The ministry of commerce is devising a mechanism on how to keep the country's export sector competitive without providing cash incentives in the post-LDC era, officials said.
The idea is being worked out since Bangladesh will lose the eligibility for providing cash incentives to the export sector after graduating from the least developed countries (LDC) status by 2024, they added.
"As a member of the LDC group, currently we can provide cash support to keep our export-oriented industry competitive. But after the graduation, we have to withdraw the incentives facility," a senior official Commerce Ministry official told the FE.
The official said that after graduation to the developing country status, the rules and regulations of the World Trade Organisation (WTO) would not allow Bangladesh to provide cash incentives to the export sectors.
In that case, he said, alternative options in line with the WTO provisions have to be explored to help the export sector maintain momentum.
A former official of the WTO cell at the Commerce Ministry said as an LDC Bangladesh presently can provide cash incentives to the industrial goods exports in line with the global rules and regulations.
Besides, against the agricultural products export support can be given for their marketing and transportation purposes instead of paying cash incentives.
He said once the eligibility for paying cash incentives is over the competitiveness have to be kept intact by lowering the cost of production and cost of doing business.
"Raising productivity and compromising profits can be other options to stay competitive in the post-LDC regime," the official argued.
The official said the LDC graduation would not bring major challenges for Bangladesh if appropriate preparation can be taken from now.
He cited the example of phase-out of Multi-Fibre Arrangement (MFA) in 2005, which Bangladesh's garment sector tackled successfully.
Under the MFA, like many other poor countries, Bangladesh had exported garments to the developed countries in a guaranteed quota regime, helping Bangladesh's apparel sector prosper.
Due to the MFA phase-out, Bangladesh's apparel industry was feared to suffer the most facing competition from countries like China.
But the official said by developing strong backward linkage industry and riding on its cheap labour Bangladesh addressed the challenge successfully and raised apparel export significantly in the following years.
"We have to take that kind of internal preparation to stay competitive in the post-LDC era," he said.
Bangladesh presently provides more than Tk 45 billion per annum as cash incentives to 35 export-oriented sectors.
The readymade garments, the top export-earner, gets the big chunk of the allocation for cash incentives, followed by jute and jute goods, leather goods, light engineering products, frozen fish, and agricultural products.
