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The Financial Express

Economic goals: Surpassing China!

| Updated: October 21, 2017 21:22:12


Economic goals: Surpassing China!

Unlike the World Bank income classification, the United Nations (UN) considers several standards and sustainability related factors besides per capita gross national income (GNI) to classify countries. A least developed country (LDC) has to cross the threshold in respect of at least two out of three indicators: per capita gross national income, human asset index (HAI) and economic vulnerability index (EVI). While per capita GNI is straightforward, the other two indices are quite complex and depend in a complicated way on several other indices and variables.
The threshold GNI per capita for graduation is currently set at $1,242. This threshold is actually an average of previous three years' income. The HAI is set at 66 and EVI is fixed at 32. While a country must attain higher than the threshold values in the case of the first two criteria for graduation, it must be below the threshold in the case of the third criterion.
The UN has set up  a committee named Committee for Development Policy (CDP), originally called Committee for Development Planning, which … 'provides inputs and independent advice … on emerging cross-sectoral development issues and on international cooperation for development, focusing on medium- and long- term aspects that are relevant for the implementation of the United Nations development agenda'.  The CDP undertakes a review of the least developed countries once every three years to decide on its recommendation regarding which countries should be added to the list of LDCs and those that could be graduated.
The last meeting of CDP for such a review was held in 2015. In that meeting it was concluded that Bangladesh did not meet two of the three criteria for graduation.  The GNI per capita of the country, as estimated using the World Bank Atlas Method, was only $926 (obviously less than the required $1242) and its HAI at 63.8 was also below the threshold. With a score of 25.1, it met the EVI requirement only.
Bangladesh will come up for CDP review again in 2018, and if it can demonstrate to have crossed at least two of these thresholds, it will be kept on the watch list for graduation. If it maintains these two indices above the threshold for three more years it could be declared to be eligible for graduation from the list of LDCs in the meeting of the CDP in 2021. While a country has the option of declining to be included in the list of LDCs, it has no such option in respect of graduation. A country eligible for graduation gets three years to prepare for transition to a developing country. Hence, if Bangladesh is found eligible for graduation in 2021 review, it will be finally graduated in 2024.
The scores Bangladesh obtained in 2015 in respect of the three criteria suggest that it has a good chance of being adjudged a candidate for graduation by CDP in the 2018 meeting. Barring any unforeseen shock the country should then graduate in 2024. It will then shed the rubric of an LDC and join the league of the developing countries more than half a century after emerging as a sovereign country. Many more LDCs are also likely to graduate by then. With graduation they will lose the special privileges they enjoy as the LDCs although some extension is possible if a case can be made.
There is no accepted quantitative definition of a developing or developed country; hence as a goal it is somewhat elastic. It is axiomatically taken to be the case that if a country graduates from an LDC it becomes a developing country, and there is not much controversy about it. However, at what stage a developing country graduates to a developed one is not defined. Some might regard the high-income countries as developed countries, but a large number of high-income countries are not included in the list of developed countries of the UN. Indeed, some of the richest countries of the world, such as Qatar, Singapore, Kuwait and Brunei, are still in the list of developing countries (UN DESA 2012). 'Developed country' seems to be essentially self-declared. Most of the countries which now belong to the list of developed countries of the UN have per capita GNI not less than twice the threshold of high income.
Nonetheless, even if we regard high income of World Bank as a proxy of 'developed', there is still the problem of figuring out what might be the cut-off point for high income in 2041. The threshold for high income was $6,000 in 1990, which gradually rose to $12,475 in 2015. If we assume that the threshold will increase in a similar manner in future, then it will reach $25,938 by 2040.
To attain even this low threshold Bangladesh economy will have to grow (in current dollar terms) at about 13.1 per cent every year for the next 25 years. Few countries have done this and there is little hope that Bangladesh, whose GNI per capita in US dollars has barely grown at 5.5 per cent during the last 25 years, will suddenly start growing at considerably more than double this rate.
It might be helpful to bear in mind that despite the unprecedented breakneck rate at which the Chinese economy grew during the last 35 years it is still several years away from becoming a high-income country. At the rate it is projected to grow in the medium term it will not be a high-income country by 2021. It is also very unlikely that it will be a developed country in 2040 by current standards.  
Therefore, economic growth of Bangladesh will have to surpass China by some large margin if it wants to attain the developed country status by 2041. To achieve this wondrous feat Bangladesh will have to be that magical land "somewhere over the rainbow … [where] the dreams that you dare to dream, really do come true".
 [The United Nations Conference on Trade and Development (UNCTAD) has just released its annual LDC Report 2016. Its simulation suggests that Bangladesh, along with another 15 countries, will graduate out of the LDC category by 2025.]
Concluded.
The writer is Professor, Department of Economics,
University of Dhaka.
 [email protected]

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