Allow Least Developed Countries to Develop

By Anis Chowdhury, Adjunct Professor at Western Sydney University and University of New South Wales (Australia), who held senior United Nations positions in New York and Bangkok and Jomo Kwame Sundaram, a former economics professor, who was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. Originally published at Inter Press Service

The pandemic is pushing back the world’s poorest countries with the least means to finance economic recovery and contagion containment efforts. Without international solidarity, economic gaps will grow again as COVID-19 threatens humanity for years to come.

Least Developed

While bringing some concessions, the ‘least developed countries’ (LDCs) designation – introduced five decades ago – has not generated changes needed to accelerate sustainable development for all.

The United Nations (UN) General Assembly created the LDCs category for its Second Development Decade (1971-80). Its resolution sought support for its 25 poorest Member States, with Sikkim out after India’s 1975 annexation.

With many others joining, the LDCs list rose to 49 in 2001. Half a century later, with only seven having ‘graduated’ – after meeting income, ‘human assets’ and economic & environmental vulnerability criteria – the 44 remaining LDCs have 14% of the world’s people.

With more than two-thirds in Sub-Saharan Africa, LDCs have over half the world’s extreme poor, surviving on under US$1.9 daily. LDCs are 27% more vulnerable than other developing countries, where 12% are extreme poor.

LDC criteria differ from World Bank low-income country benchmarks for concessional loan eligibility. Some LDCs – especially the resource-rich – are middle-income countries (MICs) disqualified from graduation by other criteria.

Most LDCs have become greatly aid reliant. Despite grandiloquent pronouncements, only 6 of 29 Organization for Economic Cooperation and Development (OECD) ‘development partners’ have kept promises to give at least 0.15% of their national incomes as aid to LDCs.

Chasing Mirages?

The UN has organised conferences every decade since to review progress and action programmes for LDC governments and development partners. The first – in Paris – was in 1981, while the fifth will be in Doha in January 2022.

The 2011 Istanbul conference ambitiously sought to graduate at least half the LDCs by 2020. But only three – Samoa (2014), Equatorial Guinea (2017) and Vanuatu (2020) – have done so. Worse, most ex-LDCs have had difficulties sustaining development after graduating.

During the 1980s and 1990s, many developing countries implemented macroeconomic stabilisation and structural adjustment policies from the Washington-based International Monetary Fund (IMF) and World Bank.

These imposed liberalisation, privatisation and austerity across the board, including many LDCs. Unsurprisingly, ‘lost decades’ followed for most of Africa and Latin America.

Midas Curse

Botswana, the first graduate in 1994, is now an upper MIC. Its diamond boom enabled 13.5% average annual growth during 1968-90. Unsurprisingly, Botswana’s ‘good governance’, institutions and ‘prudent’ macroeconomic policies were hailed as parts of this “African success story”.

However, the accolades do not sit well. Mineral-rich Botswana remains vulnerable. Right after graduation, average growth fell sharply to 4.7% during 1995-2005, and has never exceeded 4.5% since 2008.

Manufacturing’s share of GDP fell to 5.2% in 2019, after rising from 5.6% in 2000 to 6.4% in 2010. Nearly 60% of its people have less than the Bank’s MIC poverty line of US$5.50 daily.

Botswana remains highly unequal. During 1986-2002, life expectancy fell 11 years, mainly due to HIV/AIDS. When the government embraced austerity, its already weak health system suffered a disastrous brain drain.

Policy Independence Crucial

Although they have not yet graduated, several LDCs have successfully begun diversifying their economies. Their policy initiatives offer important lessons for others.

Neither Bangladesh and Ethiopia would qualify as a ‘good governance’ model by criteria once so beloved by the Bank and OECD. Instead, they have successfully intervened to address critical development bottlenecks.

Once considered a ‘basket case’, Bangladesh is now a lower MIC. Diversifying deliberately, rather than pursuing Washington’s policies, it has become quite resilient, averaging 6% growth for over a decade, despite the 2008-09 global financial crisis and current pandemic.

Bangladesh saw the potential for exporting manpower to earn valuable foreign exchange and work experience. In 1976, it agreed to provide labour for Saudi Arabia’s oil-financed boom.

Similarly, as newly industrialised economies no longer qualified for privileged Multi-Fibre Arrangement market access, Dhaka worked with Seoul from 1978 to take over South Korean garment exports.

Bangladesh is also the only LDC to have taken advantage of the 1982 World Health Organization’s essential drugs policy. Its National Drug Policy blocks imports and sales of non-essential drugs. Thus, its now vibrant generic pharmaceutical industry has emerged.

Allow Pragmatism

During 2004-19, Ethiopia’s growth averaged over 9%. Poverty declined from 46% in 1995 to 24% in 2016 as industry’s share of output rose from 9.4% in 2010 to 24.8% in 2019.

Avoiding ‘Washington Consensus’ policies, Ethiopian industrial policy drove structural change. Manufacturing grew by 10% yearly during 2005-10, and by 18% during 2015-17.

With improved governance, state-owned enterprises still dominate banks, utilities, airlines, chemical, sugar and other strategic industries. Ethiopia opened banks to domestic investors, keeping foreign ones out. Meanwhile, privatisation has been limited and gradual.

Instead of full exchange rate liberalisation, it adopted a ‘managed float’ system. While market prices were liberalised, critical prices – e.g., for petroleum products and fertilisers – have remained regulated.

Neither Bangladesh nor Ethiopia have embraced central bank independence or formal ‘inflation targeting frameworks’, once demanded by the IMF and others, ostensibly for macroeconomic stability and growth.

Both countries retain reformed specialised development banks to direct credit to policy priorities, while Bangladesh’s central bank has “remained proactive in its mandated developmental role”.

Policy Is Destiny

In development and structural transformation, ‘path dependency’ implies policy is destiny. LDCs’ current predicaments are largely due to policies from decades ago, pushed by international organisations and development partners.

Reform agendas now should avoid ambitious comprehensive efforts which will overwhelm LDCs with modest resources and capabilities. Also, there is no ‘magic bullet’ or ‘one-size-fits-all’ policy package for all LDCs.

Policies should be appropriate to country circumstances, considering their limited options and difficult trade-offs. They must be politically, economically and institutionally feasible, pragmatic, and target overcoming critical constraints.

OECD development partners must instead meet their commitments and support national development strategies. They must resist presuming to know what is best for LDCs, e.g., requiring them to ape Washington and OECD fads.



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  1. 23 years of age

    Some young artists share your admiration for those efforts and are determined to do just that— or die trying.

    Appreciate your comments and this conversation. I learn much from NC.


  2. Alex Cox

    This is very encouraging. I still think of Bangladesh in George Harrison’s song’s terms – ‘it sure looks like a mess… Never seen such distress” so it’s great to read that county is doing much better.

    Happy Labor Day!

    1. Jeremy Grimm

      Bangladesh, like our state Delaware is living on borrowed time. I suppose it is good that the people of Bangladesh can enjoy a better life for their time remaining — assuming the economic figures in some way reflect better life for its people. The seas are swelling.

  3. Ian Perkins

    OECD development partners must instead meet their commitments and support national development strategies.

    I couldn’t help noticing how top of that alphabetic list is Afghanistan, from which the West is currently withholding funds – whether pending the formation of a new government or as punishment for the new government isn’t entirely clear. Second from the bottom is Yemen, where Western weaponry has engineered and sustained what is often called the world’s worst humanitarian crisis. And inbetween is the Democratic Republic of Congo, whose massive mineral wealth continues to be plundered while its people suffer in proportion.

    Development commitments and strategies are fine-sounding ideas and might be worth trying one day. In the meantime, a little minimally civilised international behaviour by wealthy nations could be a welcome initiative.

  4. Jeremy Grimm

    This entire post reads to me like a carefully discreet repudiation of the IMF and the Imperial regime for which it is tool. I prefer what I believe is Michael Hudson’s much more clearly stated indictment of the IMF.

    As the seas swell they grow much more angry. I wonder whether shipping companies have any thoughts on what the future might bring to their mega-ships. Globalization is a serious threat to the survival of our Civilization, to the lives of too many, and to our nation as to all nations.

    1. Bill Smith

      “I wonder whether shipping companies have any thoughts on what the future might bring to their mega-ships”

      What is the concern with the mega-ships?

      1. Jeremy Grimm

        Storms at sea are growing in extent, frequency, and ferocity. They can affect shipping. The loss of a mega-ship is large financial loss and a large economic loss with large impacts on the long fragile networks delivering resources, and goods to where they are assembled, processed, or consumed.

        There are other more speculative concerns, I believe should not be too readily dismissed. Rogue waves run through the Earth’s oceans and the increasing amounts of energy stored in ocean waters suggest their incidence and power could increase as Climate Chaos proceeds.

        Reference the paper — “J. Hansen et al.: Ice melt, sea level rise and superstorms”, — page 22 of 52 in the pdf of that paper, Section 4.1.2 “Evidence of end-Eemian storms in Bahamas and Bermuda”. [Hurricane Larry is moving toward those islands as I write.] Take a look at the photo of the megaboulders on page 23.

        [“The Eemian interglacial … took place about 125,000 years ago. It appears, based on proxy evidence, that global mean annual surface temperatures were warmer than preindustrial by about 1° to 2°C and that high-latitude surface temperature was at least 2°C warmer than present …” ]

    2. Oh

      Growth is really a dirty word. Most growth targets are set by the World Bank and the IMF who really care about how much they can plunder for the rich nations and banks. Not a thought about prosperity for the people. A measure of prosperity should focus on the well being of the average person not the growth of industry or economy.

  5. Susan the other

    If capitalism were to change so that it did not require a price-setting market (which is a chaos, a mirage, when you start to analyze it) – so that instead oil and electricity could be distributed as needed so that minimal economies could provide for their citizens by doing their transactions within a set range of prices or values – it is still capitalism because all things are bought and sold – just not at usurious prices. Capitalism has never been defined as profiteering. Far better for the LDC countries to maintain a traditional balance than to be open to investment speculation that has no where to go. Reality is the best possible capital control. When all investment “opportunities” come to an end because economies cannot maintain and also cannot continue to grow and begin to shrink, aka a recession, there is a moment of truth that LDCs can avoid; populations decline, prices begin to fall, industry declines, and it can last for generations. If oil cannot afford to pump crude then it stops; if industry cannot afford more expensive energy it stops… etc. At some point industrial policies must be made because nothing is working. Bickering about old methods of world economics, old models, is tiresome. We need a long horizon. And we all need sovereign spending. Let the LDCs have independent “central banks” that are capable of creating a local currency and using it without pegging it to another currency, without paying interest on international loans, to do public spending to follow their own methods and traditions. If it follows that this limits the LDCs to using only their own resources, to being autarkic, it will be interesting to watch. We might well learn something.

  6. Matthew G. Saroff

    This article ignores thpe pernicious effects of IP, patent and copyright, on developing nations.

    Every developed nation on earth did so by not paying rents to more developed nations.

    IP enforcement through TRIPS and the like are a way to funnel resources back to the neo-colonial masters.

  7. Alice X

    In my world there would be no rich or poor, am I a communist?

    It is said that we (all but mostly the West) are presently consuming 1.7 of the Earth’s resources per annum.

    There can only be de-growth for sustainablity.

    The West must cut back inexorably and yield to the remaining world. – Am I dreaming?

    1. drumlin woodchuckles

      Well, the first step is to state the dream.

      A next step might be to imagine what the dream looks like in implemented detail.

      And then see what people think.

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