The Least Developed Countries Report 2010 by UNCTAD was launched in Kuala Lumpur, Malaysia on 29 November 2010, by Mr Kamal Malhotra, United Nations Resident Coordinator for Malaysia and presented by Datuk
Dr Zainal Aznam Mohd Yusof, Council Member, National Economic Advisory Council (NEAC).

Mr Malhotra said, “The UN recognises the special needs of the LDCs and since 1971 has denominated “Least Developed Countries” (LDCs) a category of States that are deemed highly disadvantaged in their development process, many of them for geographical reasons, and facing more than other countries the risk of failing to come out of poverty. As such, LDCs are considered to be in need of the highest degree of attention on the part of the international community.

UNCTAD’s The Least Developed Countries Report provides a comprehensive and authoritative source of socio-economic analysis and data on the world’s most impoverished countries. It outlines the most critical issues, challenges and risks our region faces. The Report is intended for a broad readership of governments, policy makers, researchers and all those involved with LDCs’ development policies.”

The Least Developed Countries Report 2010 is subtitled “Towards a new international development architecture for LDCs”. The objectives of the proposed new international development architecture are:

• Reversing the marginalisation 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.

Mr Malhotra said, “LDCs have remained marginal in the world economy owing to their structural weaknesses and the form of their integration into the global economy. Unless both these aspects are directly addressed, they will remain marginal and their vulnerability to external shocks and pressures will persist.

Unfortunately, existing special international support measures for LDCs do not effectively address the structural weaknesses of these countries or how the LDCs interact with the global economic system. Therefore it is hardly surprising that during the past three decades, only two countries were able to graduate from the LDC status and in fact the number of countries falling in the LDC category has doubled.”

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 calls for a new generation of LDC-specific international support mechanisms that should be accompanied by resources, including financial resources, institutions, policy frameworks and organisational entities, to enable their implementation. They should move beyond a focus on trade and market access, to promote development of productive capacities in LDCs.

Only then can the International Support Mechanisms (ISMs) be actionable and potentially address the specific structural weaknesses and vulnerabilities of LDC economies today, including: weak human resources, poor physical infrastructure, low technological capabilities, excessive dependence on external sources of growth, low share of manufacturing in GDP and high levels of debt.

It requires the State to play a more developmental role in creating favourable conditions for capital accumulation, technological progress and structural transformation, as well as in the generation of productive employment opportunities, which is the key to substantial poverty reduction in the LDCs,” added Mr Malhotra.

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 Organisation 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 mobilisation 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 all 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 not be made contingent on 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.

“The UNCTAD LDC 2010 Report will contribute to an increased appreciation and understanding of the complexities of the LDCs economies and their future role in ensuring a more dynamic, sustainable, and equitable growth trajectory that supports more inclusive human development. The Least Developed Countries Report 2010 will be used to help inform debate at the Fourth United Nations Conference on Least Developed Countries scheduled for May 2011 in Istanbul (Turkey). That conference will result in an international plan of action intended to address the needs of LDCs over the next decade,” concluded Mr Malhotra.

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