ECONOMIC diplomacy is going through a vital transition. Over three decades, the strategy focused on achieving macroeconomic stability, leveraging preferential market access as a least developed country and relying on low-cost labour in the apparel sector. That approach is now hitting its limits. As Bangladesh prepares to graduate from the bloc of least developed countries, preferences will decline, the domestic cost structure will change and global trade will become more fragmented.
In response, economic diplomacy is shifting focus across five interconnected areas: securing post-graduation market access, diversifying markets and products, attracting efficiency-seeking foreign direct investment into infrastructure-ready zones, strengthening regional connectivity and mobilising climate and development finance. The approach is more proactive, more regional and more rules-based than before.
Preference dependence to rules-based access: The primary challenge is the loss of preference after graduation from the least developed countries. For 20 years, duty- and quota-free schemes in the European Union, the United Kingdom and other niche markets have supported Bangladesh鈥檚 exports, especially in the apparel sector. Now, economic diplomacy focuses on obtaining GSP+ in the European Union, which requires meeting standards in labour, environment and governance, as well as similar schemes in the United Kingdom and bilateral or regional deals that maintain competitiveness in the United States, Asia and the Pacific.
Product and market diversification and supply chain: Economic diplomacy focuses on three diversification strategies. The first involves expanding product ranges within textiles, technical textiles, artificial fibre apparel and higher-value design-to-delivery services, aiming to lessen dependence on cotton cycles and low-end price wars. The second targets sectors such as pharmaceutical products, footwear, leather goods, agricultural processing and information and communications technology and IT-enabled services. The third emphasises market diversification, with diplomacy increasingly active in East Asia, the Middle East and emerging markets across Africa beyond the European Union and North America.
FDI via 鈥榩lug-and-play鈥� zones: The diplomatic approach to investment is shifting from broad roadshows to targeted, sector-specific initiatives connected to economic zones. The plan involves offering 鈥榩lug-and-play鈥� infrastructure, such as power, water, logistics and streamlined approvals, within specialised zones, supported by bilateral investment agreements and investment protection guarantees. Japan鈥檚 involvement in industrial zones and connectivity, Korean and Chinese interest in light manufacturing clusters and the growing Gulf investor demand for logistics, ports and services indicate a hub-and-spoke model.
Connectivity and regionalism: Bangladesh is located at the crossroads of South and Southeast Asia and its diplomacy is increasingly aimed at turning that geographic advantage into economic benefits. Three important corridors stand out. First, the India-Bangladesh economic corridor, which includes ports, railway connections, inland waterways, and the use of Bangladeshi ports by India鈥檚 north-east, can generate revenue from transit by setting strategic prices and managing political perceptions. Second, the Bay of Bengal rim through BIMSTEC offers quick wins through lighter cooperation on customs, motor vehicles and coastal shipping, even without a full free trade agreement. Third, potential links to Southeast Asia, whether through a future regional comprehensive economic partnership or bilateral trade deals, will support supply-chain resilience and access to essential components.
Climate finance and shift towards green competitiveness: Economic diplomacy involves aligning climate goals with industrial strategy. The main priorities include securing larger allocations of concessional climate finance and loss-and-damage funds, negotiating programme support for green transformation in export sectors and ensuring the recognition of Bangladesh鈥檚 sustainability improvements in buyers鈥� procurement policies. If factories can certify near-net-zero energy use or closed-loop water systems, tariff preferences become less important because brand compliance results in higher price premiums and more durable relationships.
Migration, skills and remittances: Remittances act as a macro-anchor, but the makeup of migrant flows is changing. Diplomatic missions are not only aiming for higher quotas in Gulf Cooperation Council and Southeast Asia but also seeking better skill matches and protections, which boost earnings and reduce repatriation risks. The focus is increasingly on 鈥榮kills-embedded migration鈥�: aligning training standards at home with host-country certification so that Bangladeshi workers can access higher-wage roles in construction technology, health care, hospitality management and shipbuilding.
Hedging major-power competition without causing paralysis: Economic diplomacy practice involves 鈥榤ulti-alignment for development,鈥� strengthening ties with the United States and the European Union for market access, compliance and capital markets; with Japan for high-quality connectivity and logistics; with China for manufacturing foreign direct investment and infrastructure; and with Gulf partners for energy and services. The challenge is in sequencing projects so that no single partner dominates a strategic asset in maintaining transparency and debt sustainability to avoid reputational or fiscal risks.
Risks and scenarios: Three risks could halt the momentum. A prolonged foreign-exchange restriction would limit the import of inputs and slow down investment. Incidents of labour or environmental non-compliance could lead to trade restrictions as preferences are declining. Additionally, regional security or geopolitical shocks could block shipping lanes and energy supplies. To address the issues, economic diplomacy needs to build buffers: diverse suppliers and buyers, credible macroeconomic frameworks and shuttle diplomacy to keep trade routes open during crises.
Bangladesh鈥檚 economic diplomacy is shifting towards a more deliberate, rules-based and regionally integrated strategy. If diplomacy and domestic reforms advance together, Bangladesh can negotiate the post-graduation landscape from a position of strength and turn its geography and demographics into a lasting geo-economic advantage.
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Dr Nasim Ahmed ([email protected]), who holds a PhD in public policy from Ulster University, UK, is an associate professor of public policy at the Bangladesh Institute of Governance and Management.