Ambassador and Head of Delegation of the European Union (EU) to Bangladesh Charles Whiteley on Tuesday said preparing for quick access to GSP Plus in the EU market is the next big factor for Bangladesh's future economic development.
The graduation from LDC status in 2026 would also mean graduation from the current Everything but Arms (EBA) unilateral trade preference given to Bangladesh by the EU, which is Bangladesh's largest export destination.
"The graduation would imply a substantial trade loss and serious shock to the country's GDP, which could be mitigated through inclusion in the GSP+ arrangement," said the EU envoy while speaking at a programme hosted by International Business Forum of Bangladesh (IBFB) at a city hotel.
US Ambassador to Bangladesh Peter Haas, founding President of IBFB Mahmudul Islam Chowdhury, Chairman of Policy Research Institute of Bnagladesh Dr Zaidi Sattar, IBFB President Humayun Rashid and its Vice President MS Siddiqui also spoke.
Attracting foreign direct investment and technological know-hows would be key to reduce dependency on single basket RMG exports and move towards industrial diversification, said ambassador Whiteley.
For this to happen, he said, a level playing field for both local and foreign sectors is necessary. "Addressing the woes of existing foreign investors is also important. We continue to engage with the government authorities in this area in our bilateral business dialogue."
There are some quite stringent requirements to GSP Plus accession and the great thing is Bangladesh has already ratified the 32 conventions that are now required for GSP Plus membership, said ambassador Whiteley.
"Now the next stage is implementation. This in particular refers to implementing the National Action Plan for the Labour Sector, which the Government has agreed with the EU," he said.
Implementing this National action plan on labour reform would help to keep Bangladesh ahead in the race in meeting the emerging sustainability requirements in the EU market, including the new Due Diligence Directive, which will legally require EU companies to clean their supply chains from labour and environmental violation, said the EU envoy.
"We continue to engage with the Government of Bangladesh and support actions and tools to navigate these challenges," he said.
The EU envoy hoped to open a European Chamber of Commerce in Bangladesh very soon and such a body, which already exists in Vietnam, India and Singapore, has been missing in Bangladesh.
Once it is operational, the envoy said, it will be another locus for advising and supporting European and Bangladeshi businesses to prepare for GSP Plus and the legislative changes in the pipeline. "It would be a useful addition to boost EU-Bangladesh commercial relations."
In Fiscal year 2021, EU was the largest source of net FDI flows to Bangladesh, according to the Bangladesh Bank.
A recent analysis by a local think-tank is showing that the net FDI flow from EU countries reached $3.5 billion over the past 5 years, which represents around a quarter of all FDI flows in this period.
"EU FDI in Bangladesh looks promising, but compared with $6 billion EU investment in Vietnam during the same period, it is far from being ideal for a country that needs massive FDI inflow to avoid a middle income trap and continue economic upgrading," said the EU envoy.
There are both direct and indirect barriers that limit the potential of EU investment in Bangladesh, he said.
"Barriers to foreign investment are intrinsically the barriers to Bangladesh's economic development," said the EU envoy.