Next January the next United Nations Programme of Action for least developed countries (LDCs) will launch in Doha. It will set the framework for the next 10 years of international support for the world’s 46 officially poorest and most structurally disadvantaged countries, home to around a billion people.
LDCs are low-income countries confronting severe structural impediments to sustainable development. Membership of the category is based on three criteria: income per capita, human assets and economic and environmental vulnerability.
Assistance for LDCs currently falls under three categories: trade, aid and a range of ad hoc measures broadly aimed at help with taking part in the international system, such as lower contributions to the UN budget and support for travel to international meetings like the annual UN General Assembly.
Support is largely based on the premise that LDCs are artificially or temporarily excluded from global commerce. Preferential market access, temporary development assistance and help with participating in multilateral processes are intended to tackle this defect, in turn helping the LDCs ‘catch up’.
Dating to 1971, the category is the only one recognised in UN and multilateral legal texts. There is no official ‘developing country’ or ‘middle income’ category with associated support measures. Low income countries are not specifically targeted, and the small and vulnerable states are only recognised as a working group at the World Trade Organisation. They are not acknowledged in the legal texts.
Although donors don’t meet aid pledges and support doesn’t go far enough, official targets are possible because the LDC group is officially recognised in the UN system and has legal bearing. An example of such a target is the commitment by developed countries to deliver 0.15-0.20% of gross national income (GNI) in development assistance to LDCs. The European Union offers duty-free, quota-free market access to LDC exports under its Everything But Arms (EBA) trade scheme for LDCs.
The theory behind support for LDCs is implicitly based on the mainstream economics view that LDCs lag behind because they aren’t exposed enough to correct market prices and conditions. The removal of so-called distortions like overseas tariff and non-tariff barriers, alongside temporary development assistance and help taking part in the global system, is supposed to free up these economies to play a fuller role in the international economy. Economic growth will drive development and reduce poverty.
The evidence shows that for most LDCs this theory never worked. Until the pandemic the economies of some LDCs were performing well. Up to 12 could leave the category in coming years. A few, like Bangladesh, Cambodia and Myanmar, were able to take advantage of lower tariffs for their garment exports. These three countries account for 87% of imports to the EU under EBA.
But half were supposed to meet the criteria by 2020, according to international targets. 12 graduations falls well short. The six that have left since the formation of the category in 1971 have not all done so because of better international market access or special support measures. Commodity exports, tourism or improved health and education are mostly responsible.
The remaining LDCs aren’t catching up. The gap is widening. The pandemic devastated the group. Gross domestic product (GDP) shrank 1.3% on average in 2020, with the economies of 37 contracting during the year and extreme poverty in the group rising by a staggering 84 million. But even before Covid, average real GDP per capita for the group had long diverged from other developing countries and the rest of the world.Read More »