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TWN Info Service on UN Sustainable Development (Feb21/05)
23 February 2021
Third World Network


COVID-19: CDP urged to defer 2021 triennial review on LDC graduation
Published in SUNS #9291 dated 23 February 2021

Geneva, 22 Feb (D. Ravi Kanth) – The United Nations Committee on Development Policy (CDP) must defer the 2021 triennial review beginning on 22 February for recommending the graduation of the least-developed countries (LDCs) due to the incalculable economic and social crises caused by the worsening COVID-19 pandemic in the LDCs, says the Penang-based Third World Network.

In its nine-page briefing paper on “LDC Graduation: COVID-19 impacts need to be considered”, issued on 19 February, the TWN laid out a strong case that due to the “scale of challenges to developmental progress posed by the COVID-19 and its economic and social crises as well as uncertainty to being a new disease”, the “2021 triennial review regarding which LDCs to recommend for graduation should be deferred” by the CDP.

The CDP, a subsidiary body of the UN Economic and Social Council (ECOSOC), is beginning its 2021 triennial review on 22 February amidst the worsening pandemic that has caused incalculable economic and social damage to all countries, particularly the least-developed countries.

In its paper, the TWN has cautioned that “excluding the impact of COVID-19 on the three main LDC graduation criteria scores which will essentially determine graduation will be a totally flawed review leading to a premature graduation assessment.”

“If the CDP is nevertheless determined to hold the triennial review this year and at it recommend some LDCs for graduation, it should at least provide them with an additional 9-year preparatory period (in addition to the usual 3-year preparatory period) as it is clear that these LDCs would require exceptional, longer preparatory periods under ongoing pandemic circumstances,” the TWN’s briefing paper emphasized.

FINDINGS IN BRIEFING PAPER

Amidst more than 111 million COVID-19 cases and around 2.5 million deaths, the CDP is holding the triennial review meeting starting from 22 February. The meeting is expected to make recommendations in its concluding session on 26 February.

The TWN’s Briefing Paper (hereinafter referred to as the Paper) has explained that for graduating from the LDC status, an LDC must meet two of the three criteria or gross national income (GNI) per capita at least twice the threshold, in two consecutive triennial reviews by the CDP.

The CDP recommendation has to be subsequently endorsed by the UN Economic and Social Council (ECOSOC) and the UN General Assembly (UNGA) also needs to take note of it for it to take effect.

After deciding the graduations, LDCs are normally given a three-year preparatory period from the date of the UNGA resolution before the graduation becomes effective.

Against this backdrop, the Paper argues that “while Bangladesh, Laos, Myanmar, Nepal and Timor Leste have achieved improvements in development (prior to COVID-19), graduation from LDC status can result in losing a number of benefits they currently avail.”

The benefits of LDC status include: (1) aid; (2) preferential market access (e.g. duty-free quota-free programs such as “Everything But Arms” to the European Union); and (3) important flexibilities at the World Trade Organization (WTO) such as transition periods before intellectual property protection (such as patents on medicines, vaccines and climate change technology or copyright on textbooks) needs to be applied, as well as transition periods in current negotiations such as disciplines on fisheries subsidies etc.

EXCLUSION OF COVID-19 IMPACT DATA

The central issue is “should LDCs graduate without 2020 data on the impact of COVID-19 on graduation indicators”. The CDP has acknowledged serious concerns about the possible negative impacts of COVID-19 on LDCs.

Yet, the CDP wants to make its decision this week as to whether to recommend that Bangladesh, Laos, Myanmar, Nepal and Timor Leste graduate from LDC status, despite not having any 2020 data for the LDC graduation criteria.

Effectively, “the CDP will decide whether to recommend [that] these five LDCs lose the benefits of LDC status without taking into account the impact of COVID-19 on the LDC graduation criteria.”

The Paper argues that “this fundamental gap in data in the three main LDC graduation criteria scores of the 2021 triennial review will obviously be prejudging the graduation of eligible LDCs, thus resulting in a premature and questionable graduation assessment.”

Citing the 2020 United Nations Conference on Trade and Development (UNCTAD) LDC Report, which states unambiguously that LDC exports of garments are forecast to “shrink by 20 per cent in 2020”, the Paper says that Bangladesh and Nepal among others will face a serious economic dislocation as these two countries manufacture “over 50 per cent” of merchandise exports, one of the eight indicators of the economic and environmental vulnerability index criteria.”

The Paper notes that “while the CDP will consider additional information on COVID-19 and its impacts when deciding whether to recommend at its next meeting that these LDCs graduate, since the pandemic has also hampered the collection of statistics, it is not clear the CDP will have sufficient statistics even for these additional considerations.”

It argues that the United Nations Department of Economic and Social Affairs (DESA) has noted that “short-term statistical production, which heavily relies on traditional face-to-face methods, continues to be affected, with low and middle-income countries impacted the most. Three out of four countries in that income group saw their production of monthly and quarterly statistics negatively affected by the pandemic”.

Moreover, it has been recorded that National Statistical Offices (NSOs) across countries have also been affected and are not able to collect data due to the pandemic.

According to the Paper, “65 percent of NSO headquarters offices are partially or fully closed, 90 percent have instructed staff to work from home, and 96 percent have partially or fully stopped face-to-face data collection” and “90% of national statistical offices in low- and lower-middle-income countries have seen the pandemic blunt their ability to meet international reporting requirements.”

Even in the normal times before the pandemic, LDCs were unable to collect the kind of excess mortality data, which would indicate the number of increased deaths due to the pandemic.

CONTINUING COVID-19 IMPACTS

More disturbingly, the Paper has pointed out that due to the unprecedented impact that COVID-19 has had on development, including in LDCs, “it is surprising that the CDP plans to go ahead on 22-26 February 2021 and decide whether to recommend that certain LDCs graduate, despite not having 2020 data for the graduation criteria.”

For example, it says that “in May 2020, DESA already warned that COVID-19 threatens to undo progress achieved towards sustainable development by the LDCs over recent decades”.

“Even before the pandemic crisis, LDCs were unlikely to achieve the SDGs” and “once the new coronavirus spreads within an LDC, prospects are dire”, the Paper has noted, arguing that the President of the Economic and Social Council noted that the pandemic is “not only a threat to our health, but a human crisis of multiple dimensions”, pointing to the setbacks caused by COVID-19.

The ECOSOC said unambiguously that “the COVID-19 pandemic, while primarily a health crisis, also quickly became the worst human and economic crisis in decades”, with millions of people living in poverty.

The Paper argues that “beyond the health crises, which include disruption caused by COVID-19 to vaccinations for other diseases and other social crises caused by this pandemic, it has also affected LDC economies through multiple channels, including reduced demand for exports, reduced commodity prices, reduced remittances, increased unemployment and reduced tourism causing unprecedented pandemic-induced recessions.”

For LDCs dependent on tourism such as Myanmar, Timor Leste, Laos and Nepal, the drop in the revenue from tourism-related sectors is significant.

“Some LDCs, where tourism accounts for around 25 per cent of foreign exchange earnings and approximately 20 per cent of GDP, will be seriously affected … Although countries with tourism sectors will be impacted irrespective of their level of development, in LDCs this impact is likely to compound other forms of economic and social fragility,” the Paper has argued.

Given the assessment of the International Air Transport Association (IATA) about the huge drop in international passenger demand, which fell 76% in 2020 (the sharpest decline in aviation history) and Asia-Pacific airlines’ traffic by 80% in 2020, it is little surprise that the baseline forecast for 2021 is half of 2019 level, the Paper has noted.

Further, “there is a severe downside risk if more severe travel restrictions in response to new variants persist,” the IATA has argued.

According to the IATA, “optimism that the arrival and initial distribution of vaccines would lead to a prompt and orderly restoration in global air travel have been dashed in the face of new outbreaks and new mutations of the disease.”

Citing UNCTAD’s LDC Report released on 3 December 2020, the Paper says that “the pandemic will push LDCs to their worst economic performance in 30 years in 2020, with falling income levels, widespread employment losses and widening fiscal deficits”.

Given these cascading effects of the COVID-19 pandemic, the GDP per capita of LDCs is projected to contract by 2.6% in 2020 from already low levels, with only $1,088, compared with a world average of $11,371 in 2019, the Paper has noted.

The UNCTAD report informs that “at least 43 out of the 47 LDCs will likely experience a fall in their average income” and that “the current account deficit of LDCs is forecast to widen from $41 billion (or 3.8% of their collective GDP) in 2019 to $61 billion (or 5.6% of their GDP) in 2020, the highest value ever”.

UNCTAD’s LDC Report further states, “the crisis will reverse years of painstaking progress by LDCs in social fields such as poverty reduction, nutrition and education … The number of people living in extreme poverty (i.e. with an income level lower than $1.90 per day) in LDCs could rise by 32 million in 2020, pushing the poverty rate from 32.5% to 35.7% and limiting these countries’ chances of achieving the UN’s Sustainable Development Goals (SDGs). The people living in extreme poverty in LDCs account for more than 50% of the global total”.

As regards graduation from LDC status, the Report cautions that “the world economic crisis brought by the COVID-19 pandemic may affect the previously planned graduation of LDCs”.

The Paper drew attention to another study that says that “the pandemic threatens to impact the LDCs, LLDCs and SIDS disproportionately with potentially devastating impacts on human health, including through social and economic effects of the virus and containment policies through the months and years to come.”

LDCs FACE NUMEROUS PROBLEMS

Furthermore, the global demand and supply-side shocks arising from the impact of COVID-19, are also heavily impacting LDCs that are dependent on exporting manufactured goods, particularly clothing and apparel. Six LDCs – Bangladesh, Cambodia, Haiti, the Gambia, Nepal and Lesotho – receive more than 50 per cent of their export revenue from exporting manufactured goods. The contraction in exports will likely lead to current account deficits, the Paper has argued.

It says that the World Health Organization (WHO) has predicted that the pandemic will take 4-5 years to get under control. Despite the WHO Director-General having said “there will be no return to the old normal for the foreseeable future”, the World Bank has stated that the global economic recovery may take 5 years.

Given the asymmetries in the global economic order, UNCTAD has noted “the talk of a “K”-shaped recovery with a “V-shaped” recovery for the wealthy and a struggle for everyone else.”

While LDCs saw the largest increase in extreme poverty in 2020 due to the pandemic, they were least able to afford support packages so they provided the smallest fiscal response to the pandemic by share of GDP or per capita (LDCs provided $17.8/person compared to $1,365/person in developed and transition economies).

This has been compounded by a lack of international support for LDCs such as debt relief, assistance with relief and stimulus packages and falling official development assistance, the Paper noted.

The Paper says, “while vaccines have been developed for COVID-19, because developed countries have bought up most of the available doses,” Bangladesh, Laos, Myanmar and Nepal are not predicted to have widespread vaccination coverage until 2023 or later and it will take until 2027 (if at all) for enough of the world’s population to be vaccinated to reduce the threat of COVID-19. Whereas Denmark aims to have vaccinated its entire population by June 2021.”

Little wonder that the stark difference in vaccines administered between developed countries and LDCs can also be seen, the Paper has pointed out.

“ME-FIRST” APPROACH FOR COVID-19 VACCINES

The Paper has cited the assessments provided by The Economist Intelligence Unit (EIU), which says “COVAX supplies may be slow to arrive, especially if delays in the production for and delivery to richer countries push back delivery dates for poorer nations.”

“Given that unexpected hiccups in procuring supplies have already occurred in most developed countries, it is likely that developing countries with poor infrastructure, few healthcare workers and inadequate refrigeration will find the roll-out even harder,” the EIU has observed.

The EIU has further pointed out that: “The costs associated with vaccine roll-outs are more than just the price of the product itself, and many developing countries will struggle to finance the additional expenditures (such as transport and distribution costs, and salaries for healthcare workers who will administer the vaccine), especially given that the coronavirus-induced recession has already depleted fiscal resources and led to ballooning budget deficits” and that even developing countries like the Kyrgyz Republic do not have the infrastructure to receive and store the vaccines.

In the face of increasing vaccine nationalism which has both health and economic consequences, the TWN paper says that “61 percent of deaths could be averted if the vaccine was distributed to all countries proportional to population, while only 33 percent of deaths would be averted if high-income countries got the vaccines first”.

The WHO Director-General has noted, “This “me-first approach” adopted by the rich countries will “leave the world’s poorest and most vulnerable people at risk and it’s also self-defeating.”

The economic consequences of vaccine nationalism include that since countries cannot reopen their economies from lockdowns etc until their populations have been vaccinated, vaccine nationalism will mean that LDCs will only be able to reopen their economies and restart their economic growth years after developed countries.

According to a study by the International Chamber of Commerce, vaccine nationalism could cause the global economy to lose as much as $9.2 trillion.

With SARS-Cov-2 virus becoming endemic and with the coronavirus mutating rapidly and the vaccines are less effective against some of the variants, the LDCs face enormous difficulties due to lack of supplies of vaccines, the Paper has suggested.

The LDC Sub-group of the CDP held its Expert Group Meeting on the Preparation of the Triennial Review of the List of LDCs from 8-15 January 2021.

According to the expert group’s recommendation, Bangladesh’s graduation is expected to be effective after 5 years of preparatory period, that is in 2026, which would imply the CDP’s LDC Sub-group recommended an extra two years in addition to the usual three-year preparatory period before the graduation becomes effective.

Since that LDC Sub-group meeting, UNGA unanimously agreed on 11 February 2021 to provide Angola an additional three years before it graduates from being an LDC due to its six year economic recession and “its socioeconomic vulnerabilities exacerbated by the global crisis triggered by the COVID-19 pandemic”.

“This indicates that all UN Member States, including the developed countries, recognize the adverse impact that COVID-19 is having on graduating LDCs and are willing to provide at least three years of additional preparatory period before the country loses its LDC status and therefore loses the benefits of LDC status,” the Paper has argued.

Therefore, “the CDP should accordingly consider additional years for LDC graduation due to COVID-19 impacts,” the Paper has emphasized.

Without knowing the above long-term impact of COVID-19, the extent of the economic and social crises that flow from this new disease are unknown. For example, graduating LDCs cannot be sure that they will be able to remove their lockdowns or other restrictions (and reopen their borders to tourists, send their workers to get remittances and restart their economies and schools in person etc) before 2027 (the date at which sufficient vaccines are estimated to reach them/the rest of the world to prevent COVID-19 re-surging), the Paper has suggested.

“Given these challenges, this significant uncertainty and the lack of 2020 data reflecting the impact of COVID-19 on the LDC graduation indicators etc, recommending in the 22-26 February meeting that an LDC should graduate in this environment casts considerable doubt on the sustainability of development progress of those LDCs,” the Paper emphasized.

Moreover, it is imperative that for avoiding “their development progress being reversed given the unprecedented pandemic and associated economic and social crises, the uncertainty and the lack of data to make an informed decision, it would be prudent not to recommend any LDCs graduate at next week’s CDP meeting,” the Paper has stressed.

It has also drawn attention to the Handbook on the Least Developed Country Category, which has emphasized the following points:

(1) One of the principles the CDP has adopted is “Flexibility, referring to the application rather than the criteria themselves. The principle ensures that the criteria are not applied mechanically. The CDP uses additional sources of information before making recommendations for inclusion and graduation”.

(2) “Based on the analysis conducted by the sub-group and any additional considerations or information, if the country has met the eligibility criteria for a second time, the CDP may decide to recommend graduation. If it has serious concerns – for example, regarding the sustainability of the country’s development progress – it may decide not to recommend graduation. In such cases, it typically defers its decision to the next triennial review … the CDP may defer its decision – for example, if it has serious concerns about the situation of the country or the sustainability of the country’s development progress.”

(3) The CDP has decided to defer its decision in the past. For example, even though they met the LDC graduation criteria at a second triennial review, the CDP chose not to recommend that Cape Verde, Kiribati, Nepal and Timor Leste etc graduate. “The CDP, ECOSOC and the General Assembly have often deferred their consideration or decisions, or granted additional transition periods, based on the unique situation of each country.”

The Paper says, for example, that Vanuatu only graduated 23 years after meeting the graduation criteria for a second time. The Maldives had 11 years after it met the graduation criteria for a second time before it graduated. With the January 2021 UNGA resolution, Angola has 9 years from when it met the criteria for a second time until it is scheduled to graduate.

CONCLUDING RECOMMENDATIONS

In its concluding recommendations, the Paper has argued that “given these precedents, the scale of the challenges to development progress posed by COVID-19 and its economic and social crises as well as the uncertainty due to it being a new disease, and the CDP not having the 2020 data reflecting the impact of COVID-19 on the LDC graduation criteria etc, the 2021 triennial review regarding which LDCs to recommend for graduation should be deferred, taking into account the valid interests of the eligible LDCs aspiring to graduate as a milestone towards sustainable development and poverty eradication.”

Furthermore, “the outcome of excluding the impact of COVID-19 on the three main LDC graduation criteria scores which will essentially determine graduation will be a totally flawed review leading to a premature graduation assessment,” the Paper has cautioned.

“If the CDP is nevertheless determined to hold the triennial review this year and at it recommend some LDCs for graduation, it should at least provide them with an additional 9-year preparatory period (in addition to the usual 3-year preparatory period), as it is clear that these LDCs would require exceptional, longer preparatory periods under ongoing pandemic circumstances,” the Paper concluded.

 


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