15 December 2016 (United Nations) – Even as the international community pledged to ‘leave no one behind’ with the adoption of the 2030 Agenda, the United Nations Conference on Trade and Development (UNCTAD) has warned that without stronger global support, 48 of the world’s most vulnerable countries will lose ground in economic development and face increasing levels of poverty.
UNCTAD’s The Least Developed Countries Report 2016: The Path to Graduation and Beyond – Making the Most of the Process, released earlier this week, underscores the need for more action from the international community to help these countries progress.
“These are the countries where the global battle for poverty eradication will be won or lost," stated stated UNCTAD Secretary-General Mukhisa Kituyi, stressing that a year ago, the global community pledged to “leave no one behind” – the rallying call at the heart of the 2030 Agenda and its Sustainable Development Goals (SDGs) – but that is exactly what is happening to the least developed countries.
The proportion of the global poor in those countries has more than doubled since 1990, to well over 40 per cent. They also currently account for the 1.1 billion people worldwide who do not have access to electricity – an increase of two thirds.
Many of these countries are stuck in poverty, where the only way out is with finance, trade and technology support. Countries can also graduate from the category if they meet a certain economic and social criteria. However, for many this goal remains out of reach.
In addition, in order to achieve a long-term development, each country needs to take more than one step. Countries also require what the Report calls “graduation with momentum” – a process of structural change to increase the productivity of their economies, criteria which many graduated countries will not meet.
“Graduation is not the winning post of a race to escape from the [least developed country] category. It is the first milestone in the marathon of sustainable long-term development,” said Mr. Kituyi, adding that ‘how’ is just as important as ‘when’ in terms of graduation.
The Report actively targets the issue of insufficient international support that least developed countries receive to fulfil their developmental needs.
The report suggests a few measures that can be taken, such as faster progress towards 100 per cent duty-free and quota-free access for least developed country exports to developed country markets, renewed efforts to break the stalemate on special and differential treatment for the country’s in World Trade Organization negotiations, improved monitoring of technology transfer to, and fulfilment by donors of their long-standing commitments to provide 0.15–0.20 per cent of their national income for assistance to the least developed countries, to make aid more stable and predictable, and to align it more closely with national development strategies.
Deteriorating economic performance
Following several years of apparent resilience to the international economic and financial crisis, economic growth in the least developed countries (LDCs) has declined steeply since 2012, reaching a low of 3.6 per cent in 2015. This is the slowest pace of expansion this century, and far below the target rate of at least 7 per cent per annum recommended by the 2011 Programme of Action for the Least Developed Countries for the Decade 2011–2020 (the so-called Istanbul Programme of Action (IPoA)). Thirteen LDCs experienced a decline in gross domestic product (GDP) per capita in 2015. This performance has been strongly influenced by the sharp decline in commodity prices, which has particularly affected African LDCs. Such weak economic growth is a serious obstacle to generating and mobilizing domestic resources for structural transformation and investment in the development of productive capacities. It also hampers progress towards the United Nations Sustainable Development Goals. This economic slowdown is likely to be reinforced by the current world economic climate, which remains lacklustre in its recovery.
Depressed exports as a result of falling commodity prices, with a smaller decline in imports, have also led to a doubling of the merchandise trade deficit of LDCs as a group from $36 billion in 2014 to $65 billion in 2015. The largest increase in the merchandise trade deficit took place in the subgroup of African LDCs and Haiti. The services trade deficit fell somewhat for the LDCs as a group, from $46 billion in 2014 to $39 billion in 2015, as a shrinking deficit across African LDCs and Haiti more than offset an increasing deficit across Asian and island LDCs. These developments largely account for an increase of almost one third in the LDC current account deficit to a record $68.6 billion in 2015, a trend that is expected to continue over the medium term.
Domestic resource mobilization has been recognized by the Addis Ababa Action Agenda of the Third International Conference on Financing for Development and the 2030 Agenda for Sustainable Development (2030 Agenda) (both adopted in 2015) as an important process for LDCs to finance their development. However, this objective remains elusive for most LDCs due to their external resource gaps, the complexity of their development challenges, their narrow tax bases, deficiencies in tax collection and administration, resources forgone due to illicit financial flows, and the underdevelopment of their domestic financial sectors. The external resource gap of LDCs as a whole increased to 3.2 per cent of GDP in 2014, due mainly to an increase in fixed investment in Asian LDCs that was not accompanied by a corresponding rise in their domestic savings. If LDCs are to raise their fixed investment, as is essential for structural transformation, the deficit will inevitably widen in the coming years, particularly in view of the enormous financing needs associated with the Sustainable Development Goals.