Monday, 24 January, 2022

Nepal’s Graduation From LDC

Uttam Maharjan

It has been 50 years since Nepal was included in the list of least developed countries (LDCs) in 1971. The country could not come out of the morass of underdevelopment during the Panchayat regime. Neither could the country slough off the tag of an LDC during the multiparty democracy after the overthrow of the Panchayat system in 1990. However, the country has been able to gradually make progress on the development front. As a result, the country is becoming a middle-income developing country in December 2026.

For an LDC to graduate to a developing country, the country needs to meet any two of the three criteria: human asset index, economic and environmental vulnerability index and gross national per capita income. Nepal met the human asset index and the economic and environmental vulnerability index in 2015. But the devastating earthquakes and the natural disasters in the subsequent years forced the country to reconsider the plan to become a developing country. At the request of the country, the United Nations postponed the country’s plan.

Triennial review
Nepal was still found meeting the eligibility criteria during the triennial review conducted by the Committee on Development Policy (CDP), a subsidiary body under the UN Economic and Social Council, in 2018. But the country had not braced itself for graduating to a developing country. In 2021, the country became ready to become a developing country. During the triennial review held in February 2021, the United Nations General Assembly approved the proposal that the country be graduated to a developing country in December 2026. Along with the country, Bangladesh and the Lao People’s Democratic Republic also got the green light to graduate to developing countries. The country was not, however, able to meet the gross national per capita income criterion that stipulates that the per capita income should be at least US$ 1,222. The country’s per capita income stands at US$ 1,191 as per the Central Bureau of Statistics.

The CDP recommends that an LDC be graduated to a developing country after it has met the required criteria. After the UN General Assembly takes note of the recommendation, the LCD concerned can become a developing country in three years. In the case of Nepal, a preparatory period of five years has been given. The five-year period has been given as an exceptional case in consideration of the COVID-19 pandemic. The pandemic has played havoc with the national economy of the country, virtually affecting every sector, be it business or tourism. The preparatory period is for undoing devastating impacts of the pandemic on economic and social sectors.

The CDP has also been advised to analyse the adequacy of the preparatory period in its 2024 triennial review and recommend a further extension, if need be. The world as a whole is going through a bad patch owing to the COVID-19 pandemic. The pandemic has not shown any remarkable signs of abatement. If anything, one new variant of the coronavirus after the other has worryingly surfaced much to the chagrin of the medical community and the general public alike. The five-year period is the time for preparation to become a developing country. Nepal has been invited to prepare smooth transition strategies with support from the UN system and in collaboration with its bilateral, regional and multilateral development and trading partners.

In fact, the transition period is a challenge for Nepal. During the period, the country should build necessary infrastructure. As far as infrastructure development is concerned, there is much to be desired. The country is lacking in industrial development. Once highly developed in the agriculture sector, the country’s performance in agriculture is dismal now. The status of the country from an exporter of food grain has turned into an importer of food grain. In fact, imports preponderate over exports in the country, resulting in a gaping trade deficit.

On the other hand, progress in development projects is slow. The capital expenditure set aside in the budget is often underutilised. Moreover, unwarranted delay in completing development projects in time results in cost overruns. The Lumbini development project has not been completed even after the lapse of decades. The Melamchi drinking water project took over twenty years for completion but the project has stalled owing to the natural disaster.

However, development projects such as airport construction and hydropower development have given a ray of hope. The transition period should be utilised for developing, or upgrading, infrastructure in various sectors such as health, education, transport, industrialisation and sanitation. Nepal will be getting concessions and support as an LDC till it graduates to a developing country. The funds should be used for the development of every sector of the economy. It is not the time for self-complacency.

There are challenges galore for Nepal. On the one hand, the country has to make preparations to don the mantle of a developing country in 2026 by building necessary infrastructure, while on the other the country has to fulfil the Sustainable Development Goals (SDGs) by 2030. However, progress on the SDGs is on track. There is hope that the SDGs will be met by the set deadline.

After graduating to a developing country, the face of Nepal will hopefully change for the better. Ergo, the government and all other stakeholders should work in tandem to smooth the transition to a developing country. After all, this development has proved to be a milestone in the history of the country, which needs to be perpetuated for the good of the country and the people.

(Maharjan has been regularly writing on contemporary issues for this daily since 2000.