Today´s dialogue is about the poverty eradication goal in the LDCs and how to attain that goal through resource mobilization and an enabling environment.
The goal is daunting. UNCTAD´s Least Developed Countries Report 2004 estimates that if current trends persist in the LDCs, far from enjoying the eradication of extreme poverty, these countries will see it soar from 334 million people in 2000 to 471 million in 2015. Not only will they miss the first MDG, they will likely fail in all the others. Consider these sobering facts: only 11 of the 50 LDCs are on course to reduce the under-five mortality rate by two thirds; only 11 are likely to halve the percentage of the population suffering from hunger; and just seven are on track to halve the proportion of people without access to safe water.
The prospects are thus dismal. And what of the means to improve them? Domestic resource mobilization is difficult in these countries, given their very low incomes, mass poverty and low savings. After subsistence consumption, what is left per person is a paltry 15 cents a day to spend on private capital formation, public investment and the running of such vital services as schools, law and order and public health. On average, the LDCs spend less than US$ 5 per capita annually on health, as compared to US$ 1,456 in the OECD countries. The conclusion is unequivocal: if the LDCs are to rely purely on domestic resources, there is no way they can lift themselves out of poverty.
Where else might resources come from? Basically, from ODA, workers´ remittances, FDI, trade and debt relief. Resources from most if not all of these categories have increased, but they are insufficient, unstable and too concentrated in a few countries. FDI rose in 2001 but fell the following year. Five LDCs whose economies are driven by oil accounted for 63% of all foreign direct investment for the group as a whole: Angola, Chad, Equatorial Guinea, Sudan and Yemen. ODA, after a sharp fall in the 1990s, recovered partially between 2000 and 2002, by 36%, but the trends were highly uneven, with aid declining in 13 LDCs and increasing in 16 others.
Nor has the debt panorama improved enough. Grants now constitute the majority of aid disbursements, but loans have been growing at 27% a year. Despite debt forgiveness, in 2002 the total debt stock rose to US$ 145 billion and total debt payments reached a record level of more than US$ 5.1 billion. Debt stock increased in 43 LDCs.
Trade, by contrast, was a bright spot. LDC merchandise exports reached a new high of US$ 37.8 billion in 2002, up from US$ 26.1 billion four years earlier. In nominal terms, this represented a 45% increase, a good part of it accounted for by oil exports. Again, export earnings were markedly uneven. During 2000-2002, 56% of LDC merchandise exports originated in five LDCs: the four major oil exporters plus Bangladesh. Whereas LDC exports of manufactures rose by 43% and those of oil exporters by 134.4%, they dropped by 6% in agricultural-exporting LDCs and by about 17% in mineral-exporting countries.
The consequence of this marked divergence in the economic performance of LDCs was that real annual GDP per capita growth exceeded 3% in 14 LDCs but stagnated or declined in 24. Only seven achieved the 7% growth target set under the Brussels Programme of Action: Angola, Bhutan, Chad, Eritrea, Mozambique, Rwanda and Sudan.
In order to bring about a more balanced performance and eradicate poverty in LDCs, a dynamic new policy is needed, with three pillars. The first is a development strategy capable not simply of mainstreaming trade in poverty reduction but also of mainstreaming both trade and development within the poverty eradication effort. This requires balanced development based on agricultural productivity growth, export-led industrialization of processed agricultural products, diversification through management of mineral resources and employment-intensive technologies.
The second pillar depends on improvements in the international trade regime, including issues beyond the scope of the WTO, to reduce international constraints on development in the LDCs. Among them, commodity dependence and its link with extreme poverty deserve special attention, with three main priorities: 1) the rapid phasing-out in OECD countries of agricultural support measures that adversely affect LDCs, and particularly those measures that are applied to beans, beef, cotton, maize, potatoes, rice, sorghum, sugar, veal and wheat; 2) initiatives to ensure greater international transparency in revenues from oil, gas and mineral exploitation; and 3) measures to reduce vulnerability to price shocks, including linking debt payments to commodity prices and making aid more countercyclical.
The third pillar is to provide financial and technical support for promoting production and trade capacities in the LDCs, the "dark and forgotten side of the moon" of trade and an area where massive investment is needed. A worrying trend of recent years is that assistance to LDCs has increasingly shifted away from production and infrastructure towards basic human and social needs. In 1980, 45% of aid went to production and infrastructure; by 2000-2002, this proportion had dropped to 23%. In the 1990s, assistance to agriculture was half the level it was in the 1980s, while aid for trade-related infrastructure (transport, storage, communication) declined by 43%. Aid commitments to support trade policy formulation and trade development in LDCs were only 0,5% and 1,5%, respectively, of the total. The composition of aid should thus shift back towards building production and trade capabilities. There is also a strong case for using HIPC assistance to develop productive sectors and to ensure that further debt relief, which is certainly badly needed, is provided in a way that is consistent with the development of productive and trade capacities.
Much more could, and should, be said about specific problems, such as fighting AIDS, the erosion of trade preferences or how to untie aid and improve its effectiveness, but our time this week is too short for an exhaustive examination of all the relevant issues.
Let me conclude by reaffirming that there is no justification whatsoever for development pessimism as regards many LDCs. The fact is that the poorest of the poor countries entered the third millennium, between 2000-2002, with real average annual GDP growth rate of almost 5%, or real per capita GDP growth of 2.6% per annum -- almost 1% more than the rest of the developing economies.
This clearly shows that development for the LDCs is by no means an impossible dream. It can be achieved and accelerated provided that the right strategies, and a friendly environment, allow for the mobilization of resources and their channelling into productive uses. This requires a new international covenant in which solidarity is granted the same stature in our aspirations as peace. As we turn to face the so-called new threats to peace and security, such as global terrorism and genocide, let us not forget that what we often find at the roots of those threats -- as was the case in Afghanistan - is a failed State with an economy in regression. It would be futile to fight the manifestations or symptoms of these phenomena without addressing their underlying causes, among them the subsidies threatening the economies of some of the poorest LDCs in West Africa, such as Benin. This is a particularly clear example of the lack of coherence in the global system which was the central subject of UNCTAD XI , held in São Paulo earlier this month. Let us all commit ourselves to widening the door that leads to development; let us remove the biases, imbalances and distortions which, instead of providing a level playing field, make of the current road a path too steep for the weak to climb.