HomeEconomyAllow the least developed countries to develop

Allow the least developed countries to develop

Authors: Anis Chowdhury, adjunct professor at the University of Western Sydney and the University of New South Wales (Australia), held senior positions at the United Nations in New York and Bangkok; Jomo Kwame Sundaram, a former professor of economics, served as the United Nations Assistant Secretary-General for Economic Development. Won the Vasily Leontief Prize for the frontier of economic thought.Originally published on International news agency

The pandemic is using the least means to fund economic recovery and contagion containment efforts, thereby causing the world’s poorest countries to shrink back. Without international solidarity, as COVID-19 threatens humanity in the coming years, the economic gap will widen again.

Least developed

Although the “least developed country” (LDC) name introduced five years ago brought some concessions, it did not produce the changes needed to accelerate the sustainable development of all people.

The United Nations (UN) General Assembly established the Least Developed Countries category for its second session Ten years of development (1971-80).its Resolution Seek support for it The 25 poorest member states, Sikkim withdrew after the annexation of India in 1975.

With the addition of many other countries, the list of least developed countries rose to 49 in 2001.Half a century later, there are only 7 “graduations”-after meeting income, “human assets”, and economic and environmental vulnerabilities standard – this The remaining 44 least developed countries Have 14% People of the world.

More than two-thirds of the population in the least developed countries are in sub-Saharan Africa, accounting for more than half of the world’s extremely poor people, and living on less than US$1.9 a day.The least developed countries are Increased vulnerability by 27% Compared with other developing countries, 12% of them are in extreme poverty.

The criteria for least developed countries are different from the World Bank’s benchmark for low-income countries Preferential Loan eligibility. Some least developed countries—especially resource-rich countries—are middle-income countries (MIC) that do not qualify for graduation according to other criteria.

Most of the least developed countries have become very dependent on aid. Despite the high-sounding statement, Only 6 out of 29 The “Development Partners” of the Organization for Economic Cooperation and Development (OECD) have fulfilled their pledge to use at least 0.15% of national income to assist the least developed countries.

Chasing a mirage?

Since then, the United Nations has organized a meeting every ten years to review the progress and action plans of the governments and development partners of the least developed countries. The first time was held in Paris in 1981, and the fifth time will be held in Doha in January 2022.

The 2011 Istanbul Conference ambitiously sought to graduate at least half of the least developed countries by 2020. But only three countries—Samoa (2014), Equatorial Guinea (2017) and Vanuatu (2020)—have done this. To make matters worse, most former LDCs have difficulty maintaining development after graduation.

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

These measures have fully implemented liberalization, privatization and austerity policies, including many least developed countries. As expected,’Lost decades‘This is followed by most of Africa and Latin America.

Turn the stone into gold

Botswana was the first graduate in 1994 and is now the upper tier of the MIC. Its diamond boom achieved an average annual growth rate of 13.5% between 1968-90. Unsurprisingly, Botswana’s “good governance”, institutions and “prudential” macroeconomic policies are hailed as “African success stories“.

However, the honor is not good. Botswana, rich in minerals, remains fragile. After graduation, the average growth rate dropped sharply to 4.7% from 1995 to 2005, and has never exceeded 4.5% since 2008.

The share of manufacturing in GDP rose from 5.6% in 2000 to 6.4% in 2010, and then fell to 5.2% in 2019. 60% of its population is below the World Bank’s US$5.50 MIC poverty line Daily.

Ruins of Botswana High inequalityDuring 1986-2002, life expectancy fell by 11 years, mainly due to HIV/AIDS. When the government accepted the austerity policy, its already weak health system suffered a catastrophic brain drain.

Policy independence is essential

Although they have not yet graduated, some least developed countries have successfully begun to diversify their economies. Their policy initiatives have provided important lessons for others.

According to the standards once so beloved by the World Bank and the OECD, neither Bangladesh nor Ethiopia qualify as “good governance” models. Instead, they successfully intervened to resolve key development bottlenecks.

Used to be considered ‘Basket‘, Bangladesh is now a lower MIC. Despite the 2008-09 global financial crisis and the current pandemic, it has deliberately diversified rather than pursued Washington’s policies. It has become quite resilient, with an average growth rate of 6% for more than a decade.

Bangladesh sees the potential of exporting manpower to earn valuable foreign exchange and work experience.exist 1976, It agreed to provide labor for Saudi Arabia’s oil financing boom.

Similarly, since newly industrialized economies are no longer eligible for market access for privileged multi-fiber arrangements, Dhaka has been cooperating with Seoul to take over Korean apparel exports in 1978.

Bangladesh is also the only least developed country to take advantage of the 1982 WHO Essential Medicines Policy. Its national drug policy prohibits the import and sale of non-essential drugs. Therefore, its now vibrant generic drug industry has emerged.

Allow pragmatism

From 2004 to 19, Ethiopia’s average growth rate exceeded 9%. As the share of industry in output rose from 9.4% in 2010 to 24.8% in 2019, the poverty rate dropped from 46% in 1995 to 24% in 2016.

Avoid the “Washington Consensus” Policy, Ethiopia Industrial policy Promote structural change. Manufacturing growth The annual growth rate was 10% in 2005-10 and 18% in 2015-17.

with Improve Governance, state-owned enterprises Still dominant Strategic industries such as banking, public utilities, aviation, chemical industry, and sugar refining. Ethiopia opened its banks to domestic investors, Keep out foreignersAt the same time, privatization Has been limited and progressive.

It did not fully liberalize the exchange rate, but adopted a “managed floating” system. Although market prices are liberalized, key prices-such as petroleum products and fertilizers- Still regulated.

Neither Bangladesh nor Ethiopia It has accepted the independence of the central bank or the formal “inflation target framework”, which was once a requirement of the IMF and other institutions, ostensibly for macroeconomic stability and growth.

Both countries retain reformed specialized development banks Direct credit to policy priorities, And the Central Bank of Bangladesh has “Be proactive in its defined development role“.

Policy is destiny

In development and structural transformation, ‘Path dependence‘It means that policy is destiny. The current predicament of the least developed countries is mainly due to the policies promoted by international organizations and development partners decades ago.

The current reform agenda should avoid ambitious comprehensive efforts, as this would overwhelm the least developed countries with limited resources and capabilities. In addition, there is no “magic bullet” or “one size fits all” policy package that applies to all LDCs.

Policies should be tailored to national conditions, taking into account their limited options and difficult trade-offs. They must be politically, economically and institutionally feasible, pragmatic, and aim to overcome key constraints.

OECD development partners must fulfill their commitments and support national development strategies. They must resist assuming that they know what is best for the least developed countries, for example, by asking them to follow the fashion of Washington and the OECD.

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