Bhutan has more to gain by graduating from the least developed country (LDC) category in the UN’s list to a developing country, a senior UN official said.
A United Nations Economic and Social Commission for Asia and Pacific (UNESCAP)’s official, Oliver Paddison said Bhutan is on the cusp of graduation.
Based on the steady socio-economic progress the country has been making since the first Plan, Bhutan was first considered eligible for graduation in 2015.
There will be another review in 2018 and if the country meets the criteria for graduation, it will be recommended to the UN’s economic and social council in 2021.
“It’s an important step to show that you’ve been successful, that you have made improvements in social and economic developments and you don’t need to rely anymore on special treatments or assistance from the international community,” he said.
When countries graduate, an element they lose in the transition period is the preferential access to markets mainly in developed economies. But in case of Bhutan the trade scenario would be largely unaffected, he said.
He said Bhutan doesn’t have much trade with the US or Europe, and its main trading partner is India, so graduation does not affect trade with India.
“India is also one of the main partners in providing loans or grants, so this also won’t be affected by graduating from the LDC category,” he said. “If you are an LDC country but you are not using any of the benefits of being classified as that, you may want to look at the costs of not graduating.”
One of the costs of not graduating is that Bhutan would be associated with many other countries that are much less developed and conflict-prone and most vulnerable.
“Maybe foreign investors are not that willing to invest in an LDC because they consider it often to be politically unstable, which is not the case in Bhutan,” he said. “If you graduate, you also send out this signal that you are doing well with a stable political and social setting which could attract FDI.”
Most graduating LDCs still remain economically vulnerable, he said. “Being classified as a least developed country (LDC) means the country has a low degree of social, economic development and your income levels are low.”
The UNESCAP with the foreign ministry organised a three-day regional capacity building workshop on Least Developed Country (LDC) graduation for policy makers that ended on November 15.
The workshop was to help countries understand the technicalities concerning graduation criteria, potential costs and challenges, and harnessing post-graduation conditionality to achieve the Sustainable Development Goals.
Over 50 participants from LDCs of the region including Bangladesh, Bhutan, Cambodia, Lao PDR, Myanmar, Timor Leste and Vanuatu attended the workshop.
The government approached UNESCAP in May to provide the capacity building exercise.
Graduating from the LDC category converges well with Bhutan’s ultimate vision of self-reliance, a foreign ministry press release stated.
A UN consultant, Jamyang Tashi said that the country’s small economic base, being hydropower-dependent, lack of value addition, and high levels of import during hydropower construction stage, among others, pose major challenges.
Of the three criteria for graduation, Bhutan has met the per capita income (GNI) parameter and the human asset index (HAI).
Bhutan’s GNI per capita is USD 2,242 while the requirement is USD 1,242 (three-year average), and the HAI score improved from 45 in 2000 to 73.8 in 2015.
HAI improvement was driven mainly by the increase in gross secondary education enrollment.
However, he said challenges remain in funding and managing the education and health infrastructure.
The country has not met the third criterion, economic vulnerability index (EVI). Bhutan’s EVI improved from 43.04 in 2000 to 37.46 in 2015.
“No country has fulfilled the EVI criteria to date,” Jamyang Tashi said.
Being landlocked with mountainous terrain, and the small domestic market are major problems for the country, he said.
He said commercialisation of agriculture is crucial, and that the country must emphasise productivity improvements over diversification alone.