Supporting Least Developed Countries on the Road Graduation

By – Daniel Gay
Inter-regional adviser on LDCs, UN Committee for Development Policy

Drive west round the ring road from Port Vila, Vanuatu’s capital, and you pass three warehouses near the airport. After some outlying villages overlooking the beach, a steep grind over the hill takes you to Havana harbour and a cluster of fancy resorts. At the north of the island you might pass women in pick-up trucks carrying fruit and vegetables to market. More resorts follow. The trip, mostly on smooth asphalt, takes a couple of hours depending on how long you stop to gaze at the ocean.  

A decade ago the story was very different. A potholed road petered out after town, leaving only the sturdiest of 4X4s to struggle along a progressively rockier track, scoured harsh by rain. There were no warehouses. The tourists at the resorts in town rarely ventured far. Those ladies took a day to travel to market.  

The revolution wrought by the ring road is part of a long-term economic boom. Driven by tourism and real estate investment, income per head in the Pacific island state has risen by over 2.5 times in real terms since 2002. The economy is bouncing back from cyclone Pam in 2015, paving the way for graduation in 2020.  

In many ways Vanuatu’s experience typifies the LDC story. Until 2016 only four had left the category since its formation in the early 1970s – Botswana in 1994, then in recent years Cape Verde, the Maldives and Samoa. Now a host of others are on the brink of graduation. Higher oil prices in recent years have meant Equatorial Guinea will leave the category in 2017, followed by Angola in 2021. 

Seven more are likely to follow shortly after, having met two of the criteria for the first time in 2015 at the most recent triennial review of the UN Committee for Development Policy (CDP), the body which monitors the category and makes recommendations on LDC graduation.  

While the economic and human development successes of LDCs are testament to the work of government policymakers and businesses in conjunction with donors (Vanuatu’s ring road was built with grant assistance from the United States), the UN agencies have played a vital role.  

One of the main successes of UNOHRLLS was to launch, help promote and implement the LDC programmes of action. The recent mid-term review of the Istanbul Programme (IPOA) among other things urged official donors to recommit to their target of sending aid worth 0.15% to 0.2% of gross national income to LDCs, and to continue promoting LDC trade and investment. 

OHRLLS has helped integrate many IPOA targets into the sustainable development goals (SDGs), including those on doubling the LDC share of global trade and raising productive capacity. 

Behind the scenes, OHRLLS has also conducted much of the necessary inter-governmental work, promoting LDC issues at the UN. Partly as a result of this work and at the UN Conference on Trade and Development, LDC trade, investment and aid receive more global attention than ever before. 

The CDP, part of the UN Department of Economic and Social Affairs, periodically reviews the category, monitoring LDCs and determining which meet the official criteria. These criteria, measured by objective indexes reflecting per capita income, human assets and economic vulnerability, have been carefully chosen to reveal the broad determinants of sustainable development, moving beyond the view that progress is just about income. LDCs must meet two of the three criteria or exceed double the per capita income criteria for two consecutive triennial reviews of the CDP to be considered eligible for graduation.  

The CDP secretariat is developing a diagnostic toolkit to help governments prepare for graduation and understand the implications. It will help remove the uncertainty surrounding the graduation process and diagnose which areas of the economy to target following graduation. 

Despite these successes, much remains to be done. Cyclone Pam is one example of the vulnerabilities that will continue to affect the LDCs, particularly the island states and countries with coastal areas hit by climate change. Inequality within and between LDCs remains a particular challenge. Insecurity and conflict are increasing. 

Many of the graduating countries achieved success on the basis of the commodities boom, and economic growth for the LDC group as a whole has faltered during the global economic slowdown. The services-based successes of the graduating island states aren’t replicable everywhere. Diversification remains weak, and many LDCs are excluded from international supply chains.  

That’s why the focus of the IPOA and SDGs on productive capacity is so important. LDCs need to develop and enact their own specific, targeted industrial policies in order to boost production and to move from low to high productivity activities. Vanuatu’s ring road demonstrates the multiplier effect of infrastructure investment, which is too low in most LDCs.  

In the meantime, Vanuatu’s story provides hope for others. With good policies, increased investment and the backing of the international community, many more will follow.