Poorest nations see a glint of hope

Despite the global financial crisis, three countries are set to shed the dubious status of being least developed.

Zim Farmer
 Supachai Panitchpakdi, secretary-general of United Nations Conference on Trade and Development, feels strongly that an independent assessment of the development impact of aid is long overdue  [EPA]

When the UN General Assembly recognised a special category of member states ranked as Least Developed Countries (LDCs) back in 1971, there were only 25 which qualified for the dubious distinction of being the “poorest of the world’s poor”.

But since then, the numbers have kept rising, reaching a high of 50. So far, the only two countries to “graduate” from LDC status – indicating a significant improvement of their economies – were Botswana in 1994 and Cape Verde in 2007.

Despite the spreading financial crisis, however, at least three countries have been earmarked for graduation in the near future: Equatorial Guinea, the Maldives and Samoa.

But Samoa has been experiencing economic difficulties because of the after-effects of the September 2009 tsunami which caused considerable devastation to the Pacific Island nation.

As a result, the General Assembly has extended Samoa’s transition period until 2014.

With the fourth UN conference on LDCs scheduled to take place in Turkey, May 30 through Jun. 3 next year, the focus will once again be on the plight of some 800 million people who currently live in LDCs.

The largest number of countries in the current list is from Africa (33), ranging from Angola and Benin to Uganda and Zambia.

The Asian countries include Afghanistan, Bangladesh, Myanmar, Nepal, Tuvalu and Vanuatu. The only country from Latin America and the Caribbean is Haiti.

Asked if any other LDCs are likely to graduate, at least in the next five years, the Secretary-General of the UN Conference on Trade and Development (UNCTAD) Supachai Panitchpakdi said: “Yes, but perhaps not as many as I would like to see graduating.”

He said much will depend on the shape and pace of the recovery, which is still very uncertain.

But a return to “business as usual” will not deliver the sustainable and inclusive growth in LDCs that is needed for graduation, he added. “A change of direction in policies, both at the macro and sectoral levels and a new generation of international support measures are needed in the coming years.”

These countries, he pointed out, are structurally vulnerable to external shocks and need a carefully crafted sequence of outward-oriented support measures with appropriate flexibilities.

But preferential market access and ‘special and differential treatment’ (SDTs) alone cannot accelerate development in LDCs.

“What is also needed are general measures that would help increase the resilience of the LDCs to external shocks, which include, among other things, insurance mechanisms, shock- facilities and counter cyclical financing,” he noted.

The UN Committee for Development Policy (CDP) usually determines “eligibility” to LDC status based on several factors, including population, national income and other economic indicators, but the ultimate decision rests with the countries themselves.

Zimbabwe, for example, has refused to join the LDC group despite being judged eligible by CDP. There has been speculation that East Timor may join the ranks of LDCs in the future.

“Obviously the downturn in the global economy raises worrying concerns for some countries and while LDCs have avoided the worst of the financial aftershocks, trade, investment and remittance flows have already been adversely affected,” said Supachai.

“In UNCTAD we are closely monitoring the debt situation of these countries, given the way in which external shocks have in the past had a lasting negative impact on LDCs through this channel,” he noted.

Asked what Western aid commitments and pledges to LDCs have been fulfilled, Supachai said the main pledge of committing 0.15 percent of gross national income (GNI) to LDCs goes back to the first LDC conference in 1981 in Paris.

More recently, the Gleneagles summit of the G8 industrial nations committed to doubling aid to Africa by 2010. Unfortunately, neither of these targets have been met, he said.

Any cutbacks in official development assistance (ODA) flows will hit the LDCs hard and the fact that some prominent G20 members – of developing and developed nations – are promising to keep to their aid commitments is welcome but needs to be monitored, Supachai added.

In 2008, net ODA flows to the LDCs amounted to a record level of some $37 billion. However, had the target agreed at the first LDC conference in 1981 been met – 0.15 percent of donors’ GNI – disbursements would have totalled $60.7 billion.

As a result, the cumulative aid shortfall to LDCs since 1990 amounts to almost half a trillion dollars.

The climate challenge is further exposing the ODA shortfall, particularly in financing adaptation responses in LDCs, Supachai said. These countries have contributed the least to rising global temperatures but they are already experiencing the damaging consequences of such increases, he pointed out.

Rich countries have committed themselves to supporting the additional investment costs needed to help countries adapt to global warming. But so far, the scale of flows has not lived up to that commitment. “It is not just the scale of aid that needs attention but its composition and delivery,” said Supachai.

The shift of aid flows to social sectors at the expense of building productive capacities is something UNCTAD has been worried about for some time now.

“I feel strongly that an independent assessment of the development impact of aid – a sort of ‘developmental auditing of the aid regime’ – is long overdue,” he added.

Perhaps the place to start is with the International Development Association (IDA), a subsidiary of the World Bank, which marks its 50th anniversary this year.

Although IDA accounts for only six to seven percent of total aid flows – and perhaps double that figure for LDCs – it has had a strong influence over the development paths of recipient countries through attached policy advice and conditionalities.

An independent examination of its successes and failures might cast useful light on the aid challenges facing LDCs, said Supachai.

But there is more to development cooperation than ODA. Additional measures are necessary to support LDCs to implement their national strategies.

For instance, there is need to articulate tailor-made national and international responses for each LDC to make support measures more effective and better targeted to countries’ needs, he noted.

Greater coherence between the international strategy for LDCs and other existing development strategies, including those initiated by the International Monetary Fund and the World Bank, is also critical.

This article first appeared on the Inter Press Service News Agency.

Source: IPS