As Bangladesh too prepares to graduate from the LDC category, it does not have to wonder what comes next. Since 1994, eight countries have completed the transition. Their experiences show what worked and what did not, and what Bangladesh can expect. Bhutan, one of Bangladesh’s neighbouring counties, lost their duty-free trade benefits soon after graduating. Their experience is an open letter and a roadmap for Bangladesh as it prepares for its own ascent.
The first lesson is a humbling one: None of these countries resembled Bangladesh. A WTO study found around 70% of Bangladesh’s exports receive special trade benefits because it is an LDC. Bhutan’s transition in 2023 was relatively smooth because less than 10% of its exports depended on LDC trade preferences.
Bhutan’s economy primarily relies on hydropower exports to India under commercial agreements rather than LDC preference. The lesson is clear: The best protection is not being dependent on LDC trade benefits. Unfortunately, Bangladesh has yet to build that sort of resilience.
The Maldives points to another important lesson. When it graduated from the LDC list in 2011, its tourism industry was booming. But its fishing industry lost its duty-free access to the European market resulting in high tariffs, making it harder for them to compete.
This illustrates the cost of preparing too late. Cabo Verde, on the other hand, took a calculated approach. Prior to graduating in 2007, it negotiated with the EU for an extension to keep its duty-free access and leveraged that time to fulfill the requirements to join the EU’s GSP+ trade scheme.
As a result, Cabo Verde continued to receive preferential market access even after graduation and remains in the scheme today. Same starting point, different outcomes. Not due to difference in size or wealth -- but rather due to strategic preparation.
The third lesson comes from Samoa, whose strategy began five years before its 2014 graduation, by quietly persuading individual partners like Japan and the United States, to keep granting duty-free access even after its LDC graduation.
Bangladesh appears to be using a similar strategy through its newly formed trade agreement with Japan: Before time runs out, the country will have to secure its market access one country at a time.
Perhaps the most important lesson comes from a country which has not yet graduated. In 2020, the EU suspended Cambodia’s duty-free access on its exports over human rights concerns. About one-fifth of its exports -- including garments, footwear, and travel goods worth about $1 billion -- lost its duty-free access within six months.
The impact was severe. Factories closed and workers lost their jobs. But Cambodia bounced back better than expected. Cambodia responded by redirecting exports to the United States and signing free-trade agreements with China and South Korea. By 2026, the State of Fashion report by McKinsey and The Business of Fashion identified Cambodia as an emerging sourcing hub.
Bangladesh has two lessons to learn from this:
First, trade benefits come with conditions. As demonstrated by Cambodia, the EU’s EBA (Everything But Arms) scheme requires countries to meet certain human rights standards, and failing to meet those standards can result in revoking those benefits.
Second, garment industries can survive losing market access, but only if it is prepared in advance. Cambodia used the time after its setback to diversify its export markets and is due to graduate in 2029.
Our country is at an advantage that Cambodia did not have: To prepare before a crisis hits.
It is of utmost importance that Bangladesh begins preparing now, for the market it will graduate into is very different from the one it grew up serving. The global apparel trend has shifted with shoppers now relying more on thrifted fashion, spending less on new apparel.
Although the market is currently worth nearly $ 2 trillion, that growth is slowing. Fashion brands are rethinking how they source their products. According to this year’s State of Fashion survey, tariffs are now the US’s biggest concern.
To tackle this, they have decided to distribute the risk by spreading production across multiple countries instead of relying on a single supplier. Companies like Zara, for instance, are moving their production closer to Europe, their main market.
Trade rules are becoming more stringent. Due-diligence and traceability laws require exporters to provide proof of meeting standards on labor wages, green production and product origin. Demonstrating compliance is becoming as important as offering competitive prices.
But Bangladesh’s real strength lies elsewhere: A large and experienced garment industry, nearly 300 internationally certified green factories, and a skilled workforce that few competitors can match.
The challenge now is to address its remaining weaknesses with faster production, greater use of man-made fibres, and strengthening the industry of handwoven fabric manufacturing.
Whether we look at the experiences of previous LDC graduates or the changing global apparel industry, the conclusion is the same: The real test is not LDC graduation but staying competitive without the advantage of special treatment like duty-free trade.
Countries like Cabo Verde, which prepared early, transitioned smoothly. Those that delayed, like the Maldives, paid the price. Cambodia faced a greater challenge, yet prevailed.
Bangladesh has been given the syllabus, the case studies, and the tentative timeline. It has the advantage that the others did not. There is still time to prepare, and few excuses if the opportunity is missed.
Abir Mymuny is a former senior manager, Sustainable Finance, City Bank PLC and Consultant in Climate Finance, Circular Capital Analytics LLC, USA.
