By Rolf Traeger, Chief, Least Developed Countries Section, UNCTAD
An internally displaced family in Yemen, one of the least developed countries. © UNOCHA/Mahmoud Fadel-YPN
The category of the least developed countries (LDCs) was created 50 years ago by UN General Assembly Resolution 2768 (XXVI) of 18 November 1971.
It followed the research and policy work done by UNCTAD since its inception, later complemented by the efforts of the Committee for Development Planning.
At present these countries find themselves at a crossroads between remaining trapped in the traditional symptoms of underdevelopment or forging ahead and building resilience to intensifying shocks.
In this context, the issue of the present suitability and efficiency of the measures put in place over the last 50 years to support these countries needs to be asked.
Why the LDC category?
The category was created to establish international support measures (ISMs) for LDCs to accelerate their development. The resolution established a list of 25 countries. In the following 20 years, other countries were gradually added to the group of LDCs, so that it reached a maximum of 52 countries in 1991. Since then, the number has shrunk somewhat to the present 46 countries.
In parallel over the last 50 years, the number and scope of ISMs has gradually increased to encompass a variety of policy measures mainly in the fields of trade, financing for development, technical assistance and technology.
These ISMs have been negotiated and applied in different fora (trade, finance, climate change) and at different levels, ranging from the multilateral to the unilateral.
The ambition and effectiveness of these different ISMs vary considerably. At one end of the spectrum, they include trade preferences that are enacted in large importing markets and potentially give a competitive advantage to the exports of LDCs that have the productive capacities to generate the corresponding supply.
At the other end, ISMs comprise hortatory calls for technology transfer that lack enforcement mechanisms and contribute little to LDCs’ development.
Development impact of being an LDC
The development impact of belonging to the LDC group is hotly debated in policy and research circles. An indirect way of gauging it is by examining the growth and development of these countries over the last 50 years.
The analysis of UNCTAD’s report, “The Least Developed Countries Report 2021: The Least Developed Countries in the post-COVID World: Learning from 50 Years of Experience“, is sobering. It shows that half of the present LDCs have fallen behind the rest of the world in terms of per capita income and other dimensions of development.
Therefore, the economic gap between these countries and the rest of the world has widened over the last 50 years. At the same time, 16 other LDCs have broadly grown at a pace similar to that of the rest of the world, thereby maintaining the development gap vis-à-vis the rest of the world broadly constant.
Only seven LDCs have achieved a growth rate clearly higher than that of the rest of the world, and thereby have achieved some degree of convergence with the latter. Five of these countries are in Asia.
This experience shows that ISMs can be supportive of development, if countries exploit them strategically and make use of them as part of a much broader development strategy centred on the development of productive capacities and guided by a developmental state.
Whither LDCs at 50?
As they turn 50, LDCs are still struggling to overcome the seriously negative health, economic and social impacts of the COVID-19 crisis, given their high vulnerability to external shocks.
At the same time, they are negotiating the new Programme of Action for LDCs for the decade 2022-2031, a period that will broadly coincide with the final years of implementation of the Agenda 2030 for Sustainable Development. In parallel, the pace of LDC graduation is accelerating.
It took more than 23 years for the first LDC to graduate (exit) from the LDC category. Between 1994 and 2020, six LDCs graduated, thanks to progress in different dimensions of development (income, education, health, economic diversification, among others).
Graduation has increasingly attracted international policy attention. The Istanbul Programme of Action of 2011 for the first time adopted a graduation target. Partly due to the morose international environment of the ensuing decade and to the absence of major new effective pro-LDC policy initiatives, the target was missed. Still, the graduation process has undoubtedly accelerated since then.
In this context, 16 LDCs are at present at various stages of the graduation process. Most of them are likely to graduate by the end of the present decade. This is being celebrated by the international community as a success of international measures put in place to support the development of LDCs.
To support the process of graduation, allay LDC hesitation concerning it and reduce their uncertainties, the international community has started putting in place new mechanisms to support the graduation process. This is in line with UNCTAD’s call for a new generation of ISMs for LDCs.
Not all LDCs are equal
The question remains about the other countries that are likely to remain in the LDC category in the foreseeable future. They are an important group of 30 countries, whose almost 700 million inhabitants account for two thirds of the population of the present group of LDCs. They generate almost half of the economic activity of the LDCs.
However, the very fact that they have not even pre-qualified for graduation means that their development challenges are much starker than those of graduating countries.
The average gross national income (GNI) per capita of non-graduating LDCs is $708, less than half of the $1,765 of graduating LDCs. Almost half of the population of the former group lives in extreme poverty, while the corresponding share is less than 20% among the graduating LDCs.
New, targeted measures needed
Given the sharp development challenges of the non-graduating LDCs, the international community needs to devise a new generation of ISMs targeted towards those countries that will remain in the LDC category in the foreseeable future.
These new ISMs need to consider not only the stage of development of these countries, but also the realities of the 21st century, such as the growing digital divide, the Fourth Industrial Revolution, accelerating climate change and the lingering adverse effects of the COVID-19 shock.
They should include especially those aiming at the strengthening of public and private institutions, and the development of the technological capabilities of LDCs. The enactment of such a new generation of effective ISMs will correspond to the more pressing needs of these countries, allowing them to build resilience, and respond to the call to “leave no one behind”.