The UN categorisations for development of nations in the world is based on the three different levels- HAI, EVI and GNI- measured to give rise to three distinct categories, least developed, developing and high income or developed countries. Without a doubt, Nepal lands in the first category. But considerable progress has been made. Nepal recorded a marginal rise above the threshold on the HAI Index with 68.7 points while the EVI Index was within the threshold limit with 28.7 points. Nepal, however, recorded a low performance on its GNI per capita Index with $865 in the FY 2016/17. Despite the remarkable improvement in two major indices, the GoN stated that the country isn’t prepared for graduation.
All of this begs to a question as to why the Nepal government was reluctant to graduate to the league of developing countries in the first place?
It is quite evident that giving up the LDC status would mean loss of these above-exhibited perks. Nepal would not only lose the development assistance and preferential treatment in international trade but also corrode its concessional lending as well as market entry preferences in developed and emerging economies. While we cannot discredit the fact that the post-graduation scenario would have been challenging for Nepal, using this as an excuse to stick to the LDC status is an absurd and a backward decision. Rather than depending upon the fringe benefits from developed nations, the government should put substantial efforts in the income front to boost its abysmally low GNI, specifically GDP, and focus on measures to ensure a smooth transition from an LDC to a developing nation.
To surge the GDP, there is a need for policy reorientation that strengthens the private sector and helps stabilize the growth rate, rise the income level and create high paying jobs. In order to create a conducive investment climate, the government should strategically address the bottlenecks in the industrial sector by improving tax systems, reducing the entry and exit barriers and managing procedural delays in administration. These services coupled with good governance would lead to an increase in investment which would further contribute to the country’s GDP. Moreover, a graduating country is entitled to a grace period of three years where it can design measures with its trading partners and donors to agree on a ‘smooth transition’ strategy. Likewise, Nepal could have used this grace period to utilize the existing measures more fully and strengthen its multilateral ties for market access instead of calling off the graduation altogether.
Thus, the government needs to understand that the trade preferences given to the LDCs by the developed countries are not the long-term solutions. This will create over-dependency on the developed countries and foreign aid. So, the government should rather shift its efforts to develop a favorable environment to increase the pace of growth and development.
At a time when we are talking about prosperity and progressivism, this move to abandon the graduation clearly justifies the need for a larger vision from the government’s end!