Bangladesh’s LDC extension proposal to be tabled at UNGA today

A proposal to defer Bangladesh’s graduation from least developed country (LDC) status by three years will be placed before the United Nations General Assembly (UNGA) today (29 October), potentially allowing the country to retain crucial trade preferences until 24 November 2029.

Uruguay will table the resolution, backed by 77 nations and China, seeking to extend the graduation deadline for Bangladesh and Nepal.

The proposal follows recommendations from the UN Committee for Development Policy (CDP) and the Economic and Social Council (ECOSOC). It now requires majority support from General Assembly member states, which have until 24 November to decide on the extension.

The BNP government, which came to power through the 13th general election in February, wants the three-year extension to address economic uncertainty, external shocks and longstanding structural weaknesses before Bangladesh loses benefits linked to its LDC status.

The draft resolution cites disruptions to global energy supplies and trade flows caused by conflicts. It also highlights lingering economic shocks and uncertainty in international commerce.

The resolution also recognises Bangladesh’s political transition. Although political changes do not normally justify extending the preparatory period, the CDP considered the country’s changeover relevant to its decision.

EU market access at risk

The proposed extension would give Bangladesh more time to prepare for the withdrawal of LDC-related benefits, including duty-free market access, special treatment under international trade arrangements, concessional financing, and technical assistance.

However, the continuation of individual benefits would depend on the rules of trading partners and development institutions.

The European Union is a major concern. It is Bangladesh’s largest apparel export market, accounting for nearly half of the country’s garment exports.

Bangladesh currently enjoys duty-free access to the EU because of its LDC status. Without an alternative preferential arrangement, garment exporters could face tariffs of around 12% from December 2029.

To mitigate the risk, Bangladesh would need to secure a free trade agreement or retain preferential access under the EU’s Generalised Scheme of Preferences Plus (GSP+).

Meanwhile, competitors such as Vietnam and India are moving towards duty-free access through trade agreements, potentially putting Bangladeshi exporters at a further disadvantage.

Estimates from the South Asian Network on Economic Modeling (SANEM) suggest Bangladesh could lose 11% of its annual exports if it graduates this year. Textiles and apparel, leather and food products face the greatest risks.

Graduation risks extend beyond exports

The loss of LDC benefits could also affect Bangladesh’s pharmaceutical industry and access to development finance.

LDC-related intellectual property exemptions allow domestic pharmaceutical manufacturers to produce certain patented medicines without paying royalties. Graduation could eventually end these exemptions, raising production costs.

Bangladesh could also lose access to some concessional development financing, including facilities linked to multilateral institutions such as the World Bank Group. This could increase borrowing costs and put further pressure on public finances.

Despite these risks, economists see little likelihood that Bangladesh will fall below the economic thresholds used to assess its graduation eligibility.

The country’s gross national income per capita reached $2,684 in 2024, well above the graduation threshold of $1,306. Its Human Assets Index stood at 77.5, compared with the benchmark of 66.

Bangladesh’s Economic and Environmental Vulnerability Index score was 21.9, below the graduation benchmark of 32. A lower score indicates less vulnerability under the index.

Nepal also seeks extension

The resolution also proposes an extension for Nepal, citing uncertainty over remittances and tourism, climate-related shocks and a difficult external trade environment.

The CDP considers an extension appropriate if Nepal develops and implements a clear, time-bound plan to revise its transition strategy.

Both countries would need to submit regular progress reports. UN resident coordinators would support implementation and monitoring within their existing mandates and resources.

The resolution also calls for continued international support for the countries’ sustainable development plans. It stresses that graduation should remain sustainable and irreversible without disrupting development programmes and projects.

The General Assembly’s decision will determine whether Bangladesh and Nepal receive additional time to prepare for graduation.

For Bangladesh, however, the extension would only delay the loss of LDC-related benefits. Securing preferential trade arrangements, diversifying exports, strengthening domestic industries and accelerating structural reforms will be crucial to protecting the country’s export competitiveness beyond 2029.