– Gyan Chandra Acharya
Former Foreign Secretary, Nepal

The United Nations General Assembly endorsed the decision of ECOSOC to graduate Nepal from the LDC status with a 5-year transition period in November this year, 2021.

This is a recognition of sustained progress that Nepal has achieved over the years, in particular in the last decade, in human development indicators as well as in the economic and some other defined vulnerability indicators specific to the LDCs.

Even though Nepal is yet to make progress to meet the gross national income criterion, our efforts in the next five years should be geared towards making the transition process smooth, irreversible, transformative and sustainable.

This requires continued progress in human development and building resilience, while ensuring economic transformation in the country.

This would increase general income and ensure a rapid, inclusive and sustained economic progress in the days ahead.

This is where we need to focus our strategy on with clear actions on the ground in a more coordinated and effective manner.

While working towards achieving these objectives, we should also make synergistic efforts to accelerate progress in achieving SDGs, which have largely incorporated many of the LDC agenda.

Now that we face an unprecedented, sweeping and comprehensive impacts of Covid-19 affecting not only the lives of the people but also their livelihoods, overall economic activities and social stability, strengthening resilience from such a pandemic and building recovery have to be part of the overarching feature of our national graduation strategy.

Achieving our own national development objectives, meeting SDGs, coping with pandemics and climate change impacts and meaningful graduation all necessitates us to take a coherent approach that keeps the people at the center, makes them more capable and productive and builds an inclusive and resilient economy with structural transformation.

Thus, it requires a close collaboration with and support from the neighboring countries and all the other international development partners.

Graduation of Nepal from the LDC status should be looked at from both the opportunities it provides and the challenges it throws in.

LDCs have always articulated well before the international community that the development challenges of these countries, in particular, their structural impediments require a strong national ownership and leadership within the country and equally strong and favor at international environment with targeted and specific supports of the development partners.

International support for these countries is an investment in global peace a sustainable prosperity.
Graduation as a common goal of the international community was well recognized during the Fourth LDC conference held in Istanbul, Turkey.

LDCs and the development partners jointly agreed to pursue this objective with a separate chapter on graduation and smooth transition in the final declaration.

In order to ensure smooth transition without disruptions to their development prospects, it was stressed that development and trade partners and UN and other international institution have a vital role to play and extend support in a way that the phasing out of benefits and measures remain consistent with their specific development situations and the expectations of structural transformation.

The spirit of mutual accountability has always guided the nature and scope of international cooperation in favor of the most vulnerable groups of countries.

In particular, the excruciating burden of the inhuman poverty, a low level of human an economic development with a high degree of vulnerabilities characterized by low domestic savings and a huge need for investment to build necessary infrastructure accompanied by technical and institutional constraints have further exacerbated the relative position of these countries vis-a-vis other developing or advanced countries in term of reaping due benefits from international trade and investment opportunities.

While some perceptible progress has been made in terms of their integration into the global economy which has gradually increased their absolute volume of international trade and inward foreign direct investment in the last two decades, they are nowhere near their need, capacity or expectations.

Therefore, during the transition time and beyond, Nepal needs to work closely with the international partners to ensure that the support measures especially in regard to the allocation of ODA in concessional term commensurate with its capacity would be enhanced to effectively propel its progress to the next level in a more accelerated and sustainable manner.

Now external development finance is needed more not only in the social sector to keep the momentum, but also in infrastructure and productive economic sectors to sustain progress towards graduation with a transformative change.

Similarly, duty- free and quota-free access of our products to the markets of developed countries and also to more capable developing countries should be enhanced during the transition, and a similar supportive market access mechanism should be ensured to the Nepalese products in the post-graduation period to avoid any disruption.

These two support measures with policy flexibilities in some of the core areas of economic activities including trade and IP policies will play a pivotal role not only in preventing any possible rollback in their achievements but also in moving them forward in a more confident manner.

In fact, the situation LDCs the day after the graduation does not essentially change that much. It is more an attainment of an important milestone with a higher level of confidence and some better signs of the economy and human development.

Therefore, they should not be left alone in the whirlpool of cut-throat global competition without adequate support measures.

There are also some new opportunities that would be opened up with graduation.

The international credit rating would improve, which will help gain better access to international finance from the global market.

It would also exhibit a sign of confidence among the people that their country is no longer at the bottom of the global rung, but moving forward to the next level of development.

This also opens up better opportunities for attracting foreign direct investment in the country.

Of course, there is a big difference between attracting foreign investment and the actual transfer and retention of FDI, which requires an equally robust and facilitatory foreign investment policy with an effective and coordinated implementation mechanism in the country.

The graduation prospect also provides us with an opportunity to initiate and deepen reforms and policy initiatives in many areas, especially in changing the structure of the economy away from consumption and import towards more productive capacity development, human capital development and resilience.

Similarly, by introducing and consolidating policies to increase competitiveness, to enhance supply side capacity together with better trade-related infrastructure and logistics, to participate in regional value chains and to enjoy better market access, we can inject new impetus to uplift our export performance from a dismal level at present.

Therefore, taking this opportunity of graduation, Nepal should develop a coherent transition and graduation strategy with special focus on key transformative sectors that can drive the economy, people and the country to a new era of ever more accelerated and inclusive progress and prosperity.

This is possible only if we summon our collective will and work together with all the stakeholders especially the private sector and sub national governments in a more coordinated and effective manner.

Many countries in our region are graduating from the LDC status in the next few years.

It is very likely that all LDCs from the Asia-Pacific region would graduate out of the LDC status in the next one decade and a half.

In our own South Asia region, Maldives has already graduated, and Bhutan is graduating in 2023.

Nepal, Bangladesh and Laos are graduating by November 2026. Cambodia, Myanmar and East Timor are also following.

Therefore, it is also important for us to look around our neighborhood and make sure that we are not left behind and our graduation process is followed with determination and commitment to transform our economy and the lives of the people in a responsible manner.

In order to make the transition smooth and transformative, we have to make sure that there is a strong political ownership of the entire process.

The transition requires a clear strategy, a coordinated response and some important policy reforms.

That means the political and administrative leaderships have to be focused on the issues, understand the implications, prepare an effective plan of action and establish credible all-inclusive institutional arrangements to steer the process for the next few years.

A high-level committee should be constituted to provide an overall coordination, preferably under the Prime Minister with participation of the relevant Ministers.

Similarly, the Steering Committee under the Vice Chair of NPC should be made further effective.

And a dedicated Action Committee with multistakeholder participation should be also formed to consistently pursue the issues at the level of implementation with better monitoring and follow up in a time-bound manner.

The Ministry of Foreign Affairs should take a prominent role in all the three levels of institutional arrangements.

It should prepare a strong diplomatic advocacy strategy for the next five years for transition and thereafter for post-graduation.

It should mobilize its missions in all the capitals of our important development and trade partners.

It should minutely analyze the situation on the ground from our national perspective and pursue our strategy in particular on development cooperation, trade, investment and technology.

They should also closely follow how other graduating countries are pursuing their interests.

And the issues of collective interests should be taken up jointly, and the issues that are of individual national interests should be taken up with our own approach and initiatives.

Priority should be given by the Ministry of Foreign Affairs to ensuring regular interactions with the NPC, and core Ministries like Finance and Commerce, Industry and Supplies so that we have a strong home-front coordination.

Similarly, the embassies should be asked to report quarterly in detail about the progress and the efforts they have made in order to keep all the relevant offices or institutions in the loop.

The foreign diplomatic missions here should also be briefed quarterly or semi-annually to inform them about our work and ensure that they also report back to their home countries the developments taking place here in regard to our transition related measures.

As we prepare a stronger foundation for a restructured economy and for a confident nation with a transformative vision of transition and graduation from the LDC status, this is a right time to employ all our diplomatic skills, enhance our international advocacy with a clear strategy and also effectively coordinate the home front and the external front.

This opportunity should not be missed for lack of initiatives, commitment, strategy or resources.

End text.
# Text courtesy: Association of Former Career Ambassadors of Nepal(AFCAN) Volume 2, 2021.
Thanks AFCAN and the distinguished author Mr. Acharya: ED. Upadhyaya. N. P.