What Bangladesh needs to learn from LDC graduated countries

Bangladesh has qualified twice the 3 criteria of LDC graduation in 2018 and 2021. UNECOSC has set the graduation of our economy in 2026 subject to a comprehensive STS based on the guideline of UNCDP. Our STS has followed almost a common structure likewise other graduating economies. While this STS was prepared, the private sector has vehemently protested it as it failed to address many core avenues of private sector and economic priorities. The changed political perspective in 2024 followed by current macroeconomic reality have massively shifted the mindset of key stakeholders and attitude of state-owned organisations to the large extent to the economic trend and related factors.

 

Amidst the geopolitical uncertainties, world power house shift and repercussions of long-held Russia and Ukraine War,our macroeconomic slowdown requires a rapid turnaround.Taking this into account, Bangladesh needs to reassess its STS for preparedness of LDC graduation. Bangladesh must develop a result-oriented economic strategies to overcome these challenges and other vulnerabilities. The multiplier effects of economic stability will help us obtain the remaining graduation criteria. The EVI, aligned with other graduation criteria, is crucial.

 

The evolving global landscape and local constraints require a comprehensive revision of the STS to ensure resilience and readiness.Currently, eight countries have graduated from LDC status, and graduation processes for 6 countries including Nepal, Timor-Leste, Cambodia, and Bangladesh are underway. Bangladesh is only economy of all said graduating and graduate nations as it met all criteria in graduation.

 

 

Despite this achievement, almost all economies differ. Bangladesh is to learn from their experiences and adapt their strategies accordingly. For example, Botswana, Cape Verde, and the Maldives navigated post-graduation shocks through strategic reforms, offering valuable lessons.Sincegraduation is unavoidable, it must implement a robust, action-oriented STS to ensure long-term competitiveness. Graduating in 2026 risks a $6 billion export loss from the EU GSP withdrawal,CMSME share and tariff hike would be strong blows. To navigate this, it is crucial to examine how other economies adapted their STS to overcome similar challengesincluding export loss, strict compliance, and ISM loss.

 

The comparative analysis of strategies from recently graduated and graduating economies reveals critical insights. Trade preference loss threatens an export-driven economy, as seen in the Maldives, where fisheries exports fell 14% after losing DFQF in the EU. Cape Verde mitigated similar challenges by securing a five-year extension of its EBA benefits.Bangladesh should pursue a similar approach while simultaneously fast-track FTAs with neighbouring economies with higher competitive and comparative advantages to off-set the export loss. Economic diversification is also crucial.

 

Botswana sustained 6% growth post-graduation through diamond wealth but struggled with mining dependency. Bangladesh may channel RMG revenue into IT, pharmaceuticals, and light- engineering. Our STS identified around 1353 products to diversify export but significant number of them are extremely behind in export readiness while graduating economies are not remarkable in export trade. Our diversification requires more strategic efforts. Structural reforms are essential, as demonstrated by Vanuatu's Electronic Single Window System, which reduced processing times and tripled customs revenue. Bangladesh has to execute its National Single Window for efficient trading chain. Cambodia's integration through RCEP and FTAs with China and South Korea drove a 34% surge in FDI, a strategy Bangladesh must prioritize to counter preference erosion.

 

After graduation, countries like Botswana, Cape Verde, and the Maldives encountered varying economic outcomes requiring strategic reassessments. Botswana experienced a post-graduation GDP growth slowdown but leveraged its diamond mining industry to maintain high tax revenue and a current account surplus, highlighting the role of resource diversification. The Maldives, however, struggled with low export competitiveness after losing Duty-Free Quota-Free access to EU markets, particularly in fisheries, underscoring the need for trade agreement renegotiations and export diversification.

 

Cape Verde saw FDI rise but faced mounting external debt, reflecting challenges in balancing reduced Official Development Assistance (ODA) with sustainable financing. These countries recalibrated their Transition Strategies by prioritizing economic resilience through sectoral diversification, enhanced FDI frameworks, and debt management while leveraging niche industries (e.g., Botswana's mining) to offset lost LDC benefits. Despite vulnerabilities, strategic shifts toward value-added sectors and regional trade integration helped mitigate post-graduation shocks.

 

To mitigate these shocks, Bangladesh's LDC graduation requires urgent tax reforms, drawing lessons from global precedents. Graduated LDCs usually maintains 20% tax-to-GDP ratio while Bangladesh maintains 8.5%. Bhutan's digital tax portal, streamlining compliance and expanding revenue, offers a replicable model, potentially adding $2 billion annually by formalizing e-commerce and gig economies. We also need tax net and tax automation strategies. Bhutan also attached 5 year-plan for smooth transition which can be replicated in Bangladesh too.

 

Equatorial Guinea's post-graduation debt collapse, due to oil dependency and neglected human capital, highlights the risks of overreliance on sectors without upskilling. Bhutan's vocational training integration ensured job-market alignment, which is crucial for Bangladesh to optimise our demographic dividends. Additionally, Samoa's success in remittance inflows through formalized migration channels provides a model for Bangladesh to enhance remittance by aligning our diversified skills demand in Gulf and ASEAN labour markets.

 

Alongside, informal sector businessand CMSME development are needed addressing conventional and emerging concerns including green technology, sustainable business practice, IP adoption and cheap financing though SMEs do not seem critical in most graduated economies. Regarding STS implementation monitoring and evaluation, engagement of private sector is inevitable beside Government, as the prime stakeholder, as experience of monitoring techniques of other economies is essential.

 

It is worth-mentioning that review of economic position of all graduating economies is not inspiring as many of them ended with middle-income trap. Therefore, the cross-country post-graduationlearning requires to be critically assessed. Graduation deferral may offer relief for the time being, but it is insufficient for long-term readiness. Regardless of the timeline, implementing a comprehensive STS is vital to avoid economic disruptions prioritizing the doing business climate. Since our economy is unlike all other economies graduated, the selection of learning needs special care.

 

To navigate this shift, it is crucial to study how competing regional economiessuch as the Philippines, Indonesia, Sri Lanka and Vietnamhave positioned themselves globally overcomingstructural challenges. Understanding the economic strategies of neighboring countries is equally important since these economies and regional economic blocs oftencreateexternal challenges which need to be contained too. Traditionally, our import relies on the China and India. Post LDC trading relation with thetwo major partners need to be fine-tuned. Cross-country experiences alert that strong preparedness is more important than delay.

 

If we cannot make forward-looking and resilient strategies, it risks losing market share in sectors where competitors are being more competent to global investors. Bangladesh can design a smart, focused strategy to ensure its LDC graduation transition by examining how regional economies are leveraging the geoeconomic shifts. The transition can be seen as a source of potentials to build business resilience, attract investment, trade and establish Bangladesh as a dynamic and competitive economy in the ever-changing global arena.

 

The writer is an economic policy researcher and analyst