Nepal’s Upgrading From LDC Status

Hira Bahadur Thapa

 

The latest meeting of UN Committee for Development Policy (CDP) has decided not to graduate Nepal from LDC status. Understandably, the above committee has taken this decision as per the request of the government of Nepal. Apparently, Nepal government’s stand on the subject raises curiosity among many people in the country. This piece intends to clarify why a country declines to be graduated when it meets the criteria set by the concerned committee of the UN for graduation of its status. The least developed country status was conceived by the United Nations in the early 1970s considering the economic vulnerabilities of the poor countries, which need special care to spur their developmental activities. These countries are constrained by a number of factors.

Criteria
The UN took a decision to categorise some countries as the least developed countries in 1971.The categorisation of the least developed countries was based on certain criteria. This included basically three factors related to health, education, economic vulnerabilities and gross national income per capita. The status of LDCs has been given considering the above points of criterion. At present, there are 47 LDCs in the world, the majority of which are from Africa. Region-wise Africa has 33, Asia-Pacific 13 and Latin America 1 least developed country.
As per the UN records only five countries among the LDCs, have exited from the category so far. These countries are Botswana, Cape Verde, Equatorial Guinea, the Maldives and Samoa. This list of graduating countries includes three from Africa, two from Asia-Pacific. Among those from Asia-Pacific region there is only one from South Asia. The Maldives became the first South Asian country to exit from the category of least developed countries in South Asia. The other South Asian least developed countries waiting to be exited from the category are Afghanistan, Bangladesh and Nepal.
The chair of the Committee for Development Policy Jose Antonio Ocampo has recently announced during the committee’s mid- March meeting that four least developed countries are eligible to exit from the category of least developed countries. These countries are Bhutan, Kiribati, Sao Tome & Principe and Soloman Islands. The list shows that only one country from Africa has become eligible for graduation to the status of developing countries this time.
Three are from the Asia-Pacific region, and of them two are in the Pacific region. Only one of them is from South Asia, which is Bhutan. The eligibility of Bhutan does hardly surprise the analysts in view of the fact that it had delayed its exit from the category of the least developed countries in the past by requesting the concerned committee of the UN declining graduation.
According to the information provided by the Committee on Development Policy, two countries viz Vanuatu and Angola are scheduled for graduation over the next three years. This committee is composed of experts on development and it conducts triennial review of the economic progress of the least developed countries. Based on such three-yearly reviews the committee has also founded that Nepal and Timor-Leste were eligible for their graduation from the category of the least developed countries.
But not surprisingly these two countries were not recommended by the said committee for development policy to the Economic and Social Council of the UN for graduating them to the status of developing countries. There are some valid reasons for this decision. The committee has cited economic and political challenges for not recommending them to exit from the category of the least developed countries.
The point here is that once countries exit from the category of the least developed countries, there should not be an adverse impact on their economies. Graduating from the category does not entitle them to various concessions in terms of trade and other areas. Under such circumstances, there remains the possibility of facing economic vulnerabilities unless these countries are able to overcome the economic challenges themselves without being assisted.
The UN has made provisions to assist the least developed countries by recognising their economic weaknesses. One of the examples is the assessed annual contributions to the UN. Such contributions are assessed taking into account the economic strength of the countries concerned. Based on this formula, Nepal is one of the countries that is required to pay the lowest amount in terms of its annual contributions to the regular budget of the UN. The US and Japan are in the lead to make such contributions. Seen from this perspective, it may be in the interest of the countries to delay the graduation from the category. But it does not necessarily mean that in the long term for any country to continue to be the least developed country is beneficial.
In connection with the decision of the government of Nepal to graduate the country from the category in 2022, when the Committee for Development Policy will have conducted its next three yearly review of the economic, health and education targets of the country, it can be said that we want to ensure that Nepal does not get into economic problems once it graduates.
The government must have reviewed the economic situation of the least developed countries in the latest analysis prepared by United Nations Conference on Trade and Development (UNCTAD) before taking a position on whether Nepal should be permitted to exit from the category though it has attained eligibility as per UN’s requirement.

Challenges
UNCTAD’s analysis reveals the economic challenges of the least developed countries. Its report shows the declining rates of economic growth achieved by the least developed countries in the year 2017. Seeing this trend of economic growth and also analysing the current economic dimensions of Nepal, it may be prudent on the part of government of Nepal to delay the exit from the category. Notwithstanding the above fact the Oli government, committed as it is to advance the process of economic prosperity, should shoulder the herculean task of economic growth not only in words but also in action. Hopefully, action will match the rhetoric and Nepal will likely gain the status of developing country by 2022.

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