Moving from LDC: Opportunity and Challange Focus Writing for Bank Jobs

Moving from LDC: Opportunity and Challange

On March 16, 2018, for the second time in the history of independent Bangladesh, the country was adorned with a crown for its achievements in development. The first time was in 2015 when it upgraded itself to the World Bank's “lower middle income” category by increasing its Gross National Income. By becoming eligible for graduation from LDC, Bangladesh has taken its status to a new height. The LDC category was introduced by the United Nations in 1971 when there were 25 LDCs. In 2018, the number has increased to 47. So far, only five countries were able to graduate from the LDC group, including Botswana, Cape Verde, Maldives, Samoa and Equatorial Guinea. Bangladesh is the only country that met all three criteria for graduation including GNI per capita, Human Assets Index, and Economic Vulnerability Index.

The three criteria are Gross National Income (GNI) per capita, Human Assets Index (HAI) and Economic Vulnerability Index (EVI).

According to the UN's graduation threshold, the GNI per capita of a country has to be $1,230 or above. Bangladesh's GNI per capita is now $1,272.

In terms of the HAI, a country must have a score of 66 or above. Bangladesh's score is now 72.8 -- well above the threshold.

The HAI is an indicator of nutrition, health, adult literacy and secondary school enrolment rate.

In the economic vulnerability index (EVI), a country's score has to be 32 or below. Bangladesh's score is 25 in the EVI, an indicator of natural and trade-related shocks.

The CDP will review Bangladesh's progress in 2021, and the country's official graduation from the LDC category will take place after a three-year transition period.

If the country maintains its position in all the three categories for the next six years, it will eventually graduate from the LDC bloc.

This graduation will bring a lot of opportunities for Bangladesh and quite a few challenges as well. There will be benefits but there will be costs to pay also. Overcoming these challenges is critical for a smooth graduation process.

Advantages:

***The new status will help in branding Bangladesh. 

***Investors will be interested to invest in the country given its strength in certain areas such as the size of its Gross Domestic Product (GDP), exports and population compared to other LDCs.

*** Bangladesh will have more opportunities for taking commercial loans from the international market at a competitive interest rate. Such branding will help it to mobilise resources from the global market through sovereign bond.

**** The private sector will also have the opportunity to generate capital from the global financial market.

Disadvantage:

*** the cost of development finance and higher debt servicing liabilities due to the cessation of access to concessional finance for LDCs.

***As a lower-middle-income country, Bangladesh is no more eligible for low interest loans. ***After graduation, Bangladesh has to go for blended finance that includes loans from the development institutions and other sources with a high interest rate and shorter repayment period.

***upon graduation from the LDC bracket, Bangladesh is likely to lose about $2.7 billion in export earnings every year. This is because exports will be subjected to 6.7 per cent additional tariff as preferential duty benefits from different countries and trading partners will no longer be available.

*** Due to the graduation, Bangladesh will lose about 8 percent of its total exports because of the imposition of additional tariff on its exports by 6.7 percent without a preferential treatment. A Centre for Policy Dialogue (CPD) study reveals that the loss will be equivalent to USD 2.7 billion.

***upon graduation, products made in Bangladesh will become more expensive to buyers and consumers in key export markets. In this context, it may be recalled that according to the United Nations Conference on Trade and Development (UNCTAD), Bangladesh's exports may decline by 5.5 per cent to 7.5 per cent due to preference erosion and exports becoming costlier.

***As per the WB criteria, if a country's per capita income remains above $1,400 for three consecutive years, the rate of interest would surge to about 2 per cent from 0.75 per cent — a facility that Bangladesh currently enjoys like all other LDCs.

#Collected from Facebook