Covid poses challenges for LDC graduation
Bangladesh is set to graduate from the group of the least-developed countries but will face some issues during the transition period as a result of the devastating impacts of the coronavirus pandemic, said a United Nations agency.
The US Conference on Trade and Expansion (Unctad) said the emergence of the pandemic and the ensuing global recession had interrupted an interval of rapid monetary growth. "Yet, the united states has so far weathered the crisis fairly well and appears place to record positive GDP growth possibly in 2020, notwithstanding a sharp slowdown in monetary activity."
Before March this season, the Unctad had assessed Bangladesh's vulnerability profile predicated on the pre-Covid data of the economy to determine the graduation criteria.
The sudden onslaught of the Covid-19 from March onwards has badly impacted the global economy and in addition Bangladesh, leading the UN body to come up with a separate vulnerable profit. It shared the results with the government on December 10 and suggested for addressing some issues through the transition period for easy and sustainable graduation.
The federal government is preparing a posture paper to be put in the second triennial assessment on the country's graduation by the UN Committee on Development Policy in January.
In line with the Unctad's latest account, despite all of the positives of the past decades, some deep-seated issues continue to linger upon Bangladesh's sustainable development prospects, notably the modest progress with regards to export diversification, and the elusive search for satisfactory sustainable development finance.
These challenges are created a lot more formidable by the fallout from the pandemic, which threatens to leave long-lasting scars in the world economy, making the international environment less conducive.
The emerging mega-trends such as for example climate change and digitalisation are bound to exert wide-ranging implications for future years development trajectory of produced and developing countries alike.
Despite the new issues, Bangladesh is planned to graduate to a developing nation in February as the country has already extraordinarily outperformed in all the three criteria. The transition period will end in 2024.
The Unctad said that notwithstanding Bangladesh's success in strengthening its overall export capacities, the data points to small progress in product diversification. The clothing things contributes 85 % of gross exports.
When there is indeed some untapped scope for merchandise differentiation, alone that is unlikely to provide a decisive spur to an industry that has relied generally on expense- competitiveness and preferential usage of developed markets.
Estimates of the affect of losing LDC-particular preferential market access spectrum between 7 % and 14 % of exports, with the majority of the lowering impinging on textile and attire exports to developed marketplaces, where changes found in tariffs would be relatively more adverse.
Similarly, large tariff differentials, in conjunction with persistent infrastructural and logistics bottlenecks, happen to be bound to entail a significant blow to a business for which these dimensions represent major drivers of international trade and investment flows.
Rubana Huq, president of Bangladesh Garment Companies and Exporters Association, has sought 10 years as the transition period for Bangladesh as the household economy, employment and export were severely afflicted by the pandemic.
The Unctad's profile also said if Bangladesh is to keep its exceptional growth performance, the country must diversify into gradually more complex products.
The advent of robotisation and professional digitalisation also questions the sustainability of Bangladesh's progress in bolstering its productive and export capacities.
These so-called "mega-trends" - that have in many ways accelerated in the wake of Covid-19 - are anticipated to trigger far-reaching reconfigurations in existing global value chains, reducing heightened reliance on crucial suppliers, encouraging reshoring and regional embeddedness, and potentially weakening the importance of low-labour cost competitiveness.
Unlike in lots of other countries, regarding Bangladesh, this resilience is apparently vindicated also in the context of the Covid-19 crisis and ensuing global recession.
"If the outlook found in 2020 is apparently reasonably encouraging, even so, this might be at least partly because of idiosyncratic factors; the medium-term potential remains a lot more uncertain," the Unctad stated.
With the impact of the pandemic still weighing down financial prospects for 2021, global labour markets are unlikely to rebound quickly, especially in key destinations for Bangladeshi migrants including the Gulf nations, the United Kingdom, europe and america.
"These prospects loom large on the subject of the remittances outlook."
Bangladesh growth performance within the last 10-15 years has been characterised by a significant investment push, with the investment-to-GDP ratio constantly exceeding 25 per cent of GDP since 2006, and reaching 31 % prior to the Covid-19 shock.
"There is little doubt that trajectory is consistent with the economy's have to redress supply-aspect bottlenecks, especially regarding infrastructural provision."
The Covid-19 shock entails a straight darker outlook in relation to Bangladesh second-largest source of external money, namely official production assistance flows, the profile said.
Over time, inward foreign direct investment flows have climbed up in absolute conditions, but since the early 2000s, they have represented not more than 4 % of gross fixed capital formation.
The UN body said in the context of LDC graduation, it is even more important that phasing out of LDC-specific international support measures will not disrupt the promising trajectory which Bangladesh has embarked.
It needed strengthening domestic reference mobilisation, bolstering investments found in climate-resilient and digital infrastructures, sustaining investments in people capital, helping technological up-gradation, continuing fostering rural development and adopting a good proactive professional policy framework.
