For use of information media - Not an official record
15 July 2009
The contents of this press release and the related Report must not be quoted or
summarized in the print, broadcast or electronic
media before 16 July 2009, 17:00 [GMT]
(1pm New York; 19:00 Geneva)
LDC Governance and the role of the state
- LDCs have just US$ 150 a year available per capita to spend on private capital formation, public investment in infrastructure and the running of vital public services such as health, education and public administration as well as providing law and order (data for 2006). The corresponding annual figures were US$ 1,165 per capita in lower-middle-income countries, US$ 2,736 in upper-middle-income countries and US$ 14,008 in high-income countries.
- The average government final consumption expenditure (an amount which covers all government current expenditures for purchases of goods and services, including compensation of employees) in LDCs was just US$ 60 per capita in 2006. This may be compared with US$ 295 in lower-middle-income countries, US$ 1,051 in upper-middle-income countries and US$ 6,561 in high-income countries.
- 19 out of 25 LDCs have identified governance as one of the strategic pillars of their poverty reduction strategy papers.
- 20% of aid to LDCs in 2005-2007 was devoted to improving government capabilities.
- 19 LDCs depended on grants (mainly official development assistance - ODA) to finance more then one fifth of their total government spending in 2008 (out of 31 countries for which data are available).
- Gross fixed capital formation in LDCs was 19.9% of gross domestic product (GDP) in 2000-2007. This is low compared to their investment needs, but still higher than in the 1990s (17.1%) and 1980s (16.1%).
- Tax mobilization is weak in African LDCs. In 2000-2006, tax revenues amounted to 12.2% of GDP, which was, however, higher than in 1995-1999 (10.8 %) and 1990-1994 (10.1 %).
- Trade taxes declined from 38.6 % of total tax revenue in African LDCs in 1990-1994 to 31.1% in 2000-2006, due to trade liberalization.
- Recently inflation has not been a major problem for LDCs. Of 47 LDCs for which data are available, the average consumer price index inflation rate for 2005-2007 was above 15 % in only five countries - Angola, Eritrea, Guinea, Myanmar, and Sao Tome and Principe. 34 LDCs had average rates below 10 %. For all LDCs, the average inflation rate was 9.8 %.
- The average real rate of interest in LDCs was 9 % per annum in 2004-2006. This jeopardizes long-term growth, because it raises the costs for public and private investment. In most rich countries, real interest rates are lower than 4 %.
- The savings rate doubled to 16% of GDP in African LDCs and Haiti between the 1990s and 2000-2007. In Asian LDCs it also rose, from 11% to 15% during the same period.
- The foreign debt burden is much higher in LDCs than in other developing countries. For the former, foreign debt amounts to 42 % of gross national income, while in the latter it is 26 %.
Only oil exporting LDCs achieved a surplus in their current accounts for 2004-2007, amounting to 4 % of GDP. All other LDC groups had deficits in their external accounts, ranging from 3 % to 7 % of GDP.
- For 26 African LDCs, the stock of capital flight accumulated between 1970 and 2004 is larger (by 29%) than their foreign debt. This means that they are net creditors vis-à-vis the rest of the world. The following countries have negative capital flight: Benin, Comoros, Mali, Niger, Senegal and Togo. Their capital inflows have been larger than their outflows during that period.
Food price increases between late 2007 and the first half of 2008 have resulted in an additional 100 million people without adequate access to food, according to estimates by the United Nations World Food Programme.
- Of the 31 countries worldwide currently in need of substantial food assistance, 21 are LDCs.
- Some 70% of the world´s poor live in rural areas, a proportion that is even higher in LDCs (75%).
- Malnutrition in LDCs has increased since 2000. Food consumption per capita, measured as average calories per capita per day, decreased from 2,390 in 2004 to 2,215 in 2006. The situation is likely to have worsened during the period 2007-2008.
- The LDC population is forecast to almost double, from around 670 million in 2000 to 1.3 billion by 2030, which will increase LDCs´ food needs.
- By 2030, more than half of LDCs´ populations will live in urban centres, but the majority of their rural populations will remain poor.
- Many poor LDC consumers spend 70-80% of their incomes on food. They were therefore hit very hard by the sharp increases in domestic food prices during 2007-2008. Since the 3rd quarter of 2008, despite a decline in international food prices, in many LDCs domestic food prices remain high.
- The LDC food import bill grew from 3.5% of GDP in 1990 to 4.4% in 2007. In 2000, the import bill for food totalled US$ 6.9 billion; in 2008, it reached US$ 23 billion. Paying for increased food imports can place a tremendous strain on the resources of the poorest LDCs, where foreign exchange earnings are limited and economic growth rates may be low.
- LDCs rely heavily on agriculture for overall growth, with the sector employing more than 68% of the labour force and generating 28% of GDP growth.
- The proportion of total official development assistance (ODA) to agriculture in LDCs declined from a high of about 18% in 1979 to less than 4% in 2006.
- Public spending on agricultural research and development corresponded to just 4.2% of the agricultural GDP of LDCs in 2004, less than half the level of other developing countries (10.5%).
- Total factor productivity (a broad measure of productivity) in agriculture in LDCs rose by 0.19 % per annum between 1960 and 2006, well below the pace of other developing countries, where it rose at 1.27 % per annum.
- Over the last 40 years, the contribution of manufacturing to generating economic activity barely increased in African LDCs. It contributed 10.6 % of GDP in 2007, just marginally more than the 9.8 % of 1970-1979 (data in real terms). At the same time, the share of mining was 13 % in 2007, double the 6.6 % share of the 1970s.
- In Asian LDCs, manufacturing has been growing. It contributed 15.7 % of GDP in 2007, up from 10.9 % in the 1970s. Mining has also expanded, but still contributed just to 3.5 % of GDP in 2007.
- The export structure of LDCs is highly concentrated on a few products. 33 of these countries had an export concentration index higher than 0.4 in 2000-2006. At the same time the average index was 0.1 in other developing countries and 0.09 in developed countries.
- Light manufacturing and low technology products accounted for over 90 % of all LDC manufactured exports in the 2005-2006 period (including food, drinks, garments and textiles). Medium- and high-tech manufactured exports are less than 2 % of their total manufactured exports.
- LDCs remain marginalized from international private capital flows. In 2005-2007 they attracted less than 0.8% of world flows of foreign direct investment.