Formulating National Policies and Strategies in Preparation for Graduation from the LDC Category

14 Nov 2017 to 16 Nov 2017
Thimphu, Bhutan

A regional capacity building workshop on Formulating National Policies and Strategies in Preparation for Graduation from the LDC Category will be organized in Thimphu, Bhutan, on 14-16 November 2017. The workshop will be co-organized by the Royal Government of Bhutan and the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP).

Background

Despite improvement in several development indicators, 12 of the Asia Pacific region’s economies are still categorized as Least Developed Countries. During the 2015 triennial review a number of the region’s economies, including Nepal and Bhutan, met the criteria for graduation from this category for the first time. For the subsequent review in the 2018 three more countries, including Lao People’s Democratic Republic, are expected to meet the graduation thresholds for the first time. Additionally, Vanuatu, a small island developing state, having already met the criteria for the second review has been recommended for formal graduation in 2020.

In the case of Bhutan, development progress since embarking on the path of modern socio-economic development in the 1960s has resulted in a level of income per capita of $2,350 in 2015 and improved education and health outcomes. For Nepal, a consistent decline in its economic vulnerability and improvement in social indicators provided the qualifying assessment for graduation. If Nepal and Bhutan can demonstrate similar levels of development performance during the next triennial review in 2018, they will then be recommended for graduation by 2022.

For Bhutan, graduation from LDC status is a concrete milestone in the nation’s 11th Five Year Plan (2013-2018), and next year’s triennial review will also coincide with the transition to the 12th Five Year Plan. The outlook and prospects for graduation for Lao People’s Democratic Republic are also promising as it has exhibited significant economic growth after its transition from a centrally planned state-command economy to a predominantly market driven model.

Beyond the technical requisites for graduation, an assessment and understanding of the associated costs and challenges is critical to ensure a smooth transition from dependence on external assistance and concessions to one characterized by self-reliance and resilience. Lao People’s Democratic Republic, Vanuatu and Nepal will face a significantly altered international landscape that will, inter-alia, include reduced trade concessions and donor financing. In contrast, the situation for Bhutan is somewhat different as a major proportion of its aid revenue comes from India, which is not determined by its LDC status. Hence, for Bhutan, the potential loss of donor financing is likely to be smaller. Similarly, the potential loss of trade related concessions for LDCs is not as relevant for Bhutan as for others given that it has still not yet acceded to the WTO and, more importantly, because 90% of its trade takes place with India and is governed by a liberal bilateral trading agreement. Hence, an accurate assessment of the potential costs and challenges for Bhutan will require a more nuanced and in-depth survey that captures such peculiarities.

The more enduring challenge for Bhutan lies in overcoming its economic vulnerabilities emanating from a dependence on a narrow range of economic sectors, low productivity, and exposure to climatic volatilities. Therefore, in addition to an assessment of the costs of graduation, identifying measures to overcome these challenges indispensable to the graduation process and success.

Beyond graduation, it is important to discuss the design of macroeconomic policies to ensure that they are conducive to inclusive and sustainable development. Mainstream economics, primarily keeping in view advanced economies, anchors its analysis and policy recommendations on an ideal world in which markets work smoothly and information flows in a symmetric way across economic actors. This idealized view may explain in part why mainstream macroeconomic policymaking often falls short to optimally tailor its recommendations to local circumstances in developing countries, especially in countries with special needs. For these countries, the need is rather for a holistic approach that is relevant in the context of the 2030 Agenda for Sustainable Development. To address such concerns, a debate to assess the role of monetary and fiscal policies and structural reforms in the pursuit of 2030 Agenda will be useful for least developed countries.

As an element of this debate, a part of the workshop will be devoted to strengthening capacities among policymakers and researchers from selected countries with special needs to better tailor macroeconomic policies that foster poverty reduction and development-orientated investments and explicitly take account of the sustainable development goals. This will take shape by including a component that demonstrates how macroeconomic monitoring and policy simulation analysis can support implementing the 2030 Agenda of Sustainable Development by integrating the sustainable development goals into a modelling framework. Technical material will be discussed to provide support to member States’ national planning processes for an effective pursuit of the 2030 Agenda for Sustainable Development.

Given the priority that ESCAP accords towards supporting countries with special needs, especially to the LDCs, a regional capacity building workshop that aims to enhance capacities of member states in formulating national policies and strategies in preparation for graduation from the LDC category is proposed.

Objectives

The workshop shall be designed to achieve the following objectives:

• Enhance participants’ comprehension of the technicalities of the graduation criteria.
• Provide participants with an in-depth understanding of the potential costs and challenges associated with LDC graduation.
• Enable participants to identify policy measures and strategies to prepare for a smooth transition away from LDC status.
• Suggest approaches to harness post-graduation conditionality to achieve the SDGs.
• Present policymakers with an assessment of potential challenges in overcoming economic vulnerability and the associated measures for diversification.
• Provide a platform for knowledge sharing between recently graduated LDCs and those about to graduate.
• To reflect on how economic policymaking (monetary, fiscal and structural reforms) can be improved so as to better contribute to the 2030 Agenda, e.g. identifying the most important constraints that limit macroeconomic policymaking in the region, building capacity of policymakers to better understand how macroeconomic policies relate to the 2030 Agenda, and present some specific tools to align policies with it.
• To discuss proto-types of macroeconomic model(s) that integrate social and environmental issues into a coherent framework.