Bangladesh's exports could drop 14% post LDC transition, ADB warns

02 May '24

1 min read

Bangladesh's exports could drop 14% post LDC transition, ADB warns

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Insights

Exports from Bangladesh may decline by 5.5 per cent to 14 per cent, especially considering reduced earnings from EU, after it loses preferential trade benefits following LDC graduation, according to ADB.
With over 70 per cent of merchandise exports benefitting from LDC-specific trade preferences, impact of LDC graduation on exports is a significant concern.

According to the Asian Development Bank (ADB), Bangladesh’s exports might face a decline ranging from 5.5 per cent to 14 per cent post its graduation from a Least Developed Country (LDC) status in 2026.

This projection, especially concerning reduced earnings from the European Union (EU), highlights the potential impact of losing preferential trade benefits.

Currently, over 70 per cent of Bangladesh’s merchandise exports benefit from LDC-specific trade preferences and the impending graduation poses a significant concern for the country’s export sector, particularly the dominant readymade garments (RMG) industry.

After graduation, Bangladesh could lose these preferences, subjecting it to less favourable trade conditions or Most Favoured Nation (MFN) tariff rates, depending on donor countries’ trade policies.

The ADB’s study on “Expanding and Diversifying Exports in Bangladesh: Challenges and the Way Forward,” published in March, highlighted that increased tariffs could lead to a significant decrease in exports.

Moreover, LDC graduation will limit Bangladesh’s policy flexibility in supporting the export sector through subsidies. While World Trade Organization members are generally prohibited from providing export subsidies, LDCs enjoy exemptions from this regulation.

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