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LDC graduation: Improving economic competitiveness

Total net official development assistance to Bangladesh is worth around US$2.57 billion (in 2015). The largest bilateral donor is Japan who provided $8.93 million as grant aid, $34.4 million as technical cooperation assistance and $422 million as loans (2015). USAID and other US agencies provided a total of $239.14 million in 2016 - primarily spent on the health sector. The remaining aid flow originated mainly from multilateral sources, EU and UK. To put this in perspective, total ODA represents 1.32 per cent of GDP and 7.37 per cent of exports of goods and services. Technical cooperation grants amount to 0.92 per cent of GDP (2015). In other words, aid dependence is low but remains useful at the 'margin'. However, the bulk of ODA is unrelated to LDC status while some of the technical cooperation and grants are possibly related to LDC membership. Graduation will not therefore substantially affect aid flows to Bangladesh.

Bangladesh benefits from a variety of preferential market access arrangements, and many of these are in fact attributable to its LDC status. The most important of these is its access to the EU market under the "Everything but Arms" (EBA) initiative, which provides DFQF treatment to its RMG exports. Under EBA all exports from Bangladesh are eligible for duty free treatment, subject to compliance with product-specific ROO. Inclusion of Turkey in the EU Customs Union also means that Bangladesh has similar access to the Turkish market as well. Access to the EU market has played a crucial role in the continued and sustained success of the sector.

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