BOSTON, Massachusetts — Between March 5 and March 9, 2023, the U.N. held its Fifth Conference on the Least Developed Countries (LDC5), in Qatar. During this conference, Nepal shared its developmental successes and its projection to graduate from the U.N.’s list of LDCs by 2026, having satisfied two of the three required criteria to graduate. Graduating from LDC status after 50 years on the list is a significant milestone for Nepal. It exhibits the progress the country is making toward its developmental goals.
The U.N.’s Committee for Development Policy conducts triennial reviews to assess an LDC’s current situation and offer guidance on addressing critical issues. At the 2021 review, the Committee updated Nepal’s LDC status, finding the country officially qualified to graduate.
Benefits of LDC Classification
There are currently 46 countries on the U.N.’s LDC list. These countries receive specific benefits to assist in economic and developmental crises. The U.N. officially established the LDC status in 1971. It wanted to begin a program that could provide specific attention to developing countries that need and want international assistance. The U.N. held its First Conference on the LDCs in Paris in 1981 to evaluate how to best assist the most vulnerable developing countries.
A country must agree to its classification and meet category inclusion thresholds for the U.N. to add them to the LDC list and to be eligible for the benefits of that classification.
All 46 LDCs receive International Support Measures (ISMs) that aid in trade advising as well as infrastructural and financial growth. LDC status offers preferential access to goods and services. LDCs benefit from a range of economic assistance and advice as well as aid from donors like the World Bank and the Asian Development Bank.
Among others, one specific program that LDCs have access to is the Investment Support Programme (ISP). ISP aims to set up LDCs with legal and professional advice, targeting areas of trade and inclusion in international organizations.
Graduation from the LDC list means that Nepal will lose some benefits that come with LDC status. At this point, it is hard to say what Nepal will lose access to and what impact that may have on the country, its trade or its agricultural industry. All LDC graduates experience this acclimation period, but the entire point of the U.N.’s five-year preparatory period is that Nepal can have a smooth adjustment period. Instead of retracting aid immediately and abruptly, which could weaken developmental progress, the process is designed to phase a country into independence.
Qualifications to Graduate
To graduate (leave) the LDC designation, a country must meet the outlined threshold of measurable key indicators established in three categories: “income, human assets and economic and environmental vulnerability.”
Income is actually the country’s Gross National Income (GNI) per capita. At the 2021 review, the graduation threshold for GNI was $2,444 GNI per capita.
To measure the “human assets” category, the U.N. uses the Human Assets Index (HAI), evaluating concerns grouped into two indexes: Health Index and Education Index. The Health Index measures the under 5 mortality, childbirth mortality and growth stunting rates. The Education Index measures access to and the gender ratio of secondary education as well as the adult literacy rate. The U.N. then converts data into a numerical value that represents a country’s human capital development.
Lastly, the Economic and Environmental Vulnerability Index (EVI) measures a country’s structural vulnerability to economic and environmental issues. The EVI comprises two subindexes: Economic Vulnerability and Environmental Vulnerability. A nation’s economic reliance on agriculture, geographical isolation, export concentration and exporting stability make up the Economic Vulnerability Index. The Environmental Vulnerability Index measures the proportion of the population in disaster-prone areas, farming instability and disaster victims.
Nepal’s LDC Status
Nepal’s LDC status began in 1971, at which time Nepalis lived on an average annual income of $70 per capita and over 60% of the population suffered from poverty. As of 2021, Nepal had met two of the three requirements for LDC graduation.
At the time of the 2021 triennial review, Nepal’s Human Asset Index was 74.9, significantly surpassing the 66 or above threshold. Its Economic and Environmental Vulnerability Index was 24.7, which passed the 32 or below criteria set by the U.N. The only category where Nepal fell short was Income. Nepal’s GNI per capita in 2021 was $1,027, just below the threshold of $1,222.
Even though Nepal’s LDC status met two of the three graduation requirements, the Committee recommended a “five-year preparatory period” to ensure that Nepal is sufficiently ready. During this time, U.N. advisors and Nepal’s government officials will work collaboratively to address post-COVID-19 policies and to recuperate from the pandemic’s economic and social damage. A preparatory period will provide a smooth transition.
At the 2024 triennial review, the committee will once again review Nepal’s LDC status in addressing damages done by the pandemic. It will then decide if Nepal is ready to graduate in 2026 or whether it should remain in the preparatory period for a longer period of time. For all countries, the pandemic created a host of challenges that created economic and developmental limitations. It is a promising indication that Nepal still met the graduation criteria, even during the pandemic.
– Maya Steele