LDC Graduation Puts $6.38 Billion of Annual Exports at Risk, Seminar Warns

Graduating from the least developed country (LDC) category is a recognition of Bangladesh's economic capability, but it could also put the country's export sector at major risk. Citing World Trade Organization (WTO) estimates, it was revealed that if duty-free and quota-free trade benefits are withdrawn after graduation, Bangladesh's annual export earnings could shrink by about 26.6 percent — up to roughly $6.38 billion.

The information was presented at a seminar in the capital jointly organised by the Bangladesh Foreign Trade Institute (BFTI) and the Economic Reporters' Forum (ERF) on the multifaceted challenges of LDC graduation. Although the analysis is based on 2018 trade data, its core message remains relevant: if tariffs rise in major international markets, the ready-made garment sector will face intense pressure in global competition.

The analysis presented by BFTI chief executive officer Mostafa Abid Khan showed that if preferential market access ends, sending goods to top trading partners will become difficult. Bangladesh's exports could fall by about 42.05 percent to Canada, 30.53 percent to Japan, 27.53 percent to South Korea, and around 26.28 percent to the European Union and the United Kingdom.

However, several major partners have given positive signals about continuing the benefits for a fixed period after graduation. Australia will keep duty-free access until its domestic law is amended. The European Union, the United Kingdom, Canada, Japan and Türkiye have indicated they will retain the benefits for an additional three years, and China for two years.

If this interim facility remains in place, then considering the export figures of the 2024-25 fiscal year, 90.3 percent of total exports — about $43.59 billion worth of market — will stay protected for three years after graduation. In other words, time is available to avert an immediate shock, but analysts stressed that permanent preparation must be completed within that window.

To retain trade in the long term, Bangladesh will have to meet the conditions of alternative frameworks such as Canada's GPT Plus, the European Union's GSP Plus, or the United Kingdom's Enhanced Preference scheme. Under these frameworks, the rules of origin for products could create major complications for exporters.

For leather goods in particular, Canada requires 60 percent local value addition, while the European Union and the United Kingdom will require a change of tariff classification or 30 and 25 percent value addition respectively. Exporters of ceramics, home textiles and agricultural products will likewise face strict conditions.

Structural weakness in the export sector is deepening this risk. The country's exports still depend dangerously on ready-made garments — in the last fiscal year, more than half of total export earnings came from just 10 garment products, with cotton T-shirts alone accounting for $7.008 billion. This lack of product diversification is making the post-graduation risk even deeper.

Weaknesses in the domestic economy are also deepening the challenge, the seminar warned. A weak tax-to-GDP ratio, the average interest rate on foreign loans rising to 2.25 percent, and foreign direct investment (FDI) falling to $1.27 billion are obstructing the government's investment capacity.

After graduation, WTO rules will also require an end to direct cash subsidies on exports. In this situation, the BFTI urged increasing state policy support for factory modernisation, technological skill development, environment-friendly production systems and labour-standard improvement, instead of cash assistance.

For the pharmaceutical industry, there is a warning even if no immediate disaster occurs. Three to four years after the intellectual-property protection waiver ends, prices of newly innovated and patented medicines could rise significantly. In addition, Bangladesh's financial contribution rates to international organisations, including the United Nations budget, will increase many times over.

Under the previously announced schedule, Bangladesh's LDC graduation date was set for 24 November 2026. But due to post-Covid economic pressure, the Ukraine war, the Middle East conflict, disruption to shipping in the Red Sea and various internal instabilities, the government has formally applied to extend the preparation period by another three years. The UN Economic and Social Council (ECOSOC) has considered the matter positively and sent a recommendation to the General Assembly, whose final decision is expected this month.

To use the extra time, the government has adopted a four-phase national roadmap for 2026 to 2029. The plan is to restore discipline in the macroeconomy and banking sector in the first phase, diversify exports and conclude bilateral free-trade agreements in the second, modernise technology in industry in the third, and retain international trade through an overall capability assessment in the final phase. The main question now is how much of the roadmap's promise is realised within this timeframe.