Worries mount for businesses as Bangladesh nears LDC graduation

Bangladesh is poised to graduate from the United Nations’ Least Developed Country (LDC) status in 2026, marking a significant milestone in its development journey. As per media reports, the interim government has also reaffirmed that the country’s official graduation is expected to take place in November 2026, as scheduled.

It may be mentioned here that Bangladesh joined the group of LDCs in 1975 and, after a 50-year journey, is now set to graduate to developing country status, having met all the necessary criteria.

According to reports, currently, 14 LDCs are at various stages of the graduation process, with four set to graduate by 2027. Bangladesh, Lao PDR, and Nepal are scheduled to graduate on November 24, 2026, followed by Solomon Islands on December 13, 2027. Cambodia and Senegal are expected to graduate on December 19, 2029. The remaining countries in the graduation pipeline include Rwanda, Uganda, the United Republic of Tanzania, Kiribati, Tuvalu, Comoros, Djibouti, and Myanmar.

While this transition is a moment of national pride, it also presents a complex set of challenges—particularly for Bangladesh’s key export sector, the readymade garment (RMG) industry, which has long been the backbone of the country’s economy.

Many from the business community are deeply concerned about the timing of this graduation. Some argue that it may be premature and potentially damaging, especially considering the uncertainties in the global economy, so much so that a prominent business leader reportedly described the scheduled graduation as a “suicidal decision” for the private sector, even as he warned moving ahead without adequate preparation could mean throwing away existing advantages.

As such, there have been growing calls from industry leaders and trade bodies urging the government to seek an extension of the transition period—ideally by six more years—before officially moving out of the LDC status.

One of the major concerns revolves around the loss of preferential trade benefits that Bangladesh currently enjoys as an LDC, particularly access to duty-free markets. According to a report by the United Nations, graduation from LDC status will result in reduced preferential market access, including the potential loss of the Generalized Scheme of Preferences (GSP) that currently allows Bangladesh to export a large volume of goods to the European Union (EU) without paying tariffs.

This is a matter of major concern—the EU, after all, is Bangladesh’s largest export destination.

Currently, under the GSP framework, Bangladesh’s exports to the EU enjoy zero tariffs. Post-graduation, however, the scenario changes drastically. After the three-year transition period ends, the tariff on Bangladeshi exports to the EU could rise to 9.6 per cent under developing country preferences, or even up to 12 per cent at the general rate. Other key markets would also impose higher duties: Canada’s tariff could jump from 16 per cent to 18 per cent, and Japan’s from 7.4 per cent to 12.8 per cent. These hikes are expected to erode the competitive pricing edge Bangladeshi currently enjoys, potentially pushing buyers to more cost-competitive destinations.

While Bangladesh cannot independently decide to remain in the LDC category, as per experts, there is a process through which it can request a deferral. This process is overseen by the United Nations Committee for Development Policy (CDP), which conducts triennial reviews to determine LDC eligibility. These reviews assess countries on three key criteria: Gross National Income (GNI) per capita, the Human Assets Index (HAI), and the Economic and Environmental Vulnerability Index (EVI).

Bangladesh reportedly met all three criteria in both the 2018 and 2021 reviews, solidifying its eligibility for graduation. The country already received a two-year extension—from 2024 to 2026—citing the disruptions caused by the COVID-19 pandemic.

That said, deferrals, though rare, are not without precedent. Nepal, for example, secured a delay due to the 2015 earthquake and again during the 2020 global pandemic. Vanuatu’s graduation was postponed in the wake of the destruction caused by Cyclone Pam. These examples suggest that a case for further extension can be made under extraordinary circumstances.

However, some economists caution that delaying graduation could have unintended consequences. A deferral may provide valuable breathing room for domestic industries to adapt and strengthen themselves, but it could also slow the momentum needed for broader economic reforms and structural diversification. These reforms are essential if Bangladesh hopes to sustain long-term growth and become more resilient to external shocks, they explained.

Nonetheless, trade bodies within the country appear to be actively exploring all available avenues to safeguard their interests. The Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA), one of the most influential trade groups in the sector, last month reportedly held discussions with representatives from the German Embassy to highlight the potential fallout from LDC graduation.

During the meeting, BKMEA reportedly stressed that the country’s industries are not fully prepared for the transition and appealed for support should the government decide to formally request a postponement.

For now, the question of whether Bangladesh will push for a delay—and if so, whether such a request will be accepted—remains open. What is clear, however, is that the impending graduation carries far-reaching implications, especially for the readymade garment sector, which is responsible for over 80 per cent of the country’s exports and employs millions of workers, most of them women.

As the clock ticks toward November 2026, Bangladesh faces a difficult balancing act. On one hand, the symbolic value of LDC graduation signals growing economic maturity and improved development indicators, while on the other, the looming loss of preferential trade terms could undermine the very industries that helped the country reach this threshold in the first place.

ALCHEMPro News Desk (DR)