On December 13th, 2023, Bhutan officially left the least developed countries (LDCs) category established by the United Nations General Assembly in 1971. While saying that the pivotal move is a nod from the global community to Bhutan’s achievements in reducing poverty and realizing sustainable development over the past five decades, the United Nations Conference on Trade and Development (UNCTAD) has cautioned that Bhutan must sustain its momentum beyond graduation. The organization has also called on development partners to scale up the transfer of technical and management skills and to address concerns around accessibility and affordability for technology deployment.
Apart from this, UNCTAD has cautioned that the measurable progress justifying an LDC’s graduation doesn’t necessarily equal economic transformation or the sophistication of support needed to steer the economy through its next phase of development. The organization has also said that if not mitigated, graduation impacts – such as losing several LDC-specific trade preferences – risk exacerbating Bhutan’s exposure to external shocks and undermining efforts to diversify its economy and exports.
To drive post-graduation growth, UNCTAD has underscored the need for further reforms to ensure synergies and coherence across Bhutan’s foreign direct investment, industrial and entrepreneurship policies.
According to UNCTAD, as Bhutan is currently at moderate levels of debt distress, there’s a need to shore up development finance and technical assistance in devising risk mitigation measures. In addition to securing a longer phase-out period of trade preferences, UNCTAD says that Bhutan will require continued support from international partners to strengthen its business infrastructure, notably the country’s four industrial parks.
To boost Bhutan’s productive capacities, UNCTAD has called on development partners to scale up the transfer of technical and management skills and to address concerns around accessibility and affordability for technology deployment.
Meanwhile, UNCTAD has called Bhutan’s graduation “an impressive ascent” and has noted that since the 1980s, Bhutan has sustained an average annual real GDP growth of 7.5%, while life expectancy increased from 47 to 68 years, with primary health care covering 95% of the population. The organization has underlined that Bhutan I among the world’s only three carbon-negative nations, absorbing more greenhouse gases than it emits and that Bhutan has embarked on a “people-centred, holistic development approach.” “Bhutan has fortified institutions, diversified its industries, and fostered an environment conducive to investment and business growth,” the organization has said.
Apart from this, UNCTAD has also said that Bhutan became the fastest place to register a small business globally, following the launch of its G2B digital government portal in 2021 with UNCTAD support. This happened on May 13th 2021, when Bhutan unveiled its G2B portal on 13 May.
The new small business registration portal used UNCTAD’s online single window technology, currently operational in 10 countries. Entrepreneurs can now fill in a form on their phone and receive their business documents by email in less than a minute and at no cost.
The portal was a big change for Bhutanese entrepreneurs, who previously had to trek across the Himalayas to one of six government offices and wait for five days for registration.
In terms of it support, UNCTAD has maintained that Bhutan’s graduation coincided with the end of implementing its 12th five-year development plan, aimed at building lasting progress and economic stability. According to UNCTAD, the process benefitted from UNCTAD’s technical assistance and policy advice to facilitate structural transformation and develop productive capacities. These included boosting areas critical to reducing vulnerabilities and increasing socioeconomic resilience, such as trade-related infrastructure, trade facilitation, export diversification by tapping alternative trade markets, and disaster risk management.
“UNCTAD has continuously supported LDCs to embark on a sustainable development path and participate in the benefits that enhanced productive capacities bring to job creation, income generation, productivity, and value addition,” said UNCTAD Secretary-General Rebeca Grynspan, earlier last week.
Bhutan is the seventh economy to change status, or “graduate”, following Botswana (1994), Cabo Verde (2007), Maldives (2011), Samoa (2014), Equatorial Guinea (2017) and Vanuatu (2020). This brings the number of LDCs down to 45.
To qualify for graduation, a country must meet the criteria on income, human assets, and economic and environmental vulnerability.
Apart from other functions, UNCTAD supports developing countries to access the benefits of a globalized economy more fairly and effectively. It helps equip countries to deal with the potential drawbacks of greater economic integration. To do this, UNCTAD provides analysis, facilitates consensus-building, and offers technical assistance, which helps nations to use trade, investment, finance, and technology as vehicles for inclusive and sustainable development.
Ugyen Tenzin from Thimphu