Lao PDR is currently listed as a Least Developed Country (LDC). Countries recorded in the LDC category are defined as low-income countries that are facing severe structural impediments to sustainable development.Due to their status, these countries are granted exclusive access to specific international support in the areas of trade, development assistance, and general support. The list is reviewed by the UN Committee for Development Policy (CDP) every three years. Driven by strong economic growth and rapidly improving health and education, Lao PDR looks set to leave the group of LDCs – as soon as 2024. This is one of the top priorities of the Government of Lao PDR.
Real income per head has more than quintupled over the past two decades rising to US$1,996 in 2018 using the World Bank’s Atlas method. This puts Lao PDR’s economy among the LDC group’s best-performers. Infant mortality rates more than halved over the same period. School enrolment and literacy continue to rise, among other measures of progress which are simultaneously propelling Lao PDR toward the achievement of the Sustainable Development Goals. As a result of these achievements the country will be considered for official ‘graduation’ from the UN category at the next review of the UN CDP in 2021. Graduation is the process of leaving the LDC category.
The category is assessed using three criteria: human assets, economic vulnerability and gross national income per capita. Countries must meet two of the three criteria at two consecutive triennial reviews of the CDP to be considered for graduation. The CDP sends its recommendations to the UN Economic and Social Council (ECOSOC) for endorsement. The decision is then referred to the UN General Assembly. Lao PDR for the first time met the threshold for graduation at the most recent triennial review in 2018. If the country continues to meet at least the human assets and income criteria thresholds at the 2021 review, graduation is likely to be recommended for 2024.
The Government is preparing a smooth transition strategy supported by the UN, donors and the broader national and international community, including the private sector, to guide the country through the process. This strategy will help the country to manage the phasing out of certain international support measures put in place to help LDCs, as well as to further improve governance, transparency, the rule of law and aid effectiveness.
These international support measures include a commitment by donors and multilateral agencies to provide a fixed proportion of official development assistance to all LDCs. Most major trading partners do not levy duties or quotas on LDC goods exports. UN entities offer discounts to LDCs for annual budgetary contributions, together with other benefits such as travel tickets to international meetings and the UN General Assembly.
UN agencies, through the Resident Coordinator system, have conducted an impact assessment and vulnerability analysis showing that the impact of the loss of these benefits is likely to be small, since Lao PDR does not yet export much to the major providers of trade preferences such as the European Union. Donors have also mostly committed to continuing their bilateral relationship with the country. But it will still be important to prepare for graduation, not least because it is a chance to advertise the country’s progress to the world. Graduation may even be used as a way of attracting new investment in the fast-growing economy. Several capacity development activities are planned for the coming years, including on fostering productive capacities and structural economic transformation for sustainable graduation. Donor partners and multilateral agencies will support the smooth transition strategy, coordinating their activities within the framework of the National Steering Committee on the Implementation of the UN Programme of Action on LDC Graduation chaired by the Minister of Foreign Affairs. This will help inform and focus discussions over the next five years and beyond.
Key development stakeholders will also channel their activities through the UN Inter-Agency Task Force on LDC graduation at UN headquarters in New York, set up to support graduating countries. International entities such as the World Trade Organisation will need to keep supporting graduation, in cooperation with the country’s Permanent Representatives in Geneva and New York. With joint action towards an equitable LDC graduation, Lao PDR can enjoy decades more rapid progress in sustainable development.
This Op-Ed is co-authored by H.E. Mr. Saleumxay Kommasith, Minister of Foreign Affairs and Ms. Sara Sekkenes, UN Resident Coordinator.