Fish being brought in and processed at a market in Cambodia’s northwestern Battambang province. As an LDC, Cambodia exports products duty-free to the EU. Credit: Michelle Tolson/IPS

By Thalif Deen
UNITED NATIONS, Jan 7 2015 (IPS)

The world’s 48 Least Developed Countries (LDCs) – a special category of developing nations created by the General Assembly in 1971 but refused recognition by the World Bank – have long been described as “poorest of the poor” in need of special international assistance for their economic survival.

But only three – Botswana, Cape Verde and the Maldives – have so far “graduated” from being classified as an LDC to a developing nation, based primarily on their improved social and economic performance."This mechanical setting of a target for graduation is impractical and has the potential of undesirable tension for development cooperation at national and global levels." -- Ambassador Anwarul Karim Chowdhury

At a U.N.-sponsored ministerial meeting of Asian and Pacific nations in Nepal last month, four more LDCs, namely Bangladesh, Bhutan, Cambodia and Laos, were singled out as countries on the “threshold of graduation” based on their recent economic and social indicators.

And as economies improve, some predict that at least six more countries – Tuvalu, Vanuatu, Kiribati, Samoa, Angola and Equatorial Guinea (two African nations dependent on oil incomes) – are likely to be forced out of the ranks of LDCs, possibly by 2020 or beyond.

But this outlook may be premature due to several factors, including the impact of the global economic recession, the long-term effects of the decline in oil prices, reduced purchasing power due to falling national currencies, and in the case of Africa, the spread of Ebola.

Ambassador Anwarul Karim Chowdhury, the first U.N. Under-Secretary-General and High Representative for LDCs, Landlocked Developing Countries, and Small Island Developing States (2002-2007), told IPS the 2011 LDCs Conference in Istanbul, Turkey, set an objective of graduating 50 percent of LDCs out of the group by the year 2020.

“But this mechanical setting of a target for graduation is impractical and has the potential of undesirable tension for development cooperation at national and global levels,” he pointed out.

The foremost objective of graduation should be to bring LDCs out of poverty and their structural handicaps, he noted.

“But given the current distressing situation in most of the LDCs in both areas, it would be unwise for either the LDCs or their development partners to go towards realising this target,” Chowdhury added.

The people of these countries, particularly civil society, should be involved in the process to ensure that common people of LDCs do not become the greatest victims, he said.

“This is a reality in LDCs which we should not lose sight of,” he declared.

According to the United Nations, LDCs represent the poorest and weakest members of the international community, comprising more than 880 million people and accounting for less than 2.0 per cent of global Gross Domestic Product (GDP).

Fighting poverty in the LDCs is a key component towards reaching the U.N.’s landmark 2015 Millennium Development Goals (MDGs).

LDCs currently benefit from a range of special support measures from bilateral donors and multilateral organisations, and special treatment under regional and multilateral trade agreements.

The benefits that will be lost or reduced due to LDC graduation include trade preferences, official development assistance (ODA) including development financing and technical cooperation, and other forms of assistance, such as travel support for participation at U.N. conferences and other meetings of multilateral bodies.

As a result, special attention needs to be given to these special measures for graduating LDCs.

Arjun Karki, president of Rural Reconstruction of Nepal and international coordinator of LDC Watch, a network of LDC non-governmental organisations (NGOs), told IPS the aim of the 2011 Istanbul Programme of Action was to enable at least 24 LDCs (half of the existing 48) to graduate by 2020, so the current proposals for graduation have not reached this level.

The majority of LDCs (34 out of 48) are in Africa and to date only two African nations, Angola and Equatorial Guinea, are expected to graduate by 2020.

In both these cases, graduation is solely based on their income criterion (of Gross National Income per capita having exceeded at least twice the upper threshold of 1,190 dollars) while they fare low in the human assets and economic vulnerability criteria.

He said LDCs can only graduate when both LDC governments and development partners take action and it is vital they both have the political will to achieve this.

Gyan Chandra Acharya, the current Under-Secretary-General and High Representative for LDCs, Landlocked Developing Countries and Small Island Developing States, told delegates at the ministerial meeting in Nepal “the path towards graduation should not be an end in itself but should be viewed as a launching pad towards meaningful and transformative changes in the economic structures and the life conditions of people in graduated and graduating LDCs.”

He said sustainable graduation agenda needs to be tied up with that of productive capacity development, structural transformation resilience building and sustainable improvement in human and social capital.

Some of the practices being considered include enhancing investment in the productive sector, upgrading technologies and increasing protection from external shocks, such as climate related events, economic crises and natural disasters, according to a statement released by his office.

Chowdhury told IPS basically, graduation is a positive effort which requires the sincere and wholehearted engagement of both LDCs and their development partners.

“However, fixing an arbitrary target and using a technical approach for graduation could undermine realization of a good objective,” he stressed.

He also warned the ongoing economic crisis in the industrialised countries influenced the setting of the Istanbul target. “As the first High Representative of the new U.N. office established in 2002 to champion the cause of the worlds most vulnerable countries, I had worked diligently to make a space for the smooth transition in the graduation process,” Chowdhury explained.

That arrangement, he said, had made the LDCs less uncomfortable to engage in the process.

“I recall fully the agonising interactions for the graduation of Cape Verde and the Maldives during my tenure,” he said.

The consultative mechanism set up during the smooth transition needs to be closely monitored by the High Representative personally to ensure that the concerns of the graduating LDC have the true support of the U.N. system, he cautioned.

“This was part of my regular firsthand contacts with all of the Cape Verde graduation process,” he added.

Chowdhury also said overcoming of the constraints in two of the three determinants for LDC status to be eligible for graduation requires the full understanding by all sides of the real situation of LDCs.

“It is a pity that the biggest development assistance provider, the World Bank, has refused to accept LDCs in its work as a special category of countries as identified by the United Nations,” he said. “And my repeated visits to and efforts with the Bank headquarters did not get any response for the inclusion of LDCs.”

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

Children in Luanda. Angola is expected to graduate from the ranks of the LDCs by 2015. Credit: Louise Redvers/IPS

By Thalif Deen
UNITED NATIONS, Jul 31 2013 (IPS)

The number of “least developed countries” (LDCs), which rose from the original 24 back in 1971 to the current 49, is beginning to shrink – haltingly.

So far, three countries – Botswana, Cape Verde and the Maldives – have “graduated” from LDCs to the status of developing countries."The key issue of a widening inequality gap and redistribution of resources remains a development challenge." -- Dr. Arjun Karki of LDC Watch

And as economies improve, at least six more countries – Tuvalu, Vanuatu, Kiribati, Angola, Samoa and Equatorial Guinea – are on the verge of leaving the ranks of LDCs by 2015.

But some of them have been reluctant to graduate – and sought postponements – since LDC status provides several benefits, including preferential tariffs on exports and increased development aid.

Still, the growing list of potential “graduates” comes in the midst of a new U.N. report that says inflows of foreign direct investment (FDI) to LDCs grew by 20 percent last year, registering a record 26 billion dollars.

The strong gains were led by Cambodia, as well as five African countries: the Democratic Republic of Congo (DRC), Liberia, Mauritania, Mozambique and Uganda, all of them LDCs.

The recently-released World Investment Report 2013, authored by the Geneva-based U.N. Conference on Trade and Development (UNCTAD), says growth was led by strong gains in Cambodia (where inflows were up 73 percent), DRC (96 percent), Liberia (167 percent), Mauritania (105 percent), Mozambique (96 percent), and Uganda (93 percent).

Still, 20 LDCs reported declines in FDI, and the trend was particularly pronounced in Angola, Burundi, Mali and the Solomon Islands.

Described as the poorest of the world’s poor, LDCs are mostly characterised by extreme poverty and economic structural weaknesses.

According to the United Nations, these have been often compounded by geophysical handicaps, limited capacity for growth and development and vulnerability to external shocks.

The most recent addition to the list of 49 LDCs is the new nation state of South Sudan, which joined the United Nations as its 193rd member in July 2011.

Asked if the FDI increase in LDCs is the beginning of a new trend or just a flash in the pan, Dr. Arjun Karki, international coordinator for LDC Watch, a global civil society alliance solely focused on developmental issues and concerns of the LDCs, told IPS, “The scenario is not crystal clear.”

Given the fall in FDI inflows to developed countries, the LDCs are now on the FDI radar, he added.

“If you observe the trend, it’s the resource-rich LDCs, such as the DRC, Liberia, Mauritania, Mozambique, and Uganda, that are receiving FDI inflows,” he pointed out.

But investments are reported to be highest in the extractive sector, he noted.

“From the development perspective, this trend is not very encouraging as this reinforces the commodity-led growth in LDCs which is not sustainable,” Dr Karki said.

The U.N. Committee for Development Policy (CDP) usually determines “eligibility” for LDC status – based on several factors, including population, national income and other economic indicators – but the ultimate decision rests with the countries themselves.
Zimbabwe, for example, has refused to join the LDC group despite being judged eligible by CDP.

Secretary-General Ban Ki-moon says the increase in FDI comes at “an important moment” when the international community is making a final push to achieve the Millennium Development Goals (MDGs) by the target date of 2015.

One of the primary objectives of MDGs is to reduce and eliminate extreme poverty and hunger, two of the major problems facing most LDCs.

At the same time, he said, the United Nations is working to forge a vision for the post-2015 development agenda.

Credible and objective information on FDI can contribute to success in these twin endeavours, Ban added.

Dr. Karki told IPS the new Istanbul Programme of Action for LDCs for the Decade 2011-2020 is a slight shift from the commodity-oriented growth towards building productive capacity of LDCs in order to achieve structural economic transformation of LDCs.

Therefore, FDI inflows to LDCs would be welcome if they are targeted at the manufacturing sector, infrastructure and basic services sector such as health, water and sanitation, electricity and communications.

The key problem with FDI inflows targeting the extractive sector is that the benefits fail to trickle down, with only the multinational and transnational corporations and the recipient country’s elites minting money at the expense of the poor, marginalised and vulnerable communities, he pointed out.

“The key issue of widening inequality gap and redistribution of resources remains a development challenge,” he said. “This fact was blatant during my recent visit to Liberia and Sierra Leone – two extremely resource-rich LDCs but unfortunately, with the poorest populations.

“Given such a sad irony, our civil society partners were of the opinion that all the riches should remain in the soil/ground as they fail to ensure the right to sustainable development of the peoples anyway.”

The negative growth – particularly in Angola, Burundi and Mali – could be attributed to the political instability in these LDCs, which is not a good breeding ground for FDI.

“Having said this, it is also interesting to note that FDI inflows are high in both authoritarian regimes as well as in vulnerable governments as is the case in Africa and Asia,” Dr. Karki noted.

He said the other reason for FDI decline could be the evolving role of development-oriented governments in LDCs that are attempting to safeguard national interests and rights of peoples over profit and plunder.

“If this is truly the case, then LDC governments are in the right direction towards genuinely uplifting their populations out of the structural causes of poverty, deprivation and injustices,” he said.

The issue of sovereignty is critical in terms of respecting and complying with country systems. Otherwise, it has been proven that FDI is more of a bane than a boon for sustainable development, Dr Karki concluded.