Adam Vai Delaney
At its 8th session in March 2006, an independent group of experts, comprising the Committee for Development Policy (CDP) at the United Nations (UN), recommended that Papua New Guinea (PNG) be included in the internationally recognised list of Least Developed Countries (LDCs)—a club of the less wealthy that includes; Nepal, Sudan, Mali, Afghanistan and Tuvalu.

This recommendation triggered a public reaction from the Grand Chief and Prime Minister of PNG, Sir Michael Somare, who accused its critiques of making false ‘brands’ (like “Failed States”) which did not reflect the country’s positive economic performance. Why the Prime Minister made such a response and not his Minister responsible for Economic Development or for Foreign Affairs is something I am not privy to.

It was, after all, a ‘recommendation’ and that the PNG Government had to signify consent for the recommendation to be worthy of any follow-up. This event did raise an irony about a nation’s “maturity” and reminded me of the deferment of Vanuatu’s graduation from the status of a LDC in 1998 at the UN. I shall return to this later.

For the CDP, the dilemma must be frustrating. On the one hand, its independent findings that rewards good practice with a ‘graduation’ tag is stalled and, on the other, it is criticised for suggesting concessions for a country that is eligible for development assistance reprieve during hard times.

From childhood, the human being strives to attain a higher level of success. This is the fundamental principle of a country’s education system where students learn to advance from primary to higher levels. It is the pursuit of “graduation” that is the hallmark of expectations; a milestone, once achieved, is collectively celebrated by the graduate and trumpeted by teachers and political leaders.

But “graduation” from the international status of being seen as a “Least” of the Developing Countries would seem, for some, unglamorous, given the privileges offered with the status. It may sound strange then, that countries having earned the right to be recognised globally, as having made important strides and prestige, would seek the opposite. Take for instance, Samoa, a Pacific Islands Country and LDC that has attracted international commendation for its recent economic and social performance opted to defer its earlier graduation, believing that the decision to stay a LDC would enable it to continue enjoying the exclusive benefits before its inevitable transition. Herein lies that irony.

The decision to ‘graduate’ or not, lies at the core of governance and politics. In PNG’s recent case, a political decision by the government to ignore the CDP recommendation is all that is required, never mind that the CDP’s analysis demonstrates that it would qualify to join Cambodia, Lesotho, Liberia and Timor-Leste.

Formerly known as the Committee for Development Planning, the CDP, was established in 1965 as a ‘consultative group of experts’ in planning theory and practice to work within the UN and provide independent advice to its boss—the Economic and Social Council (ECOSOC). During the UN’s reform and “revitalisation and restructuring” of ECOSOC—the peak inter-governmental body for development—during the late 1990s, member states debated the relevance of CDP.

It remains, after all, just a subsidiary body of ECOSOC and some questioned its ability to enhance progress for developing countries, including helping the LDCs graduate. With globalisation, the conventional view was that all developing countries would have to adapt to the new conditions of the world economy.

The Committee’s “Planning” function seemed out-of-date. Then, pursuant to ECOSOC resolution 50/227, which was negotiated through a tedious process by UN standards, the CDP was renamed the Committee for Development Policy.

Criteria

Freshly mandated, the CDP, retained one of its primary responsibilities—the setting up of criteria for the list of LDC. In 2001, this list had 49 countries including; Samoa, Vanuatu, Solomon Islands, Tuvalu and Kiribati—countries that would also later become members of a new UN category on Small Islands Developing States (SIDS), which included until most recently Cyprus and Malta.

For Vanuatu, in 1998, being a LDC/SIDS was an important bargaining chip for seeking deferment of its graduation from the LDC list for another three years. How then does the CDP determine ‘graduation’ of a country and also recommend the listing of one as it did this year for PNG?

At its Triennial Review (8th session), it considered three dimensions of a country’s state of development: Income level (Gross National Income per capita); Human Asset Index (HAI) and Economic Vulnerability Index (EVI). The HAI has four indicators: Two for the level of nutrition and two for health (e.g. average calories consumed per capita as a percentage of the minimum requirements and adult literacy rates). The EVI reflects the ‘economic vulnerability’ of countries from trade and natural shocks as a major structural handicap to growth. This Index includes instability of export earnings; instability of agricultural production and population size.

To be eligible for graduation, a country must reach the thresholds for graduation for at least 2 of the 3 criteria, or its GNI per capita must exceed twice the threshold level. Achieving such a goal is the envy of their Economic Ministries. The CDP’s findings have to be made in two consecutive reviews before a country is eligible for graduation. It was in March 2006, that having assessed that PNG met the conditions (e.g. falling below the per capital income of US$750) it was eligible for LDC status, the CDP pronounced its verdict, whilst ironically, Kiribati, Tuvalu and Vanuatu (with smaller populations) were recommended for graduation.

To be added to the list, a country must satisfy the threshold level based on all three criteria. The criteria has been the subject of controversy and debate because of the importance of staying a ‘Least’, is closely linked to financial and technical concessions. It wasn’t surprising that the CDP, at its 6th session in February 2005, emphasised that the identification of a LDC should be “a dynamic and open process, requiring periodic refinement of the criteria, in light of socio-economic development and ongoing improvements in the availability of reliable and internationally comparable data.”

The SIDS, who are also LDCs, have argued as a strategy for maintaining LDC status that, consistent with the Global Programme of Action for the Sustainable Development of Small Islands Developing States (‘Barbados Programme of Action’), “vulnerability’ in the context of environment, remoteness and natural disasters should be included in the CDP’s assessments.

Resilience and shocks

This would include ‘resilience’ and ‘shocks.’ Whilst in theory this has been supported globally, in practice, there is no emerging global consensus on how to measure ‘vulnerability’ that can be applied to all LDCs. From a political vantage, a principled agreement to the concept by the UN had provided LDC/SIDS a valuable strategic leverage to retain current LDC status for as long as the global community would develop such an Index. The main challenge for this purpose has been obtaining good accurate data on small islands for the Vulnerability Index. The South Pacific Applied Geoscience Commission has done excellent work on this for over 10 years, but its downside to the policy aspect is not the focus of this piece.

The CDP has also considered the usefulness of including the proportion of the population displaced (homelesness) by natural disasters (e.g cyclones) as a direct measure of the risk of natural disasters, in addition to the instability of agricultural production (important for sugar producers). These proxies were seen favourably and the CDP agreed to include “remoteness from main markets” as a component of the EVI. The CDP, in its resolution 2004/66, found two important elements with regards to the graduation process: (1) a country will in effect graduate six years after the CDP, in its triennial review, finds it has qualified; and 2) during the three-year period before graduation, a transitional strategy should be prepared to ensure a smooth transition.

This two-step approach signalled a cautionary “apprentice-like” attitude from the donor community. For in the past, countries once having graduated, could receive no further attention from the CDP.

Natural disaster angle

In its resolution 59/209, the UN General Assembly (UNGA) decided that after a country has met the criteria for graduation for the first time, the Secretary-General of the UN will invite the Secretary-General of the United Nations Conference on Trade and Development to prepare a ‘vulnerability profile’ to be taken into account by the CDP at its next triennial review.

If the review confirms graduation, then the CDP will submit a recommendation to ECOSOC and the Council will take action and transmit its decision to the Assembly. Three years later, that country will graduate!

Returning to Vanuatu’s case and context. Vanuatu had met all conditions according to the CDP’s criteria for graduation in 1997. ECOSOC had endorsed its recommendation on 18 July 1997 (decision 1997/223). Following procedure, the UNGA would consider the Council’s report and endorse it. (Vanuatu had not earlier defended its case at ECOSOC to seek deferment).

Thus, the only available procedure was for a sponsoring country to introduce a draft resolution that would seek the deferment of graduation from the list of LDCs. The case had to be based on solid facts. Realising the implications of ECOSOC’s decision, then Prime Minister of Vanuatu wrote to the UN Secretary-General requesting for deferment of graduation until 2000.

As a SIDS, Vanuatu, was vulnerable to the global economy and the frequency of natural disasters. The ‘natural disaster’ angle appealed to the European Union, despite its reluctance to implicitly accept a precedent on a ‘new’ LDC criteria and its perceived linkages with the SIDS category.

At the request of Vanuatu and upon instructions from the PNG Ambassador Utula Samana, I then introduced a draft resolution at a formal caucus of the G77 and China (developing countries) only to meet harsh resistance. Other LDCs, who were not SIDS, were less inclined to entertain an idea that a SIDS (Vanuatu) would receive special treatment and set a trend. In reality, those who were non-SIDS understood that an opportunity to ride the ‘vulnerability’ wave was being presented for future self-interest.

Facing a showdown within the caucus, I stated that PNG and Vanuatu were prepared to go it alone as co-sponsors. The Chairman, Republic of Tanzania, adjourned the meeting for a short while to allow for informal discussions by the group. Tanzania was much more receptive to the draft.

In the end, PNG’s close relationship with the African and Caribbean countries paid off. The draft was adopted by the G77 and now had the political backing of 132 countries. The final resolution that was agreed by consensus identifies the main argument used to get a successful compromise. Specifically, the UNGA noted that the CDP was to examine, as part of its future Work Programme, the “Vulnerability Index” for SIDS and consider its usefulness in determining LDC status.

Armed with this procedural fact, we then negotiated that the process was incomplete and that the CDP, as matter of credibility, should do its work and then decide whether or not it was useful.

In the meantime, it was premature to graduate Vanuatu. In the end, the other groups compromised. We had a fair and reasonable point. The UNGA decided to postpone Vanuatu’s graduation.

Had this small, but significant procedural point not been prior agreed to by the CDP, a request to defer Vanuatu’s graduation could have fallen flat. A few years later, it was to be Samoa’s turn to use this and related successive resolutions, to defer its graduation.

The policy to retain LDC status lies in the incentives that LDCs are granted by the international community. One big myth, however, is that LDCs have a large pool of concessionary funding (cheap loans) made available by financial institutions which would no longer be accessed upon graduation.

One big myth

The Asia Development Bank does provide concessionary treatment to LDCs, but its Development Fund (ADF) is also made available to non-LDCs that have a weak debt-reduction capacity. Graduation from LDC status shouldn’t have any consequence on the country’s classification, if its per capita GNI remains below the ADF eligibility threshold.

An important benefit for a LDC is in the commitments for developing countries under the World Trade Organisation (WTO). For instance, LDCs are exempted from agricultural obligations to reduce barriers, and on commitments under ‘textiles and clothing,’ the LDC are also favourably treated by WTO members.

A significant benefit is that a LDC has access to technical cooperation provided by sponsoring organisations, which includes; the International Monetary Fund, United Nations Development Programme and the WTO. (It is unlikely that any LDC would immediately lose these benefits upon graduation).

All LDCs can have access to trade-related technical assistance. The Pacific Islands Forum does not recognise LDC and played no role in the recent international review conference for LDCs, but it gives favourable assistance to “Small Islands States.” LDCs also have access to travel assistance (for officials to attend meetings).

So despite its status symbol, there are tangible financial and technical benefits why the “Least” would wish to remain within the club, but ‘graduation’, if managed well, can minimise the short-term risks.

There are policies that can be made by listed LDCs to ensure a ‘smooth transition’ from graduating. Cape Verde and Botswana created their own destiny upon graduating from the list of LDC.

The former has attracted remittances (just as Tonga and Samoa do) and Botswana continues to build reserves from its mineral sales. Mauritius was given special consideration following the tsunami tragedy in December 2004 and has identified the most profitable sugar agreements to ensure it is not negatively impacted by graduation.

The Pacific Islands LDCs can learn from these lessons and make the transition less painful.
A strong desire to achieve graduation day should motivate all LDCs to shake the notion, that the importance of being “Least” shall remain a golden goose forever.


• The author was a former Adviser at the Pacific Islands Forum Secretariat and a Senior Diplomat with the PNG Mission to the UN. The views are solely his and not of his previous employers.