Potential benefits of Graduation of Developing Country from LDC

---

---

Graduation from the LDC category is the recognition of significant achievements in the areas covered by the LDC criteria. In the terms of the General Assembly resolutions referring to recent cases, graduation is “a major milestone for the country involved as it means that significant progress has been made towards reaching at least some of its development goals”.

Graduation is often referred to in broader terms than in this impact assessment, as a combination of the departure from the LDC category (which this assessment focuses on), advances in performance on the LDC criteria (income per capita, economic and environmental vulnerability, human assets), the entry into the group of middle-income countries. In that context, it is often stated that graduation will help attract new investments and improve the country’s credit ratings.

Focusing on the narrower concept of graduation adopted in this assessment as the formal exit from the LDC category, the interviews conducted and documents consulted in the context of this assessment suggest that greater investments and improved credit ratings would not be an automatic consequence of graduation. Graduation could lead to an improvement of country image or could be seen as validation of the sustainability of a country’s development progress, and thereby indirectly affect investment, credit rating and others. Attractiveness for investments and credit ratings could be affected, positively or negatively, by how the country addresses challenges related to graduation identified above.

Experts interviewed for this report have also referred to the possible “socio-psychological” value of graduation as an enabler of a change in mindset towards a locally driven development process, notwithstanding the continued need for support from international partners.

The government of Bangladesh has deployed significant efforts in disseminating the concept of graduation as a milestone in the country’s development process and has raised the interest of multiple stakeholders on the challenges and opportunities facing the country at what is seen as a significant transition in the country’s development pathway. As such, the concept of graduation has become symbolic of Bangladesh’s readiness for a shift in paradigm towards development that, while still requiring foreign financial and technical support, is based on local ownership, leadership, analytical capacities and priorities.

The experience of countries that have graduated in the past is sometimes brought up as a reference to what can happen after graduation in terms of growth, FDI, ODA and other variables. In addition to the small number and great diversity in situations and country configurations, that limit the predictive power of those experiences, it is difficult to reliably establish the causal relationship between graduation and significant developments in these variables.

Finally, in their comments to a previous version of this assessment, the UNDP office in Dhaka suggested exploring potential opportunities arising from the loss of LDC-specific preferences. For example, the need to comply with more stringent rules of origin could encourage capacity expansion in upstream industries; or the possibility that relying on DFQF market access could have locked Bangladesh into relatively low-skilled manufacturing activities and that therefore graduation would provide an incentive for the country to move up the value chain. The government of Bangladesh may wish to explore the conditions under which this would effectively occur and the necessary policy measures.

Bangladesh tells a remarkable story of poverty reduction and development. From being one of the poorest nations at birth in 1971, Bangladesh reached lower-middle income status in 2015. It is on track to graduate as Developing Country from the UN's Least Developed Countries (LDC) list on 24 November 2026.

Source: UN-Bangladesh developing country status