Experts say country has plenty of plans but weak record of delivering them.
Illustration: TBS
“>
Illustration: TBS
Highlights:
- Bangladesh must use its three-year LDC extension to accelerate critical economic reforms
- Around 73% of export revenue depends on preferential trade arrangements
- Experts urge FTAs, export diversification, energy security and modernised ports
- Bangladesh must raise tax revenues, boost productivity and reform banking
- Economists warn the extension will mean little without swift implementation
To avoid a costly economic shock, Bangladesh must spend its newly secured three-year LDC extension overhauling its trade policies, modernising infrastructure, and slashing bureaucratic red tape.
Rather than viewing the delay as a cushion, business leaders and economists argue the government must immediately execute a focused, three-year priority plan centered on six key imperatives: negotiating Free Trade Agreements (FTAs), diversifying exports beyond garments, securing reliable energy, raising domestic tax revenues, modernising port logistics, and boosting industrial productivity.
Without swift implementation, the additional time will do little to prepare the country for the end of vital trade privileges.
Infograph: TBS
“>
Infograph: TBS
UN grants three-year extension
The urgency follows the UN General Assembly’s approval on 30 October to move Bangladesh’s graduation deadline from 24 November 2026 to 24 November 2029. The decision aligns with recommendations from the UN’s Committee for Development Policy (CDP), which backed the extension on the condition that Bangladesh aggressively tackle structural weaknesses in its economy.
The stakes are high: approximately 73% of Bangladesh’s export revenue currently depends on preferential trade arrangements granted under LDC status, including duty-free and quota-free market access. The country’s primary export engine, the ready-made garment (RMG) sector, faces the greatest exposure when these concessions expire.
From strategy to execution
Economists stress that Bangladesh does not lack a roadmap. The government has already drafted a five-year Smooth Transition Strategy (STS), containing 150 time-bound action items, according to Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD).
However, the core issue remains execution rather than planning. Experts told The Business Standard that the government must condense the STS into a sharply focused three-year priority plan. To ensure accountability, each ministry’s targets, strict deadlines, and progress metrics should be made public.
Analysts and industry leaders point to six key pillars that must underpin the country’s readiness:negotiating free trade agreements, accelerating export diversification, securing reliable energy supplies, boosting domestic revenue mobilisation, modernising logistics and port infrastructure, and raising industrial productivity.
Time alone will not be enough
Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), cautioned that additional time will yield little without decisive action. He called for a concrete plan focused on controlling inflation, restoring macroeconomic stability, and strengthening export competitiveness.
“Without inter-agency coordination and strong political commitment, Bangladesh will struggle to make meaningful use of this extension,” Razzaque noted, urging immediate FTA negotiations with the European Union, Bangladesh’s largest export destination.
Mustafizur added that the economy must shift from a reliance on preferential market access to a model driven by efficiency, investment, and productivity.
Business leaders call for urgent reforms
Fazlul Hoque, Administrator of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI), warned that current preparations remain inadequate. Once tariff preferences end, Bangladeshi firms will compete on equal terms with global rivals.
He urged the government to lower interest rates, reduce red tape, and streamline port operations.
Echoing these concerns, Mahmud Hasan Khan Babu, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), highlighted the strict timelines ahead.
“In the EU market, we effectively have six years, including the standard three-year post-graduation grace period,” Babu said. “After that, no further extensions will be granted.”
Babu identified five immediate priorities: securing FTAs with major markets, ensuring energy security, constructing the Dhaka-Chattogram Expressway, automating factory production, and completing a deep-sea port.
While the government aims to complete the Matarbari deep-sea port by 2029 and is currently in trade talks with key blocs, Babu stressed that private enterprises must also step up. “Entrepreneurs who fail to adopt modern technology will inevitably be pushed out of the market,” he warned.
What changes after graduation?
Graduation will bring significant shifts. Beyond losing tariff preferences, Bangladesh may face patent licensing fees for advanced technologies and lose compliance-related concessions.
To attract Foreign Direct Investment (FDI) to compensate, Mustafizur stressed that the country must reduce the cost of doing business, simplify work permit procedures for foreign experts, and resolve commercial disputes swiftly.
Operating overheads remain a major hurdle. Port congestion, cumbersome customs procedures, and erratic energy supplies continue to drive up costs for exporters.
Masrur Reaz, chairman of Policy Exchange Bangladesh, recommended establishing a LDC-linked competitiveness roadmap with explicit agency targets and regular public progress reports. He also proposed a formal public-private dialogue platform to ensure business feedback directly shapes policy implementation.
Diversification beyond garments
Relying almost entirely on ready-made garments leaves the export basket vulnerable. Broadening the export base requires structural support rather than simple cash incentives.
Razzaque emphasised that emerging sectors need access to modern technology, quality-testing facilities, R&D funding, skilled labour, affordable financing, and overseas distribution networks. He cautioned against limiting diversification efforts solely to garments and pharmaceuticals.
Masrur noted that historical policies have favoured the garment industry, forcing other sectors to operate within a framework not tailored to their needs.
“Bangladesh must select a few high-potential sectors and channel scarce resources towards building their global competitiveness,” he said, adding that public funding for innovation should be released in milestone-based tranches to manage risk.
Boosting productivity and skills
Upgrading workforce capabilities requires tight coordination between industry, academia, and vocational institutes. Masrur called for targeted, industry-led training programmes to address specific skill shortages.
At the firm level, Mustafizur noted that manufacturers must invest in automated processes and technology adoption to absorb higher operational costs after LDC exit.
Fiscal and banking sector reforms
Graduation will also alter development financing terms, reducing access to soft loans and concessional international credit. To fund infrastructure, healthcare, and education, Bangladesh must significantly raise its low tax-to-GDP ratio by expanding the tax base, modernising the tax authority, and curbing evasion.
Simultaneously, thorough banking sector reforms are critical to addressing non-performing loans (NPLs), improving governance, and restoring discipline to credit allocations.
A resilient financial sector, coupled with stable economic governance, will be vital to sustaining private investment once preferential trade cushions are gone.
About The Author
