SG's Ad Hoc Expert Group Meeting
UNLDC IV: Key Development Challenges facing the LDCs
18-19 February 2010
LDC Performance and Structural Change:
A Set of Issues
By
Mr. Debapriya Bhattacharya
Special Advisor on LDCs
Office of the Secretary General, UNCTAD
The view expressed are those of the author and do not necessarily reflect the views of UNCTAD
LDC Performance and Structural
Change: A set of issues
Debapriya Bhattacharya
Special Advisor on LDCs
Office of the Secretary General, UNCTAD
SG’s Expert Group Meeting, 18-19 February 2010
1
Focus of the presentation
• Performance
• Structural change
• Interpretation
2
The long term performance of
LDCs: an overview
Ev olution of total trade as share of world
Evolution of Real GDP as share of world
35
20
ODC
15
% of world trade
26%
25
% of world GDP
32.9%
30
30
25
20
ODC
LDC
15
10
LDC
5
10
0.9%
0
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
5
1.0%
0
2006
2003
2000
1997
1994
1991
1988
1985
1982
1979
1976
1973
1970
Evolution of FDI inflows as global share
50
45
LDC stagnated in terms of
income, trade and FDI inflows
during the past 38 years
% of world FDI
40
34.6%
35
30
ODC
25
LDC
20
15
10
5
2.0%
0
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1976
1974
1972
1970
3
How inclusive and broad-based
have been the positive signals of the
2000s? Concerns remain
• 7 LDCs account for 74% of total LDCs exports (Angola,
Bangladesh, Cambodia, Chad, Equatorial Guinea, Sudan and
Yemen)
• Oil exporting LDCs account for 62% of total LDCs
exports
• Growth was not equally shared:
– Oil-exporting LDCs grew at 10.2% during 2000-08
– Agriculture-exporting LDCs grew at 7.5%
– Services-exporting LDCs grew at 7%
4
How have the recent crises
affected the LDCs’ economies?
Quite a lot
• How much the external crises (food, fuel and
financial) have inhibited the LDC performance?
• Extent of the financial and economic crisis
– Export value in 2009 declined by 43% wrt 2008
– N. of poor expected to increase by 6.1 billion in
African LDC and by 1.2 million in Asian LDC by
2010
– Real GDP slowed to 3.8% in 2009, down from 9% in
2007 and 7.3% in 2008
5
How pervasive have been the
conflicts and natural disasters in
deterring the development in LDCs?
Significantly
• At least 18 LDCs are acutely disaster-proned
• Numerous natural disasters (tsunami, eartquakes,
droughts, cyclones..) occurred in the 2000s
• Only 1/3 of LDC has not experienced conflicts
• Conflicts are highly associated with low human
development and low economic growth
• Have the natural disasters and conflicts exposed
the fragility of the LDC developmental process?
6
How to deal with growing
heterogeneity of LDC group?
No easy solution
• Diversities in terms of:
– Per capita income (6’605US$ for Equatorial Guinea vs
152US$ in Burundi)
– Population (160 million people in Bangladesh vs 10
thousand in Tuvalu)
– Export specialization (5 oil vs 6 agriculture)
– Geographical location (17 landlocked vs 11 sealocked)
• BUT common structural handicaps (low economic
diversification, bottlenecks in production, trade and CA
deficits, poor infrastructure,, shortage of skills, dependence on
external resource flows..)
7
How to assess structural progress beyond
the LDC criteria?
Needed for a better understanding of the
problems
• How to re-organize the LDC criteria or MDG
targets to reflect structural change?
• What is structural change?
– Intertwined phenomenon that brings in new and
complementary elements aiming at at least the
following in the medium term:
•
•
•
•
•
Accelerating pro-poor growth
Balanced integration in the global economy
Increasing skills for productivity growth
Augmenting domestic resource inputs
Increasing the ability to deal with external shocks
8
How to assess structural progress
in specific areas
• Other indicators needed, maybe based on:
– GDP composition – eg. More manufacturing
– Trade – eg. Export diversification
– Aid dependence – eg. Improved quality aid to
productive sectors
– Low investment – eg. More domestic private
investment
– Low human assets – eg. Imporve secondary education,
primary health care
– High vulnerability - ???
9
Long term structural change in the
GDP performance of LDCs –
Not much progressive change
(% of GDP)
80-82
90-92
Agriculture
66.3
36.9
30.7
26.9
Industry
11.3
20.5
25.2
30.6
6.0
9.8
9.7
9.8
22.4
42.6
44.2
42.5
8.0
15.2
15.5
15.2
Final consumption expenditure
92.9
91.9
87.6
80.6
Gross capital formation
19.7
15.6
19.3
23.9
Exports of goods and services
15.2
15.1
22.5
28.5
Imports of goods and services
27.4
22.6
29.4
33.4
Trade balance
-12.2
-7.6
-6.9
-4.9
10
..
13.1
12.0
13.8
of which manufacturing
Services
of which wholesale, retail trade
Tax (n=12)
2000-02 2007-08
Evolution of Export Concentration
Index
0.6
Concentration index
0.5
0.4
ODC
0.3
LDC
0.2
0.1
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
11
Structural change in manufactured
exports
(according to technological categories)
(% of total manufactured
exports)
Items
ODC
199596
LDC
2007-8 1995-96
2007-8
Primary products
21.8
23.3
56.5
66.7
Resource-based manufactures
13.7
14.3
21.9
12.3
Low technology manufactures
22.8
16.3
16.3
14.8
Medium technology
manufactures
19.3
20.3
3.2
2.0
High technology manufactures
19.7
22.5
0.5
0.6
12
Evolution of ODA net
disbursement flows to LDCs
30
10
9
25
8
20
6
5
15
4
% of GDP
per capita
7
3
10
2
1
5
0
2000
2001
2002
2003
2004
per capita
2005
2006
2007
2008
% GDP
ODA inflows are highly concentrated, mostly to post-conflict
LDCs
13
Heterogeneity in performance
• Some countries have performed better than
others
• Even those LDCs that have graduated, or
are close to do so, did not achieve structural
change, thus remaining vulnerable
14
How to distill the lessons from the
2000s and reflect them in the
future work programme of LDC
IV?
15
Looking into the past to build the
future
• Inappropriate development model pursued
• Inadequate domestic reforms to mitigate
historical institutional deficits
• Lack of
– Domestic resources to undertake investment
programs
– Adequate ODA flows, resulting in underfinance
of physical and social infrastructure programs
16
Looking into the past to build the
future, #2
• Ineffective international support measures,
including trade-related measures (eg.
market access)
• High recurrence of conflicts, destroying the
limited achievements
• High export product concentration and
dependency on volatile global markets,
affecting remittances, commodity exports,
tourism
17
Looking into the past to build the
future, #3
• High vulnerability to natural disasters,
washing away scarce achievements
• Underdeveloped domestic financial
markets, impeding access to credit
18
Thank you
19