LDC Graduation and Beyond: Benefits, Costs and Post-Graduation Opportunities

Case of Nepal

PRESENTED BYPOSH RAJ PANDEY

ATREGIONAL CAPACITY BUILDING WORKSHOP FORMULATING NATIONAL POLICIES AND STRATEGIES IN PREPARATION FOR

GRADUATION FROM THE LDC CATEGORY 14-16 NOVEMBER, THIMPU, BHUTYAN

Presentation Outline

State of economic and social development

LDC graduation criterion

Cost and challenges of graduation

Addressing the challenges of graduation and achieving sustainable development goals (SDGs)

Economic and sectoral growth rates

Source: Calculation based on Economic Survey, Ministry of Finance, 2017

‐8

‐6

‐4

‐2

0

2

4

6

8

10

12

Perc

ent

Year

Agriculture

Industry

Service

GDP growth

Structure of the economy

Source: Calculation based on Economic Survey, Ministry of Finance, 2017

0.00

10.00

20.00

30.00

40.00

50.00

60.00

2001/022002/032003/042004/052005/062006/072007/082008/092009/102010/112011/122012/132013/142014/152015/162016/17

Perc

ent

Year

Agriculture

Industry

Manufacturing

Servcies

Resources gap

Source: Calculation based on Economic Survey, Ministry of Finance, 2017

‐5.00

0.00

5.00

10.00

15.00

20.00

25.00

30.00

35.00

40.00

Perc

ent

Year

Gross domestic savings (% of GDP)

Gross fixed capital formation (% ofGDP)

Resource gap (% of GDP)

External resources

Source: Calculation based on Economic Survey, Ministry of Finance, 2017

‐40.00

‐30.00

‐20.00

‐10.00

0.00

10.00

20.00

30.00

40.00

2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17Perc

ent

Year

Workers' remittances (% of GDP)

Trade deficits (% of GDP)

Foreign direct inverstment (% of GDP)

Labour productivity

Source: World Bank, World Development Indicator 2017

‐4 ‐3 ‐2 ‐1 0 1 2 3 4 5 6

Afghanistan

Bangaldesh

Bhutan

India

Maldives

Nepal

Pakistan

Sri Lanka

Percent

Labour Productivity Growth 2013-16

Sectoral labour productivity

Source: SET. Pathways to Job Creation, 2017

‐4 ‐2 0 2 4 6 8 10 12

Agriculture and forestryMining and quarrying

ManufacturingElectricty gas and water

ConstructionWholesale and retail trade

Hotels and restaurantsTransport, storage and communications

Financial intermediationReal estate, renting and business activities

Public administration and defenceEducation

Health and social workOther community, social and personal service activities

Percent

Average Annual Labour Productivity Growth Rate (2000-2015)

Selected SDGs indicators

Indicators ValuePopulation below national poverty line (%) 21.6Multi-dimensional poverty index (MPI) 44.2Prevalence of undernourishment (%) 36.1Underweight children under five of age (%) 27Stunting (low-height for age) children under five years of age (%) 36Wasting (low-weight for height) children under five years of age (%) 10Maternal mortality rate (per 100000 live birth) 258Under-five mortality rate (per 1000 live birth) 39Neonatal mortality rate (per 1000 live birth) 23Net enrolment rate in primary education (%) 96.6

Selected SDGs indicators (contd…)

Source: National Planning Commission 2017.

Indicators ValuePrimary completion rate (%) 87.5Gender parity index (primary school) 1.02Literacy rate of 15-24 years old (%) 88.6Gender Inequality Index 0.49Gender Empowerment Measure 0.568Basic water supply coverage (%) 87Proportion of population access to electricity (%) 258Consumption inequality (Gini coefficient) 0.33Income inequality (Gini coefficient) 0.46Annual C02 emission (metric ton per capita) 96.6

Graduation status

Indices 2003 2006 2009 2012 2015Graduation Threshold

Economic Vulnerability Index (EVI) 29.46 37.4 33.64 27.76 26.79 <32Human Asset Index (HAI) 47.10 56.03 58.34 59.82 68.67 >76Income Criterion (GNI per capita $) 240 243 320 420 659 $1,242

Government initiatives to graduate

The 12th Plan (2010–2013) targeted Nepal’s graduation from least developed country (LDC) status to that of developing country by 2030.

The 13th Plan (2013–2015) accelerated the target year for this process by 2022.

The 14th Plan (2015–2017) does not alter the LDC graduation target, aiming to meet these goals by 2022, and adds the targets of achieving the Sustainable Development Goals and becoming a middle income country (MIC) by 2030. Barcelona Statute on freedom of transit (1921),

Strategic pillars of development plan

Increase production through agriculture transformation, tourism development and expansion of industrial base;

Infrastructure development, including energy, road and air transport infrastructure;

Sustained improvement in human development with added efforts on social safety nets and social security;

Promotion of good governance;

Strengthening capacities in gender equality, inclusion and environment protection

An assessment of periodic plans

Indicators

12th Plan2006

13th Plan2012 14th Plan

Targets Actual Targets Actuals TargetsGrowth rate (%) 5.5 4.0 6.0 2.9 7.2Population below poverty line (%) 21.0 23.8 18.0 21.6 17.0

Employment growth (%) 3.6 2.9 3.2 2.9Create 400,000 new

jobs

Costs of graduation

Trade related supports Preferential market accessSpecial and differential treatment under WTO

Official development assistance

Costs of graduation-preferential market access

. Countries Preference Utilization (%)2010 2014

Developed CountriesAustralia 100.0 100.0Canada 100.0 100.0EU na NaIceland 26.1 23.6Japan 99.2 99.6Korea 90.1 91.9New Zealand 100.0 99.5Norway 100.0 53.1Switzerland 100.0 100.0US 28.2 28.6

Costs of graduation-preferential market access

Source: Author’s calculation based on WITS.

Countries Preference Utilization (%)2010 2014

Developing CountriesChina 4.2 3.2Chile 0.0 0.0India 85.0 92.0Russia 16.8 15.1Thailand 15.9 11.4Turkey 100.0 100.0

Costs of graduation-special and differential treatment

Understanding on the Balance-of-Payments Provisions of the General Agreement on Tariffs and Trade 1994Agreement on AgricultureApplication of Sanitary and Phytosanitary MeasuresAgreement on Technical Barriers to TradeTrade-related Investment Measures (TRIMS)Agreement on Import LicensingAgreement on Subsides and Countervailing MeasuresGeneral Agreement on Trade in Services (GATS)Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS)Understanding on Rules and Procedures Governing the Settlement of Disputes (DSU)Trade Policy Review Mechanism (TPRM)

Costs of graduation- official development assistance

Inflow of financial assistance to Nepal

Source: National Planning Commission 2017

Particulars 2004/05 2009/10 2014/15Total actual foreign assistance (NRs. Billion) 23.7 49.8 55.4Share of ODA in GDP (%) 4.2 4.2 2.6Share of foreign aid in total government expenditure (%) 23.1 19.2 12.9Share of foreign assistance in development expenditure (%) 86.5 55.1 62.5

Challenges of graduation

Propel into high economic growth trajectory, fast reduce poverty and attain significant progress in human development;

Create jobs through intensification of economic activities and maximize the benefits of demographic dividends;

Transform agriculture and turn subsistence farming into commercial and competitive;

Develop infrastructure and ensure regular supply of electricity;

Devise and implement climate-friendly socio-economic development programme and reduce disaster risks ;

Challenges of graduation (contd…)

Increase investment, including foreign investment, in productive sector and increase productivity;

Diversify exports from a narrow range of agricultural and low-value added manufacturing products to high value added industrial products;

Reform the public investment process.

Addressing challenges

Achieving high and sustained economic growth Building new source of growthRevitalizing existing source of growthParticipating in regional growth poles in India and China;

Augmenting human capabilities

Reviving manufacturing and participation in global value chain

Investing in infrastructure and institutions

Thank You