CDP Background Paper series

Nepal was the first Least Developed Country to negotiate its accession to the World Trade Organization. The negotiation process was demanding, yet it succeeded in securing a relatively well-balanced accession package. The purpose of this paper is to describe the contours of the negotiation process and to share lessons learned. The paper details the onerous process involved in the accession of LDCs to the WTO and describes the context of Nepal's negotiating positions. Some distinctive aspects of Nepal's approach to the process of accession are highlighted and compared with the situation of some other LDCs.

The least developed country category was established by the international community for countries requiring special support measures for dealing with their structural impediments to growth. Despite the availability of these measures and the efforts of the LDCs themselves, relatively little progress has been achieved. This paper reviews some of the main international support measures from the perspective of five LDCs. It highlights country approaches to the support received and the challenges confronted in accessing the measures. For an effective use of the special support, the report stresses stronger country ownership and improved donor support.

The proliferation of country groupings indicates the need to assess the effectiveness of the current system for development cooperation and to explore better ways to manage the international system, as heterogeneity among developing countries increases. Great caution should be exercised in devising new country categories. Donors can use sound criteria for aid allocation without creating new groupings. If new categories are created at all, issue-based classifications should be preferred to comprehensive categories; support should be issue-specific. Among the existing comprehensive classifications, the LDC category has significant advantages but it needs to better address the problems and incentives associated with graduation.

This paper examines the prospects of achieving a main goal of the Istanbul Programme of Action - at least half of the LDCs to meet the graduation criteria by 2020. Based on two different sets of graduation criteria established by the CDP and current trends in socio-economic indicators of LDCs, the paper concludes that the goal is unlikely to be met even under an optimistic scenario. There are considerable uncertainties about the possible outcome, partly owing to the way in which the graduation criteria are established and partly owing to the difficulty of predicting future course of socio-economic development of LDCs.

Multilateral trade rules have maintained stable and predictable trade flows. Developing countries increased their participation in world markets but marked asymmetries persist; not all countries are benefitting from trade. Successive trade rounds and numerous regional trade and bilateral investment agreements led to significant loss of policy space and fragmentation. Special and differential treatment has not provided necessary flexibility for implementation of development policies while the principle of less than full reciprocity is eroded. Stronger multilateralism, effective overseeing and enforcing role by WTO and greater focus by developing countries in negotiating flexible rules (instead of exceptions to the rules) are suggested.

Global evidence suggests that trade-related performance is becoming increasingly important for the socio-economic development of many developing countries. The paper finds that trade preferences accorded to Bangladesh as an LDC have played a crucial role in recent accelerated development of her economy and her significant achievements in trade and social sectors. The paper highlights the concerns that emanate from the trade preferences and proposes ways to make these more effective and beneficial for the LDCs. It concludes that Bangladesh will need to build the needed supply-side capacities and undertake necessary reforms to realize the potential opportunities provided by preferential market access.

International support to the sustainable development of SIDS has been on the international policy agenda for a long time, whereas challenges are intensifying. Stabilizing global economic and financial markets and international measures to reduce climate changes are indispensable to reduce vulnerabilities of SIDS, as is scaling-up of existing support measures at the national level in areas such as climate change adaptation. This paper also performs cluster and other statistical analyses of SIDS vulnerabilities to explore new approaches to SIDS support. The heterogeneity among SIDS is substantial even if only sub-groups of SIDS are considered. Therefore, a differentiated approach has merits, as uniform support would neither be effective nor efficient.

The paper argues that science, technology and innovation (STI) play a critical role in expediting transition to a sustainable mode of development. Latecomer nations suffer from several disadvantages as they attempt to catch-up with the technological leaders, but they can enjoy latecomer advantages, if appropriate strategies are formulated and executed. One of the key concepts is leapfrogging, whereby the latecomers absorb what the technological leaders have to offer and leap to a new environment-friendly techno-economic paradigm. To facilitate such leap, the current intellectual-property-rights regimes need to evolve to one that fosters technology diffusion and greater use of intellectual property.

This paper reviews the role of climate change vulnerability in identifying least developed countries (LDCs). Taking a sustainable development perspective, it argues that climate change should be seen as an aggravating factor of existing handicaps and many indicators used to identify LDCs already capture relevant structural vulnerabilities to climate change. However, the paper proposes some refinements in the LDC criteria to better capture vulnerabilities from natural disasters and in coastal areas. These refinements affected the vulnerability ranking in the recent triennial review, but had no impact the eligibility of countries for inclusion in and graduation from the LDC category.