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BD needs to attract private sector and FDI, SANEM

To acquire the eligibility of graduation from the LDC (Least Developed Country) status, Bangladesh is going to be able to allure larger foreign direct investment (FDI) for its improved country-image and higher rating for investment by international rating agencies.

Since Bangladesh has proudly met all three criteria for LDC graduation in the first review in March 2018 and hoped to meet the criteria in the second review in 2021, then the country will finally graduate from the LDC status in 2024 and consign a number of benefits.

Speakers opined while South Asian Network on Economic Modeling (SANEM) celebrated its four years of “Thinking Aloud” on the title of “Looking beyond LDC Graduation” at Golden Tulip the Grand Mark in Dhaka on 12 May.

Dr. Selim Raihan, Executive Director of SANEM
Figure: Dr. Selim Raihan, Executive Director of SANEM showed a presentation at the program.

Dr. Selim Raihan, Executive Director of SANEM and Professor of Economics, University of Dhaka chaired the discussion and made a presentation on “Looking beyond LDC Graduation” along with Sunera Saba Khan, and Iffat Anjum Senior Research Associates.

In his presentation, Dr. Selim stated that a number of risk factors for Bangladesh associated with its graduation from the LDC status.

Bangladesh needs a wide obtainment to face feasible investment policies, efficient resource allocation among sectors, better governance, gender equity and sustainable climate change to equipage the risk of LDC graduation.

Dr. Selim showed that if Bangladesh can officially graduate from the LDC status in 2024 then the country will lose the preferences in the markets of European Union, Canada, Australia, Japan, India, and China in 2027. It might lead to an annual retrenchment in total exports of Bangladesh by 11 percent, which would be equivalent to around US$ 6 billion as per the current projection of export growth.

Since Bangladesh has already graduated from the World Bank’s ‘low-income’ category to ‘lower-middle income’ category, the augmentation for loans at lower interest rates would be limited and this may result in balance-of-payments problems.

Later, graduation could have a more significant effect on access to Official Development Assistance (ODA) and other concessional financing, he added.

Bangladesh’s private sector investment and foreign direct investment remain supine due to poor competitiveness, delays of implementation of critical projects, institutional inefficiency, and costly projects.  Since the 7th FYP targets 8 percent real GDP growth rate by 2020 and there are aspirations to have 9 percent growth rate by 2030, these requires huge investment with the assumptions of incremental capital-output ratio (ICOR) and meet growth investment-GDP ratio rising annually by 0.7 percentage points which is more than two times higher than the current annual percentage points rise (0.3).

Dr. Selim highlighted that the country needs to attract large volumes of the private sector and foreign direct investment through improvement of trade competitiveness, increment in physical and social infrastructures, quality of economic and political institutions, reforms in trade policy, monetary and fiscal policies, industrial policy and quality service delivery by the public institutions.

Between 2013 and 2016-17 the average annual GDP growth is 6.6 percent, but average annual jobs growth is 0.9 percent. Youth unemployment rate, gender wage gap increased. Manufacturing and female manufacturing jobs declined by 0.77 million and 0.92 million respectively, he added.

The aim of SANEM is to promote the production, exchange, and dissemination of basic research knowledge in the areas of international trade, macro economy, poverty, labor market, environment, political economy and economic modeling.

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