further decline.
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BANGLADESH鈥橲 preparation for LDC graduation must focus on several key areas to remain competitive. In education and skills, building a workforce adept in modern industries is essential, particularly to support sectors like RMG (ready-made garments) and pharmaceuticals. Enhancing intellectual property rights (IPR) capacity will be critical as stricter international patent laws will affect innovation and access to technologies. Bangladesh must also accelerate its transformation towards Industry 4.0 (IR4), focusing on automation and advanced manufacturing. Boosting raw and intermediate goods production will reduce reliance on imports, while improving overall price competitiveness, especially against strong rivals like Vietnam, will secure Bangladesh鈥檚 place in global trade.
These challenges 鈥� stemming from reduced technical assistance, decreased export revenue and higher costs 鈥� will extend across multiple sectors. The key question is, has the ousted AL government conducted a precise study, sector by sector, to assess what contributions or losses will occur year by year after 2026? Can anyone present a detailed sector-based version of such a study? If not, why hasn鈥檛 this detailed work been done yet? Without this, how will the new government know which sectors will face challenges and where intellectual, logistical, and funding support will be required? The new government must undertake these tasks.
What no one has told Sheikh Hasina is that it鈥檚 time to stop manipulating figures and to prepare genuinely. If there is no proper preparation and the losses outweigh the gains, the new government will have to reconsider its approach. The hype surrounding LDC graduation should not be driven by cheap emotions but should come after financial and intellectual property protections are secured. Therefore, my suggestion to the new government is to conduct a real impact study, carefully calculate the costs and benefits and move forward with precision.鈥夆��
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Faiz Ahmad Taiyeb writes on sustainable development and is a public policy critic. He has several books to his credit, including 鈥楩ourth Industrial Revolution and Bangladesh,鈥� 鈥楤angladesh: Development Trajectory And Democracy Deficit,鈥� and 鈥�50 Years of Bangladesh Economy.鈥�