LEAST DEVELOPED COUNTRY - GOVERNANCE
News: How
Bhutan graduated from the ‘Least Developed Country’ status
What's in the news?
● Bhutan,
the mountainous, landlocked country that is consistently ranked one of the
happiest in the world, become the seventh nation to graduate from the United
Nations (UN) list of Least Developed Countries (LDC).
● While
this promotion is a cause for celebration, it also raises some concerns,
notably how Bhutan will compensate for the loss of certain trade privileges
associated with being an LDC.
What is a Least Developed Country (LDC)?
● The
LDCs are developing countries listed by the UN that exhibit the lowest indicators of socioeconomic
development.
● The
concept first originated in the late 1960s and was codified under UN resolution
2768 passed in November 1971.
● According to the UN,
an LDC is defined as “a country that exhibits the lowest indicators of
socioeconomic development, with low levels of income, human capital and
economic diversification, high levels of economic vulnerability, and a
population that is disproportionately reliant on agriculture, natural
resources, and primary commodities.”
Criteria:
The
UN identifies three criteria for a country to be classified as an LDC such as
Significance of being LDC:
● Being
an LDC confers certain economic benefits
to the listed country.
● LDCs
are also eligible for loans with
special terms for development, which include loans with a lower interest rate
and a longer repayment time than those given to other nations.
● LDCs
also enjoy duty-free and quota-free
(DFQF) access to the markets of developed countries.
Review:
● Countries
must meet a selection from all three criteria simultaneously and are reviewed
on a three-year basis by the UN.
● Currently,
the UN lists 46 countries that
qualify as LDCs. Of those, 33 are from Africa, nine from Asia, three from the
Pacific and one from the Caribbean.
How does a country get off the LDC list?
● At
the UN 2021 triennial review of LDC countries, the organization recommended
that Bangladesh, Laos, and Nepal be removed from the list.
● To
graduate from the LDC list, a country must meet certain criteria in the three
areas stated before namely, income, human assets, and economic vulnerability.
○ A
nation must have a GNI per capita of
at least USD 1,242 for two consecutive triennial reviews in order to meet the
income requirement.
○ The
nation must also show that this level of
income can be sustained over the long term.
○ By
using measures like education, health, and nutrition, a nation must show that
it has improved its human capital in
order to achieve the human assets requirement. This entails expanding literacy
rates, lowering malnutrition rates, and enhancing access to healthcare and
education.
○ A
nation also must show that it has improved its ability to withstand external economic shocks like natural
catastrophes or shifts in commodity prices in order to pass the economic
vulnerability test. Diversifying the economy, investing in infrastructure, and
raising the standard of institutions and governance are all ways to do this.
● To
achieve these goals, a country might need to implement a combination of policies, including promoting economic
growth through investment in infrastructure, improving governance and reducing
corruption, diversifying the economy, addressing environmental challenges, and
investing in human development.