Bhutan to Graduate from Least Developed Countries Group by 2022
Bhutan has stable political, economic and social settings that could attract a lot of Foreign Direct Investments.
As Bhutan prepares to graduate from the Least Developed Country (LDC) category in next few years, concerns are particularly high in terms of the country’s economic vulnerability.
Bhutan will benefit tremendously from the graduation
However experts, defying the sense of cynicism, believe that Bhutan will benefit tremendously from the graduation both in terms of trade and foreign investments.
Bhutan is one of the 47 LDCs in the world, having unique structural challenges to its development progress.
The Foreign Ministry, in collaboration with the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) organised a three-day regional capacity building workshop to help countries like Bhutan to formulate national policies and strategies in preparation for its graduation from the LDC category.
Usually there are cynicisms surrounding the graduation since a graduated country loses access to multilateral LDC specific funds. In trade, as well, graduation could imply a loss of duty free access to foreign markets.
However, UNESCAP said graduation is not a complex issue. In fact, the UNESCAP believes it reflects Bhutan’s success and improvement in its social and economic standings.
“When countries graduate, one element that they lose in the transition period is the preferential access to markets mainly in developed economies in Europe and the US. However, if you look at the Bhutan’s export structure, it doesn’t do that much trade with Europe and the US. Its main trading partner is India. So if you graduate, you will not lose any access to Indian market -electricity export, it won’t be losing that. India is also the main partner for Bhutan in terms of providing loans and grants. So this won’t be affected by graduating from the LDC category,” said Oliver Paddison, Chief of Countries with Special Needs Section under UNESCAP.
Bhutan fulfilled the criteria for graduation from the LDC category for the first time in 2015 and will be considered for graduation at the 2018 review.
Bhutan has stable political, economic and social settings that could attract a lot of Foreign Direct Investments
“LDCs are, as I said, generally more conflict prone, vulnerable and maybe foreign investors are not willing to invest into LDCs because they are often considered to be politically unstable which is clearly not the case in Bhutan. So if you graduate, you are also sending signals that we are doing really well, we have the stable political, economic and social settings and that could attract a lot of Foreign Direct Investments (FDIs) potentially,” added Oliver Paddison.
Bhutan has met the graduation threshold for income and human assets index, while falling short in the economic vulnerability criterion. If a country satisfies at least two out of the three criteria for graduation in two consecutive triennial reviews, the Committee for Development Policy recommends to the UN’s Economic and Social Council that the country should be considered for graduation. If this is accepted, Bhutan then will graduate from the least developed country to the developing country category by 2022.
By Sonam Phuntsho (This article has been edited for the Bhutan Times)