Central idea: Bhutan will become the seventh country to graduate from the United Nations’ list of Least Developed Countries (LDC) on December 13, 2023.

What is a Least Developed Country (LDC)?

• The LDCs are developing countries listed by the UN that exhibit the lowest indicators of socioeconomic development.
• The concept first originated in the late 1960s and was codified under UN resolution 2768 passed in November 1971.
• According to the UN, an LDC is defined as “a country that exhibits the lowest indicators of socioeconomic development, with-

1. Low levels of income, human capital and economic diversification,
2. High levels of economic vulnerability, and
3. A population that is disproportionately reliant on agriculture, natural resources, and primary commodities.

Criteria for LDCs

• The UN identifies three criteria for a country to be classified as an LDC:

1. It must have a gross national income (GNI) per capita below the threshold of USD 1,230 over a three-year average.
2. It must perform poorly on a composite human assets index based on indicators including nutrition, health and education.
3. It must demonstrate economic vulnerability such as being prone to natural disasters and possessing structural economic constraints.

• Countries must meet a selection from all three criteria simultaneously and are reviewed on a three-year basis by the UN.

How many countries are LDCs?

• Currently, the UN lists 46 countries that qualify as LDCs.
• Of those, 33 are from Africa, nine from Asia, three from the Pacific and one from the Caribbean.
• At the UN 2021 triennial review of LDC countries, the organisation recommended that Bangladesh, Laos, and Nepal be removed from the list.

How does a country get off the LDC list?

• To graduate from the LDC list, a country must meet certain criteria in the three areas stated before namely, income, human assets, and economic vulnerability.
• A nation must have a GNI per capita of at least USD 1,242 for two consecutive triennial reviews in order to meet the income requirement.
• The nation must also show that this level of income can be sustained over the long term.
• A nation also must show that it has improved its ability to withstand external economic shocks like natural catastrophes or shifts in commodity prices in order to pass the economic vulnerability test.

How did Bhutan get off the LDC list?

• Bhutan was included in the first group of LDCs in 1971. It fulfilled the requirements for graduation in 2015 and 2018.
• Bhutan’s economy grew more than eight times in the last 20 years, from under USD 300 million in 2000 to USD 2.53 billion in 2017.
• The percentage of people living in poverty decreased from 17.8 per cent in 2003 to 1.5 per cent in 2017.
• The percentage of people living below the national poverty line decreased from 23.2 per cent in 2007 to 8.2 per cent in 2017.

What economic measures did it take?

• Hydropower exports: Bhutan increased exports of hydropower to India, which now accounts for 20 per cent of its economy.
• Brand Bhutan: Bhutan established Brand Bhutan to diversify exports and target high-end markets with specialised exports of high-value, low-volume Bhutanese goods from sectors including textiles, tourism, handicrafts, culture, and natural resources.
• Tourism promotion: It emerged out to be an all-season tourist destination in South Asia.

Advantages of being an LDC

• LDCs enjoy duty-free and quota-free (DFQF) access to the markets of developed countries.
• LDCs are also eligible for loans with special terms for development, which include loans with a lower interest rate and a longer repayment time than those given to other nations.
• The term “Official Development Assistance” (ODA) or “aid” is frequently used to describe this form of support.

Way forward for Bhutan

• As such, advancing out of the list is often only the first step in overall development.
• Graduation from LDC status is not the end of the road, but the beginning of a new journey.
• It is a time when a country needs to redouble its efforts to build its productive capacities, diversify its economy, and create new opportunities for employment and income generation.

Back2Basics: Defining a country’s ‘Development’

• There are no WTO definitions of “developed” or “developing” countries.
• Developing countries in the WTO are designated on the basis of self-selection although this is not necessarily automatically accepted in all WTO bodies.
• The WTO however recognizes as least-developed countries (LDCs) those countries which have been designated as such by the United Nations.

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