The United Nations (UN) has identified three countries – Bangladesh, Nepal and Laos – to graduate from its Least Developed Country (LDC) category by 2026. In a world of unequal distribution of wealth and he inequality of opportunity and access, proper classification based on resources and needs can go a long way in enabling a country to find the support and assistance it needs to help its people realize their full human potential. But then, how are countries ranked according to their economic or development standards?
What is a PMA?
The classification of LDCs was introduced by the UN in 1971 to identify countries “considered very disadvantaged in their development process, for structural, historical but also geographic reasons”.
The LDCs are thus specially designated as those which “need the greatest attention of the international community” because they represent the members of the international community confronted with “the risk of deeper poverty and remaining in a situation of underdevelopment. The UN said, adding that in the 46 LDCs currently – including Bangladesh, Nepal and Laos – more than 75 percent of the population still live in poverty.
In addition, amid the dangerous impacts of climate change and the threats posed by a global health crisis such as the one that unfolded due to the Covid-19 pandemic, LDCs are also considered “characterized by their vulnerability to shocks. external economic, natural and human. – disasters and communicable diseases “.
In fact, the five years longer than usual reserved for Bangladesh, Laos (officially, the Lao People’s Democratic Republic) and Nepal should “enable them to prepare for graduation while planning a post-graduation recovery. Covid-19 ”, according to the UN. The standard period for leaving the PMA is three years.
What are the criteria for classification as an PMA?
The United Nations Development Policy Committee (CDP) is responsible for recommending which countries to include in the list of LDCs, the decision in this regard to be taken by the United Nations Economic and Social Council and, “ultimately , by the General Assembly ”. According to the UN, the basic criteria for inclusion relate to the performance in relation to a country’s GNI per capita, and its position on a human capital index and an economic vulnerability index.
The 46 LDCs currently identified include around 880 million people, or 12% of the world’s population, but less than 2% of global GDP and around 1% of global trade.
Criteria for “human assets” include “indicators of nutrition, health, education and literacy”, while those of economic vulnerability include “indicators of natural and trade-related shocks, physical and economic exposure to hazards. shocks, and exiguity and remoteness ”.
Explaining the situation facing LDCs, a 2011 memorandum from the Union’s Ministry of Foreign Affairs (MEA) indicates that they are marked by “extreme poverty, lack of productive capacity, lack of ‘infrastructure and institutions; food and energy shortages; weak domestic market; dependence on commodity exports; high global burden of health. “He also stressed that” vulnerability to external shocks and structural weaknesses have long kept LDCs in a state of underdevelopment “and are heavily dependent on exports of commodities and natural resources. for economic growth.
Indeed, the MEA notes that “India has played an active role” in the establishment of the LDC group and that “the idea of creating a separate category of LDCs was discussed in detail and took shape during the the 2nd session of UNCTAD held in New Delhi in 1968 “.
How does a country graduate from the LDC category?
The UN says a review is carried out every three years by the CDP, after which it makes its recommendations for inclusion and removal of the category. Although he notes that these recommendations are not only based on criteria scores, but also include “additional country-specific information and government views are also taken into account”. This is the second time since 2018 that the CDP has recommended that Bangladesh be removed from the LDC category.
A more granular look at the criteria explains how a country can drop off the LDC list, although it should be kept in mind, according to the UN, that “graduation thresholds are set higher than thresholds for graduation. inclusion… is sustainable ”.
Thus, on the GNI per capita, the inclusion threshold is set at a three-year average consistent with the threshold determined by the World Bank to identify low-income countries. From 2021, the threshold is $ 1,018. To exit the LDC group, a country must see this GNI per capita increase by 20% above the inclusion threshold, which in 2021 is $ 1,222. There is, incidentally, an income-only reclassification threshold – where assessment on other criteria is presumably left out – which is double the reclassification threshold, or a per capita GNI of $ 2,444 in 2021. But in the normal course, a country must meet the graduation thresholds “for two of the three criteria in two consecutive triennial reviews.”
The UN indicates that since 2015, the CDP uses “absolute thresholds” – which implies a fixed value over time compared to a relative threshold based on contemporary results – for human assets and indices of economic and environmental vulnerability. . On the human capital index, a country’s score should improve by 10% (i.e. it should score 66) above the inclusion threshold of 60, while on the vulnerability index, its score must drop by 10%. cent to 32 of the inclusion threshold of 36.
Excluding the trio just named for graduation, six countries have so far left the LDC group: Botswana, Cape Verde, Maldives, Samoa, Equatorial Guinea and Vanuatu.
What are the advantages / disadvantages of being in / out of the LDC group?
The list of LDCs is a means of giving “a strong signal to the international community on the need for special concessions in favor of LDCs”. trade concessions such as preferential market access. Countries are also encouraged to provide technical assistance to LDCs.
A DD News report notes that “the exit of the LDCs has a double-edged impact on the countries”. Thus, while they risk losing preferential support, subsidies, etc., they also gain the “increased confidence of international financial bodies”. This means that these countries are now seen as having stable and strong political and economic institutions and policies to deserve a better credit rating and larger FDI inflows, which would help boost economic growth.
How are other countries ranked?
For the purposes of its State and Outlook for the World Economy (WESP) report, according to the UN, countries are classified into three broad groups: “developed economies, economies in transition and developing economies”, although it notes that economies in transition have conditions “which could place them in more than one category”. But these groups are not clear silos and “within each major category, certain subgroups are defined according to geographic location or ad hoc criteria”. India is identified by the UN as a “developing country” and a “lower middle income country”.
When countries are classified on the basis of their gross national income (GNI) per capita as high-income, upper-middle-income, lower-middle-income, or low-income countries, the UN uses cutoffs. of GNI per capita as defined by the World Bank. “Maintain compatibility”. Thus, countries with a GNI of less than $ 1,035 per capita are classified as low-income countries, those between $ 1,036 and $ 4,085 as lower average income, from $ 4,086-12,615 as upper average income, and those with income over $ 12,615 as a high income country.
It is another matter that several alternative classification systems have now been brought up to capture the real status of a country that does not focus solely on economic indicators, one example being the Gross National Happiness Index proposed by Bhutan. . There is also the UN Human Development Index and the Happy Planet Index offered by the New Economics Foundation.
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