DEBT, DEVELOPMENT, AND SECURITY

By Rubens Ricupero and - - Reprint | | Print |

This column is available for visitors to the IPS website only for reading. Reproduction in print or electronic media is prohibited. Media interested in republishing may contact romacol@ips.org.

GENEVA, Aug 1 2004 (IPS) - If current trends persist, extreme poverty in the world\’s least developed countries, far from being eradicated, will expand from 334 million people in 2000 to 471 million in 2015, writes Rubens Ricupero, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD). In this article, Ricupero writes that nonetheless there is no justification for development pessimism regarding LDCs. Between 2000-2002 the poorest of the poor countries enjoyed a real average annual GDP growth rate of almost 5 percent, almost 1 percent more than the rest of the developing economies, which shows that development for the LDCs can be achieved and accelerated through the right strategies and a friendly environment. He calls for a new international covenant in which solidarity is granted the same stature in our aspirations as peace. Ricupero notes that the new kinds of threats to peace and security are often found in conjunction with a failed State with an economy in regression. It would be futile to fight these phenomena without addressing the sources of grievances that they exploit. This is a particularly clear example of the lack of coherence in the global system. It is indispensable to widen the door that leads to development and to remove the biases, imbalances, and distortions which make the path to development too steep for the weak to climb.

If current trends persist, extreme poverty in the world’s least developed countries (LDCs), far from being eradicated, will expand from 334 million people in 2000 to 471 million in 2015. This is one of the findings of the 2004 Least Developed Countries Report 2004 by the United Nations Conference on Trade and Development (UNCTAD).

Not only will the LDCs fail to achieve the first of the Millennium Development Goals (MDGs) –halving the proportion of people living on less than a dollar a day by 2015– but they will also likely fail in all the other goals set at the UN Millennium Summit in September 2000. These range from reducing child mortality by two-thirds, empowering women, and ensuring environmental sustainability to making significant progress in the fight against HIV/AIDS, malaria, and other diseases — all by 2015.

Unfortunately, the prospects for success are dismal: only 11 of the 50 LDCs are on course to reduce the under-five mortality rate by two-thirds; only 11 are likely to halve the percentage of the population suffering from hunger; and just seven are on track to halve the proportion of people without access to safe water.

Given their very low incomes, mass poverty, and low savings rates, there is no way the LDCs can lift themselves out of poverty if they rely solely on domestic resources. After subsistence consumption, what is left per person is a paltry 15 cents a day to spend on private capital formation, public investment, and the provision of such vital services as schools, law and order, and public health. On average, LDCs spend less than USD 5 per capita annually on health, compared to USD 1,456 in the OECD Countries.

Other sources of financing include official development aid (ODA), workers’ remittances, foreign direct investment (FDI), trade, and debt relief. While all have increased, they are still insufficient, unstable, and too concentrated in a few countries.

Nor has the debt panorama improved enough. While the majority of aid disbursements now comes in the form of grants, loans have been growing at 27 percent a year. Despite debt forgiveness, in 2002 the total debt stock rose to USD 145 billion and total debt payments reached a record level of more than USD 5.1 billion. The debt stock increased in 43 LDCs.

Trade, in contrast, was a bright spot. LDC merchandise exports reached a new high of USD 37.8 billion in 2002, up from USD 26.1 billion four years earlier. In nominal terms, this represented a 45 percent increase, a good part of it accounted for by oil exports.

But again, export earnings were markedly uneven. During 2000-2002, 56 percent of LDC merchandise exports originated in five LDCs: the four major oil exporters plus Bangladesh. Real annual GDP per capita growth exceeded 3 percent in 14 LDCs but stagnated or declined in 24.

In order to bring about a more balanced performance and eradicate poverty in LDCs, a dynamic new policy is needed, built on three pillars. The first is a development strategy capable not simply of mainstreaming trade in poverty reduction but also of mainstreaming both trade and development within the poverty eradication effort. This requires balanced development based on agricultural productivity growth, export-led industrialisation of processed agricultural products, diversification through management of mineral resources, and employment-intensive technologies.

The second pillar is the improvement of the international trade regime, including on issues beyond the scope of the WTO, to reduce international constraints on development in the LDCs. Among these, commodity dependence and its link with extreme poverty deserve special attention, with three main priorities: 1) the rapid phasing-out of the agricultural support measures in OECD countries that adversely affect LDCs; 2) initiatives to ensure greater international transparency in revenues from oil, gas, and mineral exploitation; and 3) measures to reduce vulnerability to price shocks, including linking debt payments to commodity prices and making aid more countercyclical.

The third pillar is financial and technical support for promoting production and trade capacities in the LDCs, the most neglected area of trade, where large amounts of investment are needed.

It is important to recognise that there is no justification whatsoever for development pessimism regarding LDCs. Between 2000-2002 the poorest of the poor countries enjoyed a real average annual GDP growth rate of almost 5 percent, or real per capita GDP growth of 2.6 percent per annum — almost 1 percent more than the rest of the developing economies. This clearly shows that development for the LDCs can be achieved and accelerated provided that with the right strategies, and a friendly environment, resources are mobilised and channelled into productive uses. This requires a new international covenant in which solidarity is granted the same stature in our aspirations as peace.

As we face new threats to peace and security, let us not forget that these often arise from failed States with regressing economies –like Afghanistan. It would be futile to respond without addressing the sources of grievances that feed these threats. The lack of coherence in the global system in this area is startling. It is indispensable to widen the door that leads to development and to remove the biases, imbalances, and distortions which make the path to development too steep for the weak to climb. (END/COPYRIGHT IPS)