PRESS CONFERENCE ON UNCTAD’S 2006 LEAST DEVELOPED COUNTRIES REPORT

 

Haiti, Rwanda and Nepal were three least developed countries that had been in the news because of conflict situations and political unrest, Charles Gore, author of the Least Developed Countries Report 2006 told correspondents this morning, during a Headquarters press conference.

Launching the United Nations Conference on Trade and Development (UNCTAD) report, he said the economic reality and change underlying the conflicts in those three countries were also common for the other 47 least developed countries.  One of the problems the least developed countries faced was that of productive labour absorption.  The labour force was growing rapidly, but the traditional absorption through agriculture was not possible, because of lack of land.  The result was that more and more people were seeking work outside agriculture, leading to increasing urbanization.

He said one of the surprises in the report was that the increase in the economically active population seeking work outside agriculture, during the decade 2000-2010, would be greater than that seeking work inside agriculture.  One of the implications of that phenomenon was that productive jobs had to be generated in manufacturing and in services.  For least developed countries, that was an enormous challenge, as they were operating in an open economy with global competition.

That employment transition was a key feature in the report, he said.  National poverty reduction strategies and Millennium Development Goals-based aid should be seen against that background.  The report argued that, although expenditures on social services and human development were important, they were not enough.  It was necessary for poverty reduction to focus on development of productive capacities, such as productive resources, including natural resources, human resources, financial resources, such as savings, and physical infrastructure.  Those resources must be increased through investment.

Mr. Gore said another important element of productive capacity was entrepreneurial capabilities.  Production linkages between enterprises and sectors were also important, including flows of goods, information and people.  In order to reduce poverty, one should focus on relaxing and overcoming the key constraints on the development of capital accumulation, technological progress and structural change.  Investment in human development and social services was only part of the development of productive capacities.

Strategies to relax and overcome constraints should be country specific, he added.  The report had identified three constraints: a very weak physical infrastructure, with very low access to electricity; lack of institutions, in particular private sector institutions; and a lack of effective demand, as evidence had borne out that a buoyant domestic demand contributed most to the growth process in least developed countries.  There was a need to seek an increase in agricultural productivity and rural incomes, as well as for promoting linkages to domestic industries and services.  Export structures -- external demand -- should also be upgraded.

All of that added up to “a paradigm shift in the approach to poverty reduction”, he said, in which development of productive capacities and productive employment opportunities were being put at the heart of both national poverty reduction strategies and aid policies.  Although the aid to least developed countries had doubled in nominal terms between 1999 and 2004, 47 per cent of that aid went to debt forgiveness grants, technical cooperation, food aid and emergency assistance.  That, however, left 53 per cent that was not going to the countries.  That meant that 47 per cent was not a capital transfer to the country.  The United States was the largest donor to least developed countries in 2004, giving $4.5 billion in net official development assistance (ODA) inflows.  However, only 10 per cent of that money was capital inflow to the target country.  Of the money going to the country, the proportion going to the productive sectors had declined, from 48 per cent in the period 1992 to 2002, to 24 per cent from 2002 to 2004.  Only 1 per cent had gone to the critical financial sector.

In conclusion, he said that, in order to substantially reduce poverty in a sustainable manner, the development and utilization of productive capacities and the related generation of productive employment opportunities have to be put at the heart of both national and international policies.

Answering a correspondent’s question about the impact on the environment of the export of natural resources, Mr. Gore said the environmental aspect, although important, was not a major theme of the report.  Research had indicated that “genuine national savings” -- savings adjusted for the depletion of natural resources and ODA grants -- were falling in the least developed countries and that the natural capital was being depleted.  Information on environmental degradation had been included in the 2002 report.

In response to another question he said that the least developed countries, in 2004, had indeed had the best growth performance in 20 years.  However, hidden behind those figures was the fact that one third of the least developed countries had declining or stagnant growth.  Moreover, much of the growth was dependent on high commodity prices.  The question was also how the growth contributed to poverty reduction.  The development of productive capacities was key to both achieving sustainability and increasing poverty reduction.  The increase in ODA was mostly due to increase in assistance to Afghanistan and the Democratic Republic of the Congo in the last couple of years. 

It was true that, of the 50 countries, data on about 5 countries, including Somalia, was unavailable, and a conservative estimate had been drawn up of those countries, he replied to another question.  However, the data was sufficient to make plausible arguments about what was happening.  As to the impact of agricultural subsidies in developed countries, he said that that issue had been addressed in the 2002 report.

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For information media • not an official record