International Relations

Bhutan is no longer classified as a “Least Developed Country.”

On December 13, 2023, Bhutan will become the seventh country to be removed from the United Nations’ list of Least Developed Countries (LDC).

What is the definition of a Least Developed Country (LDC)?

  • The LDCs are developing countries identified by the UN as having the lowest socioeconomic development indicators.
  • The concept first emerged in the late 1960s and was codified in November 1971 by UN Resolution 2768.
  • According to the UN, an LDC is defined as “a country that exhibits the lowest indicators of socioeconomic development, with- Low levels of income, human capital and economic diversification, high levels of economic vulnerability, and \sA population that is disproportionately reliant on agriculture, natural resources, and primary commodities.

LDC Eligibility Criteria

  • The UN defines three criteria for classifying a country as an LDC:
  • It must have a three-year average gross national income (GNI) per capita that is less than USD 1,230.
  • It must perform poorly on a composite human assets index that takes into account indicators such as nutrition, health, and education.
  • It must show economic vulnerability, such as vulnerability to natural disasters and structural economic constraints.
  • The UN reviews countries every three years and requires them to meet a selection of all three criteria at the same time.

How many countries are classified as LDCs?

  • At the moment, the UN lists 46 countries as LDCs.
  • 33 are from Africa, nine are from Asia, three are from the Pacific, and one is from the Caribbean.
  • Bangladesh, Laos, and Nepal were recommended to be removed from the list during the UN 2021 triennial review of LDC countries.

How does a country get off the list of LDCs?

  • To be removed from the LDC list, a country must meet certain criteria in three areas: income, human assets, and economic vulnerability.
  • To meet the income requirement, a country must have a GNP per capita of at least USD 1,242 for two consecutive triennial reviews.
  • The country must also demonstrate that this level of income can be sustained in the long run.
  • To pass the economic vulnerability test, a country must also demonstrate that it has improved its ability to withstand external economic shocks such as natural disasters or changes in commodity prices.

How did Bhutan get off the list of LDCs?

  • Bhutan was among the first LDCs to be designated in 1971. It satisfied the graduation requirements in 2015 and 2018.
  • Bhutan’s economy has grown more than eightfold in the last two decades, from less than USD 300 million in 2000 to USD 2.53 billion in 2017.
  • The proportion of the population living in poverty fell from 17.8 percent in 2003 to 1.5 percent in 2017.
  • The percentage of people living below the national poverty line fell from 23.2% in 2007 to 8.2% in 2017.

What economic measures were implemented?

  • Hydropower exports: Bhutan increased hydropower exports to India, which now accounts for 20% of its economy.
  • Bhutan established Brand Bhutan to diversify exports and target high-end markets with high-value, low-volume Bhutanese goods from sectors such as textiles, tourism, handicrafts, culture, and natural resources.
  • Tourism promotion: It has emerged as a year-round tourist destination in South Asia.

The Benefits of Being an LDC

  • LDCs have duty-free and quota-free (DFQF) access to developed-country markets.
  • LDCs are also eligible for development loans with preferential terms, such as lower interest rates and longer repayment terms than other nations.
  • The terms “Official Development Assistance” (ODA) or “aid” are commonly used to describe this type of assistance.

Bhutan’s future prospects

  • As a result, moving up the list is frequently only the first step in overall development.
  • Graduation from LDC status is not the end of the road, but rather the start of a new adventure.
  • It is a time when a country’s efforts to build productive capacity, diversify its economy, and create new opportunities for employment and income generation must be redoubled.
And get notified everytime we publish a new blog post.