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How does a country move from 'low income' to 'high income'? Image: Unsplash/Linus Nilsson Stay up to date: Economic ProgressThe impact of the pandemic on low-income countries (LIC). Image: World BankLicense and Republishing World Economic Forum articles may be republished in accordance with the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Public License, and in accordance with our Terms of Use. The views expressed in this article are those of the author alone and not the World Economic Forum. Global Agenda The Agenda WeeklyA weekly update of the most important issues driving the global agenda The Human Development Index (HDI) is a summary measure of average achievement in key dimensions of human development: a long and healthy life, being knowledgeable and have a decent standard of living. The HDI is the geometric mean of normalized indices for each of the three dimensions. The health dimension is assessed by life expectancy at birth, the education dimension is measured by mean of years of schooling for adults aged 25 years and more and expected years of schooling for children of school entering age. The standard of living dimension is measured by gross national income per capita. The HDI uses the logarithm of income, to reflect the diminishing importance of income with increasing GNI. The scores for the three HDI dimension indices are then aggregated into a composite index using geometric mean. Refer to Technical notes for more details. The HDI can be used to question national policy choices, asking how two countries with the same level of GNI per capita can end up with different human development outcomes. These contrasts can stimulate debate about government policy priorities. The HDI simplifies and captures only part of what human development entails. It does not reflect on inequalities, poverty, human security, empowerment, etc. The HDRO provides other composite indices as broader proxy on some of the key issues of human development, inequality, gender disparity and poverty. A fuller picture of a country's level of human development requires analysis of other indicators and information presented in the HDR statistical annex.
The United Nations defines LDCs as countries that have low levels of income and face severe structural impediments to sustainable development. LDC CRITERIA:
For more information on these measurements, visit the website of the Secretariat (DESA) of the Committee for Development Policy (CDP) INCLUSION: To be classified as an LDC, a country must satisfy all three criteria and agree to the classification. Today, 46 countries are classified as LDCs. GRADUATION: To be eligible for graduation, a country must reach thresholds in two of the three criteria in two consecutive triennial reviews by the Committee for Development Policy. Alternatively, a country may graduate based on the income-only criterion. To read more about the graduation process, see here.
Least Developed CountriesBenefits available to LDCsThese 46 countries benefit from exclusive international support measures (ISMs) in the areas of trade, development cooperation and participation in international organisations and processes. Examples of such measures in the area of trade include: preferential market access for goods (such as the EU EBA Initiative) and services; special treatment under World Trade Organisation rules and certain regional trade agreements; and technical assistance and capacity building. Other ISMs include a range of financial and technical assistance provided by multilateral and bilateral partners, such as special programmes and budget allocations at the UN, including the Technology Bank for LDCs, and the LDC Fund established by the United Nations Framework Convention on Climate Change (UNFCCC). Other support measures help LDCs participate in international forums, such as caps and discounts on contributions to the budget of the United Nations and financial support for representatives of LDCs to travel to General Assembly and other meetings. Another measure is the Investment Support Programme (ISP) for LDCs, which was jointly designed by the International Law Organization (IDLO) and UN-OHRLLS. The Programme provides on-demand legal and professional technical advice and assistance to LDCs on investment-related negotiations and dispute settlement and provides capacity building in these areas. A first project was concluded successfully and led to a favorable arbitration outcome for The Gambia in 2020. With currently 30 law firms on the roster, support and advice are provided pro bono or via reduced-fee assistance. Graduation from the LDC CategoryThe recently adopted Doha Programme of Action set an ambitious target of 15 additional LDCs meeting the graduation criteria by 2031. The list of countries categorized as LDCs is reviewed by the United Nations every three years based on specific procedures. For more on the graduation process see here. There are currently 16 LDCs in various stages of the graduation process, four of which are due to graduate soon while another three will leave the category in 2026:
Other LDCs in the graduation pipeline are:
What organization created the classification of countries based on per capita income?When it comes to income , the World Bank divides the world's economies into four income groups: high, upper-middle, lower-middle, and low. The income classification is based on a measure of national income per person, or GNI per capita, calculated using the Atlas method.
What organization has classified countries as developing?The IMF refers to the classification of countries as Advanced and Emerging and Developing Economies.
How does the UN classify countries?For analytical purposes, the WESP classifies all countries of the world into one of three broad categories: developed economies, economies in transition and developing economies.
Does World Bank classify countries on the basis of per capita income?Countries are classified each year on July 1, based on the estimate of their GNI per capita for the previous calendar year. Income groupings remain fixed for the entire World Bank fiscal year (i.e., until July 1 of the following year), even if GNI per capita estimates are revised in the meantime.
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