UNCTAD XII to review policies that help LDCs broaden economies, capitalize on natural resources
Geneva, 2 April 2008 — Defining strategies that help to reduce the ranks of least developed countries – the world´s 49 poorest nations – will be among the main themes at UNCTAD XII.
The meeting comes as LDCs continue to struggle to raise living standards and create jobs, even while experiencing high economic growth rates fuelled by the boom in commodity prices. A 24 April roundtable discussion at UNCTAD XII on developing productive capacities in LDCs will debate how to overcome obstacles to growth and how to solidify national economic progress through increased investment, improved productivity in key economic sectors and expanded employment.
Improving the ability of the world’s poorest countries to benefit from international trade and investment is among the main concerns of UNCTAD XII, which has as its principal theme “addressing the opportunities and challenges of globalization for development.”
The economies of most LDCs are based on exports of primary commodities, including crude oil and metals and simple manufactures such as clothing. They also often depend on tourism. This makes LDCs highly vulnerable to recurrent shocks and crises. Development policies to date have not produced the type of economic growth that creates enough jobs, particularly decently paid and productive ones. LDCs are actively looking for long-term and broad-based development.
Since the United Nations created the LDC classification in 1971, only two countries – Botswana in 1994 and Cape Verde this year – have graduated from it. With the benefit of 14 years of hindsight, Botswana´s experience is encouraging, especially as, like the overwhelming majority of LDCs, it is in sub-Saharan Africa. Strategies of the sort followed by Botswana will be among those under consideration at UNCTAD XII. The conference also will review the role of the international community in addressing the needs of LDCs. This may include greater aid and greater focus on the improvement of such nations´ productive capacities.
Botswana was lucky enough to have diamonds. But valuable natural resources in other developing countries have not always translated into broad-based economic progress and poverty reduction. UNCTAD’s research and analysis indicate that there must be a wider strategy that focuses on developing productive capacities. Economic activities should be diversified by strengthening investment and encouraging the adoption of new technologies.
Botswana’s government focused on effective management of the exceptional profits from its diamond mines and channelled some of the money carefully into efforts to spur domestic businesses outside the mining sector. It also rapidly increased public expenditure on social areas such as education and health care and on infrastructure, such as roads, water, energy and telecommunications. A labour-intensive public works programme helped to reduce unemployment, and an arable land development programme helped to raise the incomes of resource-poor farmers.
A financial assistance policy (FAP) established in 1982 offered grants to local firms, particularly labour-intensive companies, many of them small- and medium-sized enterprises (SMEs). Studies have shown that LDC economic growth is often hampered by a "missing middle" – businesses are either very large or very small, with the small firms operating in the informal economy. In successful economies, by contrast, most jobs are created by SMEs.
A landlocked country with a population of 1.8 million, Botswana saw its gross domestic product (GDP) grow by an average of 6.1% a year from 1996 to 2006. In 2006, the diamond trade generated some US$3.7 billion in income. Botswana now exports copper and nickel (17%), textiles (7%) and meat products (2.5%). Diversification efforts are focused as well on exports of leather, glass and jewelry products. However, mining still dominates the economy, accounting for 87% of exports in 2006, and for 39% of GDP. And the government remains the largest employer – it provides 38% of jobs in Botswana´s formal sector.
Difficulties remain that are characteristic of LDCs – and which may well be discussed at the April 24 roundtable. So far, for example, the extremely poor have missed out on the benefits of growth. Approximately a third of the population lives below the poverty line and much of this group is located in rural areas. And the agricultural sector requires investment in new productivity-enhancing technologies, as well as in research and development. Finally, Botswana has the second highest adult HIV prevalence rate (24.1%) in the world, which has had a negative impact on the population, workforce and human development indices.
