You mentioned Vanuatu, Cabo Verde and Samoa, which are among the Small Island Developing States (SIDS). What are key steps for them to cope with economic vulnerability?
Many small island countries are inherently economically vulnerable because a small number of industries or sectors dominate the economy. Some of these countries put in place policies to promote agriculture and sustainable manufacturing in small niche areas. Economic diversification helps to ensure long-term stability.
Environmental vulnerability is another concern. Small island developing states are also very vulnerable to climate change impacts like rising sea levels and extreme weather events such as cyclones in the Pacific. Climate change adaptation policies can help at least partially address this sort of vulnerability.
UNDESA has been taking stock of international support measures available to the LDCs. Can you share some international support measures that will remain available after LDC graduation? How can the global community support those countries?
The Committee for Development Policy Secretariat has created a website (www.un.org/ldcportal) cataloguing the various international support measures, which cover trade, official development assistance and other measures such as climate financing, reduced budgetary contributions to the UN and travel assistance.
Some donors and partners extend support measures for a certain period after graduation. For example, the European Union extends trade preferences for three years after graduation. So, countries still benefit from the preferences after they leave the category. Similarly, there are several other smooth transition measures aimed at phasing out this type of support.
The Enhanced Integrated Framework (EIF) has been extending support up to five years after graduation.
Other donors and partners might wish to follow the EIF in continuing to support these countries in building productive capacity on the ground with a view of achieving structural transformation in the long run.
One thing that is lacking is any positive incentive to graduate, other than the reputational benefits. Countries simply face a slower loss of support rather than any new special benefits for recent LDC graduates.
The countries that graduate risk the middle-income trap whereby they are no longer competitive on the basis of low costs and cheap labour, but they have not yet developed the technological sophistication or moved up the value-adding ladder far enough to leapfrog into upper middle-income status. So, they are stuck in this no man's land where they really need new sources of help, or revitalised economic policies, to promote development.
This is something that UNDESA is thinking about. One recent initiative is to help graduating LDCs along the Chinese ‘Belt and Road’ to conceptualize and enact new support measures aimed at tackling specific challenges on a country-by-country basis after graduation. The international community seems likely also to start taking those issues on board given the fact that more and more LDCs will graduate in the near future.
For more details you can listen to the EIF Global Forum on Inclusive Trade for LDCs panel discussion with Daniel Gay on 'making the connections between inclusive trade, economic growth and LDC graduation' here.