LDC Numbers Double to 49 in 40 Years

The world’s poorest countries and the international community urgently need to revise their approach to development policy. Or so believe many economic, trade, and development experts looking ahead to a high-profile United Nations summit on least-developed countries (UNLDC IV) in Istanbul next May.

Since 1971, the United Nations has identified LDCs as a category of states which, for reasons of very low income, poor human development, and high economic vulnerability to natural, trade, and economic shocks, face more structural handicaps than other countries in rising out of poverty.

However, over the past 40 years, despite the increased spotlight on their problems, and considerable economic aid, the number of LDCs has doubled, to 49. Only two have graduated to non-LDC developing country status: Botswana, in 1994, and Cape Verde, in 2007. Many LDCs remain exporters of raw materials, with little value addition taking place, a diagnosis that has remained largely unchanged over the past thirty years. Even the LDCs that have expanded trade and attracted foreign investment have struggled to diversify beyond a handful of products. Despite high commodity prices over the past decade, LDCs are still failing to converge with developing countries, with income gaps widening instead of narrowing. Reversing this trend will require new policies, the experts said.

A theme echoed at both meetings was the opportunity presented by the changing dynamics of the global economy and of LDC trade patterns. While LDCs traditionally focused on Northern markets, relying on trade preferences linked to colonial-era ties, developing countries - above all, China - were becoming a more and more important source of capital and destination for exports. Furthermore, since emerging economies will be the fastest growing economies in the near future, LDCs should try to get access into these markets.

Promoting coordination between governments and the private sector was also pointed to by WTO Director-General Pascal Lamy, who suggested that such partnerships could be one potential focus for the Istanbul summit on LDCs. Other issues he raised were youth employment and the simplification of rules of origin, which often act as a barrier to LDC exports.

Aid, not just trade, is also likely to feature prominently in Istanbul. At the last UN LDC summit, in Brussels in 2001, government pledged to provide 0.15-0.2 percent of national income in aid to LDCs. Despite significant increases, however, development aid flows to LDCs remain at 0.09 percent of total donor country income, well below the target.