What is…a Least Developed Country (LDC)?

Background and Criteria

The classification of Least Developed Country (LDC) was established by the United Nations in 1971. The main purpose was to enhance support those countries facing severe and persistent challenges to economic growth and development.

The criteria for LDC status have evolved over time. They currently are:

  • Gross National Income (GNI): The average income per capita must be less than US $1,035 (2015 standard).
  • Human Asset Index (HAI): Based on indicators of undernourishment, under-five mortality rate, secondary school enrolment, and adult literacy.
  • Economic Vulnerability Index (EVI): Based on indicators of population size, remoteness, instability of agricultural production and exports, effects of natural disasters, etc.

Originally, just 20 counties were given the LDC classification. In the 45 years since, 32 countries have been added to the list. In this same period, only four countries have left LDC status. The first was Botswana in 1994, followed by Cape Verda in 2007, the Maldives in 2011, and Samoa in 2014. Equatorial Guinea and Vanuatu are expected to leave LDC status in 2017.

LDC Countries in 2016The current total of LDC countries is 48, including 34 in Africa, nine in Asia, four in Oceania, and one in the Americas. Three ASEAN countries, Cambodia, Laos and Myanmar, are classified as LDCs.

Three countries (Ghana, Papua New Guinea and Zimbabwe) also meet the LDC criteria, but have declined to accept because they do not agree with the criteria as accurately reflecting their developmental status.

Entering and Leaving LDC Status

Every three years, the Committee for the Development Policy (CDP) in the UN Economic and Social Council reviews the status of UN member counties. Nations that meet all three criteria are eligible for LDC status.

Those that do not meet at least two of the three criteria for two successive reviews may “graduate” from the category.

This means that a minimum of six years is required from the first successful CDP review until a country may leave LDC status. In the 2015 review, five LDC countries (Timor-Leste, Bhutan, Sao Tome and Principe, Solomon Islands, and Nepal) met one or more of the criteria, and will consequently be considered for graduation in the 2018 review.

Benefits

There are three types of advantages of LDC status:

  • Trade-related benefits: These include preferential treatment in various multi- and bi-lateral trade agreements, such as lower tariffs and greater market access, as well as additional support in building trade and market capabilities.
  • Official Development Assistance (ODA): Bi- and multi-lateral development agencies such as the UN and international financial institutions usually give more aid and lower loan rates to LDCs. A number of support mechanisms have also been created specifically for LDCs.
  • General Support: The costs of membership and participation in many UN bodies is reduced or subsidised for LDCs. Considerable support is also given to help LDCs phase out of the category.

While the benefits of LDC status are many, they are also complex. As a result, many LDC countries often lack the capacity to take full advantage of them.

The Lao PDR

Because of the above benefits and advantages, many countries have resisted leaving the LDC category. The Lao PDR, however, has pinned much of its development strategy on ridding itself of this status by 2020.

Because Laos did not meet the necessary criteria in the 2015 review, it is no longer possible to achieve this. However, the Lao government and many development partners continue to promote the goal, hoping that Laos will “graduate” as soon as possible. Led by UNDP, donors are providing significant assistance for this effort.

For each of the three LDC criteria, the table below shows the current thresholds for entering and exiting LDC status, the Lao ratings for the past four review periods, and the averages for LDCs and Developing Counties (DC).

LDC Table

Further Reading

Wikipedia

United Nations

UNDP-Lao PDR

One Reply to “What is…a Least Developed Country (LDC)?”

  1. So basically, Laos failed to meet all three LDC indicators, and hence it is totally impossible for the country to “graduate” from LDC by 2020 and meet the party target! Wow! so like why do we keep hearing the mantra, “graduate from LDC by 2020” repeated ad-nausium from the donor community and government alike? And more importantly, how is the LPRP going to save face on this one?

Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.