The LDC Graduating Cohort of 2026: Working across countries and UN agencies to support a smooth transition

In November 2021, Bangladesh, Lao PDR, and Nepal officially qualified to graduate out of the least developed countries category by 2026. This was an important development milestone for the three countries marked by reaching threshold criteria in per capita gross national income, human assets index, and economic and environmental vulnerability index for two consecutive three-year cycles.

The three countries differ significantly in terms of their economies, geographies, and histories. Yet, they share the common prospect of graduating out of the LDC category in the aftermath of the greatest global pandemic in living memory, followed by the cascading effects and impact of the ongoing war in Ukraine, against the backdrop of the intensifying triple planetary crisis.

Bangladesh is among the countries that extensively use the international support measures for LDCs to increase exports and produce pharmaceuticals for domestic and international markets. Given the dependence of exports on duty-free-quota-free market access, the Government and private sector of Bangladesh would like to prioritize advocacy and negotiations for continuation of the trade and intellectual property related support measures and preparing the country to access better trade deals.

Nepal, on the other hand, has not been able to fully utilize available international support measures due to the supply side constraints, and so its losses in trade and erosion in concessional aid are expected to be low in the short to medium term. However, Nepal may experience constraints on diversifying exports due to high tariffs, loss of flexibility in the implementation of the Trade-Related Aspects of Intellectual Property Rights (TRIPs) Agreement, limited flexibilities to promote infant industries and other.  To offset these challenges, the Government of Nepal and the private sector prioritize international support to accelerate economic transformation, bring foreign direct investment, and access to development finance, particularly climate finance.

For Lao PDR, the case is of relatively limited exports taking place under LDC-specific market access arrangements as most trade is covered by regional agreements, but LDC provisions are important for some key sectors and a growing demand for new export markets. Key challenges for Lao PDR in managing a smooth transition relate to securing sufficient development finance, in particular climate finance, and strengthening integrated planning to support economic transformation and sustainable long-term development. Rising inflation and emerging complexities around the price of food, energy, and finance over the course of 2022 have subsequently added to the difficulties and challenges for these three countries.

In this context, the UN in the three countries is supporting respective governments in addressing country-specific needs associated with graduation within their Sustainable Development Cooperation Frameworks. A key imperative for LDC graduation is to ensure that the transition is smooth and sustainable in the face of shocks and a changing global context. For this, the three graduating countries are formulating nationally owned, time-bound, and action-oriented Smooth Transition Strategies.

Relevant expertise, knowledge, and capacity to support the development, and later implementation, of these strategies sits across different parts of the UN development system- at national, regional, and global levels. This includes dedicated specialists in UNDESA—including with its secretarial support to the Committee for Development Policy (CDP), which advises the Economic and Social Council of the UN General Assembly on a wide range of issues relevant for the implementation of the 2030 Agenda for Sustainable Development including the LDC graduation process, —OHRLLS, UNCTAD, and ESCAP, as well as in-country technical capacities in agencies such as ITC, ILO and UNDP and the overall in-country coordination of systemwide efforts supported by the strategic economic and development analysis and planning capacity of RCOs led by UN Resident Coordinators.

The reform of the UN has created the opportunity to take a significant step forward in the efficiency with which this distributed capacity can be used to support government efforts. In particular, to facilitate the process and help land such support among in-country stakeholders, as Resident Coordinators of the three countries, thanks to new ways of working, we have been able to convene integrated cross-country support that is showing the potential to make a difference at this key moment for the three countries. This has included regular discussions across the RCOs of the three countries to coordinate approaches, share practice and facilitate peer learning, and support the three countries in leveraging a common voice, aligning their positions for international negotiations.

Challenged by COVID-19, but nonetheless almost two years of effective background work, and a first virtual meeting among government representatives in 2021, this led to physically bringing the three governments together for a joint South-South Exchange. The three RCOs, with support from the UNDESA and in collaboration with the UN-OHRLLS and UNESCAP organized the conference on formulating smooth transition strategies in Bangkok in August 2022. Among the participants were Government officials who would lead and draft the transition strategies, and representatives from the private sector and civil society. Experts from UN Development System, multilateral organizations, representative from the Republic of Korea and Viet Nam, academia, and think-tanks also joined. The topics discussed ranged from challenges and priorities of each country to specific thematic issues common to all countries. These included issues like leaving no one behind, market access, intellectual property rights, export diversification, climate action, the criticality of investments into human capital, development finance, and domestic resource mobilization. This broad and inclusive participation and agenda showcased promising practice and possible pathways ahead, but also highlighted the many trade-offs that must be addressed to ensure a sustainable, irreversible, and quality LDC graduation.

LDC graduation not only brings changes to the trade and finance landscape, but it also directly affects people – workers in the sectors most impacted, and unskilled workers across the board. Particularly affected are women in the informal sector and in factory jobs and, importantly, the prospects for future employment opportunities which underscores the criticality of investments into human capital looking ahead. It is, therefore, an imperative to ensure that LDC graduation is inclusive and that the smooth transition strategies incorporate the interests of all stakeholders, including workers and an outlook that stretches beyond the immediate concerns. To that end the South-South Exchange included discussions on leaving no one behind, inclusive institutions, environmental and labour standards, and human rights as key drivers for sustainable economic growth. Also on the agenda was climate change and the potential for climate action to be supported by concessional climate finance to drive sustainable development of these LDCs. Government representatives of all three countries actively engaged in these discussions. During final presentations, they committed to work on the issues on inclusive development, increased investment in human capital, labour and human rights, and environmental standards for an informed smooth transition strategy.

The discussions unpacked some of the needs of the three countries for policy, capacity, and technical support, and they clarified areas where joint advocacy could be leveraged to create space for advanced engagement and broader development cooperation. The event also provided the opportunity for the private sector representatives of the three countries to engage directly with each other. There is also interest among the three governments to continue the peer exchange and learning through virtual discussions.

Importantly, the work also serves to demonstrate what can be achieved with more coordinated and integrated support from across the UN system, also when capacities do not sit directly in-country. The preparations for a smooth LDC graduation cut across the mandates of many parts of government and of the UN development system, offering the potential to spur integrated and transformational ways of working, and to address some of the most pressing and challenging multidimensional development challenges facing countries today.

The next steps in the process will involve each country identifying the needs for technical, financial and policy support in more granular detail, and mobilizing country-specific support through the UN and other development partners. The UN’s support to the three countries will require to be tailored to the needs identified in these ongoing discussions and be fully anchored within the respective UN Sustainable Development Frameworks. Our offices will carry on the collaboration across the three RCOs and with UNDESA at the technical level to facilitate exchange between the three Governments. We will continue to coordinate our advocacy and messaging both internally and in international fora. Delivering as One-UN can go beyond country teams and across borders and indeed, also coherently align UN efforts vertically from HQ through regional to country-based support in line with the ambitions of the UN development system reform.