Dec 14, 2021

The United Nations General Assembly has approved a proposal to upgrade Nepal from an underdeveloped country to a middle-income developing country by 2026 on 24th November 2021.

UN Committee on Development Policy (CDP) in February 2021 recommended for the country’s graduation from the LDC category with a transition period of five years, or effective from 2026. 

The decision to this effect was made by the Committee on the basis of the country’s achievement in human assets (HAI) and economic vulnerability (EVI) index - two of the three criteria for the eligibility. But, it didn’t meet the GNP per capita income criteria, the average GNI per capita of Nepal (2017-2019) was $1,027 against the requirement of a three-year average threshold of $1,222. It is the only country amongst all eligible countries that secured graduation requirement without meeting the per capita income threshold criteria. 

Graduation from LDC is doubtlessly a matter of self-esteem for the country. But, there are potential economic costs caused by the loss of access to international support measures (ISMs) provided to the LDCs. The magnitude of such costs depends on the extent to which the country concerned, benefited from such measures before graduation. The ISMs can broadly be observed in terms of preferential treatment in trade and market access, international financial and technical assistance.

Considering these realities, the FNCCI cautiously supports the adoption of graduation plan focused as a major national goal and the developing programs with target of the graduation criteria by the government. It is indispensable that the government should bring a comprehensive plan for a smooth graduation process that addresses structural vulnerabilities and inherent challenges as discussed earlier. In this report, FNCCI, on behalf of the private sector, proposes a holistic national graduation strategy led by private sector, with the basic objective of minimizing the consequent impact after LDC-specific support measures are phased

I would like to thank ILO Nepal office for all the support to prepare this report. I would like to thank Manish Lal Pradhan chair and Export Promotion Committee of FNCCI for taking lead to prepare this report. I sincerely thank Mr. Bijendra Man Shakya for his time and dedication to prepare this report. In this report, we have presented the perspective of private sector on LDC graduation. I hope government and other stakeholders actively work to minimize the risk of graduation particularly in international trade.

Shekhar Golchha 
Federation of Nepalese Chambers of Commerce and Industry

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