The coronavirus challenge in graduation from LDC

For graduation from the Least Developed Country or LDC group, Bangladesh celebrated the first recommendation of the Committee for Development Policy under the United Nations Department of Economic and Social Affairs (UNDESA) on Mar 18, 2018. The second recommendation in 2021, vulnerability profile by UNCTAD, the recommendation of ECOSOC and finally the endorsement by UNGA will take us out of the LDCs in 2024. We will have the scope to enjoy the facilities for the LDCs until 2027.

Now with the global scenario changing due to COVID-19, will we be able to continue our journey towards graduation from LDC at the same pace? What are the new challenges we face? What steps are we taking? Are these enough?

The Istanbul Program of Action or IPoA 2011-2020, which aimed to enable half the 48 LDCs to graduate from the group, has now become difficult to implement. Equatorial Guinea is the only country that graduated after the IPoA declaration. Five others are awaiting graduation – Vanuatu (2020), Angola (2021), Bhutan (five years of preparatory period to 2023), Salmon Island, Sao Tome and Principe (six years of preparatory period to 2024). Graduation of Bangladesh, Timor-Leste, Laos and Myanmar will be decided in 2024.

During the recommendation in 2018, our records were as follows:

Any two criteria or double the Gross National Income (GNI) per capita threshold (i.e $2,460) entitles a country to the recommendation. Bangladesh, the largest LDC in terms of population, is the first country to have achieved all the three criteria at a time.

After LDC graduation, we will lose some preferential access in export such as like Generalised System of Preference or GSP and Duty Free Quota Free Access or DFQF. Likewise, our contribution to UN agencies will double; the rates of interest on loans from development partners will be high, export will face additional 6.7 percent tariff. UNCTAD estimates 5.5%-7.5% fall in export.

On the other hand, Bangladesh is a resilient country with a good record of loan repayment. It is preparing for the loss of advantages after graduation from LDC. It has robust plans to raise FDI, expand social safety net programs, climb up the World Bank's Ease of Doing Business Rankings, engage expatriates in philanthropy, boost investment and remittance, develop the capital market, emphasise skill development and ICT in all spheres of life, including production.

Its GNI per capita was $1,274 in 2018 against the threshold value of $1,230. We made further progress and the GNI per capita stood at about $1,540 in January 2020. But the pandemic has slowed down economic activities and production. Until March, our ADP expenditure was 43%, a 2 percentage point drop from the same period last fiscal year. Almost all the major development projects, except the Padma Bridge, Bangabandhu Tunnel under the Karnaphuli river and a few others, halted after March. It is quite uncertain when we will be able to resume the work in full swing. ADP implementation is now expected to reach maximum 60-70%. After five weeks of lockdown, the readymade garment sector started production slowly. And it is uncertain how long we can continue production in the sector. In other sectors, maximum 30% production units are in operation.

The sectors related to agriculture are still doing well following all-out efforts ordered by Prime Minister Sheikh Hasina and I believe we will be able to cope up with the coronavirus crisis. Our GNI per capital will be as required for the graduation.

In the second indicator, Human Asset Index (HAI), our achievement in 2018 was pretty good – 73.2 against the threshold value of 66. It rose to 76 in January 2020. This is very remarkable progress indeed. Under HAI, all the five components, namely a. under-nourished population, b. under-5 mortality, c. secondary school enrolment, d. adult literacy and e. maternal mortality showed good progress. But we need to give more emphasis on U-5 mortality, adult literacy and maternal mortality. The coronavirus pandemic can influence all these five sub-indexes which cover health and education. Keeping health at the centre of the plans, our government has already decided to reduce allocation for other sectors in the revised budget. The same thing is expected in the next budget as well.

The Ministry of Health will get much more importance in both revised budget and the next national budget. It is quite reasonable to spend more on hospitals, ventilators, PPE, laboratories, and medical workers to combat the outbreak. But it is equally important to work for malnutrition as it will help ensure better immune system, if coupled with healthy lifestyle. Initially it was thought that the impact of COVID-19 on the elderly is heavy, but it is now evident that children are not immune to it. I believe the vulnerability of women to COVID-19 is still hidden. The male to female infection ration in Bangladesh is 68:32. But if the virus spreads through the RMG workers, the majority of whom are women, it will not take time for the ratio to change.

After COVID-19, it is expected that the government will give priority to education just after health. We can expect that the enrolment rate in secondary education and adult literacy will get more attention. NGOs that work on health and education need to help the government to tackle the issues like malnutrition, U-5 mortality, maternal mortality, secondary education and adult literacy.

The third factor considered in graduation from LDC is Economic Vulnerability Index (EVI). Bangladesh in 2018 posted 25.22 while the required value is below 32. In January, it dropped to near 25. This EVI consists of a) Exposure Index having 5 sub-indexes and b) Shock Index, consisting of 3 areas. Under Exposure Index, the first indicator is population and Bangladesh's score is zero as its population, 161 million, exceeds the ceiling. We are almost at the same value with very insignificant development in three other sub-indexes – Trade Remoteness, Share of Population in Low Elevated Coastal Area and Merchandise Export Concentration. It is very difficult to show significant progress in trade remoteness and population in coastal area. There are scopes of making progress in export concentration and the government is working on export diversification and increase of export by setting up 100 Economic Zones and more than 30 Hi-Tech Parks. But the Share of Agriculture, Forestry and Fisheries in GDP index has become very difficult to maintain. Hasina, yet again, rightly stressed the need for making more progress in these areas.

Our track record is significant and consistent in the three Shock Indexes – Victims of Natural Disaster, Instability in Agriculture Production, and Instability of Merchandise Export. The 1970 Bhola Cyclone took away around half a million lives. We lost around 135,000 lives to the cyclone in April 1991. The cyclone Sidor in 2007 claimed more than 3,000 lives but during cyclone Fani in 2019, we could reduce the death toll to five. No country in the world could show such remarkable achievement in disaster management. In these three areas, we are perfectly on the right track. But we need to work hard after COVID-19 to find out the challenges we will face and how we can overcome them.

With existing incentives for agriculture and industries to cope up with the coronavirus crisis, Hasina declared robust economic plans, from short to long term ones, of about Tk 1 trillion. The plans will surely shield us all from the heavy economic impacts of the virus crisis.

The countries that are graduating from LDC have already raised their voices at the global levels to continue the facilities of LDCs for them after graduation to help them fight off the impacts of the pandemic. Nothing will be worse for them than to coming back to the LDC bracket. To continue the journey towards graduation, we need to asses very critically the emerging risks, develop more strategic partnerships, increase domestic resource mobilisation, boost export and import with the neighbouring countries, strike bilateral free trade agreements. A study on the 'Way Forward to Graduation' was done at the end of last year and the related government ministries are working following the recommendations made in the study.

The additional threat to achieving the goal of graduation from LDC is the coronavirus crisis. We need to understand how much the crisis will deviate our course and how we will come back to the right track.

Besides mobilising local resources, we will need to maintain the right balance and sufficient allocation for health, education and agriculture. More incentives will be needed for investment, especially for FDI. We will surely maintain the path towards graduation from LDC and eventually earn the 'Developed Nation' status by 2041.