Without developing productive capacities to respond and recover from crises such as COVID-19, least developed countries (LDCs) will remain on the margins of the global economy, according to UNCTAD.
By developing productive capacities, the world’s poorest countries are able to foster structural economic transformation, which will in turn, help reduce poverty and accelerate progress towards the UN SDGs.
The new report, ‘Least Developed Countries Report 2021’ details the urgency in the need for LDCs to develop their productive capacities and advance towards sustainable development.
According to UNCTAD, reaching the SDGs, however, requires massive investment and spending, which go well beyond LDC’s financial means.
UNCTAD Secretary-General Rebeca Grynspan commented: “Today LDCs find themselves at a critical juncture. They need decisive support from the international community to develop their productive capacities and institutional capabilities…”
The UN established the LDC category 50 years ago. Over all these years, countries have graduated out of the category with others adding up to the list of world’s weakest economies, which is so classified. This grouping has expanded from an initial 25 countries in 1971, peaking at 52 in 1991, and stands at 46 currently, with only 6 countries having stopped being LDCs to date.
“The pandemic has severely affected LDCs due to their reduced resilience and diminished capacity to react to the COVID-19 shock and its aftermath,” the report notes.
LDC’s limited resilience is reflected in their low COVID-19 vaccination rates, as only 2 per cent of their population has been vaccinated, compared with 41 per cent in developed countries.
Huge financing needs for LDCs
The UNCTAD report revealed that LDCs’ financing needs to achieve the SDGs are daunting, especially in areas pertaining to the targets on structural transformation.
For example, the report estimates that average annual investment requirements to reach the 7 per cent growth target (SDG 8.1) is of the order of $462 billion. The average annual investment requirements to end extreme poverty (SDG 1.1) in LDCs is estimated at $485 billion.
Financing needs are also very huge for advances in structural transformation. The average annual investment requirements to double the share of manufacturing in GDP (SDG 9.2) is estimated at over $1 trillion. This amounts to more than three times the fixed investment of LDCs in 2019.
To mobilize sufficient development finance, the report notes LDCs will need to strengthen their fiscal capacities, increase domestic resource mobilization and improve the effectiveness of public expenditures. But this will not be enough, the report warns.
“The international community has an essential role to play in supporting LDCs in their efforts to mobilize adequate financing for their sustainable development needs.”UNCTAD
The report further reveals official development assistance (ODA) in LDCs display weak catalytic impact on government expenditure because of the lack of synergy between ODA allocations and national development plans.
Noting the gravity of this problem, while calling for correction of same, UNCTAD highlighted the need for increased investment in state capacity and productive capacities in LDCs.
Most LDCs will take several years to recover the level of GDP per capita chalked in 2019. Based on UNCTAD’s analysis, the median LDC would take roughly three years to climb back to that level, while one-third of the LDCs would take five or more years.
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