TWN Info Service on UN Sustainable Development (Mar21/02)
7 March 2021
Third World Network

UN: Triennial review recommends LDC graduation without Covid impact data
Published in SUNS #9300 dated 8 March 2021

Kathmandu, Nepal, 5 Mar (Prerna Bomzan) – The United Nations Committee for Development Policy (CDP) has recommended graduation of Bangladesh, Lao PDR and Nepal from the list of least developed countries (LDCs), as defined by the UN.

The CDP is responsible for the periodic review of the LDC category and for recommending countries (all UN Member States in developing regions) for both graduation and inclusion.

At its annual plenary in virtual mode on 22-26 February, the triennial review of the LDC category took place on the 23rd.

There are concerns that this triennial review of LDC graduation without 2020 data and consequent Covid-19 impact on the key criteria scores is a flawed graduation assessment.

[LDCs are eligible for graduation, if they meet thresholds for either two of the three key LDC criteria: gross national income (GNI) per capita, human assets index (HAI) and economic and environmental vulnerability index (EVI)] or alternatively, at least twice the GNI per capita threshold, at two consecutive triennial reviews.

The CDP’s graduation recommendations are required to be endorsed by the UN Economic and Social Council (ECOSOC) and further noted by the UN General Assembly in their upcoming respective sessions.]

The CDP’s online recorded briefing on LDC-related issues addressed at last week’s annual plenary meeting includes the conclusions of the 2021 triennial review.

Myanmar and Timor-Leste were the two other LDCs considered for graduation recommendation; however, decisions on their status were deferred to the next triennial review in 2024.

In the case of Myanmar, deferral of decision was due to “concerns on negative impacts of the state of emergency declared by the military on Myanmar’s development trajectory and graduation preparation; inability to review at this time” whereas in Timor-Leste’s case, decision was deferred due to “continued concerns about the sustainability of the country’s development progress”.

In its consideration of the graduation of Bangladesh, Lao PDR and Nepal, the CDP has provided “horizontal recommendations due to Covid-19”:

(i) an extended five-year preparatory period (as against the usual three-year preparatory period);

(ii) analyse at the 2024 triennial review if extension is needed;

(iii) improve the monitoring system, pay special attention to Covid-19 impacts, and alert ECOSOC if action is needed.

Further, the CDP emphasized that “support to graduating countries by development and trading partners is more important than ever” by “extending access to relevant international support mechanisms (ISMs) for an appropriate period; support to address challenges arising from Covid-19; capacity building; …”.

Given the specific “horizontal recommendations due to Covid-19” as well as emphasis on “support” to the graduating countries in the context of COVID-19, it remains highly debatable that the triennial review was conducted without 2020 data and hence, COVID-19 impacts on the three key criteria scores (GNI per capita, HAI and EVI) which essentially determines graduation of countries.

In its 12 May 2020 statement addressing the “Covid-19 and graduation from the LDC category”, the CDP had announced that “the LDC criteria for the 2021 triennial review will be calculated on the basis of the most recent data available at the end of 2020 and will include data up to 2019. Hence, the LDC criteria scores will not show the impact of Covid-19”.

The CDP statement had cautioned that it is “deeply concerned about the possible negative impacts of the Covid-19 crisis on LDCs.”

“The Committee is also anxious that Covid-19 may negatively impact the preparations of LDCs that are graduating and those to be considered for graduation at the next triennial review”.

It had further highlighted that “Covid-19 threatens to have devastating effects” on the LDCs.

“Their public health systems are often underdeveloped and unable to cope with widespread pandemic. Lockdowns and social distancing measures to stop the spread are more difficult to implement and can have particularly debilitating impacts on livelihoods.”

“Moreover, LDC economies have little resilience to shocks such as the collapse of global demand, exacerbating the socio-economic consequences of the crisis”.

When even developed countries are currently struggling to cope with the crippling pandemic, the current list of 46 LDCs with an estimated 1.06 billion people are undeniably the hardest hit given their characteristic low levels of income and severe structural constraints.

True to the CDP’s warnings, the annual flagship Least Developed Countries Report 2020 by the UN Conference on Trade and Development (UNCTAD), released on 3 December, “forecasts 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”. ”

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 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”.

The report further states that “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”.

Further, the CDP’s main findings on impact of COVID-19 on LDCs, as requested by the ECOSOC, states that “socio-economic fallout of pandemic is a lot more devastating for LDCs” with “economies dependent on tourism and fossil fuel exports most affected” as well as “service reduction in health, education with long-term impacts”.

The findings also include: limited fiscal space is a key constraint to response (in developed economies, the size of fiscal stimulus per capita has been 580 times higher); important support provided by development partners, but far below what is needed; DSSI [Debt Service Suspension Initiative] is short-term relief and additional fiscal space, but insufficient with LDCs spending more in servicing debt than strengthening the health sector.

It further explicitly cautions that the “health crisis is still evolving, and socio-economic crisis will last even longer; stalling or reversing years of progress towards achieving SDGs. Most LDCs were not on track even before the crisis” and “returning to pre-Covid-19 situation is neither feasible nor advisable”.

In this clearly worrisome context, the recently conducted 2021 triennial review of LDC graduation that was conducted without 2020 data and consequent Covid-19 impact on the key criteria scores is a flawed graduation assessment.

The fundamental gap in data has obviously prejudged the graduation of eligible LDCs, thus resulting in a premature graduation assessment.

For instance, the 2020 UNCTAD LDC report states that LDC exports of garments are forecast to “shrink by 20 per cent in 2020” which will directly affect Bangladesh and Nepal, amongst others, for which manufactures account for “over 50 per cent” of merchandise exports, one of the eight EVI indicators.

Moreover, the 2021 triennial review has also identified countries that meet graduation criteria for the first time, namely Cambodia, Comoros, Djibouti, Senegal and Zambia.

This first eligibility too is pre-judged in the absence of 2020 data and COVID-19 impacts on the key criteria scores.

At the same time, the review conclusions rightly predicts the “risk” that some of these countries “will fail meeting the graduation thresholds in 2024, mainly due to Covid-19”.

Thus, it is curious why the lack of 2020 data and Covid-19 impact did not feature more prominently in the recently concluded review so that a deferment could be recommended instead.

The huge uncertainties due to the COVID-19 pandemic are clear, with the World Health Organization predicting it will take 4-5 years to get it under control and the World Bank stating that global economic recovery may take 5 years.

The UN Secretary-General’s remarks to the General Assembly Special Session in response to the Covid-19 pandemic on 3 December alerts that “a vaccine cannot undo damage that will stretch across years, even decades to come”.

The global shortage of vaccines has meanwhile triggered another wave of massive concerns, including in Europe – prospects are not bright for the majority of LDCs and even many developing countries achieving the required level of vaccination.

With the projected bleak scenario of continued global turmoil brought about by the COVID-19 pandemic, this unprecedented crisis indeed provided a case for deferral of the 2021 triennial review and decisions on premature LDC graduation.

However, with the “horizontal recommendations due to Covid-19”, an additional 9-year preparatory period (as against the additional 2 years) was well warranted since exceptional, longer preparatory periods are clearly required under the ongoing pandemic circumstances.

It is to be noted that the UN General Assembly recently on 11 February, decided to extend the preparatory period for Angola with an additional three years (to 2024), preceding the graduation of Angola scheduled in 2021, “noting with great concern the reduced revenue resulting from the decline in commodity prices and the negative impact on the vulnerable economy of Angola from the global crisis triggered by the COVID-19 pandemic, which have further disrupted the sustainable development progress of the country”.

The additional three years is longer than the extended two years granted in the CDP’s 2021 triennial review.

Notwithstanding the CDP’s graduation recommendations for Bangladesh, Lao PDR and Nepal, the ECOSOC and the UNGA need to reconsider the 2021 triennial review and its conclusions.

It would bode well for these countries, while recognising their valid interests of aspiring to graduate as a milestone towards sustainable development and poverty eradication.