Delays in structural reforms could gradually erode Bangladesh’s competitiveness and resilience, researchers warned at a policy dialogue, urging alignment of trade, industrial, and macroeconomic policies to sustain growth.
The warning came at a knowledge dissemination event organised by South Asian Network on Economic Modeling (SANEM) with support from the Australian Government’s Department of Foreign Affairs and Trade (DFAT) in Dhaka on Sunday, according to a press release.
University of Dhaka Economics Professor and SANEM Executive Director Dr Selim Raihan presented six policy papers covering LDC graduation, trade policy, free trade agreements, the leather sector, macroeconomic outlook, and geopolitical risks.
“The cost of inaction is not immediate collapse, but the gradual erosion of competitiveness, resilience, and opportunity,” he said.
The research said Bangladesh’s graduation from Least Developed Country status in 2026 should be treated as an opportunity, but the Smooth Transition Strategy lacks focus and suffers from a “free-riding problem.”
Debates over deferral risk distracting from urgent reforms, Raihan said, adding any extension must be used with clear sequencing and prioritisation.
The papers identified structural weaknesses in fiscal space, institutions, and export diversification, calling for stronger private sector empowerment.
On macroeconomic outlook, stabilisation alone will not restore growth, with slowing expansion, high inflation, weak investment, and financial sector vulnerabilities persisting.
A key finding was the disconnect between trade and industrial policies, constraining diversification and movement up global value chains, alongside Bangladesh’s high tariffs and heavy reliance on readymade garments compared with more diversified economies such as Vietnam.
On trade agreements, Global Trade Analysis Project modelling showed potential welfare losses after LDC graduation due to reduced market access, although deals such as Regional Comprehensive Economic Partnership accession and a China free trade agreement offer export gains.
However, domestic reforms such as tariff rationalisation, customs modernisation, and productivity improvements would deliver stronger benefits than trade deals alone.
The leather sector was flagged as a missed opportunity despite around $1 billion in exports and nearly 200,000 jobs, remaining stuck in low-value crust leather due to compliance failures, governance gaps, and lack of Leather Working Group certification linked to problems at the Savar Central Effluent Treatment Plant.
Participants said institutional failures have prevented the sector from becoming the next readymade garments success.
On geopolitical risks, simulations showed a prolonged Middle East conflict could cut GDP by up to 2.9 per cent, reduce exports by 5.8 per cent, and raise prices by 6.1 per cent due to higher energy costs, disrupted logistics, and lower remittances.
Participants called for energy diversification, improved logistics, and broader export bases to build resilience.
Asian Development Bank Economist Rabiul Islam Rabi stressed prioritising structural reforms, while World Bank Senior Public Sector Specialist Hosna Ferdous Sumi cautioned against repeating failed CETP fixes.
Centre for Policy Dialogue Distinguished Fellow Professor Mustafizur Rahman said Bangladesh’s export basket remains largely unchanged and urged stronger foreign direct investment integration.
DFAT Deputy High Commissioner Clinton Pobke said current pressures could create momentum for reforms, particularly in revenue mobilisation.
Ministry of Commerce Additional Secretary for Export Md Abdur Rahim Khan said better alignment between export and import policies is needed, noting untapped sectors such as plastics and overreliance on cotton.
Raihan said aligning policies and investing in sectoral transformation can turn Bangladesh’s transition into an opportunity.
