PRESS BRIEFING ON 1998 LEAST DEVELOPED COUNTRIES REPORT

Press Briefing

PRESS BRIEFING ON 1998 LEAST DEVELOPED COUNTRIES REPORT

The 1998 Least Developed Countries Report, published by the United Nations Conference on Trade and Development (UNCTAD), was introduced at a Headquarters press briefing this morning by the Special Adviser to the Secretary-General, John Ruggie.

Mr. Ruggie said Secretary-General Kofi Annan was heavily involved in the cause of the least developed countries (LDCs) and believed one of the cardinal missions of the United Nations was to be their advocate. The Secretary- General believed the problems of the poorest countries must be taken seriously, particularly in the context of the current international economic crisis.

At his meeting last week with United States Treasury Secretary Robert Rubin, the Secretary-General had addressed the needs of the LDCs and stressed the importance of fencing off development funding from global liquidity needs, Mr. Ruggie said. He had urged that money dedicated to development purposes remain committed to development. He had also spoken extensively about the need to liberalize the Heavily Indebted Poor Countries (HIPC) Debt Initiative to make it more flexible and facilitate greater access. The Secretary-General had stressed the need to expand representation around the table where global financial decisions and the international economic architecture were made.

Mr. Ruggie said the Secretary-General had enlisted private sector help in promoting development opportunities for the LDCs. For example, he had reached an agreement with the International Chamber of Commerce to fund investment guides. The Secretary-General had also taken a number of initiatives, including the recommendations contained in his April report on "The causes of conflict and the promotion of durable peace and sustainable development in Africa". Recently, he had convened a meeting with the foreign ministers of the Development Assistance Committee of the Organisation for Economic Cooperation and Development (OECD) and had asked them to address the need to increase the volume and quality of official development assistance; to write off all official bilateral debt; and to address the issues of the HIPC Debt Initiative, trade access and investment promotion.

The UNCTAD report addressed the overall growth performance and financial situation of the LDCs, Mr. Ruggie said. In 1997, their economic performance was relatively good, because of enhanced macroeconomic stability, their prudent policies and reform efforts, favourable weather conditions in some Asian LDCs and economic growth in Europe and North America. The prognosis for future growth was not so good. The global economic crisis was having a drastic impact on lending and investment in emerging or other developing country markets. Declining commodity prices and adverse weather conditions, probably associated with the El Niño phenomenon, were also a factor. Official development assistance for the LDCs had dropped sharply from $16.6 billion in

1995 to $14.2 billion in 1997. Their external debt burden was an unsustainable $134 billion at the end of 1996.

The HIPC Debt Initiative, while well-intentioned, was not functioning in a way that greatly assisted poor countries, Mr. Ruggie said. Uganda had made it all the way through the approval process and only two or three countries were in the early stages of pipeline. The initiative needed considerable revision, expansion, and increased flexibility.

The report also addressed the complicated issues relating to the multilateral trading system and its relation to and impact on the LDCs, Mr. Ruggie said. The institutional complexity of doing business with trade regimes was a challenge to many LDCs. Accession to and negotiations within the World Trade Organization (WTO) and the Uruguay Round agreements were extraordinarily complicated, time consuming and elaborate. The LDCs required concerted capacity-building to become fully effective partners in those global arrangements. Major non-tariff barriers to the exports of developing countries also affected their ability to move up the hierarchy of production. Barriers in industrial countries, such as numerical targets on agricultural exports, clothing, textiles, leather products, footwear and food industry products needed to be liberated.

In reply to a question about how LDCs were defined, Khalil Rahman, Chief of the UNCTAD Office in New York, said the Committee for Development Policy did the initial work to determine a country's status based on three indices: per capita income; the level of economic diversification; and augmented physical quality of life. Similarly, if a country did well, it would be kept on hold to see if its progress was reversible. The Committee's recommendations went to the Economic and Social Council and for final consideration to the General Assembly. There were currently 48 LDCs -- 33 in Africa and only one, Haiti, in the Western Hemisphere.

Asked about UNCTAD's efforts to deal with the impact of trade liberalization, Mr. Rahman said that the LDCs recognized the difficulty of responding to a rapidly liberalized global economy. Their export structures were concentrated on one or two items, mainly commodities. Although the LDCs had not received short-term financial flows, their external earnings were dwindling because of falling commodities prices. The LDCs could benefit from globalization by diversifying the trade export sector and strengthening the supply capacity. UNCTAD supported the granting of zero tariff entry for the products of the LDCs. The cost of such a facility would be insignificant for importing countries and would benefit LDCs by allowing them to diversify their export base and take advantage of new market opportunities.

A correspondent asked why the United Nations presence in Haiti had made no difference to the country's economy. Mr. Rahman said the United Nations had a predominantly peacekeeping role. Development was a complex process, as shown by the so-called Asian miracle that was now often described as the Asian debacle. Countries were primarily responsible for their own development.

LDC Briefing - 3 - 14 October 1998

International support could help if a country built its human resources, promoted individual rights, created competent and transparent governance and implemented policies conducive to broad-based development. International support would not help if a country descended into war and civil strife. Even with all those factors in place, development took time. The LDCs had per capita incomes of $300 or $500, and even doubling that level would take an enormous effort. It was not a question of whether the United Nations or a

particular country failed, but rather of putting together a policy package and persisting with it over the long haul.

According to a report of the United Nations Development Programme (UNDP), Haiti was in a better place before the arrival of the United Nations peacekeepers, the correspondent said. Mr. Rahman said Haiti may have been better off 10 years ago, just as Uganda was 30 years ago. The United Nations had nothing to do with Haiti's deterioration and he doubted the UNDP report made that claim.

Mr. Ruggie said that the United Nations would not have gone into Haiti if the situation had been sustainably self-sufficient and security and public order had not needed external assistance. The United Nations went to Haiti because the country was not doing well.

Why had some LDCs, namely Ethiopia, Eritrea, Uganda and Mozambique, done particularly well? a correspondent asked. Mr. Rahman said those countries had been in the grip of civil strife and peace had brought the possibility of a normal life and economic upturn. Their governments had the courage to institute reforms and take tough economic decisions. Uganda was the first country to qualify for the HIPC Debt Initiative and the next in line was Mozambique.

The Secretary-General in his report on Africa had addressed that issue, Mr. Ruggie said. The greatest impediment to development was conflict that was often not related to broad public divisions or deprivation, but was stimulated by ruling groups for personal interests. The fundamental obstacle to development was a perpetuating cycle of violence as opposed to transformation towards a stable and accountable political system.

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