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LDC Graduation Calls For Accelerated Development

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56 views

LDC Graduation Calls For Accelerated Development

The service providers are duly paid for their service and the social service organizations and government should come forward to recognize the excellence of services beyond the 'responsibility' and 'paid for' to encourage others to provide service about self for mankind. http://today.thefinancialexpress.com.bd/views-reviews/ldc-graduation-calls-for-accelerated-development-1520169366

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Mohammad Shahjahan Siddiqui
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http://today.thefinancialexpress.com.

bd/views-reviews/ldc-graduation-calls-for-accelerated-
development-1520169366

LDC graduation calls for accelerated development

MS Siddiqui | March 05, 2018

The United Nations (UN) has divided the countries into three categories:
developed, developing and the least developed country (LDC) on the basis of
economic and social indicators. The level of development of a country is
considered to be based on how socially, culturally and economically
advanced that country is. The following three criteria are used by the
Committee for Development Policy (CDP) to determine the LDC status: (a)
Per capita income (gross national income per capita), (b) Human assets
(indicators of nutrition, health, school enrolment and literacy), and (c)
Economic vulnerability (indicators of natural and trade -related shocks,
physical and economic exposure to shocks, and smallness an d remoteness).

The LDCs are officially designated by the General Assembly of the UN on the
basis of CDP recommendation. The LDCs have a lower position in the global
society and are listed as the countries trying to upgrade their status and
come out of a group of the poorest countries across the world. In order to
graduate to the developing country status, the per capita gross national
income (GNI) should be US$ 1,230 or above the income of US$ 2,460. The
Human Asset Index (HAI) should be of 66 per cent or a bove and the
Economic Vulnerability Index (EVI) 32 or below.

The W orld Bank (W B), on the other hand, has classified the countries on the
basis of level of development in a different way. W B divided into: low income
countries (LIC) - having GNI per capita of $1,045 or less, medium income
countries (MIC) - with GNI per capita of more than $1,045 but less than
$12,746, and high income countries (HIC) -having GNI per capita above US$
12,746.

Bangladesh was a low-income country and has just crossed the income le vel
of US$ 1,045 per capita and become lower middle income county as defined
by the W B. It is also in the process of graduating from the LDC to a
developing country as categorised by the UN.

The indicators of LDC are measureable. The share of exports in th e gross


domestic product (GDP) is lower in the LDCs than in the low -income
countries. Productivity is low in the LDCs, particularly with respect to labour.
This is due to low levels of both physical and human capitals. Moreover, total
factor productivity is low, presumably due to factors such as out -dated
technologies and inefficient allocation of resources across sectors.

The developed and developing countries and the donor agencies extend a
variety of benefits to the LDCs. The main international support c an be
grouped under three categories: official development assistance, measures
related to trade and other. These benefits fall into four main areas: (a)
preferential market access, (b) special treatment regarding the W orld Trade
Organisation (WTO)-related obligations, (c) Overseas development
assistance and other forms of development financing, and (d) technical
cooperation and other forms of assistance.

These benefits are not granted by the UN or the WTO, but other countries on
preferential treatment. These are generalised system of preferences (GSP).
EU names the scheme as everything but arms (EBA). The GSP is subject to
WTO law, in particular to the GATT and the "Enabling Clause," which allows
for an exception to the WTO's most -favoured nation (MFN) principle.

Under the WTO agreements, countries cannot normally discriminate between


their trading partners. This principle stipulates equal treatment for all WTO
members. The objective of the GSP is (a) to increase export earnings; (b) to
promote industrialisation; and (c) to accelerate rates of economic growth.
These laid the foundation for the launching of the GSP. It is non -reciprocal
and non-discriminatory system of preferences in favour of the LDCs. The
preferential treatment is unilateral decisions of dut y-free access for exporters
from the LDCs to pay lower tariffs or to have duty -free and quota-free
(DFQF) access to the developed and developing countries' markets.

The GSP schemes are determined unilaterally by the preference -giving


countries, which also unilaterally modify the preferences, product coverage
and beneficiary countries. The preference -receiving countries play no part in
the determination or modification of the schemes.

The product coverage includes most of the agricultural and industrial expo rts
- albeit a few and often notable exceptions. The beneficiaries of non -
reciprocal preferential schemes have to meet certain and often non -economic
conditions to be designated as such and to maintain the beneficiary status.

Individual GSP schemes are applied by the developed countries and some
others belonging to Eastern Europe and made available to most of the
developing countries. USA is asking Bangladesh to improve working
condition, trade union rights and other conditions at workplace for granting
again the GSP facilities. EU is also asking for improvement of working
condition in garment industry and also for improvement of environmental
protection from garment-related pollution to continue the EBA status.

Bangladesh and some other countries are in the process of graduating to


developing countries from the LDC status. The most visible trade -related
implication of LDC graduation is the loss of preferential market access, such
as the EU's EVA initiative and of the concessions granted to the LDCs under
the global system of trade preferences (GSTP) among the developing
countries. The impact on a graduating country's exports of losing preferential
market access is determined by three main factors: (a) the coverage and
structure of preferential schemes, (b) th e product composition of exports,
and their distribution across markets; (c) the benefit of tariff concession.

The LDCs are now enjoying the tariff concession and also exempted for the
trade-related aspects of intellectual property rights (TRIPS) agreement . If the
countries lose the facilities, that'll result in rise of the cost of products and
administrative burdens.

Potential benefits of the duty-free and quota-free access include: (1) higher
prices of existing exports, (2) price gains from diverting sale s from other
export markets or domestic markets, (3) increased value added through
expansion of production. The graduation from LDC will gradually close down
these preferential trade opportunities.

The developing countries and other development agencies ta ke into


consideration the status of the recipient countries for loan, grant etc. The
LDCs or other low-income countries (LICs) get loan at softer terms and
conditions compared to the loan provided under the same conditions to a
middle-income country (MIC). The development progress underlying
graduation should, in principle, give rise to a progressive reduction in the
need for ODA and other concessional financing during the course of the pre -
graduation period.

According to the Article 33 of TRIPS agreement, patent protection will be


granted for innovating company that will last at least 20 years from the date
of the patent application filed. So, TRIPS provide incentive for innovation.
Under the Article 66 of TRIPS agreement, developed member countries shall
provide incentives to enterprises and institutions in their territories for the
purpose of promoting and encouraging technology transfer to the least -
developed member countries in order to enable them to create a sound and
viable technological base. The LDCs are exempted from Article 33 and hence
allowed for production and export of pharmaceuticals up to 2033. Bangladesh
will lose these facilities by 2027 with finally graduating from LDC.

As a UN member, Bangladesh is expected to graduate concurrently from a n


LDC to a developing country while the W B has already upgraded Bangladesh
to a lower-middle income economy. The option for concessional financing will
no longer remain available after final confirmation of graduation from an LDC
to a developing country. Bangladesh will face the challenge of withdrawal of
GSP facilities from Europe, Canada, Japan, Australia and some other
markets.

The likely impact of Bangladesh's loss of preferential facilities in major


export destinations will be felt on the export, susta inable GDP growth and
other socio-economic indicators e.g. poverty and employment generation as
the cost of overseas funds will increase. The transition process has to be
smooth in a gradual and predictable manner so that it does not disrupt the
development progress of the graduating country. Otherwise, Bangladesh will
lose exports between 5.5 per cent and 7.5 per cent as per an UNCTAD
projection in 2016.

Graduation from LDC has a more direct impact on financing for climate
change adaptation as graduating countries lose access to LDC-specific
funding sources, most notably the LDC Fund. In principle, 50 per cent
financing from the Green Climate Fund is to be allocated to particularly the
vulnerable countries, including the Small Island Developing States (SIDS )
and African States as well as the LDCs. However, the graduating Asian LDCs
would not benefit from this target while the graduating African countries and
the SIDS would need to compete with the better -resourced ODCs within
these categories. They will compete with other categories of countries for the
green funds.

The UN has taken the matter of disruption of development and decided to


make the process after graduation in a predictable manner, so as not to
disrupt the development progress of the graduating c ountry, pursuant to the
general assembly resolutions 59/209, 66/213 and 67/221, among others.

The CDP Secretariat has confirmed that Bangladesh will meet the criteria for
graduation and they will consider it during the CDP's triennial review of the
LDCs in March 2018. Therefore, Bangladesh could be recommended for
graduation at the following triennial review in 2021. The transition period is
of three years. However, monitoring of development progress by the CDP is
limited to a maximum of nine years. Transit ion period report procedures are
three years after the general assembly takes note of the CDP
recommendation of graduation. The graduated country will report annually to
the CDP on the implementation of the smooth transition strategy for three
years for two triennial reviews on implementation of the smooth transition
strategy. The CDP is used to monitoring development progress in its annual
reports to the UN Economic and Social Council (ECOSOC). On the basis of
the procedure, Bangladesh will hopefully gradu ate with final confirmation of
acceptance by the UN following the recommendation of ECOSOC in the UN
General Assembly of 2027.
Bangladesh should now be prepared for the probable impact of graduation
and build capacity to retain the export market and enhanc e internal capacity
to finance development programmes. The country should go for bilateral free
trade agreement with the buying (importing) countries and also for sourcing
of raw materials to maintain the competitive price for export and also try to
retain duty-free market. It should also work on improving internal revenue
collection, capacity building, etc.

MS Siddiqui is a Legal Economist.

mssiddiqui2035@gmail.com

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