LDC graduation the “first milestone”, not the “winning post”

The least developed countries should not just look to meet the criteria for graduating from LDC status but also establish the foundations for development beyond graduation, states a report recently discussed at a meeting of a UN economic body.

by Kanaga Raja

GENEVA: The Trade and Development Board of the UN Conference on Trade and Development (UNCTAD) held a discussion on 6 February on UNCTAD’s Least Developed Countries Report 2016, which amongst others had argued that graduation of the least developed countries (LDCs) is “not the winning post of a race to cease being an LDC, but rather the first milestone in the marathon of development.”

The report, released around mid-December last year, had pointed out that the progressive nature of development means that graduation – and still more the achievement of the statistical criteria for graduation – is not an end in itself. It marks the end of a political and administrative process, but not the completion of an economic or developmental process.

According to the report, it is not enough simply to target achievement of the criteria needed for graduation; it is also necessary to establish the foundations needed to maintain development progress beyond graduation.

“Focusing exclusively on the graduation indicators risks diverting attention and resources from other aspects of development that will be critical long after graduation has been achieved,” it said.

Policy approaches to graduation need to go beyond the need to escape from the traps particular to the earliest stages of development, and take fully into account the need to prepare for the challenges of development beyond graduation.

“In other words, it is not sufficient merely to fulfil the criteria and complete the processes of graduation itself. The aim should rather be to achieve graduation with the momentum required to maintain development progress in the post-graduation period.”

The report had also noted that the number of LDCs doubled from the original list of 25 in 1971 to a peak of 50 between 2003 and 2007, declining only to 48 since 2014.

As well as the number of new countries becoming LDCs, the near-doubling of the size of the group in the last 45 years in part reflects the small number of countries graduating out of the category – just four in the 25 years since the principle of graduation was established (Botswana in 1994, Cabo Verde in 2007, Maldives in 2011 and Samoa in 2014).

The report had called for improvements to international support measures to address the developmental needs of the LDCs. According to UNCTAD, these include donors fulfilling their long-standing commitments to provide 0.15-0.20% of their national income for assistance to LDCs, to make aid more stable and predictable and to align it more closely with national development strategies; faster progress towards 100% duty-free and quota-free access for LDC exports to developed-country markets; renewed efforts to break the stalemate on special and differential treatment for LDCs in the WTO negotiations; improved monitoring of technology transfer to the LDCs; and a more systematic, smooth transition process for graduating countries, to limit the impact of losing access to international support measures when they graduate.

In addition, among the key priorities for LDCs in moving from graduation strategies to graduation-plus strategies are: transforming rural economies by developing rural non-farm activities in parallel with upgrading agriculture; combining economy-wide industrial policies directed towards market failures with policies aimed at promoting productive activities; building capacities in science, technology and innovation; strengthening tax systems, improving financial systems and addressing financial inclusion; and strengthening efforts to address gender inequality across all policy areas.

The UNCTAD report went on to emphasize that the economic outlook for LDCs as a group for the next two years remains uncertain and will be driven by unfolding conditions at the global level. It said the current international economic scenario remains lacklustre due to a combination of weak demand in developed countries as a result of stagnant real wages, the continuing slowdown of international trade, a sharp decline in growth or even recession in many developing countries, high or rising debt in both developed and developing countries, and depressed commodity prices.

“This international environment will continue to weigh down on the outlook for economic growth in LDCs and, hence, on their prospects for graduation and sustainable development.”

Nevertheless, the collective GDP growth of the LDCs is forecast to strengthen somewhat to 4.5% in 2016 and 5.7% in 2017, it said.

The road to graduation and beyond

The presentation of the report was one of the agenda items of the 64th executive session of the UNCTAD Trade and Development Board, held from 6-8 February.

In opening remarks at the session, Joakim Reiter, the Deputy Secretary-General of UNCTAD, said that the complex challenges and vulnerabilities of LDCs do not come to an end with graduation. After graduation, much more work remains to be done to face the daunting task of achieving the Sustainable Development Goals (SDGs).

The road to graduation and beyond is the focus of the 2016 LDC report, he said. The report provides advice to all LDCs, including those that are close to graduation, on how to achieve graduation, how to make the most of the process to graduation while setting the course for sustainable development beyond graduation itself.

Graduation is only a milestone in the development process. “It is a signpost, not the winning post of the long marathon of development. And how a country graduates is at least as important as when graduation is achieved,” said Reiter.

He pointed out that the report advises LDCs on graduation-plus strategies. Those are supposed to be game-changing strategies and should be an indispensable feature of every LDC’s sustainable development policy toolkit. Such strategies are centred on structural transformation and action to mitigate the loss of access to LDC-specific international support measures following graduation. The strategies are also in line with the Istanbul Programme of Action principle of ownership, leadership and primary responsibility of LDCs for their own development.

Technology has in many cases been the missing link in the international support to the LDCs, he said, adding that the report highlights how the international community can match LDCs’ self-initiative with constructive targeted and expanded support especially technology fusion and transfer and technology capacity building.

Finally, Reiter said, the report recalls the importance of donor countries’ fulfilment of their longstanding official development assistance (ODA) commitments to LDCs, which have recently been reaffirmed in the 2030 Agenda for Sustainable Development. He highlighted that in 2015-16, ODA to LDCs amounted to around $26 billion, while LDCs are missing or losing an equivalent of $23 billion in exports because of G20 protectionist measures.

“So you will understand that for many LDCs, what is given with one hand, although still inadequate compared to the ODA commitments, is also taken by the other hand through the various market distortions and protectionist measures that more powerful countries are imposing on LDC exports.”

Left behind

Also speaking on 6 February was the new Director of the UNCTAD Division on Africa, Least Developed Countries and Special Programmes, Paul Akiwumi.

Akiwumi said that the 2030 Agenda is a universal agenda. The increased emphasis on social goals, and the aim of leaving no one behind, has shifted the world’s attention towards a category of countries that are the epitome of those left behind by the global economy and socially.

This universal agenda and integrated approach now has critical implications for global and national approaches to development. It clearly calls for a stronger focus on those countries where poverty reduction is most difficult, i.e., the LDCs. “As you are also aware, the LDCs are intrinsically linked to the 17 goals and 169 targets that make up the SDGs,” he told the meeting.

Nearly half of the population of the 48 LDCs – approximately 400 million people – remain in extreme poverty, compared to less than a quarter in any other developing country.

The proportion of poverty in LDCs has doubled from less than 20% in the 1990s to nearly 40% in 2014. And the latest growth rates of between 4.5% and 5% expected by the LDCs on average fall well short of the target growth rate of 7%.

What this means is that under the current trajectory, some 35% of the population will remain below the extreme poverty line by 2030, said Akiwumi.

He noted that UNCTAD has repeatedly argued – and will continue to argue – that the LDCs are the battleground on which the 2030 Agenda will be won or lost. This is where the shortfalls for the SDG targets are greatest, where the improvements have been the slowest and where the barriers to further progress are highest.

Closing the existing gaps and achieving the SDG targets will require not only specific focus on the LDCs but also political commitment from member states and continued coordination and enhanced international support.

In this regard, Akiwumi encouraged member states to participate at the next High Level Political Forum on Sustainable Development under the auspices of the UN Economic and Social Council (ECOSOC), which will take place from 10-19 July in New York, and called for them to be represented at the highest level.  The theme of the forum will be “Eradicating  poverty and promoting prosperity in a changing world.” (SUNS8397)                                         

Third World Economics, Issue No. 632, 1-15 January 2017, pp8-9