Report calls for «new international development architecture» to support world´s poorest countries

Says inclusive global governance is needed to boost world´s poorest countries

Geneva, 25 November 2010 -- Comprehensive and systemic reforms are needed so that the world´s poorest countries can better integrate with world markets, a new UNCTAD report urges.

The Least Developed Countries Report 2010(1) is subtitled "Towards a new international development architecture for LDCs". The objectives of the proposed new international development architecture are:

• Reversing the marginalization of LDCs in the global economy and helping them in their catching-up efforts, in particular by helping them to develop their productive capacities - that is, their abilities to efficiently and competitively produce an increasing range of higher value added goods and services through expanding investment and innovation;
• Supporting a pattern of accelerated economic growth to improve the general welfare and well-being of LDC populations; and
• Helping LDCs graduate from LDC status (only two countries, Botswana and Cape Verde, have done so in the last 30 years).

"Business as usual" isn´t working, the report argues. A number of LDC-specific international support measures have been devised to promote the economic development of these nations, but the UNCTAD study concludes that they have had largely symbolic, rather than practical, development effects. In the majority of cases, the report contends, they have not promoted the development of productive capacities, and the lack of these capacities is the key source of the structural economic weaknesses of LDCs.

The report says LDC governments must play stronger roles in creating favourable conditions for capital accumulation, technological progress, structural transformation -- especially a shift away from LDCs´ dependence on commodity exports -- and the creation of productive jobs that are vital for substantial poverty reduction. The new international development architecture should support these national efforts.

A feature of the proposed architecture is that it expands the focus beyond aid and trade to include technology, commodities and climate change as key pillars. The proposed new international development architecture thus includes reforms in global economic regimes in these areas which directly affect development and poverty reduction in LDCs. It encourages the design of a new generation of special international support mechanisms for LDCs that would address their specific structural weaknesses. Efforts to enhance South-South development cooperation are also recommended.

The report proposes an agenda for action to create a new international development architecture for LDCs. It identifies five major pillars:

• In the area of finance, the report calls for increased official development aid inflows in line with the Organization for Economic Cooperation and Development (OECD)-Development Assistance Committee (DAC) aid commitment of 0.15 and 0.20 per cent of gross national income (GNI) and enhanced efforts to enable country ownership of national development strategies. It argues for increased use of aid to support domestic resource mobilization as well as for innovative uses of aid to develop productive capacities.
• In the area of trade, the report suggests that the so-called "early harvest" of measures (such as full duty-free, quota-free market access for LDCs and more favourable treatment of services trade from LDCs) benefiting LDCs that have already been agreed upon in the Doha Round of world trade negotiations should be given in advance of the completion of the negotiations. The report calls for empowering LDCs to use existing flexibilities under current trade rules so that they can implement strategic trade policies, as well as more efficient delivery of aid for trade.
• In the area of commodities, an absence of global governance appears to be the main obstacle to greater stability in prices and earnings. Priority actions in the global economic regime should include the introduction of new measures for reducing the volatility of commodity markets and the adverse impacts of this volatility. Moreover, improved management is proposed to increase returns for LDCs -- and alleviate financial and fiscal bottlenecks -- from the harvesting of their natural resources.
• In the field of technology, the report calls for a new, coherent, and dynamic pro-development knowledge architecture centred on LDC technological needs and capabilities. In particular, the report calls for a reorientation of global governance on technology and intellectual property rights. It proposes a series of international support mechanisms, including the development of a technology license bank and a multi-donor trust fund for financing enterprise innovation in LDCs.
• In the area of climate change, the report calls for urgent and adequate financing of the LDC Fund in the field of climate change, and improved access for LDCs to the United Nations Framework Convention on Climate Change´s Clean Development Mechanism as a means of overcoming the financial barriers that prevent LDC access to renewable energy technology.

South-South development cooperation is considered relevant to all five of these issues. In 2007-2008, developing countries were the source of 62 per cent of LDC merchandise imports and the destination of slightly more than half of their merchandise exports. There are further opportunities for expansion of trade, technology and investment flows between LDCs and other developing countries, as well as exchange of policy experiences, the report says. These opportunities should be seized.

The forward-looking agenda UNCTAD proposes would create a much more supportive international environment for LDCs. Linking international support mechanisms for LDCs with a new international policy and cooperation framework that can deliver a more stable, equitable and inclusive global governance regime for all countries is one of the most urgent challenges facing the international community, the report contends. Doing so will not only help make special international support for LDCs more effective, it will also contribute to including LDC issues in wider international activities and debates on development.

One billion people will be living in the LDCs by 2017, the report notes. It says they need to find new development paths which will reduce their marginalization in the global economy and will substantially reduce their poverty.

ANNEX

Tables and figures

The New International Development Architecture for LDCs


Source: UNCTAD secretariat.