Bangladesh, a nation of resilience and remarkable economic growth, stands at a pivotal juncture. The ready-made garment (RMG) industry, a dominant global player and the driving force behind the country’s economic transformation, just got a three-year breather as it stood to lose duty-free access to major markets under the Least Developed Countries (LDC) preferential trade schemes.
This extension of duty-free market access presents a golden opportunity for Bangladesh. By leveraging this window effectively, the country can consolidate its economic gains, diversify its export base, and solidify its position as a global trade player. Focusing on strategic investments in infrastructure, skill development, and industry diversification will be crucial for Bangladesh to navigate the path towards becoming a full-fledged middle-income nation.
The recently concluded World Trade Organization’s (WTO) thirteenth Ministerial Conference decided to extend duty-free access for another 3 years, until 2029. This resolution, endorsed by 166 members of WTO, was approved after intense rounds of negotiations carried on over the last 5 years.
But, what are the challenges ahead and how can the country turn this into an opportunity for growth? Let’s first see how the garment industry has emerged as a cornerstone of growth.
With a workforce exceeding 4 million, primarily women, the RMG sector contributes significantly to national exports, accounting for around 84% of total export earnings in 2022 (BGMEA). This dominance is attributed to factors like competitive labour costs, a skilled workforce, and duty-free access to major markets.
Over the past few decades, Bangladesh has emerged as a success story in development. Strategic investments in infrastructure, education, and the garment industry have fuelled impressive economic growth averaging over 6% annually. The country has witnessed a significant decline in poverty rates, with the extreme poverty headcount ratio dropping from 41.5% in 1992 to 10.5% in 2019 (World Bank). This progress is further reflected in improved life expectancy, literacy rates, and gender equality indicators.
Challenges of Graduation
Graduation from LDC status necessitates a recalibration of economic strategies. One of the primary concerns is the potential loss of duty-free market access enjoyed by Bangladesh under various trade agreements. This could place Bangladeshi exports at a disadvantage compared to competitors from other developing countries. Estimates suggest that without duty-free access, Bangladesh could face annual export losses exceeding $7 billion.
Having achieved significant progress in poverty reduction and human development indicators, the country is on track to graduate from LDC status by 2026. This graduation signifies a milestone in its journey towards becoming a full-fledged middle-income developing nation. However, the transition also presents potential challenges, particularly regarding continued competitiveness in the global trade arena.
