Nepal’s LDC graduation: Things to gain and lose

KATHMANDU, Jan 16: The United Nations Organization (UNO) is preparing to upgrade three countries including Nepal as developing nations in 2026. Two other countries to join the developing countries’ club are Bangladesh and Laos. 

Before graduating as a developing nation, the UN has granted a five-year time to make necessary preparations and comply with the standards. 

Nepal has so far met two of three criteria to be uplifted as a developing nation. Nepal, which has made it to the expected standard of human capital and vulnerability to economic risks, is yet to meet the criterion set for the per capita income. 

Nepal has a score of 71.2 as the Human Assets Index, an indicator measuring human capital,  compared to the required threshold of 66. Similarly, the Economic Vulnerability Index stands at 28.4. The criterion required that the vulnerability to economic risks must be less than 30. While the UN requires a country to have a per capita income of USD 1,222, Nepal records only USD 1,027. 

In case three countries including Nepal graduate from the LDCs, Afghanistan will be left as the only LDC in Asia. 

Things to gain 

After its graduation, Nepal will have a changing role in the international community. According to an associate professor at Tribhuvan University, Dr Ramesh Poudel, Nepal would have a different level of dignity in the international community and various forums. 

"We are now presenting ourselves to the international community as one of the weakest and poorest countries in the world," Poudel said, adding, “We can introduce ourselves as a developing economy following the graduation.” He also said that the level of the financial condition of Nepal will rise at least one place after upgrading from least developed to a developing country.

What to lose? 

After being graduated to a developing country, the various assistance and facilities that Nepal is currently receiving as an LDCwill automatically be removed. Nepal will stop receiving grants and assistance provided by international donors along with the customs exemption available in foreign trade.

Asian and European countries have been offering 100 percent duty and quota exemption on goods imported from Nepal in its capacity as the LDC. 

Similarly, developed and rich countries have been providing various forms of assistance to the poor and vulnerable. This facility will automatically be suspended as it upgrades to the list of developing countries. Shekhar Golchha, president of the Federation of Nepalese Chambers of Commerce and Industry, said that the removal of the facility would reduce Nepal's exports and have a direct impact on per capita income.

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