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Just Trade All Your Troubles Away

By Ferial Haffajee

The key message to the 49 poorest nations from this third UN meeting is that they can trade themselves out of trouble. Private sector solutions dominate: market access, enterprise development and commodity development.

Yesterday, young entrepreneurs met all day - a symbol of where the world is pinning its hopes. This is a remarkable show of support for a market-led development project - despite the fact that the market has largely failed the poor in the Nineties.

In three decades, the number of LDC countries shot up from 25 to 49, as the concept of a developmental state has receded, to give way to the ideology of the market - that economic growth will automatically bring development.

Despite growth in Africa - the continent that is home to 35 of the 49 LDC countries - satisfying human need is not a logical consequence. "Development must be geared toward a human development objective. Markets and trade are only a means toward an end," says Isabelle Hoferlin of Social Alert! - a Brussels-based NGO.

Yet, the nuts and bolts of human development - women's empowerment, education, basic services, health - have played a secondary role at the Conference. Instead, the focus has fallen on assisting a nascent business class in the LDCs, the digital economy and market access. Its central theme has been about trying to bring the benefits of globalisation, that has seen rising prosperity in the North, to the LDCs.

Funds have been forthcoming in the form of bilateral agreements; the World Trade University and numerous other business training opportunities; business linkages; an International Advisory Council, comprised of leading businesses.

These efforts are meant as a fix-it. Since 1990, these countries were cut out of the loop - foreign investment declined by 39 per cent.

One in two people cannot read or write; four in 10 do not have access to clean water; now they face HIV/AIDS as well. The disease is threatening to take life expectancy down from 59 years to 45 years in the next two days. Yet HIV/AIDS formed only a sideshow at the Conference - designated only an emerging issue, its ugly realities pushed aside.

Where need is so deep, the role of the state is crucial in spearheading the national effort. Yet, at the meeting, the role of the state has been confined to discussions on good governance. If you delve into the quality of discussions on governance, these are in turn dominated by discussions on how best to construct systems that are good for investors.

The development model - determining strategy, budget, implementation and priority - is increasingly the work of donors and their civil society partners. The state's role is in decline; the market is still in ascendancy, despite the patchy record.

Yet, sustainable development, at scale, rests on finding the balance between the state and the market. "Market economies are the future, but in Africa there are many areas where you need the state," says Geoffrey Mwau of the Economic Commission for Africa (ECA).

The UNDP director, Eimi Watanabe, says she does not detect an overly market-led approach. "There is a strong recognition that market's will not solve everything," she believes, adding that, "a public sector role is vital". In the most vulnerable countries, the public sector is small - its role must be complemented and assisted by the "development partners" - the definition of which is still an area of contention.

In addition, the LDCs need to start developing their regional identities - the only way to survive in the global world.

"Business has come a long way," says Watanabe, suggesting that the private sector can be a development partner. "But we must remember that their raison d'etre is profit."

Attracting investment into the LDCs is also no guarantee of development. This depends on national efforts to make transnational businesses reinvest a portion in the host country or to procure goods and services from small and medium sized businesses.

But this in turn raises another conundrum. What has happened in all the LDCs in the past two decades is that national wealth gaps have grown - elite creation has been successful. In many of the LDCs - Uganda, Ethiopia, Angola, Bangladesh - the laptop tapping, mobile-phone chatting class is emerging, although not at the scale required to assist the development of viable markets.

Where does the answer lie? Perhaps it lies in finding the balance between the state and the market. This will mean that the developed world must make good on those aspects that bolster the state's role as well: effective debt relief to reduce the burden on the national treasury and short to medium-term aid to boost social spending.

The prognosis for an even-handed approach is not good - while the developed world and the United Nations have made tangible "deliverables" to support LDC markets, it appears their support for state-led development is going to be far more mealy-mouthed.