Syed Fardin Tahmid, AusTex 25th Batch
Introduction:
Bangladesh, a country with a rich history and a strong determination of will, is on the verge of an enormous transition. Bangladesh has been classified as a Least Developed Country (LDC) since 1975, which has granted it certain benefits and privileges in the international economic and trade sphere. Bangladesh has been given this designation since its inception in 1971. However, as 2026 approaches, Bangladesh is gearing up to bid farewell to its LDC status, embarking on a new chapter in its development journey. This transition comes with apprehension and hopes as the nation grapples with the challenges that lie ahead while seeking to leverage its strengths for continued growth. As of June 2023, there are 46 LDC countries in the world, and Bangladesh is one of them, along with Afghanistan, Nepal, and Bhutan from SAARC nations.
A country’s qualification for graduation is determined by its performance across three criteria:
– Per capita Gross National Income (GNI) of above 1242 dollars,
– Human Assets Index (HAI) score of 66 or above, calculating factors like literacy rate, under-five mortality, and secondary school enrollment rate.
– The Economic and Environmental Vulnerability Index (EVI) portrays economic and
environmental challenges.
The UN declares LDC graduation based on the recommendations made by the Committee for Development Policy (CDP) and endorsed by the Economic and Social Council (ECOSOC). These benchmarks gauge a nation’s potential for sustained development and the necessary support it requires. A country needs two criteria to meet the threshold for graduation. Bangladesh has demonstrated remarkable achievement across all three indices, meeting all the threshold criteria by CDP in 2018. However, before the final approval, UNGA recognized the disastrous impact of the COVID-19 pandemic; Bangladesh, together with three other LDCs on the list, has been given five years to navigate the transition. So, the graduation of Bangladesh will now take place in 2026 instead of 2024. The change enables them to prepare for graduation while planning and implementing policies and strategies to recover from the economic and social damage caused by the COVID-19 shock.
Bangladesh is on the cusp of a significant milestone: graduation from its least developed country (LDC) status. While this achievement is, on paper, a testament to our progress, for years now, experts and the media alike have attempted to bring to attention the numerous challenges that a nation such as Bangladesh would face after its graduation.
Challenges of LDC graduation:
In November 2026, Bangladesh is set to graduate from the United Nations’ Least Developed Country (LDC) category. It is a moment many have called historic—a badge of honor earned through decades of hard work and resilience. An economy once synonymous with famine and aid dependency has become the world’s second-largest garment exporter, lifting millions out of poverty in the process. But celebrating the graduation without addressing the challenges that come with it would be misleading. Graduation is not a fairy-tale ending; it comes with real risks, new rules, and the potential for painful shocks if we fail to prepare.
Indeed, with Bangladesh scheduled to graduate on November 24, 2026, we do not have much time, and the economic challenges we continue to face—from the constant inflationary pressure to improving our forex reserves to addressing unemployment and creating more jobs to improving the business climate—will only become more difficult if we do not act with immediate effect.
The reality is that graduation from LDC status will bring about considerable changes in the preferential treatment Bangladesh currently receives in international trade. Therefore, relying solely on current efforts is insufficient; Bangladesh needs more assertive and innovative trade strategies.
The most urgent challenge lies in trade. At present, nearly 85 percent of Bangladesh’s export earnings come from one source: ready-made garments. Yet, once LDC graduation takes effect, the tariff-free access to Europe, Canada, and Japan that enabled our garment industry to flourish will gradually disappear.
For years, as an LDC, Bangladesh has benefited from soft loans—low interest, long repayment periods, and easy terms. Graduation will end this privilege. From then on, we will borrow like any other middle-income country, at a much higher cost.
Bangladesh enjoys advantageous market access to numerous advanced global destinations under the Generalized System of Preferences (GSP) due to its classification as a least developed country. This enables Bangladeshi exporters to trade with these nations, exempt from import duties and potentially benefiting from reduced export-import tariffs. Nevertheless, following the conclusion of the least developed country graduation process, Bangladesh will no longer meet the criteria for receiving GSP benefits. Although GSP benefits in the EU will remain until 2029 and market access to the UK and Australia will continue, trade relationships with Canada, Japan, China, South Korea, and SAFTA countries remain uncertain.
While graduation symbolizes progress and economic maturity, it also threatens to remove trade preferences amid declining foreign reserves, stagnating exports, reduced incentives, and supply chain weaknesses. External shocks, including the Russia-Ukraine war, Middle East tensions, and global inflation, have further complicated this decision.
The decision to graduate comes at a time when foreign reserves have plummeted, exports have stagnated, and export incentives have been reduced by 60 percent. Many small and medium-sized factories that relied on these benefits have closed, exposing weaknesses in competitiveness due to rising costs.
How to address the challenges:
For Bangladesh to thrive after graduation, its institutions must step up. Courts and regulators need to enforce contracts efficiently. Customs systems should be digitized to reduce costs and delays. Workers must be offered opportunities to reskill and transition into higher-value industries. Without this foundation, graduation will only expose the cracks. The government must implement support mechanisms such as technical assistance programs, access to affordable financing, and productivity enhancement initiatives to help offset the removal of tax advantages and preferential market access.
Bangladesh still has a choice. We can sprint through the next two years, negotiating smarter trade deals, creating a sovereign stabilization fund, and reforming our tax and governance systems. Our story has always been one of resilience—of people refusing to give up in the face of adversity. But resilience alone cannot carry us forever. LDC graduation must not become an empty badge of honor that ordinary people end up paying for.
Economists often use the metaphor of a chair: a country that depends on one or two sectors is like a chair with only two legs—it can stand, but not steadily. To stand firmly, a country needs four legs. Vietnam, once our direct rival in garments, understood this well. It diversified into electronics, ICT, and even shipbuilding, transforming itself into a manufacturing hub. If we do not follow suit, our chair may wobble and fall.
We need new industries, stronger institutions, and smarter governance. Only then will graduation be more than a milestone—only then will it mark the beginning of a new chapter, where Bangladesh competes in the world not as a fragile exception, but as a confident peer.
Sri Lanka’s experience should worry us. After losing access to concessional finance, it filled the gap with costly loans and, within a few years, spiraled into crisis. The lesson is clear: cheap credit disappears after graduation, but the bills keep arriving. Unless we modernize revenue collection, broaden the tax base, and attract more foreign investment, we could find ourselves cornered in the same way.
With graduation imminent, these infrastructure and policy bottlenecks must be addressed urgently. The government should create a task force to fast-track projects that impact export competitiveness, including power generation, transportation networks, and port facilities. Since GSP+ is unlikely to offer relief, securing bilateral trade agreements is imperative.
Bangladesh must overcome regulatory and structural challenges to make itself attractive for such agreements. This requires reforms to investment policies, intellectual property protection, customs procedures, and digital trade frameworks. A negotiation team with private sector representation should be established to pursue these agreements.
Conclusion: A Transition Toward Prosperity
Bangladesh stands at a pivotal crossroads as it prepares to graduate from LDC status. The nation’s incredible journey from its turbulent beginning to this momentous milestone is evidence of its resilience and willpower. Despite the numerous challenges that lie ahead, Bangladesh has the potential to handle this transformation successfully. This can be achieved through meticulous planning, strategic execution, and collaboration with international partners and organizations. Bangladesh should capitalize on its strengths, build upon past achievements, and chart a path for sustained development and prosperity.
Bangladesh’s path to sustained prosperity and inclusive development involves fostering innovation, investing in human capital, and diversifying the economy. Additionally, the country must bolster its climate resilience to navigate the complexities of the landscape effectively. For a successful transition, the government, civic society, businesses, and the public must collaborate to undertake this transition successfully. Together, they must choose a collective path that protects recent improvements and steers the nation toward a brighter future. Bangladesh can make sure that leaving the LDC category represents a turning point in its history and a step towards continued success on the global stage by embracing change with strategic forethought
and a commitment to development. Graduation from LDC status is not an end but a new beginning. Bangladesh can overcome the obstacles posed by post-graduation challenges and usher in a new era of prosperity and progress for its citizens by demonstrating its capacity for resilience, adaptability, and sustainable development on the global stage.
Leave a Reply