English | Dzongkha Wednesday, December 13, 2017

Bhutan to graduate from Least Developed Countries group by 2022

Sonam Phuntsho, Thimphu
Nov 16, 2017

As Bhutan prepares to graduate from Least Developed Country (LDC) category in next few years, concerns are particularly high in terms of country’s economic vulnerability. But experts, underlying the sense of cynicism, believe that Bhutan will benefit tremendously from the graduation both in terms of trade and foreign investments. Bhutan is one of the 47 LDCs in the world, having unique structural challenges to its development progress.

The Foreign Ministry, in collaboration with the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) organised a three-day regional capacity building workshop to help countries like Bhutan to formulate national policies and strategies in preparation for graduation from the LDC category.

Usually there are cynicisms surrounding the graduation since a graduated country loses access to multilateral LDC specific funds. In trade, as well, graduation could imply a loss of duty free access to foreign markets.

However, UNESCAP said graduation is not a complex issue. In fact, the UNESCAP believes it reflects country’s success and improvement in its social and economic standings.

“When countries graduate, one element that they lose in the transition period is preferential access to markets mainly in developed economies in Europe and the US. However, if you look at the Bhutan’s export structure, it doesn’t do that much trade with Europe and the US. Its main trading partner is India. So if you graduate, you will not lose any access to Indian market -electricity export it won’t be losing that. India is also the main partner for Bhutan in terms of providing loans and grants. So this won’t be affected by graduating from the LDC category,” said Oliver Paddison, Chief of Countries with Special Needs Section under UNESCAP.

Bhutan fulfilled the criteria for graduation from LDC category for the first time in 2015 and will be considered for graduation at the 2018 review.

“LDCs are, as I said, generally more conflict prone, vulnerable and may be foreign investors are not willing to invest into LDCs because they are considered often to be politically unstable which is clearly not the case  in Bhutan. So if you graduate, you are also sending signal that we are doing really well, we have the stable political, economic and social settings and that could attract a lot of FDIs potentially,” added Oliver Paddison.

Bhutan has met the graduation threshold for income and the human assets index, while falling short in the economic vulnerability criterion.  If a country satisfies at least two of the three criteria for graduation in two consecutive triennial reviews, the Committee for Development Policy recommends to the UN’s Economic and Social Council that the country should be considered for graduation. If this is accepted, Bhutan then will graduate from least developed country to developing country category by 2022.

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