Pathways to LDC Graduation

Pathways to LDC Graduation The Case of Nepal SWARNIM WAGLÉ N A T I O N A L P L A N N I N G C O M M I S S I O N

Outline 1. LDCs: A Glimpse 2. Graduation and IPoA 3. Where Does Nepal Stand? 4. The Path Ahead

A Glimpse of the Club 1. 48 countries 13% of world population; 1% of GDP; 1.2% of trade; 2% of FDI inflow Began with 25 countries (with 3 eligible opting out) 2. A diverse bunch, but shared vulnerabilities From Bangladesh to Tuvalu; Equatorial Guinea to Malawi Many are landlocked, remote, undiversified 7 countries account for 3/4 of LDCs exports 3. Over 320 million people in 13 LDCs in Asia-Pacific Third largest in the world if a country (but economy comp. to Greece)

Change in non-income HDI 2000-2013.25 Convergence in Income and Non-income Development.2.15.1.05 YEM TMP LAO 0 -.5 0.5 1 1.5 Log change in real GDP, 2000-2013 Source: WDI and HDR data

0 15 30 45 60 Non-mineral exports relative to GDP (%) 6 8.5 11 Log of GDP per capita (PPP) 1995 0 15 30 45 60 6 8.5 11 Log of GDP per capita (PPP) 2012 Source: WDI & UN Comtrade Note 1: Non-mineral exports exclude ores and metals (SITC Divisions 27, 28 and 68) and fuel (SITC Section 3) Note 2: Dashed vertical lines indicate global median income per capita (in log) Trade Openness

Services & manufacturing in GDP (%) 2001-2003 Log of real export per capita 2011-13 Economic Diversification 100 20 90 18 80 70 Vanuatu Tuvalu Bangladesh 16 60 50 40 30 Lao PDR Bhutan Timor-Leste Cambodia Afghanistan Nepal 14 12 10 Lao PDR Vanuatu Bhutan Cambodia Timor-Leste Nepal Bangladesh Afghanistan 30 40 50 60 70 80 90 100 30 40 50 60 70 80 90 100 Services & manufacturing in GDP (%) 2011-2013 Services & manufacturing in GDP (%) 2011-2013 Source: WDI & UN Comtrade

Criteria 1. GNI per capita $1035 for eligibility (2015 triennial review), 3-year average per Atlas method of WB Threshold for graduation: 20% above ($1,242) 2. Human Assets Index (HAI) Education: gross secondary enrollment ratio and adult literacy Health & nutrition: % of undernourished population and under-5 mortality rate Threshold for graduation: 10% above the inclusion threshold of 60 (3 rd quartile of ref. group) 3. Economic Vulnerability Index (EVI) Exposure: population size, location, economic structure, environment Shock: trade (instability of exports); and natural (victims of natural disasters; instability of agri.) Threshold for graduation: 10% below the inclusion threshold of 36 (1st quartile of ref. group)

Graduands Istanbul Program of Action (IPoA): The overarching goal is to overcome the structural challenges to enable half of the LDCs to meet the criteria for graduation this is closely related to the objective to achieve sustained growth of at least a level of 7 percent annually. Graduates so far: Botswana (1994); Cape Verde (2007); Maldives (2011); Samoa (2014) Expected by 2018: Equatorial Guinea (2017); Vanuatu (2017) Next in line (likely propelled by income): Tuvalu, Angola, Kiribati, Solomon Island, Timor-Leste, Bhutan

Where does Nepal stand?

Human Assets Index Health and Nutrition Index (HNI) Education Index (EI) Undernourishment in population (%) (PUN) Under-5 mortality (per 1,000 live births) (CMR) HNI Gross secondary school enrolment ratio (%) (GER) Adult literacy rate (%) (ALR) EI HAI 3 yr. moving average Value Max-Min Value Max-Min Value Max-Min Value Max-Min 2012 16 81.6 41.6 80.8 81.2 65.8 62.0 58.2 44.3 53.2 67.2 65.3 2015 14 84.9 37.6 83.2 84.1 69.9 66.6 60.3 47.1 56.8 70.4 69.2 2018 11.6 88.9 35.6 84.4 86.6 75.9 73.2 62.1 49.4 61.3 74.0 72.8 2021 9.3 92.8 35.6 84.4 88.6 82.0 80.0 63.6 51.5 65.7 77.2 76.1

Index 80 75 70 65 60 Graduation Threshold ᵜ 55 UNCDP Review Estimates of HAI * 50 2006 2009 2012 2015 2018 2021

Economic Vulnerability Index Exposure Shock Size Location Economic Structure Environment Trade Shock Natural Shock Population Remoteness Merchandise export concentration Share of agriculture in GDP Share of population in low-elevated coastal zones Instability of Exports of Goods and Services Victims of Natural Disasters (VND) Instability of Agricultural Production NSI EVI 3 yr. moving average Value Max- Min Value Max- Min Value Max- Min Value Max- Min Value Max- Min Value Max- Min Value Max- Min Value Max- Min 2012 26.8 20.2 54.6 55.8 0.14 5.07 35.9 59.3 32.1 0.0 0.0 27.06 11.60 21.99 0.26 52.13 2.33 4.47 28.30 25.14 26.10 26.10 2015 27.9 19.6 49.2 49.0 0.14 4.86 34.73 57.1 31.0 0.0 0.0 24.93 11.04 20.12 0.28 52.83 2.21 3.85 28.34 24.23 24.58 24.91 2018 29.0 19.0 44.3 42.9 0.13 4.48 33.2 54.6 29.5 0.0 0.0 22.90 10.51 18.35 0.32 54.88 2.10 3.26 29.07 23.71 23.30 23.81 2021 30.1 18.4 40.0 37.5 0.13 4.27 31.8 52.2 28.2 0.0 0.0 21.06 10.00 16.67 0.32 54.88 2.00 2.70 28.79 22.73 21.89 22.36

Index Economic Vulnerability Index 40 35 30 25 20 15 Graduation Threshold ᵜ UNCDP Review 10 Estimates of EVI * 2006 2009 2012 2015 2018 2021

US$ 2500 GNI per capita 2000 1500 1000 500 Graduation Threshold ᵜ UNCDP Review Estimates of GNI per capita* GNI per capita for each Year 0 2006 2009 2012 2015 2018 2021 2022

1775 1785 1795 1805 1815 1825 1835 1845 1855 1865 1875 1885 1895 1905 1915 1925 1935 1945 1955 1965 1975 1985 1995 2005 2015 Sluggish growth over 200 years After Prithvi Narayan Shah 30000 25000 20000 15000 10000 5000 0 Nepal USA South Korea Malaysia India China Japan Argentina Source: Illustrated by Swarnim Wagle based on Bolt, J. and J. L. van Zanden (2013), New Maddison Project Database Note 1: Y-axis values in per capita Geary-Khamis international $ (1990)

The Path Ahead

Augmenting human capabilities Efficacy of budgetary allocation in education and health Evidence-driven management of systems and professionals Low attendance and absenteeism Matching of inputs (medicine, textbook) with other (performance) incentives Teaching at the right level Enforcing accountability; widening access; and coordinating better Well-regulated private initiatives, including PPP

The imperative of sustained high growth Massive investments esp. in clean energy, transport and other infrastructure that constrain growth Enhanced productive capacities; revival of manufacturing; niche agriculture and modern tradable services (including tourism) Regional growth poles in India and China; global value chains Youth bulge and the remittance economy

At a time of our choosing Mainstream and pursue the three pillars for graduation Graduation Strategy, Periodic Plans, NHDRs Engage in CDP review of eligibility in 2015, 2018 Take the parliament on board Prepare vulnerability profile and impact assessments Work on a smooth transition strategy Meet technical criteria -- but not seek to graduate formally? Income base ought to be much stronger; and Implications for aid, market access, S&DT and international obligations clearer

The End