The Least Developed Countries Report 20151: Transforming rural economies
The LDCs and the Sustainable Development Goals (SDGs)
• The "global consumption floor" (the lowest per capita consumption level globally) has remained unchanged for the past 20-30 years according to estimates. However, it needs to double in the next 15 years if poverty is to be eradicated by 2030, as foreseen by SDG 1.
• In six LDCs the poverty headcount ratio (the proportion of the population living in absolute poverty) is 70–90 per cent, and in eight others, 50–70 per cent. Overall, all but seven LDCs have a poverty headcount ratio above 30 per cent, while only five other developing countries (ODCs, which are not LDCs), all in sub-Saharan Africa, have ratios above 25 per cent.
• Only eight LDCs were on track to halve poverty between 1990 and 2015 (according to 2011 data), while poverty had increased since 1990 in seven. Outside sub-Saharan Africa, only four of the other developing countries (ODCs, i.e. non-.LDCs) were off track, while half of ODCs in sub-Saharan Africa are off track.
• Minimum incomes in rural areas of some African LDCs are as low as $0.10-0.20 per day. Fulfilling the SDG of poverty eradication (SDG 1) would require these incomes to increase by a factor of 6-14 by 2030.
• Achieving the SDGs will also require providing access to water to some 600 million people in rural areas of LDCs, and electricity and sanitation to some 900 million, in just 15 years.
• Overall, access to water in rural areas of LDCs needs to increase twice as fast as in 2011–2012, access to electricity four times as fast, and access to sanitation six times as fast.
• In the average LDC, meeting the SDGs would mean 45 per cent more rural children attending primary school and four times as many attending secondary school. IT would also entail 70 per cent more rural inhabitants having access to an improved water source, 250 per cent more to sanitation, and 10 times as many to electricity.
• Among the 48 LDCs, only two (Bhutan and Djibouti) have a poverty gap of less than 1 per cent of GDP. Among the 54 ODCs for which data are available, only seven are worse placed on either count; and in only one third are these indicators more than one fifth of this level. Four LDCs have both a poverty gap greater than 20 per cent of GDP and more than four people per $1,000 GDP without access to water, electricity or sanitation. LDCs account for some 40–50 per cent of global needs to meet the SDGs in terms of extreme poverty and increased access to water and electricity. An equivalent share of the committed level for total ODA in the SDGs (0.7 per cent of donor national income) would be 0.30-0.35 per cent, around double the current commitment of 0.15-0.20 per cent.
• If major donors were to provide 0.35 per cent of their national income in ODA to LDCs, this would increase aid flows to these countries by 300 per cent, from $40 billion in 2014 to $165 billion, and by a further 50 per cent to $250 billion by 2030.
• Provided the 0.7 per cent commitment were also fulfilled, ODA to ODCs could also be increased by 150 per cent over the same period.
Rural population and workforce
• Two thirds of the total population of LDCs live in rural areas, and in only six is the proportion below 50 per cent (Djibouti, Gambia, Haiti, Mauritania, Sao Tome and Principe and Tuvalu).
• Rural population is projected to grow by 1.3 per cent per annum on average in LDCs, while stagnating in other developing countries (ODCs, i.e. non-LDCs).
• Despite continued urbanization, in most LDCs 50–60 per cent of the population will reside in rural areas in 2030. The proportion in nine LDCs is projected to be in a range of 70–85 per cent.
• The rural working-age population is expected to increase by 20–50 per cent in most LDCs, by 50–70 per cent in six, and by 90 per cent in one (Niger). Only five LDCs are expected to experience a reduction in their rural working-age population (Bangladesh, Bhutan, Haiti, Myanmar and Tuvalu).
Rural-urban differences in living standards
• The proportion of people below the national poverty line in rural areas of LDCs is typically around double that in urban areas. Rural average income shortfall relative to the poverty line is around 20 per cent greater.
• Despite a global trend towards urbanization of poverty, rural-urban poverty differences have widened over the last 20-30 years in two thirds of the LDCs for which data are available.
• Typically, rural inhabitants in LDCs are 50 per cent more likely than their urban counterparts not to have access to sanitation or to attend secondary school, twice as likely not to have access to electricity or to attend primary school, and more than four times as likely not to have access to clean water.
The Importance of agriculture
• In most LDCs, the share of agriculture in employment has fallen since the early 1990s, but remains between 40 and 80 per cent in most cases, with an average of 60 per cent across LDCs as a whole, and 68 per cent in African LDCs and Haiti.
• The greatest reductions in the agricultural share of employment since 1990 have occurred in Cambodia, Equatorial Guinea, Myanmar, Timor-Leste and Yemen, while five LDCs (Central African Republic, Comoros, Madagascar, Niger and Senegal) have experienced an increase in the share.
• Agriculture accounts for 25 per cent of value added across LDCs as a whole, with a substantially lower share in islands (12.9 per cent) than in Asia (24.1 per cent) or in Africa LDCs and Haiti (25.9 per cent).
• The poverty-reducing effect of agricultural growth is 1.6 times that of industrial growth, and 3 times that of growth in the services sector. Its relative impact is still stronger at lower poverty lines: 3–4 times that of non-agricultural growth for people living at $1 per person per day.
• Agricultural labour productivity in LDCs has grown by 2.2 per cent annually since 1991, compared 4.2 per cent ODCs and 3.9 per cent in developed countries.
• In 2011–2013, average LDC agricultural labour productivity amounted to 18.7 per cent of that of ODCs and just 1.8 per cent that of developed countries. The productivity gap in agriculture was wider than in industry or services.
• Asian LDCs have overtaken African and island LDCs in agricultural productivity since 2006. Their labour productivity in agriculture increased by 88 per cent between 1991-1993 and 2011-2013, compared with 32 per cent in African LDCs, and a fall of 5 per cent in island LDCs.
• LDCs have raised yields more than labour productivity. Both have increased most in Asian LDCs. In African LDCs, yields have doubled since the early 1980s, and labour productivity has started to increase strongly since 2000.
• Total factor productivity (TFP, which takes account of all inputs to agriculture), was largely stagnant in LDCs from the 1960s to the 1980s, but began to grow in the 1990s, and has accelerated since 2000, performing best in the Asian LDCs.
• The use of synthetic fertilizers in LDCs (17.6 tonnes/hectare) corresponds to just 10 per cent of the intensity in other developing countries (ODCs) and 15 per cent of developed countries.
• Asian LDCs use 59 tonnes of synthetic fertilizer per hectare, compared with 7 tonnes in island LDCs and just 0.5 tonnes in African LDCs.
• In Asian LDCs, 34.6 per cent of agricultural land is irrigated, compared with 3.4 per cent in African LDCs and 6.5 per cent in island LDCs.
• Asian LDCs use 4.5 machines per hectare, about half the level in ODCs. In African LDCs, the figure is 0.6, and in island LDCs it is just 0.4.
• In 2008, low-income countries spent only $0.44 (at 2005 purchasing-power parity (PPP)) on public agricultural research and development for every $100 of agricultural GDP, compared with more than $3 for high-income countries – and the gap has widened consistently since the early 1980s.
• In 2000, more than half of the national agricultural research systems in sub-Saharan Africa had fewer than 100 scientists.
• Road density (road length relative to land area) in African LDCs is just 15 per cent of that in other (non-LDC) developing countries. The road density of sub-Saharan Africa today (201 km/1000 km2), is less than a third of that of India in 1950 (703 km/1000 km2). India’s current road density is 32 times that of Ethiopia and 255 times that of Sudan.
• For low-income countries, estimates of changes in yield due to climate change between 2000 and 2050 range from -3.4 to -0.5 per cent for maize, from -9.8 to +1.6 per cent for rice and from -18.0 to -10.1 per cent for wheat.
Rural economic diversification and the non-farm economy
• In LDCs, total household income from non-agricultural activities typically exceeds agricultural wage income by a factor of 3–4.
• Wage employment generally accounts for only 5–20 per cent of total agricultural income in African LDCs, but 25–40 per cent in Bangladesh and Nepal.
• In most African LDCs, self-employment income is more important than wage income in the rural non-farm sector, but the reverse is true in Bangladesh and Nepal.
• Local non-farm earnings are typically around 2–5 times migration income overall in LDCs, and can be as much as 10–20 times in areas of high agricultural potential.
• The contribution of non-farm activities to generating economic output range from 9 per cent of the rural economy in Ethiopia in 2012 to 68 per cent in Haiti.
• In some African LDCs, such as Ethiopia, Sudan, Uganda and United Republic of Tanzania, more than 100,000 producers are engaged in organic agricultural production
• The average size of the farms involved in organic production varies very widely. Average certified areas per producer range from less than 1 hectare in Afghanistan, Bangladesh, Benin, Senegal, Togo and Zambia to around 100 hectares in Niger, 300 hectares in Lesotho and Timor-Leste, 600 hectares in Sudan and 2,800 hectares in Mozambique.
Gender inequality and constraints
• Overall, 61.5 per cent of all women in LDCs work in agriculture, with proportions of 65 per cent in African LDCs and Haiti, 56 per cent in Asian LDCs and 41 per cent in island LDCs.
• More women than men are in vulnerable employment (typically informal and low-earning) in LDCs. The greatest difference is in African LDCs, where 89 per cent of women are in vulnerable employment, compared with 75 per cent of men.
• The gender gap in vulnerable employment primarily reflects differences in (unpaid) "family contributory labour". In African LDCs, 40 per cent of women but only 18 per cent of men are engaged in family contributory labour. In Asian LDCs, this gap is wider, with figures of 45 per cent and 13 per cent, respectively.
• In all LDCs for which data are available, there are more male than female holders of agricultural land. The share of women ranges from 3 per cent in Mali to 33 per cent in Comoros.
• Women have formal land ownership rights in all 25 LDCs for which data are available, and women have inheritance rights as daughters or surviving spouses in 16 cases. However, such formal rights are often obstructed by customary law or practice.
• Providing women with the same access to productive resources as men could increase yields on their farms by 20–30 per cent, raising total agricultural output by 2.5–4 per cent, according to estimates of the Food and Agriculture Organization of the United Nations (FAO).
Economic trends and prospects
• LDCs' economic growth was 5.5 per cent in 2014 ‒ down from 6.1 per cent in 2013. This is well below the 2002–2008 average of 7.4 per cent, but above the 4.4 per cent growth recorded by other developing countries. It is expected to fall further to 5.2 per cent in 2015.
• The LDCs' current account deficit increased from $9.3 billion in 2011 to a record level of $49.4 billion in 2014. The larger deficit originated mainly in a major increase in the deficit of African LDCs, which was pushed by falling commodity prices.
• Manufactured goods represent 62 per cent of LDCs' merchandise imports, but only 23 per cent of their exports. Fuels account for almost half (49 per cent) of LDC exports.
• Across LDCs as a whole, investment (gross fixed capital formation) increased to 26.3 per cent of gross domestic product (GDP) in 2013, slightly above the 25-per-cent level deemed necessary to sustain long-term growth.
• The gap between investment and savings –which has to be covered by external borrowing– of the African LDCs and Haiti widened to 8.4 per cent of GDP in 2013, but narrowed to 5.9 per cent in Asian LDCs.
• Official development assistance (ODA) to LDCs rose by 2 per cent in 2013 to $44.2 billion, accounting for 93 per cent of total official capital flows. However preliminary estimates show bilateral ODA from the major donors to LDCs falling by 16 per cent in real terms in 2014.
• Foreign direct investment (FDI) flows to LDCs increased by 4.1 per cent in 2014 to $23.2 billion; but just five countries in Africa accounted for 58 per cent of the total (Mozambique, Zambia, United Republic of Tanzania, Democratic Republic of the Congo and Equatorial Guinea).
• Remittance flows to LDCs are estimated to have risen by 7.1 per cent to a record $2.4 billion in 2014.