International Marketing MAR 4156
University of Central Florida
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LOCALDEVELOPMENT AND GLOBALiSSUES e IV Review of the list of least developed countries A Introduction 1 The Committee for Development Policy is required pursuant to Economic and Social Council resolution 199846 of 31 July 1998 annex 1 paragraph 9 to conduct triennially a review to determine the countries to be added to or graduated from the list of least developed countries Since the previous review was conducted in 2000 the Committee conducted another review in 2003 2 The Committee bases its identification of the least developed countries on the consideration of three dimensions of a country s state of development its income level its stock of human assets and its eco nomic vulnerability The Committee thus uses a gross national income GNI per capita as an indicator of income b the Human Assets Index HA1 as an indicator of the stock of human assets and c the economic vulnerability index EVI as an indicator of economic vulnerability In addition because the underlying concept of the least developed country category excludes large economies in 1991 the General Assembly in its resolution 46206 endorsed the principle that no country with a popula tion exceeding 75 million should be considered for addition to the list as had been set forth in the report of the Committee for Development Planning on its twentyseventh session15 3 For each review the Committee determines threshold levels for each of the three indicators These thresholds are used to identify the countries to be added to or graduated from the category To be added a country must satisfy all three criteria To become eligible for gradua tion a country must meet an adjusted set of thresholds for two of the same three indicators to qualify for graduation it must do so in two consecutive reviews The Committee understands however that its role is to assist in identifying which countries are eligible or qualify for grad uation from least developed country status based on the application of 15 See Revolution and Reform in Eastern Europe and the Soviet Union the Giobai DeVeiopment impact Report of the Committee for DeVeiopmentPianning on the We1 tyrseVentn Session 22726 Aer 1991 United Nations pubiication Saies No E92iV2 para 242 the criteria adopted by the Committee and endorsed by the Economic and Social Council The decision on whether the countries should be graduated is the responsibility of the Council and ultimately the General Assembly 4 The Economic and Social Council in its resolution 200236 of 26 July 2002 took note of the recommendations of the Committee regard ing three major changes to the criteria for the identification of the least developed countries first that gross national income GNI per capita should replace gross domestic product GDP per capita as the indica tor of income second that as it was a better indicator of the level of education the gross secondary school enrolment ratio should possibly replace the gross combined primary and secondary school enrolment ratio in the Human Assets Index HA1 previously called the Augmented Physical Quality of Life Index APQLI and third that the percentage of the population displaced by natural disasters could be used as a supplement to the economic vulnerability index EVI when suitable data became available 5 The Committee has made improvements to the new criteria for the identification of the least developed countries adopted in 2000 However it considers that there is scope for further methodological improvemenm in this before the next triennial review Particular atten tion should be given as in the past to the quality and reliability of indi vidual indicators and the way in which the criteria are applied B Criteria for the identification of the least developed countries in 2003 1 Gross national income GNI per capita 6 The initial list of countries to which the criteria for identifying the least developed countries were applied during the 2003 review comprised all countries classified by the World Bank as lowincome in any one of the three most recent years16 The Committee gave special attention to the lowincome countries with economies in transition of Easteni Europe 15 The World Bank39s list of lUerllCUme coohtries changes from yearto yearas a result of changes in the cutoff point and the differences in growth arhohg coohtries overtime LOCALDEVELOPMENT AND GLOBALlSSUES e and in Central Asia that had become independent in the 1990s but found that none of them should be included in the initial list for the rea sons given in the box below As a result 65 countries have been retained for consideration during the 2003 review comprising the 49 current least developed countries and 16 lowincome countries not currently included in the list of least developed countries including one new State Member of the United Nations TimorLeste 7 The Committee decided that the threshold for inclusion in the present review should be a threeyear 19992001 average GNI per capita of US 75017 With regard to the threshold for graduation the Committee increased the margin from 15 to 20 per cent above the threshold for inclusion primarily to avoid the possibility that graduat ing countries would rejoin the category as a result of shortterm fluctu ations in their GNI per capita arising from exogenous shocks It was thus agreed that in the 2003 review the threshold for graduation would be a threeyear average GNI per capita of US 900 Six current least developed countries would be above the graduation threshold for this criterion see table 2 2 Human Assets Index HA1 8 The Committee agreed that the HA1 should continue to reflect the following a nutrition measured by the average calorie consumption per capita as a percentage of the minimum requirement b health measured by the underfive child mortality rate and c education measured by i the adult literacy rate and ii the gross secondary school enrolment ratio 9 As agreed in 1991 the HA1 threshold for inclusion is the value of the border between the third and fourth qualtiles of the group of 65 countries identified in table 2 In the 2000 review the threshold for graduation was 15 per cent above the inclusion threshold The Committee decided however that the margin between thresholds for inclusion and graduation should be decreased from 15 to 10 per cent 17 The World Bank cutoff points for lowr39mcome countries during thesethree years were US 755 US 755 and US 745 respectively The case of countries with economies in transition ine countries with economies in transition have been classified as low Nincome countries by the World Bank in at least one of the past three years Owing to the major political and economic changes that took place during their transition to market economies these countries suffered deep recessions During the period 199072000 for example GDP per capita fell by over 50 per cent in each of these Their threeryear average GNI per capita ranged from US 173 in Tajikistan to US 780 in Turkmenistan see table below GNI per capita is within the current threshold for inclusion in eight of the nine economies in transition Similarly seven of these countries would also be eligible for inclusion under the EVI criterion However as former socialist republics they still have high HAI scores owing to past social policies and should not be recommended for inclusion in the list of least developed countries The Committee agreed that considering economies in transition for inclusion in the 2003 triennial review of the list of least developed countries would also crer ate distortions of the HAI in the establishment of thresholds for inclusion and gradui ation It was recalled however that the economic decline in these countries had last ed longer than was expected It was also noted that a few of these countries now have lower GNI per capita than many current least developed countries If the economies of these lowrincome economies in transition do not improve in the near future erosions of social progress may be difficult to reverse leading to a possible lowering of HAI The Committee thus emphasized the importance of monitoring the economies in transition with low incomes and decreasing HAI scores ECONOMIES IN TRANSITION DATA AND CRITERIA USED IN DETERMINING ELIGIBILITY FOR LEAST DEVELOPED COUNTRY STATUS Populatlon Per caplta EVl 2002 GM modr mllllons US dollars HAl EVl lfleda Armenia 38 523 794 307 340 Azerbaijan 81 607 72 8 38 9 40 6 Georgia 5 2 647 762 47 6 48 2 Kyrgyzstan 5 0 287 776 38 2 39 9 Republic of Moldova 43 397 811 396 391 Tajikistan 62 173 695 377 391 Turkmenistan 49 780 845 609 538 Ukraine 487 723 863 238 261 Uzbekistan 256 607 813 403 363 a EVl wltn slxtn component percentage of populatlon dlsplaced by natural dlsasters LOCAL DEVELOPMENT AND GLOBAL ISSUES ble 2 Ta LEAST DEVELOPED AND OTHER LOWINCOME COUNTRIES N DETERMINING ELIGIBILITY FOR LEAST DEVELOPED COUNTRY STATUS PopuIa on Percap39na EV1 2992 GM rnodr m39nhons US dohars HA1 EV1 Inedh LDC AfghanISIan 233 523 116 591 499 LDC Ango1a 139 447 256 485 468 LDC Bang1adesh 1434 363 453 229 295 LDC Ben1n 66 367 492 579 564 LDC 22 699 494 496 419 LDC Bundna Easo 122 217 265 493 479 LDC Burund1 67 119 197 538 496 LDC CambodIa 138 263 445 497 481 Cameroon 155 583 438 319 312 LDC Cape 94 1323 720 555 567 LDC CentraI Afncan Repubhc 38 277 299 431 429 LDC Chad 84 293 261 592 566 LDC Comoros 97 387 381 591 587 Congo 32 619 552 593 468 Cote d 1vo39ne 167 687 439 254 259 Democra c PeopIe s Re 9th of Korea 226 449 629 328 295 LDC Democra c Repubhc of the Congo 543 199 343 498 423 LDC DNbou 97 873 392 486 495 LDC Equatona1 GuInea 95 743 472 644 558 LDC Entrea 49 199 328 517 592 LDC E1h1op1a 669 199 252 429 497 LDC CambIa 14 349 349 698 565 Ghana 292 337 579 499 419 LDC CUInea 84 447 393 421 499 LDC CuInearBISSau 13 179 312 646 697 LDC Ham 84 493 353 417 435 1nd1a 19411 459 557 135 196 1990119818 2175 619 736 181 219 Kenya 319 359 493 284 299 LDC K1nba11 91 923 675 648 694 LDC Lao PeopIe s Democra c Hepubhc 55 297 464 439 434 LDC Lesotho 21 573 454 442 445 LDC Ubena 33 285 387 631 583 LDC Madagascar 169 253 379 216 279 LDC Ma1aw1 118 177 399 499 494 Table 2 continued PopuLatLon Per cap39rta EVL 2002 GNL mode mLLLLons US doLLars HAL EVL 39rr39reda LDC MaLdLVes 03 1983 652 330 375 L C MaLL 420 230 400 475 454 LDC MaurLtanLa 28 377 382 380 377 MongoLLa 20 303 033 500 480 LDC Mozamb39rgue 400 220 200 350 302 LDC Myanmar 400 282 000 454 450 LDC Ne L 24 2 240 474 29 5 310 Nrcaragua 53 305 008 304 425 LDC Nrger 44 0 480 442 544 534 Nrgerra 4200 207 523 528 54 4 Pakrstan 448 7 437 45 5 20 2 204 Papua New Gu39rnea 50 073 402 304 380 LDC Rwanda 84 230 344 033 500 LDC 0 2 1447 888 40 0 50 8 LDC Sao Tome and Pr39rnc39rpe 04 280 558 448 370 LDC SenegaL 00 400 384 384 388 LDC S39rerra Leone 48 430 247 457 433 LDC SoLomoanLands 05 057 473 407 404 LDC SomaLLa 0 0 477 8 5 55 4 534 LDC Sudan 320 333 40 4 45 2 40 5 TLmorrLeste 08 478 304 h h LDC o o 48 203 480 44 5 42 8 LDC TuVaLu 0 04 1383 637 70 3 07 3 LD anda 24 8 207 308 43 2 44 0 LDC Un39rted RepubLLc or anzanLa 308 203 444 283 302 LDC Vanuatu 0 2 1083 57 4 44 5 40 4 Vret Nam 80 2 300 72 7 374 30 4 DC Yemen 400 423 408 404 400 LDC ZambLa 400 347 434 403 470 ZLmbabwe 434 403 505 337 303 Note ThreshoLds for anLusLon Ln the 44st of Least deveLoped countr39res are popuLatLon Less than 75 m39rLL39ron per cap39rta gross natLonaL anome 0N4 Less than 750 Human Assets Lndex HAL Less than 55 and econom39rc vuLnerab39rL39rty Lndex EVL greater than 37 A country must meet ah the cr39rter39ra ThreshoLds for graduat39ron from the LLst of Least deveLoped countr39res are per cap39rta GNL greater than 000 HAL greater than 04 and EVL Less than 33 A country must meet at Least two cr39rter39ra to be e447 g39rbLe for graduat39ron The Letters LDC before a country name Lnd39rcate a country that Ls currentLy des39rgnated as a Least deveLoped countr FLgures Ln boLdrace type Lnd39rcate a graduat39ron cr39rter39ron that has been met by a current Least deveL oped country a EVL w39rth s39rxth component percentage of popuLatLon d39rspLaced by naturaL d39rsasters threshoLd for anLusLon greater than 38 threshoLd for graduat39ron Lessthan 7 Data unavaLLabLe LOCALDEVELOPMENT AND GLOBALlSSUES e because this margin would be sufficient to distinguish the countries that had developed significantly better human assets According to the agreed guidelines the threshold for inclusion in the list of least devel oped countries under this index is an HAl value of 55 The threshold for graduation under this index is 61 3 Economic vulnerability index EVI 10 Economic vulnerability can take a variety of forms The vulnera bility that has to be considered in the identification of the least devel oped countries is structural economic vulnerability For this purpose the EVI should re ect the relative risk posed to a country s development by exogenous shocks the impact of which depends not only on the size of the shocks but also on structural characteristics that determine the extent to which the country would be affected by such shocks The EVI used by the Committee is therefore an average of five indicators a merchandise export concentration b instability of export earnings c instability of agricultural production d share of manufacturing and modem services in GDP and e population size ll The Committee was informed that the quality of intenrationally comparable data on the number of people displaced by natural disasters had improved significantly The Committee thus agreed that this infor mation should be included in a modified EVI as a supplement to data on the instability of agricultural production 12 The Committee fully recognized that small countries are econom ically more vulnerable to extenial shocks than large ones because their economies are heavily dependent on external trade are less diversified and suffer from diseconomies of scale In particular most small island least developed countries face a range of structural handicaps i such as high intenrational transportation costs and relative isolation from main markem i that make them less vulnerable to extenial shocks For that reason it was suggested that the remoteness of countries might also be taken into consideration in future reviews 13 As in the case of the HAL the Committee decided that the EVI margin between thresholds for inclusion and graduation should be decreased from 15 to 10 per cent According to these guidelines the threshold for inclusion is a value of 37 The threshold for graduation under this index is 33 With the inclusion of the percentage of popula tion displaced by natural disasters the threshold for inclusion would be a value of 38 and for graduation 34 4 Eligibility for inclusion and graduation a Country to be added to the list 14 TimorLeste is the only country eligible for addition to the list lts EVl cannot be calculated because of lack of data but both its GNl income per capita and HAl are well below the thresholds for inclusion The Committee recommends that it be included in the list of least devel oped countries b Countries to be considered for graduation i Countries qualifying for graduation 15 The Committee agrees that two countries 7 Cape Verde and Maldives 7 qualify for graduation since they have met two graduation criteria in two consecutive reviews a Cape Verde 16 In 1997 the Committee had indicated that Cape Verde would become eligible for graduation in the following review as it met two graduation criteria income per capita and human capital indices at that time The 2000 review confirmed that Cape Verde had met these two graduation criteria and qualified for graduation However it ranked as one of the most economically vulnerable developing countries accord ing to the EVl Because of its high economic vulnerability and the high dependence of the country on foreign aid and workers remittances the Committee recommended that the graduation of Cape Verde from the list of least developed countries be postponed for reconsideration at the 2003 review 17 Cape Verde now has the fourth highest GNI per capita and the fourth highest HAl among the 65 countries Both measures are well LOCALDEVELOPMENT AND GLOBALlSSUES a above the graduation threshold In contrast it is economically vulnera ble with an EVI score of 555 compared with a graduation threshold of 33 Nevertheless given that the country meets two of the three gradua tion criteria 7 and that it has done so in three consecutive reviews i the Committee agrees that it qualifies for graduation from the list 18 The Committee was informed that the Goveniment of Cape Verde had expressed reservations about the accuracy of data on nutrition used in the calculation of its HAI In the Goveniment s view the calorie intake data presented by the Food and Agriculture Organization of the United Nations FAQ 7 based on food balances that compute data on national food production and food imports rather than on household consumption surveys i do not re ect the nutritional reality of the country As a result the Govermnent believes that adjustments should be made in the calculation of its HAI score The Committee took note of this conceni but was informed by FAO that its calorie intake figure was the most reliable statistic collected on an internationally compara ble basis The Committee stresses that the credibility of its triemiial review of the list is partly dependent on the fact that it uses data col lected on an inteniationally comparable basis by specialized agencies of the United Nations system such as FAO the United Nations Educational Scientific and Cultural Organization UNESCO and the World Health Organization WHO b Maldives 19 In its resolution 200236 the Economic and Social Council request ed the Committee to continue its work on the reexamination of its rec ommendation to graduate Maldives from the list of least developed coun tries at its fifth session and to submit its recommendations to the Council at its substantive session of 2003 in the context of the triemiial review of the list of least developed countries taking into account the information referred to in the resolution and further information to be provided by rel evant development partners and multilateral organizations 20 The Committee reexamined its recommendation 7 made in its 2000 review 7 that Maldives be graduated and the subsequent con sideration of the case of Maldives by the Committee in 2001 and 2002 The Committee recalls that in the 1997 and 2000 reviews the country met two graduation criteria its income per capita and HA1 formerly APQLI were both well above the graduation thresholds In the present review its GNI per capita is not only the highest among the 65 countries but also more than twice the graduation threshold lts HAl score ranks as the fourth highest among the least developed countries and is also above the graduation threshold lts EVl 336 is also very close to the graduation threshold 33 or less Given that Maldives meets two grad uation criteria for a third consecutive time the Committee concludes that the country qualifies for graduation 21 The Committee was informed that the Government of Maldives had expressed procedural and substantive concenis to the Secretary General about the interim vulnerability profile of Maldives that had been made available to the Committee For its part the United Nations Conference on Trade and Development UNCTAD informed the Committee that the profile had been prepared with substantial coopera tion from the Goveniment The preliminary reaction of the Government to the interim vulnerability profile did not contain any material evidence to reverse the Committee s view that Maldives technically qualifies for graduation The Committee recognizes that Maldives faces special dif ficulties and cosm because it is a small widely dispersed island econo my and that it may lose important international benefim if it graduates from the list of least developed countries ii Other countries meeting two graduation criteria in 2003 22 Samoa has the second highest average GNI per capita and the highest HAl among the 65 countries Although the country is consid ered economically vulnerable 7 as reflected in its EVI score 41 com pared with a graduation threshold of 33 or lower 7 it is now the eleventh least vulnerable least developed country based on this criterion Since it meets two graduation criteria the Committee recommends that it be considered eligible for graduation As a result it might qualify for graduation should it fulfil the graduation criteria again in the 2006 review 23 The data for two countries 7 Kiribati and Tuvalu 7 indicate that they meet two graduation criteria GNI per capita and HAD However while they are technically eligible for future graduation the Committee LOCALDEVELOPMENT AND GLOBALlSSUES e recommends that they should not be considered In the case of Kiribati iwhose threeyear average GNI per capita US 923 is just above the graduation threshold of US 900 i GNI per capita fell constantly over the past four years from US 1130 in 1998 to only US 830 in 2001 In the case of Tuvalu only GDP per capita data are available In addi tion the Committee stresses that these are the two most economically vulnerable countries in the initial list according to the EVI 0 Smooth transition of countries graduating from least developed country status 24 The fact that a country that has long been recognized as least developed qualifies for graduation is an indication of some success in its development and in its ability to achieve a degree of structural change in its economy These successes in turn are likely to have been largely attributable to a mix of sound domestic policies and propitious extenial conditions With regard to the latter inteniational support has frequently played a central role and the capacity to use world market opportunities may also have been important 25 Despite the progress they have achieved countries that qualify for graduation from least developed country status are likely to continue to have a limited capacity to withstand exogenous shocks A sudden with drawal of external support is likely to constitute such a shock and to have negative effects possibly reversing some of the development progress achieved Countries that qualify for graduation from the least developed country category should be commended for their success and not penalized for it by the imposition of such a shock 26 The Committee recalls the importance that it has consistently attached to smooth transition measures for graduating countries as elaborated in the reports of its third and fourth sessionsquot It also recalls that the Economic and Social Council in its resolution 200236 reiter 1 See Participatory DeVeiopmentand GoVernance Africa s Special Needs Report of the Committee for DeVeiopment Poicicy on the third session 26 April 200i United Nations publication Sales No EUillA4 paras ii47ii7 See also Capacityrbuiiding in Africa EffectiVe aid an human capital Report of the Committee for DeVeiopment Policy on the fourth session 842 April 2002 United Nations publication Sales No EUZllA4 paras l587l63 ated the importance of ensuring a smooth transition from least devel oped country status which it had emphasized in earlier resolutions Council resolutions 200034 and 200143 in keeping with the obser vation made in 1991 by the General Assembly in its resolution 46206 on the importance of ensuring that graduation from least developed country status would not disrupt the progress in the development of graduating countries 27 The Committee was informed that the importance of securing smooth transition for graduating countries had begun to be taken into account by the multilateral trading system as the question of the treat ment of graduating member States was in the agenda of the Work Programme on Small Economies of the World Trade Organization The Committee suggests that with the general trend towards freer trade and erosion of trade preferences for all developing countries least devel oped country benefits should be maintained when a country graduates as the cost to trading partners would be negligible and the benefit to the graduating country will gradually dissipate as trade barriers for all developing countries fall The Committee recommends that the Economic and Social Council encourage relevant development partners and multilateral organizations to accelerate the progress in their treat ment of graduation issues including the provision of technical assis tance through the Integrated Framework for Traderelated Technical Assistance to Least Developed Countries 28 The Committee therefore recommends that a meeting of experts on the overall question of smooth transition be organized in order to cast light on the likely treatment of graduating countries by their main bilat eral and multilateral partners 29 It was stressed that the treatment of graduating countries by their bilateral and multilateral partners 7 notably with regard to trade pref erences i could be decided upon only in international organizations such as the World Trade Organization It was recalled that graduation would imply the loss of a number of significant advantages in particu lar preferential market access and extended deadlines for implementa tion with regard to World Trade Organization obligations The Committee also recommends that in each case graduation should trig LOCALDEVELOPMENT AND GLOBALlSSUES e ger the convening by the United Nations of a roundtable meeting in which the graduating country and its development partners would iden tify measures to ensure a smooth transition 30 The Committee has benefited from a document submitted by the Commonwealth Secretariat drawing attention to the general resistance to graduation among least developed countries This document stresses the particular disadvantages to be faced by graduating small island developing States and their need for assistance in maintaining access to traditional markets and securing access to new markets 31 Bearing in mind that all countries meeting the graduation criteria in the current review were small island developing States the Committee recognized that the question of a smooth transition consti tuted a particular aspect of wider considerations relating to the special treatment of those States The Committee calls upon the forthcoming intenrational meeting in 2004 on the sustainable development of small island developing States see General Assembly resolution 57262 of 20 December 2002 to give consideration to their special needs The Committee urges the Economic and Social Council in considering the questions of graduation and smooth transition at its substantive session of 2003 to underline the need for a more differentiated treatment of developing countries that face special disadvantages and vulnerabilities such as small island developing States D Major findings and recommendations 32 The Committee maintained its position that in addition to the cur rent least developed countries the initial list of countries to be consid ered during the triennial review should be those identified by the World Bank as lowincome in any one of the three most recent years Among these countries the Committee found that the comparatively high stocks of human assets in the lowincome countries with economies in transi tion made them ineligible to join the list of least developed countries 33 The Committee adopted a threeyear average of US 750 per capita as the threshold for inclusion in the category under the GNI per capita criterion It also decided to increase the margin for graduation from 15 to 20 per cent above the threshold for inclusion the graduation threshold under this criterion thus became a threeyear average of US 900 per capita 34 The Committee agreed that the threshold for inclusion with regard to both the HAl and EVI criteria should be chosen so that three quarters of the most disadvantaged countries would be eligible under each of these criteria The Committee also decided that the margin between the thresholds for inclusion and graduation should be decreased from 15 to 10 per cent for these indicators 35 Applying the agreed thresholds and taking into account other information and considerations the Committee concludes that a TimorLeste quali es for inclusion in the list of least devel oped countries b Cape Verde and Maldives qualify for graduation c Samoa is eligible to be considered for graduation in 2006 36 The Committee strongly emphasizes the need for a smooth transition for countries that are graduated from the list of least developed countries and calls upon the international community including bilateral donors and trading partners to give urgent attention to this matter Since all countries that either qualify or are eligible for graduation under this review are small island develop ing States the Committee considers it imperative that the intema tional meeting on small island developing States in 2004 make sub stantial progress in formulating policies and actions that will address the particular set of development challenges faced by this group of countries particularly those that succeed in qualifying for graduation from least developed country status