International efforts urged, along with domestic policies, to enableworld´s poorest nations to boost variety and sophistication in the goods they produce
Geneva, 8 June 2010 - The world´s 49 poorest countries should adopt strategies - and be firmly backed with international help - to modernize and broaden the productive abilities of their economies, speakers said as the forty-ninth executive session of the Trade and Development Board considered the dilemmas facing least developed countries (LDCs).
UNCTAD Secretary-General Supachai Panitchpakdi and a series of other experts said a change of strategy is needed not only to help LDCs sustainably reduce poverty, but also to leave them less vulnerable to external shocks such as natural disasters and global economic downturns.
In the run-up to the Fourth United Nations Conference on Least Developed Countries (LDC IV) to be held next year in Istanbul, it is necessary to keep in mind that "only two countries have graduated from the LDC group in the last 40 years," Mr. Supachai said. "A very dismal record… a total failure from all sides."
"We have seen a failure to achieve structural progress. Even during short-term periods of growth in LDCs, those achievements were mainly derived from a small group of countries and based to a great extent on the growth in exports of energy goods. It is nothing to be proud of. It has actually got the LDCs dependent to a greater extent on certain commodities."
"If we go on the traditional development path, we´ll end up where we always have," the Secretary-General said. "We need new development paths."
Mr. Supachai and the speakers who followed said it is necessary to boost the "enabling role" of the State in domestic economic growth; to foster greater reliance on domestic sources of growth; to expand domestic markets; to reduce commodity dependence; and to deal effectively with external policies that affect LDCs, as LDC economies are very open to the forces of global markets. Some developing countries that have done well have established State-based "growth poles," such as ministries of finance or national planning agencies, Mr. Supachai said. He added that steps are needed to attract foreign investment to LDCs that is not focused on extracting natural resources but on expanding manufacturing or the more advanced processing of goods.
Lakshmi Puri, Director of the United Nations Office of the High Representative for LDCs, Landlocked Developing Countries, and Small Island Developing States, said "LDCs have tried institution-building, they have tried meeting social objectives." Yet, she said, 70% of their populations are still below the poverty line, and 50% are below the level that defines extreme poverty. The global economic crisis has taught that "the role of the market and the State" must be revisited, she said, and that "international solidarity" with LDCs must be reinforced.
Bozkurt Aran, Representative of Turkey, the host country of LDC IV, said the intent of the upcoming conference is a "meaningful outcome" - a series of actions and recommendations that will help LDCs achieve broad and sustainable economic growth. "There is a need to revisit the development thrust of the LDCs," he said. "Are we really prepared to change our mindset?"
And Dinesh Bhattarai, Ambassador of Nepal and Coordinator of the LDC Group, told the meeting that LDCs are "unreasonably hit" by global events such as the current world financial crisis "through no fault of their own." LDCs have benefited from various international efforts to help them over the years, "but they have not been able to achieve structural change," he said. "We have to identify weaknesses and strengths. He called for "a deliverable plan of action for the next decade" to ensure that economic transformation occurs in the world´s poorest countries. He went on to stress that issues of food security and improved agricultural production are vital for any sustained improvement of living conditions in LDCs.
During the discussion that followed, a representative of Cuba, speaking on behalf of the Group of 77 and China, said "LDCs cannot make progress by themselves; they need great and permanent assistance from the international community." Currently, he said, LDCs "lack productive capacities, advanced technologies, financial resources, physical infrastructure, market access, and institutional capabilities."
A representative of Egypt, speaking on behalf of the African Group, noted that 33 of the world´s 49 LDCs are in Africa. The group stressed that economic diversification is vital for LDCs; that LDCs should have more of a role in the governance of international financial and economic institutions; that such countries should have more "policy space" in which to decide on the allocation of domestic and external resources so that development is achieved; and that debt-relief initiatives for LDCs should be "tailored" to meet those countries´ individual priorities and needs.
The Asian Group, whose statement was given by a representative of Bangladesh, repeated that the number of LDCs has doubled since the category was created. "We have formulated and applied various strategies and programmes. But nothing has worked as planned. . . All this proves that there is something awfully wrong in our approach to the problem, as well as with our commitment."
The Group of Latin American and Caribbean Countries (GRULAC) called for addressing the "special needs" of LDCs in a way that will lead to their graduation from the category.
A representative of the European Union delegation gave a somewhat contrasting opinion. After reviewing EU aid and support to LDCs over the past decade, the representative said "important progress" has been made by LDCs, "notably in areas of economic growth, macroeconomic stability, trade and investment." The speaker added, however, that "The EU is well aware of the importance of assisting LDCs to diversify their production base and move up the value chain, and we are supporting this via our development, trade, and agricultural policies."
Speaking on behalf of the Group of Landlocked Developing Countries (LLDCs), a representative of Paraguay noted that 16 LDCs are landlocked nations. "Many are geographically remote from world markets and thus marginalized from the world economy. . . There is a need to address the landlocked condition of these LDCs to improve their performance and address their development needs."
At an afternoon roundtable session, Mothae Anthony Maruping, Permanent Representative of Lesotho in Geneva, said structural transformation of LDC economies has been identified as the "central theme" for future efforts to help LDCs achieve growth, but "treatment" of the topic so far has fallen short. He added that the global recession, as far as LDCs are concerned, is still under way: "We´re not out of the woods yet."
Kimberly Ann Elliott, Senior Fellow of the Center for Global Development (Washington) reviewed the status of duty-free quota-free access for the exports of LDCs. The problem, she said, is that while much progress has been made, remaining tariffs in major industrialized countries tend to be in sectors where LDC exports have a comparative advantage, such as agricultural goods and textiles. The Center for Global Development was recommending that rich countries, keeping in mind the global campaign to achieve the Millennium Development Goals (MDGs), attempt quickly to allow duty-free, quota-free access to all exports of all LDCs, she said.
Darlington Mwape, Permanent Representative of Zambia in Geneva, said some 74% of LDC exports in 2008 were accounted for by seven countries, and oil-exporting LDCs accounted for 62% of total LDC exports. Unemployment continues to rise in the wake of the global crisis, and some LDCs that have benefited from debt-forgiveness programmes are losing ground again. The chief problem, Mr. Mwape said, is dependence on commodities; income earned from resource extraction tends not to spread to other sectors - growth is needed in the manufacturing and agricultural sectors to create jobs and spread economic benefits more broadly.
Dirk Willem Te Velde, Head of the Investment and Growth Programme of the Overseas Development Institute (London), told the meeting that although LDCs showed strong growth earlier in the decade, and economic growth has been higher than the rates in the developed world, "there is a long, long way to go," and the global recession hit some LDCs especially hard, as their economies weren´t diversified. The important task now is to develop strategies that can support such diversification, Mr. Te Velde said. He said creating linkages between local firms and multinational corporations is a way of spreading technology and knowledge, and innovative methods can be found for providing finance to the productive sectors of LDCs.
Delegations speaking from the floor said, among other things, that there are wide differences between the circumstances of LDCs - landlocked countries, for example, have special problems with the transport of goods; that issues that were ""almost taboo 10 years ago," such as the environment and climate change, at least are now being discussed as they relate to LDCs; that development banks are important conduits for channeling funds to LDCs; that extreme poverty is increasing again in LDCs; that natural disasters can quickly wipe out years of economic progress made by LDCs; and that more than money is needed from overseas partners - for example, the sharing of knowledge and technology, and help in training workers, is vital and important.
Debapriya Bhattacharya, UNCTAD´s Special Advisor on LDCs, summarizing the discussion, said the strategic approach to the LDC IV conference should be focused on such "deliverables" as "revisiting the macroeconomic framework of the LDCs"; addressing the "thematic/sectoral concerns" of these countries; "treating the varying vulnerabilities of LDCs"; and improving the participation of the world´s poorest countries in global economic governance.
Trade and Development Board President Jean Feyder, during his moderation of the day´s debate, said among other things that as the market access for LDCs improves, including the terms for commodities exports, it should be possible for these countries to take steps to add more "process" and value added to what are now basic exports, and use that as a starting point for expanding the productive abilities of LDC economies. Aid earmarked for development should be aimed at investment as well as consumption, he said, and overseas assistance is most useful if it is promised for a series of years, so that LDC governments can plan their development programmes to use it effectively and efficiently.
The Trade and Development Board´s executive session will conclude Tuesday with a review of efforts to achieve the United Nations Millennium Development Goals.
