Annual Ministerial Meeting of the Least Developed Countries

Speech to the Annual Ministerial Meeting of the Least Developed Countries

Posted On September 26, 2018

 

As prepared for delivery

Excellencies,

It is a pleasure to address the Annual Ministerial Meeting of the Least Developed Countries.

Three years into the implementation of the 2030 Agenda for Sustainable Development, and just two years before reaching the completion of the Istanbul Declaration and Programme of Action (IPOA) for the Least Developed Countries (2011-2020), it is timely to, first, take stock of progress towards graduation from the LDC category. And, second, to reflect on what can be done to accelerate this long-standing aspiration of the United Nations since the LDC classification of countries was established in 1971.

Taking Stock
The pace of progress towards LDC graduation has been slow – with only 5 countries fully graduating since 1971. But the progress has accelerated rapidly over the last few years: the Committee for Development Policy assessed that an additional 12 LDCs had met graduation thresholds. Since 1990 the LDCs have experienced the highest rate of growth of the Human Development Index (at 51.4 percent). This accelerating rate of progress is expected to continue this, and into next year, with GDP growth in the LDCs forecast to reach 5.2% in 2018 and 5.5% in 2019 – a significant improvement over 2015-2016.

But more needs to be done. Rates of economic growth in LDCs are, on average, well below the SDG target of 7%. Whereas per capita economic growth in LDCs is steadily rising, it is still at levels insufficient to eradicate extreme poverty: based on current trends, 35 per cent of the population in LDCs would be expected to remain in extreme poverty by 2030. This is not inevitable: some large LDCs are growing at or above 7% a year, including Bangladesh, Cambodia, Ethiopia, Myanmar and Tanzania.

Accelerating Progress
So what needs to be done to further accelerate progress?  I would like to offer three suggestions, aligned with the priorities of the Istanbul Programme of Action.

First, LDCs need not only faster GDP growth, but also to ensure that growth is inclusive and sustained. For growth to be inclusive, a significant reduction in income inequality will have go along with faster growth rates. In addition, LDCs have to snap out of the boom and bust cycle of high growth volatility that affects so many countries.

An important factor in this pattern of volatility and non-inclusive growth is the dependence of so many on commodity exports: in 38 of the 47 LDCs for which data are available, commodities accounted for more than two-thirds of merchandise exports in 2013–2015. Commodity-linked sectors tend to be capital-intensive, generating little employment and opportunities for inclusive growth. When commodity prices change this is reflected in growth volatility. A priority, therefore, is to diversify towards more labor-intensive and higher value added activities. Yet, only five LDCs have reduced their dependence on primary commodities significantly since 2000, with a quarter have seen increases.

Second, the integrated approach called for in the 2030 Agenda needs to be fully internalized in LDCs’ development strategies. While the Istanbul Programme of Action does identify priority areas, with the 2030 Agenda and the SDGs we have the opportunity to explore interlinkages and self-reinforcing synergies across sectoral interventions. Let us recall that the Istanbul Programme of Action was agreed several years before the SDGs were adopted, and thus we need to imbed the 2030 Agenda into the programme of support for the LDCs

As an example, which was also emphasized in a recent UNCTAD report, consider improving access to energy. It would carry multiple benefits across a wide range of SDGs – from reducing poverty, to enhancing access to health and education services. Today, 62 per cent of people in LDCs have no access to electricity, compared with 10 per cent across other developing countries. The majority of people worldwide who lack access to electricity live in LDCs — a proportion that has grown steadily from less than one third in 1990.

But we need to face the challenge in ways that go beyond providing more than access to energy for basic household needs. Access to energy is critical for productive capacity, for manufacturing, for irrigation – for the essential activities that will enable the LDCs to make progress in the SDGs linked to employment and industrialization. Without adequate and reliable energy supplies, the labor cost advantages that many LDCs still have will be washed away, because the overall costs of production – accounting for power supply blackouts and volatility – increase dramatically.

Finally, the third set of challenges that LDCs need to confront are the dramatic changes to our economies and societies.

The combination of technology and globalization has driven an explosion in international trade, much of which linked to global value chains. More than 80% of global trade flows through multinational corporations, and one in five jobs around the world is tied to global value chains. Developing countries rode these trends, banking on labor cost advantages, to expand their economies and lift people out of poverty at unprecedented rates. A typical pathway was characterized by a transition from agriculture to labor-intensive, but low value, manufacturing – eventually evolving to more complex manufacturing tasks. Production was meant not for relatively small – though growing – domestic markets, but for the much larger international demand.

This is still the development pathway implicit in the Istanbul Programme of action for the LDCs, but the opportunities are narrowing.

Geopolitical dynamics are changing the policy environment of borders open to the flow of goods and capital, potentially making it harder to export to international markets and to integrate in global value chains. Escalation of trade wars will limit opportunities for LDCs, not only on the trade side, but also in limiting investment flows. Already, this year, we have seen very sharp devaluations in several developing country currencies (linked also to the normalization of monetary policy in the US) and reversal of capital flows.

In addition, and more long term, LDCs have to confront the technological revolutions that are happening at the moment. Sometimes, the technologies of what is often called the fourth industrial revolution seem relevant only in the most advanced economies. But it would be misguided to ignore the major trends that are happening globally, and not to reflect on their implications for LDCs.

There are, naturally, immense opportunities. The way in which access to mobile phones has enhanced financial inclusion – through mobile banking as well as peer-to-peer money exchanges – is one example. On energy access, that I have mentioned before, technological advances in renewable energy – especially sharp drops in prices and increase in efficiency of wind and solar – offer more and more affordable, scalable, and rapidly deploying options. In fact, renewable energies are expected to capture three-fourths of the $10 trillion the world will invest in new power generation through 2040. The LDCs need to ride this wave of technological progress, as recognized in the Istanbul Programme of Action, and for which the Technology Bank can make important contributions.

LDCs need to not only seize these opportunities but also manage risks of new technologies. With automation and artificial intelligence, labor can be replaced at faster rates than has already happened. Labor cost advantages may be eroded, with manufacturing by robots cheaper in advanced economies than in low-labor cost developing countries. The World Bank has estimated that two-thirds of all jobs in developing countries are susceptible to automation, with numbers as high as 85 percent vulnerable in some countries.

Even if these estimates are controversial and may seem exaggerated, there is no question that the global decrease in the price of investment goods relative to labor, driven by computerization, the Internet, and digital technologies, will likely continue, and will have implications for LDCs.

Over the last couple of decades, technology and globalization has driven an explosion in international trade, much of which is linked to global value chains. More than 80% of global trade flows through multinational corporations, and one in five jobs around the world is tied to global value chains. Developing countries rode these trends, banking on labor cost advantages, to expand their economies and lift people out of poverty at unprecedented rates. However advances in artificial intelligence and automation may close opportunities to explore labor cost advantages in the LDCs.

UNDP’s Role
Let me conclude with some short observations on the role of UNDP in supporting LDCs. Our contribution is in part linked to our programmatic activities. Just because I emphasized the example of energy, let me share that we have a large portfolio of sustainable energy projects in at least 32 LDCs to accelerate access to electricity in rural off-grid areas, deploying renewable energy-based solutions where possible. UNDP has supported more than 140 countries, including all LDCs, to access more than USD3.2 billion in grant finance since 2008 to develop and implement climate change initiatives. This includes the Low-Emission Capacity Building (LECB) Programme supported by the European Union (EU), Germany and Australia that has assisted 9 LDCs - Bhutan, the Democratic Republic of Congo, Uganda, Zambia, Lao PDR, Sierra Leone, Solomon Islands, Tanzania and Vanuatu - to transition to a low emission pathway.

Another relevant initiative is Tax Inspectors Without Borders, jointly organized by UNDP and the OECD, which supports improvements in tax administration – a critical requirement to increase domestic resource mobilization. We are working with 10 LDCs to enhance tax audit knowledge and skills in line with the Addis Ababa Action Agenda.

Beyond programmatic activities, UNDP has long been an advocate for LDCs and an active partner in implementing IPOA and the 2030 Agenda. We urge all partners to ensure tailored support to LDCs, from resource mobilization to the development of productive capacities and stronger and more transformational mechanisms for implementation at national and regional levels.
Our global policy expertise, country support platforms, and innovative approach to development that follows a model of open collaboration and scalability will facilitate new ways of collaborating within and across government and society in pursuit of greater development achievements in this networked age.

I wish you successful deliberations in your meeting today, and I wish to conclude by reaffirming UNDP’s commitment to accelerating development progress by LDCs, towards the implementation of the 2030 Agenda.