UNCTAD praises growth but finds big inequalities

It emphasizes product diversification to adapt to the competitive market







Bangladesh has experienced sustained growth in the decades following restructuring, but the structure of the country’s economy remains focused on a few sectors and products that can prove counterproductive when its trade preferences disappear.

A United Nations agency is sounding the alarm that such focus or concentration could harm Bangladesh when it exits the LDC category, currently slated for 2026, leaving it playing in an open field of international trade.

The United Nations Conference on Trade and Development (UNCTAD) made the observations in the Least Developed Countries Report 2021, released Monday evening in Geneva.

“Despite a discouraging picture of the impact of international and national policies to boost the development of least developed countries (LDCs), some success stories indicate that development paths can be differentiated,” the report said.

“From the 1970s, Bangladesh accelerated its development as it undertook trade liberalization and began to develop an export-oriented garment industry,” he noted, indicating structural adjustments made according to donor revenues in a shift from the country’s trajectory with a state-controlled economy. .

While noting that Bangladesh has also invested in other economic sectors, such as the pharmaceutical industry, creating a conducive national innovation system, the report warns of the fallout from less diversification of the basket of export of the country as well as overall economic activities.

“However, Senegal, on the other hand, followed a different development strategy and achieved an economic structure diversified between agriculture, industry and services,” the United Nations trade body mentions in its report as a case in point. virtues of diversity.

“It also has a proportionately more diversified export structure, which is less vulnerable to the consequences of graduation.”

The report adds, however, that despite an undiversified export structure, relying largely on ready-to-wear, Bangladesh has experienced “steady and sustained growth”.

The theme of UNCTAD’s latest report on the state of world trade is “Least Developed Countries in the Post-COVID World: Learning from 50 Years of Experience”.

The United Nations created the category of LDCs 50 years ago. The group of the world’s weakest economies grew from an initial number of 25 countries in 1971, peaking at 52 in 1991, and stands at 46 today, with just six countries having graduated – ceased to be a PMA – to this day.

UNCTAD also reports that the structure of merchandise exports from LDCs differs considerably as some countries may better take advantage of available international preferences than others.

“Bangladesh is an example of an LDC that has exercised its state capacity to substantially benefit from ISMs,” he adds.

ISM stands for International Support Measures, developed for LDCs.

The UN agency also points out that fast-growing LDCs have increased their total wealth more substantially than other LDCs, as has happened in Bangladesh, Cambodia, Ethiopia, Lao People’s Democratic Republic or the United Nations. Rwanda.

He focused in particular on two LDCs – Bangladesh and Senegal – currently engaged in the process of graduation from the LDC category, which “largely reflects the success they have achieved in their development policies”.

According to UNCTAD, “These countries have adopted contrasting development strategies, but which have each succeeded (albeit to varying degrees) in overcoming some of the main structural obstacles to the development of LDCs.”

Both countries have been recommended for reclassification in 2021 and are expected to no longer be LDCs in 2026.

Senegal is in an earlier phase of the reclassification process, as it pre-qualified for reclassification during the 2021 LDC review.

The report further shows that structural transformation and economic growth in Bangladesh have taken the form of an expansion of the manufacturing and service sectors.

“The development of global value chains (GVCs) in Bangladesh has been somewhat limited, especially compared to the progress made by Cambodia and the Lao People’s Democratic Republic, as well as other Asian countries, such as China and Vietnam “, he added.

“Bangladesh stands out with relatively high upstream participation and low downstream participation in its GVCs, driven by a textile and clothing industry accounting for 83 percent of national value added in exports,” he predicts. .

The report praises the country’s efforts to reduce poverty, despite the glaring inequalities.

“Economic growth, driven by the expansion of exports and remittances, has accelerated since 2002,” he said, highlighting a negative aspect of growth – gaping inequality.

“Bangladesh’s growth over the period 1983-2016 occurred amid worsening inequalities; a period in which the Gini index fell from 25.6 to 32.4, before stabilizing again as rural development and job creation made growth more inclusive.

“Despite these increases, the Gini index remains relatively low by international standards. Bangladesh has reduced the rates and incidence of income poverty. Between 2000 and 2016, the incidence of poverty halved by 24.6 percentage points.

The UNCTAD report further states that Bangladesh must maintain the momentum of structural transformation by emphasizing economic diversification and the execution of bold industrial policies for the sustainable resettlement of LDCs.

During the virtual launch of the report, global experts called Bangladesh’s economic growth resilient, but this resilience is highly dependent on international support measures or ISMs.

But the economy needs to integrate graduation as part of industrial policy by strengthening its competitiveness to avoid shock when the ISM path narrows soon after graduation, they said.

They also suggested investing more in targeted areas such as human capital, social protection, income mobilization and financial sector reform. At the same time, they also called on the international communities to invest to facilitate the economic progress of Bangladesh in a sustainable way.

UNRC office economist Mazedul Islam hosted the national event where Ministry of Commerce Secretary Tapan Kanti Ghosh was the main guest.

Sharing the summary of the report, UNCTAD Economic Affairs Officer Giovanni Valensisi said the agency found Bangladesh’s growth performance relatively resilient. The country, even during the time of the pandemic, has maintained a certain positive level of GDP growth.

“What is essential is to maintain the investment, not only the physical investment but also the human capital, because we know that the education sector is hit hard by the pandemic. Vulnerable groups must also be protected, “he said.

Stressing the importance of maintaining the momentum of structural transformation, he said it is important to focus on economic diversification and adopt and implement bold industrial policies.

Sharing his third reflection on the sustainability of the economy, he said Bangladesh’s progress depended heavily on ISMs, especially preferential market access.

He suggested integrating graduation as part of industrial policy by trying to gradually strengthen competitiveness, which will be essential to absorb the phasing out of ISMs in the coming days.

UNCTAD LDC Section Chief Rolf Traeger noted that LDCs must devote 40% of their GDP to achieving SDGs such as health, education, social protection and biodiversity conservation.

“Currently, LDCs only spend 10 percent of GDP. So huge investments will be needed and that shows how great the challenge is,” he said.

Bangladesh, like other LDCs that are on the verge of becoming developing countries, needs to shift its workforce to more productive sectors, which have higher incomes.

Calling national efforts for economic sustainability key, he said national efforts will not be enough. Thus, ISMs will also be essential in the areas of commerce, finance and technology.

Distinguished CPD Professor Prof. Mustafizur Rahman pointed out that Bangladesh’s economy is shifting from agricultural to non-agricultural sectors, mainly services, while manufacturing is still a nominal contributor to GDP.

“If we look at agriculture, 43 percent of the workforce contributes 13 percent of the GDP. So we can understand what is the productivity of labor in agriculture. We will have to have a structural transformation, ”he said.

After graduation beyond 2026, he said, Bangladesh will need to shift from primarily market-driven competitiveness to productivity and skills-based competitiveness.

“If we are to do this, we will need to invest more in improving productivity and improving skills,” he said.

Speaking as the main guest, Commerce Secretary Tapan Kanti Ghosh said the country will face multiple challenges ahead such as the fallout from a pandemic, climate change events and the loss of ISM after graduation.

“We are aware of this and the government has already formed six committees to successfully identify challenges and turn them into opportunities. Bangladesh is actively working with relevant UN bodies to develop a holistic plan for a graduation journey in gentleness, “he said during the meeting. .

United Nations Resident Coordinator in Bangladesh Mia Seppo said LDCs, including Bangladesh, have faced many challenges due to the negative impact of the Covid-19 pandemic and the climate crisis.

She suggests that Bangladesh diversify its exports while improving the competitiveness of the private sector and the business climate to overcome obstacles.

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