Graduation and Differentiation, with regard to Vulnerability and Fragility

May 21, 2018, New-York

Side event organized by UN-OHRLLS and FERDI at the 6th Biennial High-level Meeting of the Development Cooperation Forum (DCF) - ECOSOC

On the occasion of the 2018 Development Cooperation Forum, and in collaboration with the United Nations Office of the High Representative for the LDCs, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), Ferdi organized a side event on the graduation and differentiation of countries.

This event held in New York, May 21, 2018.

Moderated by Patrick Guillaumont, Chairman of the Ferdi, it brought together the following panelists:

Shamshad Akhtar, USG and Executive Secretary of UN ESCAP

Roland Mollerus, Chief, Secretariat of the Committee for Development Policy (UN-DESA)

Robin Ogilvy, Special Representative of the OECD to the United Nations

Susanna Wolf, Senior Programme Officer at UN OHRLLS

Nguéto Tiraina Yambaye, Former Minister of Economy and Development Planning of Chad, and former Executive Director of African group II at IMF Background and objectives 

Context

The objective of the side event was to discuss the importance of taking into account vulnerabilities in the differentiation of countries, the definition of categories of countries and in the way donors ensure a smooth transition for graduated countries. 

Building sustainability and resilience through development cooperation implies taking into account the various types of vulnerability – economic, social and climatic – faced by developing countries.

For the least developed countries, vulnerability, which is a key element of the category, is not a compulsory criterion of graduation from the LDC category, but is also considered more qualitatively. The UN General Assembly invited development partners to take it into account in their aid allocation, as a way to promote a smooth transition after graduation. At a higher level of income per capita vulnerability has also been recognized as an element to be taken into account for the graduation from the DAC list of developing countries eligible for ODA.

Furthermore, regarding graduation at intermediate levels of income, especially for the financial instruments of differentiation of multilateral development banks, vulnerability is not systematicallyconsidered, while state fragility may involve a special treatment.  

The side event gathered senior representatives of governments, international institutions and of civil society to discuss how vulnerability and fragility can be consistently taken into account.

To read : background information by Shamshad Akhtar 

Brief report

The side event discussed the importance of taking into account vulnerabilities in the differentiation of countries, the definition of categories of countries and the way in which donors ensure a smooth transition for graduated countries. 

There are many reasons justifying the differentiation of partnerships for development, in particular the great heterogeneity of the countries, some being in very specific situations.

This need for differentiation implies rules, automatic or discretionary. The simple use of the level of per capita income turns out to be reductive; thus, taking into account of criteria of vulnerability (even though this concept is difficult to define precisely) seems relevant and suitable for the integration of sustainability in the development.

Where the application of a policy measure is not binary, the use of continuous criteria rather than discontinuous categories of countries turns out to be more relevant: This allows to avoid the effects of thresholds, to differentiate countries within a category, and to smooth the graduation from the category.

The use of continuous criteria also avoids instability in belonging to a category for countries whose characteristics are close to the thresholds for inclusion and graduation (although graduation and inclusion may respond to asymmetric rules to avoid this problem of reversibility, as with the LDCs for example).

An implication of this debate concerns the allocation of aid. The debate particularly addressed the case of middle-income countries because of the large number of poor they count and a possible loss of external resources they face when they come out of the category of LDCs or low-income countries. It is however the responsibility of graduated countries - who are supposed to know an improvement in their economy – to share this improvement with the poorest sections of their population. In addition, the LDC category (or the criteria that define it) brings together countries generally affected by structural handicaps significantly greater than in the other categories of countries.

It was also discussed the importance of taking into account the root causes of the conflicts which are nowadays the main catalyzer for vulnerabilities and fragilities, in order to avoid, in the long run, consuming an important part of concessional resources in favor of a category of countries identified as fragile. This point illustrates the relevance to consider continuous variables to identify weaknesses in early stages and to take them into account in the allocation rather than categories to which countries become members only when their weaknesses are important enough to be taken into account.

The case of the LDCs especially illustrates the topic of the side event. The binary nature of belonging or not to the category means abrupt changes in the status of countries and their access to many measures - while development is an ongoing process.

Graduated LDCs can no longer be eligible for specific support measures reserved for them while they are facing plenty of persistent vulnerabilities. United Nations support graduated countries and encourage donors to put in place mechanisms to smooth the effects of thresholds. It is in this spirit that the United Nations General Assembly has invited donors to take into account the criteria used for identification of LDCs in the allocation of assistance (resolution A/RES/67/221), in order to promote a smooth transition after graduation. The European Commission currently applies this rule. Other multilateral donors are also thinking about better taking into account this resolution in their allocations. An important point stressed in the debate is that the partner countries can be fully part of the evaluation process and inclusion or graduation decisions.

In addition, many countries are also vulnerable to climate change but this criterion is not taken into account in the definition of the LDC category. CDP (Committee for development policy) of the United Nations has proposed the creation of a specific category of countries facing an extreme vulnerability to climate change and other environmental shocks to ensure to these countries a specific assistance. At the risk of multiplying categories and diminishing the relevance of the LDC category. Another solution would be to revise the criteria for the LDC category to better reflect vulnerability to climate change.