Shedding the LDC status

One issue to ponder when all of us come back from the long tshechu break (in the capital) refreshed and rejuvenated, could be the country’s preparation to transit from a least developed country to a middle income country.

The finance minister is seeing it as a positive change and calls it an ultimate solution to self-reliance. There is confidence in his words and the government, it seems, is already prioritising activities for the three-year transition period. For a country that had depended on the good will of overseas development assistance and development partners it would be an achievement to shed the LDC status.

Going by experience, it is not sure if we would change the status as since the concept of LDC was created four decades ago, only three countries have graduated. There are a dozen countries expected to become middle-income countries in the next few years together with Bhutan. But it is advisable to start the discourse now because 2021, the year we are supposed to graduate, is not very far.

Going by the thresholds for graduation from a LDC status, Bhutan is bound to graduate because a country with a Gross National Income of USD 2,380 or more qualifies irrespective of the other two criterion- Economic Vulnerability Index and Human Asset Index. Bhutan’s per capita GNI as of 2014 is USD 2,440.

Graduating to an improved status comes with a lot of implications. If we see a shrinkage or withdrawal of ODA, it would mean an end to preferences we enjoy as a LDC. A loss of preferences would be a major blow that could put LDCs at a significant disadvantage. The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), not long ago when discussing Maldives’ graduation noted that graduation should technically also bring an end to market access preferences under the South Asian Association for Regional Cooperation (SAARC). This includes the South Asia Preferential Trading Arrangements or SAPTA among SAARC member countries.

However, there are areas to which we can look for consolation. The dependence on ODA, which forms a significant part of our capital budget, could fall, as, like the finance minister said, we would have built most of the infrastructure by 2021. With the commissioning of at least three mega hydro projects commissioning before the graduation day, we would be a lot more comfortable.

If challenges of LDC are related to trade, experts are quick to point out that the change in status would not affect us much as most of the trade is with India and Bangladesh with whom we enjoy free bilateral trade arrangements.

That said we cannot relax in the comforts of assuming that our trade will not be greatly affected. We have all the grounds to well prepare for post 2021. Unlike other LDCs we have political stability and good governance to effectively utilise our resources to create preconditions for the economy to take on, like an expert, said a high, inclusive employment centric and sustainable growth path.

There is already warning that the hydropower sector we rely on too much is not guaranteeing employment.

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