‘Least Developed Country’ Status

March 14, 2023

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Bhutan is about to become the seventh nation to graduate from the United Nations’ (UN) list of Least Developed Countries (LDCs).

What are LDCs?

LDCs are low-income countries confronting severe structural impediments to sustainable development. They are highly vulnerable to economic and environmental shocks and have low levels of human assets.
The concept first originated in the late 1960s and was codified under UN resolution 2768 passed in November 1971.
There are currently 46 countries on the list of LDCs which are reviewed every three years by the Committee for Development (CDP). 33 are from Africa, nine from Asia, three from the Pacific and one from the Caribbean.
LDCs have exclusive access to certain international support measures in particular in the areas of development assistance and trade.

LDC Identification Criteria & Indicators

The CDP is mandated by the General Assembly (GA) and the Economic and Social Council (ECOSOC) to review the list of LDCs every three years and to make recommendations on the inclusion and graduation of eligible countries using the following criteria:
- Gross National Income (GNI) per capita below the threshold of USD 1,230 over a three-year average.
- Human Assets: It is a measure of level of human capital.
- Economic and Environmental Vulnerability (EVI): The EVI is a measure of structural vulnerability to economic and environmental shocks.
Each of the three criteria is measured using key indicators which reflect long-term structural handicaps.

Inclusion in LDCs

The CDP makes recommendations for inclusion in and graduation from the category every three years.
These recommendations are not exclusively based on the criteria scores, complementary country-specific information and the views of the government are also taken into account.
The inclusion thresholds, as determined by the CDP, must be met for each of the three criteria (GNI per capita, HAI and EVI) in one triennial review.

Criteria to get off the LDC list?

A nation must have a GNI per capita of at least USD 1,242 for two consecutive triennial reviews and shows that this level of income can be sustained over the long term.
By using measures like education, health, and nutrition, a nation must show that it has improved its human capital such as expanding literacy rates, lowering malnutrition rates, and enhancing access to healthcare and education.
A nation also must show improved ability to withstand external economic shocks like natural catastrophes or shifts in commodity prices in order to pass the economic vulnerability test.

Countries who Graduated from the status of LDCs

Six countries have graduated from least developed country status:
- Botswana in December 1994
- Cabo Verde in December 2007
- Maldives in January 2011
- Samoa in January 2014
- Equatorial Guinea in June 2017
- Vanuatu in December 2020
Botswana achieved graduation in 1994 primarily due to its strong economic performance driven by its diamond mining industry and investments in education and infrastructure.

Carbo Verde graduated in 2007 following investments in tourism, fisheries, and services, as well as positioning its strategic location as a hub for sea and air transportation to help attract foreign investment.

Case of Bhutan

Bhutan was included in the first group of LDCs in 1971. Bhutan first fulfilled the requirements for graduation in 2015, and then again in 2018 and therefore scheduled to graduate in 2021.
However, the UN viewed Bhutan’s request to match the effective graduation date with the conclusion of the nation’s 12th national development plan in 2023 as a legitimate request and thus postponed the delisting.
Bhutan has mostly accomplished this by increasing exports of hydropower to India, also established Brand Bhutan in an effort to diversify exports with specialised exports of high-value, low-volume Bhutanese goods. Their goods come from sectors of the economy including textiles, tourism, handicrafts, culture, and natural resources.

Transition from LDCs to Developing Countries

Country Actions: Prepares a national transition strategy and establishes a consultative mechanism to facilitate its preparation in cooperation with development partners
- May seek assistance from the United Nations system in the preparation of the transition strategy.
- Voluntarily reports on the preparation of the transition strategy to the CDP on an annual basis.
Smooth transition strategy: Aims to ensure that development efforts are not disrupted by graduation.
- Focuses on expected implications of loss of LDC status and associated special support measures.
- Presents a comprehensive and coherent set of specific measures in accordance with the priorities of the graduating country, taking into account its specific structural challenges, vulnerabilities and strengths.

Countries scheduled for graduation