Saturday, September 26, 2020

Laos reaffirms commitment to LDC graduation despite challenges

Sep 10. 2020
Phot Credit to Vientiane Times
Phot Credit to Vientiane Times
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By Vientiane Times

Laos remains firmly committed to graduating from the United Nations (UN) Least Developed Country (LDC) list, despite the numerous challenges that lie ahead.

Deputy Minister of Foreign Affairs Thongphane Savanphet reiterated Laos’ commitment on Tuesday when speaking during a videoconference with the United Nations Office of the High Representative for Least Developed Countries, the foreign ministry said in a press statement.

The meeting aimed to prepare for the upcoming review of Laos’ graduation from LDC status. 

The review – the second of its kind - is scheduled to take place early next year. If Laos is deemed to have met the targets set by the UN, the country is expected to officially leave the LDC list in 2024.

In 2001, the government set a target date for graduation from LDC status by 2020 but this target could not be met. 

To be considered for LDC graduation, countries must meet two of three criteria when assessed at two consecutive triennial reviews, according to the UN.

LDCs are assessed using three criteria: the human asset index (HAI) which assesses health and education targets, economic vulnerability (EVI), and gross national income (GNI) per capita. 

Laos was judged as meeting two of the three criteria in the first review, which took place in 2018. Only the economic vulnerability criterion remains to be fulfilled.

The 2018 review found that Laos’ gross national income per capita of US$1,996 exceeded the lowest graduation threshold of US$1,230. The human asset index stood at 77.2 compared to the lowest threshold of 66. 

The EVI was 33.7, close to the threshold of 32 or below.

“Economic vulnerability is the only criterion we have not yet met,” the foreign ministry said.

“However, if Laos is still able to meet two of the three criteria or meet all the criteria in the second review by the UN in 2021, it will be proposed that Laos leave the LDC list by 2024.”

Laos is one of 47 nations categorised by the United Nations as a Least Developed Country. 

The Party and government of Laos attach great importance to LDC graduation.

This is reflected by the fact that policies and guidance in this regard were integrated into the 8th five-year national socio-economic development plan for 2016-2020. 

This enabled Laos to enjoy high-level economic growth of 6-7 percent annually, according to the ministry. In addition, the poverty rate fell from 46 percent in 1992 to just 18 percent today.

Along with the progress made, there are challenges ahead, notably those caused by the Covid-19 pandemic, which has severely impacted the economy and slashed growth.

Tuesday’s meeting also discussed the Laos-UN cooperation plan, including the joint development of strategies for the graduation transition period and post-graduation to address potential post-graduation challenges.

There are concerns that once Laos is no longer classified as a Least Developed Country the change could affect trading privileges and the foreign aid that development partners and foreign countries extend to LDC countries.

The garment sector will be hardest hit by trade losses when Laos no longer qualifies for special tariff allowances upon expected 2024 LDC graduation. 

In the European Union alone, the garment sector can expect trade losses amounting to US$56 million, according to the latest research paper conducted in the context of the International Trade Centre project and funded by the EU.

However, Deputy Minister of Planning and Investment Dr Kikeo Chanthabouly eased concerns by saying that cooperation strategies and plans with development partners including the UN would be developed for further cooperation during the transition and post-graduation period to ensure Laos’ smooth graduation and its sustainability.

“This will ensure that Laos will not fall back into the LDC category in the future,” he told Vientiane Times.

Although grants for development are expected to decline after graduation, the number of low interest loans is expected to increase because Lao will be eligible for more credit. 

“Grants represent a small component of financial assistance,” Dr Kikeo said, referring to Official Development Assistance.

Tuesday’s videoconference was attended by senior representatives from various ministries. 

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