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Risks and opportunities of LDC graduation

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A worker hangs clothes to dry on the roof of a garment factory in Dhaka on June 15, 2005. After graduation from the LDC group, Bangladesh will no longer be eligible for grants and low interest loans under official development assistance (ODA) from the developed countries. PHOTO: REUTERS/RAFIQUR RAHMAN/FILES

The prime minister, the government and the people of Bangladesh can be justly proud that the country will now be able to graduate out of the Least Developed Country (LDC) status within the next few years.

However, this graduation comes with both risks as well as opportunities.

The first risk is that we will lose our duty-free access to the markets of developed countries for our goods and services such as garments and textiles. This was indeed the rationale for the creation of the LDC group in the context of trade negotiations to allow the poorest countries duty-free access to the developed markets.

However, it is only natural that a subsidy will not last forever. In recent years, our garments exports have lost their duty-free access to the United States of America but despite some initial problems, the sector has managed to survive.

Hence, LDC graduation is a risk that we will need to face and we need to learn to compete with other developing countries on a level playing field without asking for subsidies for an indefinite period.
The second risk we will face is that we will no longer be eligible for grants and low interest loans under official development assistance (ODA) from the developed countries, which we have been receiving ever since our independence in 1971. This will no doubt be a difficult habit to kick but it is again the right thing to do.

Already a number of developed countries have either dropped Bangladesh from their list of bilateral grant recipients or are planning to do so. This will mean that Bangladesh will have to depend on getting higher interest loans if it wants to tap the global capital markets for bringing in foreign investment.

This is again a better strategy for the country to become a part of the global economy without depending on handouts forever.

In addition to the risks mentioned above, there are also a number of opportunities associated with the graduation from LDC status.

The first opportunity is that we can continue to access global climate finance even if we can no longer access ODA. The amount of global funds available for tackling climate change will be USD 100 billion a year starting from 2020 onwards, and will increase each year after that. This will soon overtake the amount of ODA available each year.

However, in order to access climate finance, we will need to learn the rules of the climate finance game which are quite different from those of development finance. So far, Bangladesh is making good progress in learning these rules of accessing climate finance, especially from the Green Climate Fund (GCF).

The second opportunity that opens up as we graduate from LDC status is to not leave the other LDCs behind, rather offer them our help and guidance in the spirit of South-South collaboration so that we can also help them graduate.

After all, the LDCs all aspire to graduate sooner or later and we can help them do so sooner rather than later.

In the realm of developing climate resilience, Bangladesh is already supporting other LDCs by sharing experience on adaptation through the International Centre for Climate Change and Development (ICCCAD) at the Independent University, Bangladesh (IUB), which has set up the LDC Universities Consortium on Climate Change (LUCCC) through which more than 500 professionals from 50 LDCs have been trained already.

Hence, Bangladesh has an opportunity to become a leader in helping the LDCs graduate from their current status while at the same time helping them become climate-resilient.


Originally this article was published on  March 21, 2018 at Daily Star. The author Dr. Saleemul Huq is the director of the International Centre for Climate Change and Development (ICCCAD) at the Independent University, Bangladesh (IUB).
Email: saleemul.huq@icccad.net

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