Extra Three Years for LDC Graduation, But the Challenges Remain: Reform in Exports, Banking and Revenue Is Now the Real Test

Bangladesh has gained three more years to prepare for graduation from the list of least developed countries (LDCs). Under a decision of the UN General Assembly, Bangladesh's graduation will now take effect on 24 November 2029 instead of 24 November 2026. The extension was granted considering global economic uncertainty, disruptions in energy and supply systems, the changing situation of international trade, and the country's internal weaknesses.

The approval was given at a plenary meeting of the UN General Assembly session that began at 1am Bangladesh time on Thursday. It was chaired by UN General Assembly President Khalilur Rahman. The decision adopted on 29 October at the 81st session of the General Assembly extended the preparatory period for Bangladesh and Nepal until 24 November 2029. On 20 October, Uruguay presented the related draft resolution on behalf of the Group of 77 and China.

The UN Committee for Development Policy (CDP), while supporting an extension of Bangladesh's preparatory period, also stressed significant reforms to address internal structural weaknesses. In other words, this time cannot be seen merely as a chance to postpone graduation; it is an important deadline for strengthening the foundations of the economy.

But gaining three extra years will not by itself remove Bangladesh's economic challenges. Within this time, important tasks must be advanced: increasing export capacity, creating new markets, attracting investment, overcoming weaknesses in the banking sector, raising revenue collection, and improving the business environment. At the same time, preparations must be made to survive competition in international markets after graduation.

One of the biggest challenges before Bangladesh is sustaining the capacity of its export sector. A large share of the country's export earnings comes from the ready-made garment sector. As an LDC, Bangladesh receives duty-free or preferential market access in various countries. After graduation, some of these benefits may change, which could affect exporters' costs and competitiveness. An effective trade strategy is needed especially to retain access for Bangladeshi products in important markets including the European Union.

For this, dependence on ready-made garments alone must be reduced and exports increased in promising sectors including pharmaceuticals, leather products, agro-processed goods, light engineering and information technology. Product quality, productivity and the capacity to follow international standards must also be raised. Finding new markets for export diversification is another major challenge. Opportunities to expand trade in new markets in Africa, Latin America, the Middle East and Asia could be used.

Attracting foreign investment is also essential. Without uninterrupted supply of electricity and energy, access to land, development of ports and transport systems, policy continuity and simpler approval processes, it will be difficult to ensure the desired flow of investment. To increase investment, the cost and time of starting a business must be reduced, and contract enforcement and dispute resolution must be made effective.

Overcoming weaknesses in the banking sector is also essential for a sustainable transformation of the economy. Defaulted loans, governance deficits, weakness in loan recovery and a crisis of confidence in financial institutions can obstruct investment and business expansion. For this, banks' financial condition must be assessed, effective measures taken to recover defaulted loans, accountability for irregularities ensured, and corporate governance strengthened.

Another major challenge for Bangladesh is increasing government revenue. A limited tax net, tax evasion and weaknesses in tax administration affect the government's fiscal capacity. Revenue must be raised by simplifying the tax system, expanding the tax base, preventing evasion and improving services for taxpayers. Controlling inflation is also important; if the prices of daily essentials stay high for a long time, people's purchasing power falls.

To make LDC graduation sustainable, employment must grow alongside economic growth. In particular, creating quality jobs for young people, increasing women's employment and developing skills according to labour-market demand are essential. It is difficult to stay ahead in international competition in the long run with labour-dependent production alone. Investment in technology use, research, innovation and technical education must be increased to raise productivity.

On this point, Dr Fahmida Khatun, distinguished fellow of the private research organisation Centre for Policy Dialogue (CPD), said, 'This is an important diplomatic success for Bangladesh. But there is no scope to see it as a breathing space. Rather, this additional time must be used to overcome the weaknesses of the economy and strengthen preparations to make LDC graduation sustainable.' She said a realistic, time-bound action plan must be formulated first. Which reform will be implemented when, which institution will be responsible, and how progress will be evaluated must be specified.

Fahmida Khatun said, 'At the same time, diversity must be brought to export products, new markets explored, and product quality improved according to the demand of international markets. Exporting firms must also be prepared to meet labour rights and environmental standards. Quick discussions must be held with Bangladesh's main export markets to retain as much as possible of the existing duty benefits and easy market access. Small and medium entrepreneurs also need support in technology, skills development and financing.' She said political will, policy coordination and accountability are essential to use this time effectively.

The UN decision called on Bangladesh to continue implementing its national smooth transition strategy during the extended preparatory period. Regular information must also be provided on the progress of reforms. The decision further said that graduation from the LDC category must be sustainable and irreversible, and that it must be ensured that the country's development plans, programmes and projects are not disrupted because of graduation.

The main task before Bangladesh now is to use these additional three years as a time of effective reform and preparation. Merely postponing graduation will not secure Bangladesh's economic future. Rather, how far the economy's weaknesses are overcome in this period, how much productivity rises, and how much capacity is built to compete in international markets will determine how sustainable Bangladesh's economic progress will be after 2029.