EXCLUSION OF GENERALIZED SYSTEM OF PREFERENCES (GSP): NEGATIVE IMPACT ON FOREIGN DIRECT INVESTMENT (FDI) FOR BANGLADESH

The paper contains about the Generalized System of Preferences (GSP) that is a trade scheme under which the United States (US) allows import of more than 3,500 goods from least developed and developing countries with lower or zero duty benefit. Specifically, the paper gives information about the GSP program, which is mainly for the Ready-made Garments [RMGs] sector in Bangladesh. But, it has lost GSP advantage from US market since June 27, 2013 due to lack of labor rights in Bangladesh, for example, Rana Plaza and Tazreen Fashion Collapse. As a result, the most troubled sector of recent times is Ready-made Garments [RMGs] sector of Bangladesh which is the backbone of our economy. In the RMG sector, there are about 5,000 garments factories scattered across the country, and almost 78% of our foreign earnings come from this sector [1,2]. The study also provides information about the exclusion of GSP for Bangladesh which has a negative impact on Foreign Direct Investment (FDI) by the Gravity Model. Bangladesh is a low-middle income country in the world economy. Recently, it has been performing well from the growth perspective, e.g., GDP growth rate was on average 5.8% per year during 2000-2010, [3]. The study focuses why GSP was cancelled for Bangladesh. It also attempts to discuss briefly about FDI after suspension of GSP for Bangladesh. Finally, the study identifies some culprits behind the exclusion of GSP and provides suggestive measurements to regain GSP based on findings.