Over the past decades, least developed countries (LDCs) have made only limited progress in dynamically transforming and diversifying their economies. Their structural challenges and weak economic and social performance are rooted in the limited development of their productive capacity. Building productive capacities helps move LDC towards graduation from the category and provides development momentum necessary to manage graduation and beyond. Graduation is not only a policy objective for many countries and the international community but, more importantly, it is a reflection that a country has been able to overcome or mitigate the most severe structural impediments to sustainable development. This is part of the Committee for Development Policy (CDP) Policy Note series. The CDP analyses how intergovernmental cooperation could be strengthened to better manage the increasing interdependence among countries, reduce inequalities among and within countries and contribute to the post-2015 sustainable development agenda.