Let Least Developed Countries Develop — Global Problems

Let Least Developed Countries Develop — Global Problems

  • Opinion by Jomo Kwame Sundaram, Anis Chowdhury (Sydney and Kuala Lumpur)
  • Inter Press Service

Least developed
While the designation of ‘least developed countries’ (LDCs) – introduced five decades ago – entailed some concessions, it has not brought about the changes needed to accelerate sustainable development for all.

With many others joining, the list of least developed countries rose to 49 in 2001. Half a century later, only seven had “graduated” – after meeting income, “human wealth” and economic and environmental vulnerability. criteria – the 44 remaining LDCs to have 14% of the people of the world.

With more than two-thirds in sub-Saharan Africa, the least developed countries have more than half of the world’s extremely poor and live on less than $1.9 a day. MOLs are 27% more vulnerable than other developing countries, where 12% are extremely poor.

LDC criteria differ from World Bank low-income benchmarks for: economical qualify for a loan. Some LDCs – especially the resource-rich – are middle-income countries (MICs) excluded from graduation on the basis of other criteria.

Most LDCs have become heavily dependent on aid. Despite pompous statements, only 6 of 29 The ‘development partners’ of the Organization for Economic Co-operation and Development (OECD) have kept promises to give at least 0.15% of their national income as aid to the least developed countries.

Chasing mirages?
Since then, the UN has organized conferences every ten years to review progress and programs of action for LDC governments and development partners. The first – in Paris – was in 1981, while the fifth will be in Doha in January 2022.

In the 1980s and 1990s, many developing countries implemented macroeconomic stabilization and structural adjustment policies from the Washington-based International Monetary Fund (IMF) and the World Bank.

These led to liberalisation, privatization and austerity across the board, including many LDCs. Not surprising, ‘lost decades‘ followed for most of Africa and Latin America.

Midas curse

Botswana, the first graduate in 1994, is now a higher MIC. The diamond boom provided an average annual growth rate of 13.5% in 1968-90. Unsurprisingly, Botswana’s ‘good governance’, institutions and ‘prudent’ macroeconomic policies have been hailed as parts of this”African success story”.

However, the accolades are not well received. Mineral-rich Botswana remains vulnerable. Immediately after graduation, the average growth rate dropped sharply to 4.7% in 1995-2005 and has never exceeded 4.5% since 2008.

Industry’s share of GDP fell to 5.2% in 2019, after rising from 5.6% in 2000 to 6.4% in 2010. 60% of people have less than the Bank’s MIC poverty line of US$5.50 daily.

Botswana stays very uneven. In the period 1986-2002, life expectancy decreased by 11 years, mainly as a result of HIV/AIDS. When the government embraced austerity, the already weak health system suffered a disastrous brain drain.

Policy independence crucial
Although they have not yet graduated, several LDCs have successfully begun to diversify their economies. Their policy initiatives provide important lessons for others.

Bangladesh and Ethiopia would not qualify as a ‘good governance’ model by the criteria once loved by the Bank and the OECD. Instead, they have intervened successfully to address critical development bottlenecks.

Once considered a ‘basket case‘, Bangladesh is now a lower MIC. By deliberately diversifying, rather than pursuing Washington’s policies, it has become quite resilient, growing at an average rate of 6% for more than a decade, despite the 2008-09 global financial crisis and the current pandemic.

Bangladesh saw the potential for exporting labor to gain valuable foreign exchange and work experience. In 1976, it agreed to provide labor for the oil-funded boom in Saudi Arabia.

Likewise, when newly industrialized economies were no longer eligible for privileged access to the Multi-Fibre Arrangement market, Dhaka teamed up with Seoul from 1978 to take over South Korean clothing exports.

Bangladesh is also the only LDC to benefit from the 1982 World Health Organization Essential Drugs Policy. The national drug policy blocks the import and sale of non-essential drugs. This is how the now vibrant generic pharmaceutical industry was born.

Allow pragmatism
In 2004-19 Ethiopia’s growth averaged more than 9%. Poverty dropped from 46% in 1995 to 24% in 2016, as industry’s share of manufacturing increased from 9.4% in 2010 to 24.8% in 2019.

Avoiding ‘Washington Consensus’ policy, Ethiopian industrial policy brought about structural change. Production grew annually by 10% in 2005-2010 and by 18% in 2015-2017.

Of improved board, state enterprises still dominate banks, utilities, airlines, chemicals, sugar and other strategic industries. Ethiopia opened banks to domestic investors, keep foreigners out. Meanwhile, privatization has been limited and gradual.

Instead of fully liberalizing exchange rates, it adopted a managed float system. While market prices have been liberalised, critical prices – for example for petroleum products and fertilizers – have remained regulated.

Neither Bangladesh nor Ethiopia have embraced central bank independence or formal “inflationary frameworks” once demanded by the IMF and others, ostensibly for macroeconomic stability and growth.

Both countries retain reformed specialized development banks to direct credit for policy priorities, while the Central Bank of Bangladesh”remained proactive in its mandated development role”.

Policy is destiny
In development and structural transformation,’path dependencyimplies that policy is destiny. The current problems of LDCs are largely due to policies from decades ago urged by international organizations and development partners.

Reform agendas must now avoid ambitious comprehensive efforts that will overwhelm the least developed countries with modest resources and capabilities. There is also no ‘magic bullet’ or ‘one-size-fits-all’ policy package for all LDCs.

Policies must be adapted to the circumstances of the country, taking into account the limited possibilities and difficult trade-offs. They must be politically, economically and institutionally feasible, pragmatic and aimed at overcoming critical constraints.

The OECD’s development partners should instead fulfill their obligations and support national development strategies. They must resist the presumption of knowing what is best for the least developed countries, for example by forcing them to imitate the fads of Washington and the OECD.

Follow @IPSNewsUNBureau
Follow IPS New UN Bureau on Instagram

© Inter Press Service (2021) — All rights reservedOriginal source: Inter Press Service

.

Leave a Comment