DIVERSIFICATION, BETTER AGRICULTURAL PRACTICES KEY TO REDUCING POVERTY

IN POOREST COUNTRIES, ROUND TABLE PARTICIPANTS TOLD

 

Earlier Panel Considers Debt Management Solutions Supporting Trade, Development

(Received from a UN Information Officer.)

ACCRA, GHANA, 24 April -- Diversifying products and services and improving agricultural practices were the key to poverty reduction in the world’s poorest countries, participants heard this afternoon during a round table discussion at the Twelfth Ministerial Meeting of the United Nations Conference on Trade and Development (UNCTAD XII), taking place in Accra, Ghana.

“What happens in 2030 if you haven’t diversified products or services?” asked Kandeh Yumkella, Director-General of the United Nations Industrial Development Organization (UNIDO), as he led the discussion under the theme “Developing productive capacities in least developed countries”.  There would be no way to employ the urbanized youth, whose numbers could have doubled by that year.  In addition, the natural resources that were currently the economic mainstay of many poor countries may have dried up by then, accelerated in some cases by climate change.

Moderating the discussion, Debapriya Bhattacharya, Permanent Representative of Bangladesh to the United Nations in Geneva and to the World Trade Organization, pointed out that there were more than 800 million people in the 49 least developed countries that now accounted for less than 1 per cent of global trade, direct investment and other economic activity.

He said that according to reports prepared for the Meeting by the United Nations Conference on Trade and Development (UNCTAD) the economies of many least developed countries –- including some that had enjoyed high growth rates in the last several years -- remained dependent on the export of raw commodities, low-skilled manufacturing or tourism, which left them highly vulnerable to recurrent shocks and crises.  The reports pointed to a lack of systemic improvement, whether in productivity, processing and manufacturing with the potential to add value to raw materials, or long-term structural change in those countries.  Furthermore, their current poverty reduction strategies did not tend to support the building of productive capacity, favouring social development projects instead.

Such an approach had to change, he stressed, noting: “We manage poverty, but we remain poor.”  Investment must be made now to meet the challenges of 2030.  Capacity must be built not only in manufacturing, but also in the service sector and in agriculture through agri-business.  In particular, “the missing middle” must be assisted, he said.  While economic assistance currently favouring tiny businesses through microfinance was useful, it must be coupled with support for medium-sized businesses, which were stable, able to employ many people and capable of linking smaller businesses to markets and other investments.  That kind of support was particularly relevant for Africa, he said.

Joining Mr. Yumkella as panellists were Abdoulie Janneh, Under-Secretary-General and Executive Secretary of the United Nations Economic Commission for Africa (ECA); Sid’Ahmed Ould Raiss, Minister for Commerce and Industry of Mauritania; William Kalema, Director of the Uganda Manufacturers Association Consultancy and Information Services; Richard Newfarmer, Special Representative of the World Bank to the United Nations in Geneva and to the World Trade Organization; John Clarke, Deputy Head of the European Union Delegation; and Anna Kajumulo Tibaijuka, Under-Secretary-General and Executive Director of the United Nations Human Settlements Programme (UN-HABITAT).

Discussants were Simone Cipriani, Senior International Market Development Adviser of the International Trade Centre UNCTAD/WTO; and Joy Kategwa of Oxfam International, representing the Civil Society Forum.

Mr. Janneh said the main goal of ECA was to address the Africa’s development challenges.  Home to most of the world’s poorest countries, the continent was currently doing very well, with many of its countries posting record socio-economic growth rates and as a whole beginning to attract new investors.  At the same time, however, African countries and their international partners would have to start thinking about ways to sustain that growth by enhancing productive capacities and diversifying their economies, among other steps.

Trade liberalization and closely managed use of natural resources would also offer least developed countries an opportunity to participate in global markets, he said.  As for other challenges, many African countries lacked modern infrastructure and access to new technologies that could help them, and they also struggled to meet international market and manufacturing standards.  ECA, for its part, would continue to help countries deal with those and other challenges as a way to increase their productive capacities.

Highlighting the troubling situation faced by many least developed countries today, Mr. Ould Raiss said the income surplus generated by rising world commodity prices was being absorbed to cope with the current skyrocketing food prices.  At the midpoint to achieving the Millennium Development Goals, Mauritania and other developing countries found themselves facing severe food shortages.  That challenge was exacerbated by a lack of funding to improve its productive capacity or strengthen its human resource base.  To respond to those concerns, the country was giving priority to diversifying its economy, investing in infrastructure repairs and doing the best it could to ensure that the international development aid it received was injected into the sectors that needed it most.

Providing the private sector viewpoint, Mr. Kalema said the lopsided situation in Uganda -- which had thousands of tiny businesses employing very few people, very few medium-sized enterprises and even fewer large-scale businesses with large workforces -- reflected that of many other least developed countries.  Those few large businesses, therefore, were responsible for paying the lion’s share of taxes.  The lack of medium-sized businesses, or Uganda’s “empty middle”, also meant that employment rates were bound to remain low.

He said developing countries needed to do more to balance out their productive sectors and support the expansion of medium-sized businesses.  Asked by the moderator if foreign investors were killing small- and medium-sized businesses in Uganda and elsewhere, Mr. Kalema said national entrepreneurs needed all the support they could get from their “bigger, smarter and more experienced brother overseas”, who did not compete, but complemented productivity and growth by buying unique products and services from small enterprises.

Mr. Newfarmer agreed that the expected economic slowdown in the West was certain to negatively affect developing countries, especially the least developed.  Weakening of import demand in the United States and other industrialized countries would obviously hurt small export-dependent countries.

It was, therefore, necessary for small countries to start thinking now about not only diversifying their products, but also about expanding traditional business models, he said.  While there was no “magic bullet”, those countries that could do so, might consider scaling up funds to improve their business infrastructure -– including energy grids and roadways –- as well as their information and communications sectors.  Access to the Internet, for instance, would help a farmer or small business-owner in Ghana reach new markets in far-flung African nations just as easily as it would countries on the other side of the globe.

Touching on socio-economic dynamics, Ms. Tibaijuka pointed out that trade presupposed the existence of goods or services.  “But, if you don’t have anything to trade, there is really nothing to talk about,” she said, underscoring that a common factor for most least developed countries was that infrastructure and skills were largely rudimentary, affecting their productivity and hampering their ability to participate even at the margins of world trade.

With that in mind, she said, the challenges of governance, institutional bottlenecks and even household dynamics –- especially violence against women –- must be addressed, as must the fact that the world was quickly becoming more urbanized.  “International support measures must also address the supply-side constraints that had made the least developed countries what they were, including binding duty- and quota-free access for products from the poorest countries.  Indeed, when they produce goods, the least developed countries should be able to sell them.  Productivity could not be improved without a guaranteed market.  Also, quota-free products were supremely attractive to foreign investors.

Mr. Cipriani proposed that the panel consider ways in which least developed countries could increase the productive capacity of their own markets.  That would require choosing the best vehicle to drive in-country demand and matching development aid to infrastructure enhancement.  Local people must be empowered.

Ms. Kategwa said raising productive capacities in developing countries required intervention at three levels -– at the farm gate, at the market and globally.  At the farm gate level, local authorities should perhaps “go back to doing what they did best” and distribute seeds and pesticides, while providing market information and ensuring price guarantees to help struggling farmers.

When the floor was opened briefly for comments from the audience, several speakers expressed concerned that not enough attention had been paid to shielding the least developing countries from worrying emerging realities like global warming and skyrocketing food and commodity prices.  Moreover, with workers slowly but surely abandoning farmlands for city life, how were agro-based poor countries supposed to simultaneously enhance their productive capacities, improve livelihoods and meet global development goals? one speaker asked.

Another audience member agreed that those were critical issues, especially in the context of Africa, “where the future of our planet will play out”.  Any improvements in the lives and livelihoods of the world’s poorest people depended on how the global community dealt with migration flows, rapid urbanization, environmental degradation, energy shortages and lack of investment in agricultural technology.

Earlier this afternoon, UNCTAD ministers held an interactive round table to discuss “Debt management solutions supporting trade and development”.  The panellists also considered the effectiveness of cooperative measures to enhance the coherence of poverty reduction and sustainable economic development policymaking at all levels, including regional approaches.

There was general agreement that, despite existing debt relief initiatives and favourable conditions on world financial markets, debt instruments remained an important source of finance for developing countries.  Speakers stressed that active public-debt management was an important tool for ensuring that countries maintained sustainable debt levels while pursuing broader development objectives.

Moderator Ellias E. Ngalande, Executive Director of the Macroeconomic and Financial Management Institute of Eastern and Southern Africa, said recent concerted international debt-relief measures had been effective in reducing the long-standing crippling debt burdens of some developing countries.  Those initiatives, coupled with increased socio-economic growth and more predictable, better targeted development aid, had made African countries more attractive to foreign investors other than traditional partners in the West.

At the same time, he said, developing countries were still having trouble maintaining debt stability while pumping precious resources into sectors that could increase productivity and promote socio-economic development.  It was, therefore, important that they weigh decisions carefully before taking out more loans.  It might also be necessary to consider that, in some cases, excessive focus on social rather than productive sectors could also raise debt levels.

Sinan al-Shabibi, Governor of Iraq’s Central Bank, recounted his country’s “very important and revealing” experience, especially for a medium-income oil-exporting country, noting that most of Iraq’s debt had been accumulated during the 1980s, not to finance development -- as was usually the case with many countries -- but mostly to fund conflict and war.  The debt had continued to pile up throughout the 1980s, due to late payment fees, and into the 1990s owing to sanctions imposed on the country.

After all was said and done, Iraq had incurred some $100 billion, about half of which was held by the Paris Club, with the rest spread between non-Paris Club countries and Arab countries, he said.  Before restructuring, the debt burden had grown to about six times the gross domestic product, hampering both reconstruction and development.  By 2003, United Nations Security Council resolution 1483 had called for international efforts to restructure Iraq’s debt.  After that, the new Government had had to find out what was owed to whom.  That exercise had revealed claims held by 73 countries and thousands of individuals.

He said Iraq had then gone to the Paris Club under an emergency post-conflict assistance plan and started discussions with the International Monetary Fund (IMF) in 2004 on debt-relief or forgiveness initiatives aimed at bringing down its debt.  Since that time, the country had been able to erase nearly 80 per cent of its debt.  It was currently in consultations with international partners and its Gulf region neighbours seeking ways to reduce the debt further.

Other participants in the discussion were Hakon Gulbrandsen, Secretary of State for Development of Norway; and Jürgen Zattler, Deputy Director-General for Multilateral and European Development Policy and Trade in Germany’s Ministry of Economic Cooperation and Development.

The Meeting will reconvene tomorrow from 10 a.m. to 1 p.m., and 3 p.m. to 5 p.m. in panel discussions devoted to strengthening the work of UNCTAD.

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For information media • not an official record