Graduation of Bhutan From the Group of Least Developed Countries (LDCs)

On December 13, 2023, Bhutan is set to become the seventh nation to graduate from the United Nations' (UN) list of Least Developed Countries (LDC).

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Context: On December 13, 2023, Bhutan is set to become the seventh nation to graduate from the United Nations’ (UN) list of Least Developed Countries (LDC).

What is a Least Developed Country (LDC)?

The LDCs are developing countries listed by the UN that exhibit the lowest indicators of socioeconomic development.
Origin of the concept: The concept first originated in the late 1960s and was codified under UN resolution 2768 passed in November 1971.
Criteria for classification: The UN identifies three criteria for a country to be classified as an LDC:
- Gross National Income (GNI) per capita: The country must have a GNI per capita below the threshold of USD 1,230 over a three-year average.
- Human Assets Index (HAI): The country must perform poorly on a composite human assets index based on indicators including nutrition, health and education.
Economic Vulnerability Index (EVI): The country must demonstrate economic vulnerability such as being prone to natural disasters and possessing structural economic constraints.
Assessment: To be considered for graduation from LDC status, a country must meet certain criteria for at least two consecutive triennial reviews conducted by the United Nations.
Global LDC distribution: 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.

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.

Income

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.

Human assets

By using measures like education, health, and nutrition, a nation must show that it has improved its human capital in order to achieve the human assets requirement.

Measures: This entails expanding literacy rates, lowering malnutrition rates, and enhancing access to healthcare and education.

Economic vulnerability

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.

Measures: Diversifying the economy, investing in infrastructure, and raising the standard of institutions and governance are all ways to do this.

Advantages and Disadvantages of being an LDC

Related Information: Other Important Country Taxonomy Systems used by International Organization

UNDP

The UNDP’s country classification system is calculated from the Human Development Index (HDI).

In the classification system, developed countries are countries in the top quartile of the HDI distribution. Developing countries consists of countries in the high group (HDI percentiles 51-75), medium group (HDI percentiles 26-50), and the low group with bottom quartile HDI.

IMF

The main criteria used by the IMF in country classification are i) per capita income level ii) export diversification iii) degree of integration into the global financial system.

The IMF refers to the classification of countries as Advanced and Emerging and Developing Economies.

World Bank

The World Bank’s classification of the world’s economies is based on estimates of gross national income (GNI) per capita.

The world bank classifies countries into Low income, middle income, Upper middle income, and High income.