Five small island developing States in the Asia-Pacific region are classified as least developed countries (LDCs): Kiribati, Solomon Islands, Timor-Leste, Tuvalu and Vanuatu. These countries experience major development challenges associated with the small size and remoteness from major markets, which are compounded by inadequate domestic infrastructure. Consequently, these LDCs continue to face structural bottlenecks that hamper the development of adequate productive capacities, making sustainable development difficult and expensive.
Upon meeting the criteria at two consecutive triennial reviews undertaken by the Committee for Development Policy, a country is usually recommended for graduation. While Solomon Islands and Timor-Leste met the criteria for the second time at the 2018 triennial review, Kiribati and Tuvalu have met the criteria at several consecutive triennial reviews, yet their graduation has been postponed due to their high economic and environmental vulnerability. Vanuatu is scheduled to graduate in December 2020.
Meeting the criteria for graduation is a remarkable achievement. Yet, graduation can bring about challenges stemming from the withdrawal of LDC-specific international support measures (ISMs), which include access to concessional finance and preferential market access for exports. In addition, none of the small island LDCs have met the economic vulnerability threshold, suggesting that they remain highly vulnerable to external shocks. In this regard, the small island LDCs need to prepare and implement an adequate transition strategy to mitigate potentially adverse impacts of graduation, especially in view of the large and growing need for financing for development to support the implementation of the 2030 Agenda for Sustainable Development.
It is thus of importance that policymakers and Government officials of the small island LDCs have the capacity to gauge the costs and benefits stemming from graduation from the LDC category. This capacity will enable them to develop national economic policies, financing for development strategies and institutional arrangements to minimize negative impacts of, for instance, reduced market access and erosion of policy space in relation to intellectual property rights, industrial policy and agricultural subsidies.