Sustainable Graduation

Background

The concept of Least Developed Countries or LDCs originated in the late 1960s. The first group of LDCs was listed by the United Nations back in 1971. LDCs are usually low-income countries confronting severe structural impediments to sustainable development. While there were only 25 countries in the list of LDCs back in 1971, the number has grown to 46 now. Bangladesh was listed as an LDC in 1975. So far, a total of seven countries have been able to graduate from the LDC category. These are- Botswana (1994), Cape Verde (2007), Maldives (2011), Samoa (2011), Equatorial Guinea (2017), Vanuatu (2020) and Bhutan (2023).

 

The Committee for Development Policy (CDP) – a subsidiary body of the United Nations Economic and Social Council (ECOSOC), is mandated to review the category of LDCs every three years and monitor their progress after graduation from the category. The identification as well as graduating from the LDC status is currently based on three criteria (a) GNI per Capita, (b) Human Assets Index (HAI), and (c) Economic and Environmental Vulnerability Index (EVI). An LDC must meet any two of the three criteria in two consecutive triennial reviews to be recommended for graduation. Alternatively, the GNI per capita of an LDC should be at least twice the graduation threshold in two consecutive triennial reviews (income-only criterion).

New LDC Graduation Framework, February 2020

Bangladesh Progress Towards LDC Graduation

Under the visionary leadership of the Honourable Prime Minister Sheikh Hasina, Bangladesh has made remarkable progress in various socio-economic parameters during last twelve years. The country met all the graduation criteria from the LDC status in 2018 and 2021 reviews consecutively. As a result, the UN-CDP has recommended Bangladesh for graduation with a five-year preparatory period on 26 February 2021. Bangladesh is the first country that has been recommended for graduation by meeting all three criteria. The recommendation has been duly endorsed by the United Nations Economic and Social Council (ECOSOC) on 08 June 2021. Subsequently, United Nations General Assembly (UNGA) has taken note of Bangladesh’s graduation recommendation during its 76th session held in November this year. The country is set to leave the list of LDCs by 2026 after enjoying a preparatory period of five years. UN-CDP will further analyze the country’s situation at its 2024 triennial review if an extension is needed.

Criteria Threshold for 2018 Review Bangladesh’s Score (2018) Threshold for 2021 Review Bangladesh’s Score (2021)
GNI Per Capita* 1230 US Dollar Or More 1274 US Dollar 1222 US Dollar Or More 1827 US Dollar
Human Assets Index 66 or more 73.2 66 or more 75.4
Economic And Environmental Vulnerability Index 32 or less 25.2 32 or less 27.0

* Average of last three years (calculated by ATLAS method)

GNI per capita

For the 2018 triennial review, the minimum threshold for GNI per capita was fixed at US$ 1,230, while it was refixed at US$ 1222 for the 2021 triennial review. A steady rise in the GNI per capita guaranteed Bangladesh exceeding the graduation threshold for the first time in 2018 (with 104 per cent more than the graduation threshold). Meanwhile, the country’s GNI per capita rose by 150 per cent of the graduation threshold of the 2021 triennial review.[1] As a result, Bangladesh fulfilled this graduation criterion again quite comfortably.

Human Assets Index (HAI)

Human Assets Index (HAI) is based on the indicators of child (under five) mortality rate, maternal mortality ratio, prevalence of stunting, gross secondary school enrolment ratio, adult literacy rate, and gender parity index for gross secondary school enrolment. Bangladesh, for the first time, exceeded this particular graduation threshold during the 2018 triennial review (with a score that is 111 per cent more than the graduation threshold). The country’s score stood at 114 percent of the graduation threshold for this criterion in 2021.

Economic and Environmental Vulnerability Index (EVI)

Following the adoption of the outcome of the comprehensive review of the LDC criteria by the CDP, the structure of the EVI has been modified (CDP, 2020). With this revision, the EVI has been simplified and now consists of two sub-indices, one on economic vulnerability and the other on environmental vulnerability with each sub-index containing four indicators, with an equal weight of 1/8. The indicator on “Population size” was removed from the EVI. The Economic vulnerability indicator “Remoteness” has been renamed as “Remoteness and land locked ness”. The Environmental vulnerability indicator “Victims of natural disasters” has been renamed as “Victims of disasters” to better align it with common United Nations terminology and to highlight that disasters are not always natural. Meanwhile, an additional indicator called “Share of population living in dry lands” has been added to the EVI. Bangladesh’s performance under the graduation threshold relevant to the economic and environmental vulnerability criterion demonstrated sustained improvements between 2012 and 2015 triennial reviews, with the EVI score hitting a plateau thereafter. The EVI score of Bangladesh in 2018 was 25.2, which was 21 per cent below the graduation threshold. During the 2021 triennial review, the country again met this graduation threshold with a comfortable margin (16 percent below the threshold).

Opportunities Of LDC Graduation

Graduation from LDC status may result in:

• Better credit rating for the country, wider credit access

• Greater investment opportunities- FDI, PPP, access to non-traditional financing

• Greater access to global job market

• Reinforcing other national and global development agenda

• Self-reliance and self-dignity at the global stage

How Bangladesh Is Preparing For A Smooth And Sustainable LDC Graduation:

While graduation from LDC is certainly a big achievement, this remarkable feat comes with a set of opportunities and challenges. The Government of Bangladesh is attaching highest priority to ensure smooth and sustainable graduation with momentum. Therefore, to make this achievement sustainable— a range of policies, strategies, and programs have been initiated by the government.

The government has formed a National Committee on LDC Graduation (NCG), headed by the Principal Secretary to the Honorable Prime Minister, involving all the relevant Ministries and organizations from both public and private sectors. The NCG is providing an effective platform to support Sustainable Graduation taking all the relevant stakeholders on board. Seven thematic subcommittees have been formed under the guidance of the NCG to address various core issues related to graduation including: preferential market access & trade agreement; Intellectual Property Rights (IPR); WTO issues (other than market access & trips); investment, domestic market development & export diversification; internal resource mobilization & tariff rationalization; smooth transition strategy; and branding Bangladesh abroad.

It is recommended by the United Nations that a graduating LDC should prepare a national smooth transition strategy (STS) during the preparatory period in cooperation with its development and trading partners and with targeted assistance from the UN system. The 9-member Subcommittee on STS led by the Secretary of the Economic Relations Division (ERD) and co-led by the Secretary of the Prime Minister’s Office is tasked with the formulation of the STS. The subcommittee is assigned to designing a consultative mechanism engaging all stakeholders, identifying process and preparing a roadmap for STS and providing periodic reports to the National Committee. A ‘Working Group’ comprising the officials from relevant Ministries and Private Sector, and a ‘Joint Task Team’ comprising representatives from government, the private sector and development partners are now working to support the Subcommittee on STS in preparing an effective and inclusive transition strategy for sustainable graduation.

The Government is carrying out in-depth sectoral studies, research works and technical papers to assess the impact of LDC graduation and to formulate the relevant strategies accordingly.

ERD has undertaken a project called “Support to Sustainable Graduation Project (SSGP)” to identify the impacts of graduation, to provide necessary capacity-building supports and other necessary supports to the relevant ministries as well as to promulgate this historic achievement at home and abroad by producing various research papers and publications related to graduation.

ERD, with support from SSGP, has coordinated with UN-DESA in preparing an ex-ante impact assessment. Similarly, UNCTAD, in close collaboration with the ERD and SSGP, has prepared a vulnerability profile on Bangladesh —identifying the impacts that the country may face after graduation. Both these documents provided valuable inputs regarding the decision taken by the CDP regarding the LDC graduation of Bangladesh during the latest triennial review.

The importance of private sector in Bangladesh’s economy cannot be overstated because of its contribution to investment, job creation, growth and development. Therefore, the private sector has been recognized as an active partner in devising the sustainable graduation strategy. Private sector bodies are well represented in various subcommittees on graduation as well as the Joint Task Team on STS. Regular consultations are also taking place with the sectoral business leaders and related stakeholders with regard to graduation related issues.

Bangladesh is committed to play a leading and active role in voicing the common concerns of the graduating countries in the international arena. In this context, the government, with support from ERD, is maintaining intense and regular liaison with the relevant international bodies like UN Committee for Development Policy (CDP), United Nations Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), United Nations Economic and Social Council (UN ECOSOC), United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), World Trade Organization (WTO), etc. regarding the LDC graduation related issues—especially for the continuation of international support measures for the graduating LDCs for an extended period.

Moving Forward

Led by prudent government policies and driven by a vibrant, productive workforce— Bangladesh has achieved higher economic growth over the last decade and is on course to formally graduate from LDC category. To keep this momentum, the country is now working towards the long-term target of becoming an upper-middle-income and developed country by the year 2031 and 2041 respectively, while also committed to achieving the UN-mandated Sustainable Development Goals by 2030. Therefore, graduation, per se, is not the final destination, but rather another milestone towards the vision of becoming a developed country by 2041.