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UNCTAD: Least Developed Countries Report 2011

arton3624Considering the overarching goal of the Istanbul Programme of Action [1] (IPoA) “to overcome the structural challenges faced by least developed countries (LDCs) in order to eradicate poverty, achieve internationally agreed development goals and enable graduation from the least developed country category,” and considering that only two LDCs graduated from LDC status during the past ten years, UNCTAD’s Least Developed Countries Report 2011 calls for a major up-scaling of national and international efforts to ensure that at least 50% of the LDCs reach the graduation criterion within the next decade. Moreover, the report emphasizes the need for a development model that promotes sustained and inclusive economic growth.

The development perspective that the report brings for LDCs looks grim. The report indicates, for example, that the high growth rates that characterized the LDCs in the past decade will not be achieved in the next five years. Moreover, LDCs are likely to experience lower export dynamism, more commodity price volatility, and increased fuel and food prices.

On the other hand, the report draws attention to the growing importance of South-South economic relationships that are increasingly supporting LDCs’ integration into the world economy. The report explores whether LDC-South economic relationships could help LDCs to advance their productive capacities, create jobs and contribute to poverty reduction. It explains that the relationship between LDCs and other developing countries is mainly characterized by relations in trade, investment, migration and official financial flows.

The report finds that, in the past decade, there has been a shift in LDCs’ export destinations as LDCs (commodity) exports were increasingly driven by Southern markets (a few large developing countries, mainly in the Asian region). Similar developments are also visible in terms of LDCs imports.

In terms of migration, the report estimates that in 2010 two thirds of the nearly US $26 billion of remittances received by the LDCs originated in Southern countries, such as India, Saudi Arabia, and South Africa.

Foreign direct investments also continued to increase between LDCs and other developing nations – mainly in extractive industries, although there are signs of economic diversification (increasing investment in other economic sectors, such as telecommunication, tourism, and manufacturing).

The development implications of these increased flows and economic relations between LDCs and other developing States, are presented in the report through three different scenarios: (1) the flying geese paradigm; (2) a traditional centre-periphery model; and (3) a growth pole approach. While the first scenario is rather positive and visualizes the development opportunities of LDCs as “flying geese” in which all countries are advancing together, but at different stages of development, the second scenario is rather negative. The latter suggests a scenario that is comparable to the former North-South relationships – although now it only takes place within the South. The third scenario can go either way – positive or negative – for example, on the positive side, it could result in better bargaining power and trade policy space for LDCs; in broader access to low-prices consumer goods; and increased access to financial resources. On the negative side, it could lead to, for example, detrimental effects on import-competing industries within LDCs.

The report emphasizes that “the benefits of South-South cooperation will be greatest when a dynamic (two-way) relationship is established in which policies carried out by ‘catalytic’ developmental States in LDCs and South-South cooperation reinforce each other in a continual process of change and development.” A Catalytic Developmental State (CDS), as proposed in the report, is a developmental State that is more holistic and integrated. It focuses on both economic and social development, and in particular on creating new productive capacities & comparative advantages, and ensuring financial resources for long-term investments.

The report cautions that the success of the CDS will depend on effective development governance, and a country’s ability to achieve and sustain high investment rates, and to obtain and use new technologies. Legitimacy, political will, and trade openness are other key words that underpin success.

To get most out of the CDS and South-South Cooperation, the report provides specific recommendations to LDCs, and Southern partners. Moreover, the report advocates for development regionalism – “development-led regionalism that accepts globalization as a historical trend, but rejects the market-led approach to globalization.” To finance such regionalism and to support LDCs, the report calls for a larger role for regional and subregional development banks. It also considers Sovereign Wealth Funds (SWF).

To access the summary of the report, click here.
To access the full report, click here.

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