Nepal has set the goal of graduating from the category of least developed country (LDC) to a developing one by 2026. The deadline is just a little over four years away, and the country is badly off-track.
Economic downturns caused by the Covid-19 pandemic and more recently, the ongoing Russia-Ukraine war, have only added to the challenge of achieving the ambitious target.
Least developed countries are currently facing multiple challenges, such as ballooning trade deficits, depleting foreign currency reserves, slow industrial growth, and rising inequality. These economic challenges figured prominently at the 12th World Trade Organization’s (WTO) Ministerial Conference held in Geneva, Switzerland, from June 12-15.
The first and immediate challenge faced by the LDCs is to secure additional support from donor agencies and bilateral partners to expedite the recovery of their economies battered by the pandemic and the war in Ukraine.
To this end, officials present at the conference were of the view that WTO and other international organizations should consider an immediate package to revive the faltering economies of LDCs.
A senior WTO official said LDCs should prepare a solid and pragmatic plan to switch to the developing country category, as they lose several international facilities with the graduation. If a sound plan is not in place, the official warned, there are chances of freshly graduated countries sliding back to the LDC category.
To graduate from the LDC category is a major development success, but it comes with a host of challenges, including the loss of preferential access to lucrative markets.
So the organization’s LDC Group called on the preference-granting members to extend and gradually phase out their preferential market access schemes over a period of six to nine years. But developed countries are not ready to offer such a long transition period. China says it can provide a three-year transition, while other big powers like the US are yet to make their position on this clear.
Addressing the conference, Nepal’s Minister for Commerce, Industry and Supply Dilendra Prasad Badu emphasized the need for continued international support for smooth graduation transition. He raised the issues of duty- and quota-free market access, special and differential treatments, preferential rules of origin, service waiver, aid for trade, and flexibilities in the implementation of multilateral trade rules and commitments.
The minister also told the conference that bilateral and multilateral development partners should allocate additional resources to implement the Doha Plan of Action for LDCs.
Supply-side constraints, weak productive capacity, insufficient trade infrastructures, and non-tariff barriers are some of the obstacles that keep LDCs from benefiting from the current multilateral system. The WTO’s LDC Group has been seeking international support to overcome these challenges.
High transit and transport cost of the LDCs is another constraint hindering their progress in the international trading system the WTO ensures. They have hence asked for uninterrupted, unconditional, and smooth transit rights.
The widening digital divide between rich and poor countries, which is slowing down integration in the global value chains, was also brought up during discussions.
Minister Badu told the conference that Nepal is in need of help in transferring technologies, building ICT infrastructures, and developing human resources to reduce the digital divide.
Trade ministers from Australia, Japan and Singapore acknowledged the barriers faced by developing and least developed countries seeking to benefit from the digital economy.
Issuing a joint press statement, they said the ‘E-commerce Capacity Building Framework’ will help these countries better address those barriers and enjoy the benefits of digital trade.
In order to create sound and viable technological bases, LDCs want developed countries to effectively implement the Trade-related Intellectual Property (TRIPS) agreement and give incentives to their enterprises and institutions to promote the transfer of technology.
Considering the needs of least developed countries, the WTO and the UN have signed a partnership agreement aimed at boosting the participation of LDCs in the global trading system.
The WTO is joining hands with the UN to give renewed hope to the most vulnerable group of countries to ensure that LDCs have a special place in the multilateral trading system, the WTO said in a statement.
The WTO-UN partnership aims to support LDCs with analysis of the latest trade trends, joint capacity-building and joint outreach and awareness-raising.
Over the past decade, the WTO said, its members have provided increased trade opportunities in order to expand LDC exports. It added that the WTO remains the main forum to achieve the Doha Program of Action targets in the area of trade.
There are at present 46 LDCs on the UN list, 35 of which are WTO members. LDCs want effective implementation of the WTO provisions and decisions related to special and differential treatment or exemption in favor of LDC members. They are also in need of specific technical assistance and capacity building facilities provided under the WTO system.
Members from the least developed countries at the WTO Ministerial Conference jointly urged the WTO member countries to consider their proposal without any delay. They have asked for aid and assistance for trade-related capacity building, addressing the supply-side bottlenecks, development of trade-related infrastructures, and facilitating integration of LDC economies in regional and global trade.
WTO Director-General Ngozi Okonjo-Iweala said priorities of LDCs naturally deserve particular attention. Some of them have done well enough to graduate, and are keen to smooth any bumps that might come with that step, he said.
As of 2021, 16 LDCs out of 46 are on the path to graduation. Of these, 10 are the WTO members (Angola, Bangladesh, Cambodia, Djibouti, Lao PDR, Myanmar, Nepal, Senegal, Solomon Islands and Zambia) while four (Bhutan, Comoros, Sao Tomé and Principe, and Timor-Leste) are in the process of negotiating their WTO accession. The other two LDCs are Kiribati and Tuvalu.
