unctad.org | Trade and Development Board, 49th executive session
Statement by Mr. Supachai Panitchpakdi, Secretary-General of UNCTAD
Trade and Development Board, 49th executive session

07 Jun 2010

"Revisiting the performance of the Least Developed Countries"

Thank you very much, Mr. President.

Let me get straight to the heart of the matter that we will be discussing in more concrete terms.

This year, we have held several meetings on the least developed countries (LDCs). In February, we had a special session on the key challenges facing the LDCs, at which we talked about all kinds of challenges, particularly the dismal performance of this group of countries over the past couple of decades. In 1997, there were 25 LDCs. Today, we have twice that number - and this is after three or four decades of what we call intensive help, policymaking and analysis for LDCs. Only two LDCs have graduated from the group in all that time, and there are now only three in the pipeline for graduation. This is a total failure from all sides, including ours, and is not something to be proud of.

Just last month, at the consultations of the President of the Trade and Development Board, we launched ourselves into the background paper on LDCs - the structural progress paper that will be discussed today. There, we clearly saw diversification, trade and structural change in terms of only some commodity sectors. This is another failure to achieve structural progress. We have missed the opportunities to enhance capability and improve economic specialization. We need to do more in infrastructural investment. Also, we have done very little in the area of science and technology capacity-building.

We have tried to console ourselves by alluding to various short-term periods of positive growth in LDC export earnings and GDP. But we have to be honest with ourselves and others: those achievements in growth, export and production are mainly derived from just a very small group of countries, and are mainly based on dramatic increases in the price of basic commodities, including energy sources. So again, this is nothing to be proud of. In fact, it has actually made the LDCs more dependent on very few extractive commodities.

Today, you have my formal speech before you, but I am not going to use it. I am concerned and angry. This is because we are not performing, and we keep repeating the same mistakes. Albert Einstein said that doing the same thing and expecting different results is a sign of madness. We do not want this to happen, which is precisely why we have LDC-IV.

I do not think we can just keep on producing papers like the one we are looking at and just keep talking about all the challenges and the failure to do structural transformation. There is something else we should be looking at. What kind of measures and concrete recommendations can we identify from LDC-IV to bring to LDC-V? Because I can predict that in the next decade between LDC-IV and LDC-V, we will be saying the same thing. This is why we should take the opportunity to say something different; please try to do so at this meeting. Keynes said, "Assaulting the mind is the most important thing". Sometimes we have to assault our own mind.

At the meeting with the G-77 and China, I called for a new development path. People may like it, people may not like it, but if we continue on the traditional development path, we will end up doing the same things we have done in the past couple of years. And there is no going back to the same path, because it did not work out. Now, the new paths are also quite unclear. They could be quite arcane as well.

We need each other. We need to thrash things out and try to achieve the things that UNCTAD has been saying time and again in various reports, particularly those on Africa and the LDCs. We need to divine and distil from that something concrete that we can present and have included in the outcome document from LDC-IV, so that all of us can change - we here at UNCTAD, the LDCs, those who assist the LDCs and multi-stakeholders around the world, including trading nations.

I have three main points to make. First, I would like to give some context to everything we have been saying about the enabling developmental role of the State. Second, I would like to offer you some ideas on how to reduce the degree of commodity dependence. And third, because LDCs are already open, we need to deal with external policies and see how these will work out.

State´s developmental role

On the State´s developmental role, first and foremost we need leadership commitment. If we had that kind of leadership commitment, it would be understood that when you talk about governance, you talk about strategy, you talk about States´ roles. We need to alert the leadership, make them aware of this.

Everyone will also talk about macroeconomic policy, but we need what I would call growth-oriented macroeconomic policies. When I talked to the G-77 and China on the new developmental path, I said we had to depend increasingly on ourselves. Growth could be dependent on trade, but more and more we have to be able to bring about growth from within. I can be more specific - macroeconomic policy should not be allowed to upset the balance in trade and the fight against inflation, which has almost always been deflationary. We should not be fighting past wars - and of course, balance of payments will be another war - but macroeconomic policy must be driven by growth objectives: interest rate policies, taxation policies and job creation.

We will also have to talk about direct State intervention, not in terms of a planned economy, but in terms of areas where the State will need to lead the way, because if you want to have investment policies, growth-oriented policies, industrialization policies, then you cannot just leave things to the market. Markets can work only in certain circumstances, and do not necessarily work well in every country.

Having taken another look at our LDC report from last year, on the role of governance, I think we have to start from somewhere humble; we cannot go all out for complete modernization of government administration. We have mentioned some examples of some countries that have done well: some have concentrated on finance ministries, some on commerce, others on planning agencies or central banks. Assuming they have the absorptive capacity needed, and the level of competence, planning agencies can coordinate the work, even more so than the finance ministry. So here I would be very explicit. Planning agencies need to represent the Government in trying to provide the kind of economic management and intervention that would be good for the country itself, and not just distort the markets.

I want also to talk about the specificity of aid funds. Can we talk about the sectoral allocation of aid funds that are linked more to productive capacity, so that we can easily assess and evaluate what we have done? Otherwise, we don´t know, because it´s all gone into the budget, or been allocated based on the needs of the donor countries, and nobody knows what´s happening. If we see some of the sectoral implications, we might be able to measure and gauge the impact.

Finally, we need participatory democracy. Whatever government does in terms of leadership, economic management and intervention, there must be some accountability to the population. There must be some roles for non-governmental organizations and institutions that represent the farmers - all this must be brought back into practice.

Reducing commodity dependence

My second point concerns reducing the degree of commodity dependence. This is a serious issue and one which we will have to tackle successfully in the next decade. We need first of all to add value. So what we need now are clear policies, because we have seen from the reports that some countries have gone in that direction successfully, and others less so. But even in countries that have diversified in areas such as tourism, one would have to be careful, because tourism brings with it some benefits, but in some countries it also brings huge import demand in order to meet the specific consumption demands of tourism. There must be clear policies towards adding value. I have seen countries that have clear policies about putting the excess supplies of agricultural producers to use in the food-processing industry - something that has not been done enough. We have seen a lot of diversification from tourism into textile processing, which is very close to the national comparative advantages of the LDCs.

We also need to ask how we can help target and attract more non-extractive FDI. The resource curse is creating more problems because of the so-called "Dutch disease". We need strategies to target non-extractive FDI.

I think LDCs will also need special concessional finance for industries. Many successful industrialization processes have been backed up by long-term bank credit provided on a concessional basis. Industry needs not just working capital; it also needs huge capital, and capital equity, which in most cases cannot be mobilized in the LDCs.

We have talked about regional economic integration processes. It must be understood that the number of regional groupings does not indicate the success of the regional groupings themselves. In fact, the more regional groupings, the more entrepreneurs are confused and the less they make use of rules of origin and other rules. Now there are movements under way to merge some of these groupings, and that is very good news. What Africa needs is not 12 or 15 or 20 groupings. What it needs is about three groups of regional trade areas that could become well managed and not constitute impediments to trade.

We should touch on the transfer of technology as well. I know it is very difficult to talk about the proprietors of technology in LDCs. So we have to discuss transfer of technologies among countries that have been able to apply simple intermittent technologies. This is a task for South-South cooperation. There are many projects in LDCs that are derived or based on South-South technology, and this must be the driving force.

External policies

Concerning external policies, we must simplify the rules of origin. Otherwise, all the concessional market access given by donor countries to the LDCs will not be used. Figures on the utilization of that concessional market access are of little use. We give with one hand and take away with the other.

We also need urgent action on the reallocation of all official development assistance (ODA) funds into productive sectors. The President has talked about this hundreds of times. I have talked about this hundreds of times. Of course we have to talk about the adequacy of ODA in terms of amounts. But what is even more important is the allocation of ODA. Can we set a target for the amount of ODA that will go into the productive sectors?

And to supplement this ODA, can we create sector-specific investment funds that could be dedicated to areas of deficiencies in LDCs, like infrastructure, agriculture, and research and development?

As I heard from the LDC Ministers meeting in Dar es Salaam last year, I think we need to emphasize at LDC-IV the need for LDCs to have an early harvest from the DDA. I do not think anyone can predict when the DDA is going to end. What we don´t need is for the LDCs to wait forever. They are not going to be asked to do anything in return for the concessions they are getting, so why wait for the returns? Why wait for the concessions? I think we should emphasize at LDC-IV that at most, the DDA will result in perhaps just one additional percentage point of trade shares going to the LDCs. This will not harm anyone.

We must also be able to tap into the Enhanced Integrated Framework and Aid for Trade. We should set a target at LDC-IV, that all 49 LDCs should have a reasonable trade and development strategy. At the same time, we must be able to help those LDCs that are still outside the WTO to be able to use the so-called "simplification" rules of accession, which have rarely been adopted. I think that all 49 LDCs should be members of the WTO.

Lastly, all of this is incumbent upon the G-20. Since I am sure they will be around for a long time, we would like to see some synergy between the G-20 and the United Nations system. If the G-20 are serious when they say they represent the whole world, then LDCs should be on their agenda every time they meet.

Thank you very much, Mr. President.



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