The World Trade Organization (WTO) has said it expects Bangladesh to graduate from the Least Developed Countries list in 2024 – the status under which it enjoys duty-free access to the European Union, Canada and Japan – with the body urging the government to make the necessary reforms so it can to continue to capitalise on global trade opportunities.
In a trade policy review meeting held in Geneva last week, the WTO noted that Bangladesh’s GDP growth at an average annual rate of approximately 6.8% to reach nearly 7.9% in 2017-18, has “been driven mainly by the ready-made garment sector.”
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A post-meeting report added growth has resulted in a decline in poverty levels, stable inflation moderate public debt, and greater resilience to external shocks. Bangladesh, it said, is expected to graduate from Least Developed Countries status in 2024.
However, the country is heavily reliant on preferential trade access with many of its trading partners, including the Least Developed Countries scheme with Canada and Japan – allowing it duty-free access to those markets. As a least developed country it also benefits from the EU’s ‘Everything but Arms’ arrangement, which grants duty-free, quota-free access for all exports, except arms and ammunition. There is, therefore, some concern it may struggle to continue to grow at current rates once it graduates from LDC status.
At present, the EU is the biggest importer of Bangladeshi garments accounting for more than 50% of its overall exports – and apparel is the single most important export item of Bangladesh to the EU markets.
“One of the key concerns of Bangladesh is the likely loss of LDC preferences after graduation, currently available in some key markets, such as the European Union, where it benefits from a preference margin of 12 percentage points for its garments’ exports,” the WTO report reads.
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By GlobalData“This edge would be eroded upon its graduation from LDC status. As from 2018, under the aegis of the committee formed for the purposes of graduation, the government and the private sector have started to explore options available to a graduated LDC to pursue preferential exports. These options include schemes providing preferential treatment equivalent to that for LDCs, e.g. the EU GSP+ programme.
“However, several eligibility conditions, including the ratification of some 27 conventions, inter alia, relating to core human and labour rights, and environmental and governance principles, need to be met…In addition to the ongoing reforms, which address diversification and competitiveness, improvement of the business climate and fiscal reform, the authorities recognise the need to undertake further reforms, including infrastructure development promoting rural growth and technical/vocational training, to sustain the inclusive and widespread growth that has been achieved. These reforms would help Bangladesh attain its economic and welfare policy objectives and further integrate into the world trading system.”
Last week, the government of Bangladesh announced it was establishing a EUR50m (US$56m) loan fund to provide the country’s ready-made garment sector with medium-to-long-term finance for safety and environmental upgrades to factories.
The news came a day after it was criticised as being “shockingly unready” for factory safety in an investigation by a consortium of labour rights organisations, based on an analysis of two government-run databases intended to provide information on the remediation of garment factories. The investigation revealed none of the 745 factories under the government’s inspection programme has eliminated high-risk safety hazards – all of which were identified between three and five years ago.
A decision on the future of the Accord on Fire and Building Safety in the country was supposed to take place yesterday (7 April). However, this has been delayed for the seventh time and is now expected to take place on 15 April.
