LDC5 side event: A new generation of industrial policies for the least developed countries

 

 

Your Excellency, Macky Sall, President of the Republic of Senegal,

Your Excellency, José Antonio Ocampo, Minister of Finance of Colombia,

Your Excellency, Fitsum Assefa Adela, Minister of Planning and Development of Ethiopia,

Your Excellency, Shadiya Alimatou Assouman, Ministre de l’Industrie et du Commerce du Bénin,

Your Excellency, Chhem Kieth Rethy, Minister Delegate Attached to the Prime Minister and Secretary of State of the Ministry of Industry, Science, Technology and Innovation of Cambodia,

Dear Fatou Haidara, Deputy Director-General of the United Nations Industrial Development Organization (UNIDO),

Dear Annalisa Primi, Head of the Economic Transformation and Development Division of the OECD Development Centre,

Distinguished Delegates,

Ladies and Gentlemen,

As the threats of climate change increase, the world is feverishly trying to accelerate its transition towards a low-carbon economy. While this is an immense challenge, it also creates opportunities - for new goods and services or for establishing new economic sectors.

Least developed countries (LDCs) need to design and implement industrial policies that target these “green” windows of opportunity.

Given the realities of LDCs, there is considerable potential, especially for renewable energy, extractive industries and agriculture.

Let me briefly develop on each:

In terms of renewables, LDCs have the potential to start, or greatly expand, the production of renewable energy, especially solar energy and green hydrogen. This can enhance domestic supply of electricity and fuel which is fundamental for growth and development. At the same time, it offers an avenue to diversify and boost exports.

In the case of extractive industries, the low-carbon transition is expected to rapidly expand the demand for strategic minerals, such lithium, platinum, cobalt, rare earths, silver, or copper. With rich reserves of these raw materials, LDCs can develop new activities and exports.

However, in both cases, there is a real danger that activities are developed as they were in the past; with resources exploited primarily for exports of raw materials, with very limited local value addition, and little – if any – development of entrepreneurial or national productive capacities. This is the recipe to reproduce the manifold challenges of commodity dependence that have haunted most LDCs for decades.

Instead, LDCs need to devise a strategy of natural-resource-based industrialization. This means a strategy where enterprises and economic activities are developed around extractive industries, and where industries further process the products of extractive activities. This will foster technological learning, value addition and employment.

There are also opportunities in agriculture, including forestry. This is crucial as this sector employs more than half of the LDC labour force.

New technologies for sustainable and smart agriculture can boost agricultural productivity and income of farmers. They can also improve the environmental outcome of agriculture.

In forestry, there is potential in nature-based solutions which draw on local knowledge. These can better livelihoods of local populations through development of local enterprise, value addition and employment. Moreover, these solutions can contribute to preserving the essential services forests provide to the planet.

These are some examples of how LDCs can foster sustainable structural transformation, which does not mean that LDCs should not seize opportunities in other manufacturing or services sectors.

But none of these potentials will be realized spontaneously. LDC governments need to adopt “green” industrial policies to tap on emerging opportunities to the benefit of their own economies and populations.

This implies the following:

LDC governments need to design and implement policies that foster innovation, deployment of foreign and national new technologies, and upskilling of their population. They need to make use of all suitable instruments - such as extension services, preferential credit, subsidies and trade policy measures - and coordinate with the private sector.

Here, I want to emphasize three points.

First, when developing national industries in sectors where intellectual property is important, LDCs should make use of the flexibilities and exemptions in the context of the WTO TRIPS Agreement. This is relevant especially for pharmaceuticals or some aspects of agriculture.

Second, LDC governments have to negotiate with foreign partners, both private and public.

They need to ensure that foreign direct investment brings broader developmental benefits through knowledge transfer, strong linkages to the local economy, and equitable sharing of benefits of local production between foreign and domestic partners.

And development partners should intensify their support to building the technological and entrepreneurial capabilities of the local private sector in LDCs.

This calls for technical cooperation, especially in the field of entrepreneurship, and living up to the long-standing promise of technology transfer to LDCs as foreseen in the WTO TRIPS Agreement.

These two points highlight that we need a strong multilateral trading system and cooperation. UNCTAD and UNIDO are both collaborating to this end.

And third, the need to enhance productive capacities. Productive capacities are the only real pathway for long-term development in LDCs. UNCTAD developed a Productive Capacities Index for this purpose, and conducts National Productive Capacities Gap Assessments that allow LDCs to strategize their structural transformation. This is an effort with many potential synergies across the UN.

Dear Friends,

Transformations are a long journey.

UNCTAD will continue to be your constant partner. We have undertaken several activities and technical assistance projects in this area. At present, we are launching a major project in favour of the latest generation of graduating LDCs, including Cambodia, Comoros, Djibouti, Senegal and Zambia.

We look forward to assisting LDCs in developing and implementing industrial policies that are transformative for the future of these countries.

Thank you.