On 20 November, the United Nations Conference on Trade and Development (UNCTAD) launched the Least Developed Countries Report for 2013, presenting its annual analysis on the state of the world’s poorest countries. This year the report focuses on the theme of “Growth with employment for inclusive and sustainable development” and examines the association between investment, growth and employment.
Providing specific country examples and key figures, the publication reveals some alarming demographic trends which threaten the economies of the 48 least developed countries (LDCs). It estimates that by 2050 the collective population of the LDCs will double to 1.7 billion people, with the youth population alone soaring to 300 million. According to the report, in order to absorb the new entrants to the labour market, these poor countries will have to create about 95 million jobs by the end of the current decade, and another 110 million in the 2020s. The report also notes that if these numbers are not achieved, the rates of poverty, social instability and international emigration are likely to increase.
While acknowledging that in recent years most LDCs have enjoyed moderate economic growth, with overall per capita income expanding steadily, the publication states that this growth has been disappointing in terms of employment creation, job quality and inclusive growth. Most LDCs are in fact characterized by what economists call a “jobless growth” – high gross domestic product (GDP) growth rates, but no concomitant creation of employment. Moreover, vulnerable employment – work with no formal work arrangements, no decent working conditions and inadequate social security – is a still widespread phenomenon in these regions and accounts for around 80% of total employment in the LDCs.
Least Developed Countries Report for 2013urges LDCs to acknowledge these demographic challenges and take action. It calls for leaving behind the “business as usual” policies pursued to date, mainly centered on macroeconomic stability, economic efficiency and liberalization, and instead to shift attention to social policies. It calls on governments to make policy decisions which encourage inclusive growth and create an adequate number of quality jobs and decent opportunities, particularly for younger generations. Further, the report stresses the need to foster the development of productive capacity, which according to UNCTAD is the only path to sustainable and “job-rich” growth.
The report provides a number of key recommendations. First, it stresses the need for fiscal policies aimed at increasing public investment for infrastructure, education and training. According to the report, public investment is indispensable to create conditions which encourage private investment. In the LDCs, these circumstances are currently lacking and hold back the creation of firms and thus hinder employment generation. The report also adds that this increase in public investment would simultaneously require the strengthening of government capacities, in order to mobilize and manage fiscal revenues.
As UNCTAD Secretary-General Mukhisa Kituyi noted in the overview to the report, “Private sector development is a sine qua non for large-scale employment generation in LDCs, since it generates the bulk of jobs, both today and tomorrow.”
Underscoring this idea, the report urges to direct efforts towards the development of micro and small enterprises, particularly to improve their access to capital and to facilitate their upgrade to formal status. Expanded credit for these typically credit-constrained actors should originate from national development banks, commercial banks, and other public and private financial institutions.
In addition, the report suggests designing industrial policies for a structural transformation towards more productive activities and proposes two specific strategies. One strategy, designed for the modern sectors, entails the acquisition of advanced technologies from developed countries, while the other, for the more traditional sectors, involves the so-called “appropriate” technology.
The report also stresses the need to upgrade rural infrastructure and to provide rural extension services in order to boost rural productivity and link farms to higher-value-added activities, such as food processing. It encourages private sector actors to provide the necessary capital for these investments. It stresses that the State itself must play an active role in generating employment and urges governments to adopt labour-intensive production processes in infrastructure work, which offer several advantages over capital-intensive technologies. Some of these benefits are: generating more jobs, having lower costs, contributing to local enterprise development and capacity-building, generating foreign-exchange savings, and providing more readily available maintenance and repair services.
Finally, the report recommends LDCs’ development partners to help spur employment. It puts forward the establishment of an international support measure where donors, national governments and other actors cooperate to support technically and financially the creation of startup businesses by young people.