Structural Transformation Vital to Boosting Stagnating Economies of Many Least Developed Countries, Speakers Stress in Round Table
DOHA, 6 March — Structural transformation — through measures such as increased market access, industrial development, export diversification and capacity-building — is required to bolster the stagnating economies of many least developed countries, speakers stressed today as the fifth United Nations Conference on the Least Developed Countries concluded its second day of high-level thematic round tables.
Opening the meeting, Julius Maada Bio, President of Sierra Leone and co-chair of the third high-level thematic round table, said that most least developed countries face the “unfortunate realities” of low productivity, high debt distress, inflationary pressure, weak investment and low levels of human-capital development. Further, recent global downturns, occasioned by the lingering impact of the COVID-19 pandemic and geopolitical crises in Europe have disrupted supply chains, limited development and investment and resulted in the tightening of monetary policy in advanced economies, all further squeezing the economies of least developed countries. To overcome these challenges, he highlighted the importance of pro-productivity policies to improve the business ecosystem, develop a competitive private sector, emphasize science and technology and modernize infrastructure. Stressing that structural transformation in least developed countries requires the full support of all stakeholders and partners, he also said that least developed countries themselves must adopt conducive policies in this regard.
Narayan Kaji Shrestha Prakash, Deputy Prime Minister of Nepal and co-chair, said that structural transformation entails a shift to higher levels of production and a transition from simple to complex activities, which is difficult for least developed countries to achieve. On the contrary, most such countries have witnessed stagnating activity and a reliance on natural-resource commodities. He said that the three main challenges that prevent such countries from accelerating progress towards structural transformation are insufficient investment in human-capital development; an inability to sufficiently exploit scientific, technological and innovative capacities; and insufficient infrastructure. As global political, economic and environmental challenges make progress more difficult, the international community must unite to support least developed countries. He went on to note that Nepal is facing weak links to global value chains, insufficient industrial development, a lack of quality infrastructure and inadequate technical and institutional capacity. Against that backdrop, he said that the Doha Programme of Action is a guiding document for strengthening productive capacity and fostering structural transformation.
Titled “Structural transformation as a driver of prosperity in Least Developed Countries”, the round table featured a keynote address by Andrés Rodríguez-Pose, Professor of Economic Geography at the London School of Economics. Mr. Rodríguez-Pose, who noted that, over the last 20 years, most of Asia and many parts of Africa have actually done well over this period. As a whole, the world’s population is now far better off in economic terms, life expectancy and quality of life than it was 20 years ago. However, about one tenth of the global population lives in places that are, in absolute terms, worse-off today than they were 20 years ago, particularly in Latin America and in Africa. Noting the traditional factors that determine growth — such as market size, human capital, infrastructure and digital accessibility — he also spotlighted other significant factors including macroeconomic stability, trade integration and institutional quality. Examining the quality of the rule of law, Government efficacy, accountability, transparency and participation explains why certain parts of the world are not fulfilling their economic-development potential.
He went on to state that those countries integrated into global trade have prospered the most, but stressed that global value chains do not just involve trade with the global North; rather, trade that happens at the continental level is also important. African countries trade much more with the developed world than amongst themselves and, while the African Continental Free Trade Agreement is an important step forward, it requires more political will to improve its implementation. Stating that development is like a bicycle, he stressed that, to move forward, two wheels are required — the right strategy and the right institutions. On that point, he underscored the need to move from the penny farthings and bicycles with square or no wheels of current development policy — where strategy are not context-sensitive, institutions are lacking or both — to proper bicycles to drive towards improved quality of life and mobilized national potentials.
The third of eight thematic round tables scheduled for the Conference featured panellists Francisco André, Secretary of State for Foreign Affairs and Cooperation of Portugal; Thomas Östros, Vice-President of the European Investment Bank; Somachi Chris-Asoluka, Chief Executive Officer of the Tony Elumelu Foundation; and Armida Salsiah Alisjahbana, Executive Secretary of the Economic and Social Commission for Asia and the Pacific (ESCAP).
Mr. André said that his country’s development strategy prioritizes partners that are least developed countries, also noting that it aligns with the Doha Programme of Action’s aims to enhance productive capacity-building, promote infrastructure development, develop the private sector and integrate least developed countries into global and regional value chains. Portugal is committed to working with least developed countries towards these ends by, among other measures, supporting plans to allow such countries privileged access to global markets. Further, Portugal is involved in several regional initiatives in Africa. In Angola, it is supporting export diversification and import substitution and, along with partners, Portugal has supported more than 2,000 small and medium-size enterprises and created an investor network to finance start-ups. Adding that his country will continue to do its part, he welcomed all partners to join in this development path.
Mr. Östros, while stating that multilateral development banks can play an important role, said that more engagement is needed from the private sector. Energetic entrepreneurs in least developed countries are frustrated by a lack of incentives, insufficient access to finance and structural problems. For its part, he highlighted the European Investment Bank’s “Boost Africa” initiative, which aims to create opportunities for young people in Africa. He also said that crowding-in private-sector investment is at the core of the Bank’s activities, which it facilitates through portfolio guarantees, public-private partnerships, de-risking instruments and technical expertise and assistance. Stressing that structural transformation will only succeed if it is built on solid foundations, he said that building capacity is key, as is fostering concrete partnerships between States and the public and private sectors.
Ms. Chris-Asoluka said that her organization works to empower young African entrepreneurs, reporting that, since 2010, it has supported 18,000 such individuals by providing over $100 million in seed capital. Such entrepreneurs have collectively created over 400,000 jobs across Africa, and 7,000 women entrepreneurs have lifted 1.2 million household dependents out of poverty. She said that, on average, entrepreneurs create 30 additional jobs across the continent. Noting that her organization is launching a coalition for African entrepreneurs, she said that she was present today to appeal for $500 million in donor funding to empower additional individuals. In 2022, the organization received over 400,000 applications, but could only fund 5,000. To create more opportunity, she asked partners to work with her organization to reach more African entrepreneurs and create economic prosperity in their communities across the continent.
Ms. Alisjahbana said that industrial policy is important for least developed countries to generate more economic activity and employment and reduce poverty, pointing out that, in most least developed countries, a large percentage of the workforce is still engaged in low-production activities such as agriculture. While manufacturing success has eluded many least developed countries, there are success cases that illustrate the positive impact of strategic intervention. She cited, for example, Bangladesh, Cambodia and Myanmar, which have been more successful than their peers in generating formal-sector employment and export revenues. She went on to say that, as least developed countries face significant gaps in infrastructure, regulation and skills, special economic zones can work to enable domestic firms to enter global and regional value chains. She also said that Governments should play a stronger role in facilitating industrial policy, particularly by promoting infrastructure improvement in areas such as transport, communication and energy. She also urged Governments to implement regulatory policy to reduce the costs of production and to invest in education, which can enable least developed countries to promote higher-value services and exports.
The round table then turned to its lead discussants, Pamela Coke-Hamilton, Executive Director of the International Trade Centre; and Zo Randriamaro, Research and Support Center for Development Alternatives-Indian Ocean.
Ms. Coke-Hamilton echoed Mr. Rodríguez-Pose, stressing that strong institutional frameworks are necessary to ensure continuing economic evolution. Further, while trade policy is needed to create conditions that enable small businesses to thrive, there is also a need to strengthen such businesses’ capacity to compete. She said that a practical example of this is the International Trade Centre’s work with coffee producers in several African countries, which focused on enabling such producers to distribute to consumers in Europe. With the right financing, the margins of selling branded coffee in that market can be up to five times higher than selling it at the farm. She went on to say that least developed countries need market-intelligence tools to support their integration into global value chains.
Ms. Randriamaro stressed that structural transformation for least developed countries is not a technocratic process, and that it should not be depoliticized like debates on the Doha Programme of Action tend to be. The neoliberal, unequal development model that led to the current, multidimensional crisis must be left behind, and least developed countries must progress towards an endogenous growth model based on developing Africa’s agricultural potential. Further, there is a need to move away from dependence on essential-good imports by including commercialization and production chains in African development models. Processing raw materials locally will create value, knowledge, skills and decent jobs for the 40 million young Africans who will enter the labour market in the next few years. Also stressing the need to move from free trade to fair trade, she called for urgent measures to protect African public goods from extractivist development models and the imperialism hidden behind the “greenwashing” of the fight against climate change.
When the floor opened, ministers and delegates detailed national initiatives and development plans geared towards structural transformation, including efforts to integrate into global value chains, reduce dependency on imported goods and diversify exports. Many speakers also highlighted the challenges presented by the war in Ukraine and the lingering impact of the pandemic, observing that the budget space for least developed countries has been restricted and calling on development partners to deliver on commitments made in the Doha Programme of Action.
Abdoulaye Diop, Minister for Foreign Affairs of Mali, noted that only a limited number of least developed countries have succeeded in moving towards transformation and reconstruction. Countries like Mali must be able to draw on their potential in sectors such as agriculture, textiles and extraction to break the vicious cycle of dependence on external aid. He also stressed the need to break from neocolonial development models based on domination and predation and to improve access for least developed countries to financing with acceptable conditions.
Olivia Ragnaghnewendé Rouamba, Minister for Foreign Affairs of Burkina Faso, said that her country’s development plan seeks to fight terrorism, re-establish territorial integrity, respond to the humanitarian crisis and improve governance. The Government also seeks to involve the citizenry in the development process, diversify exports and improve education by building new lecture halls, supporting online learning and increasing the number of subsidized computers for students.
Pilar Cancela Rodríguez, Secretary of State for International Cooperation of Spain, stressed that youth are key for sustainable growth and global socioeconomic stability, particularly in least developed countries. Such countries have the youngest populations, and therefore a high proportion of workers able to contribute to growing, productive economies. To obtain these “demographic dividends”, there is a need to support investment in young entrepreneurs. Towards this end, she said that Spain’s international cooperation plan will allocate 0.7 per cent of gross national income to development aid in the coming years to promote such individuals’ ability to create quality jobs.
In final comments, Mr. André underlined the wide consensus on what should be done to support least developed countries, and that the Doha Programme of Action is key in this regard. Mr. Östros stressed the need to harness the multiplier effect of crowding-in the private sector to make needed investments. Ms. Chris-Asoluka called on all Governments to connect with her organization to ensure that young entrepreneurs are given the opportunity to prosper and create jobs. Ms. Alisjahbana underlined the need to leverage opportunities for digital transformation and create an enabling regulatory environment for structural transformation.
Mr. Prakash, in closing remarks, said that proper policy priorities can encourage human-capital development, strengthen infrastructure and increase investment in science, technology and innovation. Mr. Bio urged efforts to promote macroeconomic stability, trade integration, strong institutions and better market access.
Also speaking were ministers and delegates of Zimbabwe, Somalia, Madagascar, Cabo Verde, Uganda, Bangladesh, Senegal, Algeria, Burundi and France.
Representatives of the United Nations Conference on Trade and Development (UNCTAD), Pay No Bribe Animators Sierra Leone, United States International Development Finance Corporation, Organization of African, Caribbean and Pacific States, Association of Collegiate Schools of Planning and the International Seabed Authority also spoke.