With the 2015 target date for the achievement of the Millennium Development Goals (MDGs) fast approaching, the international community is taking stock of countries' performances, and discussing a Post-2015 Development Agenda, along with a much more ambitious new set of Sustainable Development Goals (SDGs) to succeed them.
Global goals such as poverty eradication can only be realized if they are achieved everywhere, and it is in the LDCs that they are the most challenging. Therefore, the performance of the LDCs will be critical to achieving the SDGs.
LDCs have enjoyed unprecedented economic growth since 2000, helped by increasing commodity prices and aid flows. But despite economic growth and substantial progress in human development, most LDCs will not meet the majority of the MDGs. Understanding this "LDC paradox" is crucial to the development of a coherent post-2015 agenda. This report contributes towards that objective.
Its key messages are:
LDCs are trapped in a vicious circle of economic and human underdevelopment. Real economic progress and achieving the planned SDGs depend on reversing this process in order to unleash an upward spiral of economic and human development by harnessing the synergies between the two.
Economic growth is not enough: it must be accompanied by structural transformation and the creation of decent jobs in higher-productivity activities.
The "LDC paradox" is rooted in the failure of the MDGs to recognize the need for a policy framework that generates transformative growth, and in the inability of the LDCs to achieve structural transformation.
If the LDCs are to meet the more ambitious SDGs in a more challenging external environment, this shortcoming must be rectified in the post-2015 agenda. That agenda will need to focus much more on ensuring a structural transformation of LDCs towards a modern and diversified economy, which shifts labour towards higher value-added sectors and more knowledge-intensive activities, thereby reversing their chronic decline in labour productivity relative to other developing countries while increasing quality employment.
Policy lessons can be gleaned from non-LDC developing countries that have successfully combined economic and human development through economic transformation. While they have used a wide range of policies and regulatory measures to promote structural transformation, this report focuses on three critical policy areas:
- Resource mobilization, to generate financing for public and private investment.
- Industrial policy, to direct those resources into sectors and activities that promote structural transformation.
- Macroeconomic policies that support structural transformation rather than impeding it.
It also highlights the importance of rural development as well as industrialization in LDCs, and the need to foster synergies between agricultural upgrading and the development of non-farm rural production.
In addition to appropriate domestic policies, achieving the SDGs in LDCs will require concerted efforts by the international community commensurate with the ambition of the new goals themselves.
This includes creating more development-friendly international financial and trading systems, and agreeing on an effective and equitable global response to climate change. Donors will also need to fulfil their long-standing commitments on the quantity and quality of official development assistance.
Since women constitute a large proportion of the population in LDCs and are important contributors to both social and economic development, especially in rural areas, this Report also proposes a new international support measure, Female Rural Entrepreneurship for Economic Diversification (FREED), to bolster the development and consolidation of women's enterprises in non-farm activities in rural areas in LDCs.