Meeting the MDGs in the Least Developed
Countries
Giovanni Valensisi
UNCTAD, Africa Least Developed Countries Division
Short course for Diplomats on MDGs; UNCTAD, Geneva, 26 October 2010
Presentation structure
• The progress towards the MDGs;
• MDGs outlook after the crisis;
• Lessons from the past experience;
• LDCs in the global context;
• Concluding remarks.
The progress towards the MDGs (1)
Despite the acceleration in the mid 2000s
PROGRESS has been MIXED across regions and
varied with the nature of each MDG indicators
(different scope for state intervention).
3 Examples from the UN MDG Report 2010
Globally the poverty target is likely to be exceeded
(“China effect”), but we are off track for productive
employment and hunger.
The progress towards the MDGs (2)
Gender gaps in education are shrinking globally, and
most regions are on track.
Globally progress has been insufficient, and most
regions are off track.
The progress towards the MDGs (3)
Focusing on the LDCs, three caveats apply:
1. given their starting point, LDCs had the hardest challenge;
2. heterogeneous size and socio-economic structure;
3. dearth of data is still a big problem.
Number of LDCs progressing or regressing on selected MDG indicators
45
40
35
30
25
20
15
10
5
0
1.1 - Proportion
of people living
below $1.25 per
day
1.9 - Share of
undernourished
population
2.1 - Net
enrolment ratio
in primary
education
4.1 - Under-five
mortality rate
Setbacks/Stagnation
4.2 - Infant
mortality rate
Insufficient progress
7.8 - Share of
7.9 - Share of
population using population using
improved water
improved
source
sanitation
facilities
On track
The progress towards the MDGs (4)
 Only a few LDCs are on track for a broad set of
indicators (more effort required → MDG 8);
 "Conflict states" lag behind, while Island LDCs tend to
do better;
 Very slow progress on health-related indicators;
 Slow progress on access to water and sanitation
(→infrastructure gap, urbanization, climate change);
 Insufficient progress on poverty reduction, in spite of the
acceleration before the crisis (food crisis?);
 Significant progress in the access to primary education,
and closing gender gaps, though less so for secondary
and tertiary levels (role of donors).
MDGs outlook after the crisis (1)
The global economic crisis resulted in a severe growth
slowdown for LDCs, with significant job losses.
The impact of the crisis on domestic economy varied
considerably according to structural conditions.
Despite some apparent “macroeconomic resilience”,
social costs are likely to be serious and long-lasting.
 The global economic crisis came on top of the food and
fuel crisis;
 21 LDCs in need of external food assistance, and food
prices on the rise again in various LDCs (FAO, 2010);
 Many coping strategies of vulnerable households affect
their long-term wellbeing (hysteresis!).
MDGs outlook after the crisis (2)
The crisis may have resulted in 9.5 mln. additional people
living in extreme poverty in the LDCs (Karshenas 2009).
As a result of the crisis, in Africa there have been additional
30’000-50’000 infant deaths in 2009 (WB, 2010).
The social costs of the crisis in LDCs will ultimately depend
on world recovery and on future ODA trends, but there are a
number of downside risks.
If poverty reduction rates achieved during the 2000s are
maintained until 2015, the incidence of extreme poverty in
LDCs will be 46%. But if recovery does not take off and
poverty reduction slows down to the speed of the 1990s,
headcount ratio will be 51% in 2015.
Lessons from the past experience (1)
There is a need to reconnect the MDGs to inclusive
development, especially where a large share of the
population is poor.
• MDGs ARE INTER-CONNECTED
Progress is stronger where social objectives are part of a shared,
coherent and holistic developmental strategy (UNDP 2010 case
studies).
• STABILITY , BUT “DEVELOPMENT-FRIENDLY” MACROEC.
Fiscal policy central to crowding in private funds (→
infrastructure gap), away from over-restrictive inflation
targeting, capital control if needed, economic diversification (→
industrial policies), and strategic integration.
• THE STATE HAS A COORDINATION ROLE TO PLAY
All actors are important in developing productive capacities.
Lessons from the past experience (2)
Economic growth is “a key driver in MDG progress”
(WB, 2010), but not all patterns of growth are the same.
• STRUCTURAL CHANGE IS IMPORTANT
Recent boom in oil and
mining had little effect on
employment creation, thus
weak benefits for poverty
reduction.
“Employment challenge”
esp. in African LDCs.
De-industrialization in 27
LDCs during the 2000s
Structural change and the composition of output
(% of GDP; period average)
70
60
50
40
30
20
10
0
2000-2002 2006-2008 2000-2002 2006-2008 2000-2002 2006-2008 2000-2002 2006-2008
Agriculture
LDCs total
Manufacturing
LDCs: Africa and Haiti
Industry, excl.
Manufacturing
LDCs: Asia
Services
LDCs: Islands
Lessons from the past experience (3)
Not all patterns of growth are the same (continued)
MORE ATTENTION TO AGRICULTURE
Agriculture was largely by-passed by growth, but in LDCs it
employs 60% of L, and is crucial for food-security and intersectoral linkages; poverty is deeper in rural areas.
• INEQUALITY MATTERS
Poorest 20% of pop. in
LDCs consumes 6 % of
income,
while
the
richest 20% gets 48%
(McKinley,
Martins
2010).
Agriculture value added per worker (constant 2000 US$)
900
30'000
800
25'000
700
600
20'000
500
15'000
400
300
10'000
200
5'000
100
0
0
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
•
LDCs (left scale)
High-income countries (right scale)
Middle-income countries (left scale)
Lessons from the past experience (4)
Given LDCs’ sluggish capital accumulation, improving
the mobilization of domestic resources is imperative to
reverse aid-dependency.
•
MORE ATTENTION TO PUBLIC REVENUES
Public revenues rose slightly as % of GDP, but are still low (≈
15% on average in 22 African LDCs) and trade liberalization
entailed significant revenue losses! → link ODA to tax revenue
mobilization, broaden tax base, more efficient collection systems
(border controls and exemptions), more effective negotiations on
mineral rents, address capital flights.
• PRIVATE ACTORS ARE FUNDAMENTAL
Greater financial deepening (esp. in rural areas), Public-PrivatePartnerships in strategic sectors (ex. ICT), diaspora-bonds and
international bond issuance.
• INNOVATIVE SOURCES OF DEVELOPMENT FINANCE
Lessons from the past experience (5)
Successful development strategies are context-specific
(no one-size-fits-all), and shared by all stakeholders.
• “ECONOMIC PRINCIPLES DO NOT MAP INTO UNIQUE
INSTITUTIONAL ARRANGEMENTS” (Rodrik, 2003)
Institutional innovations and adaptations are crucial.
• POLICY SPACE IS NECESSARY
MDG progress is not only about “service delivery”, but also
about innovative policies and institutions to foster inclusive
growth (→ heterodox policies often proved successful).
• COUNTRY OWNERSHIP IS CRITICAL FOR SUCCESS
Conditionalities undermined ownership and policy
coherence; recent “rethinking” by IMF brought little
substantial change → still pro-cyclical conditionalities in
many LDCs.
LDCs in the global context (1)
Relevance of the LDC category in the wake of the crisis
• Though most of the poor now live in MIC (“new bottom
billion”), LDC challenges in poverty reduction remain of
immense political relevance: the majority of pop. lives below
poverty line and the number of poor continued to grow.
• LDCs medium-term outlook raises serious concerns, and they
have limited resources to cope with adverse shocks.
Real GDP per capita in 1990 $
(constant prices and exchange rates)
2'500
30'000
25'000
2'000
20'000
1'500
15'000
1'000
10'000
500
5'000
0
0
19
80
19
82
19
84
19
86
19
88
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
• Despite
rapid
growth in the runup to the crisis,
LDCs continue to
diverge from other
developing
countries.
Developing economies excluding LDCs
LDC weighted average
Developed economies (right scale)
LDCs in the global context (2)
International Support Measures (ISM) had limited success
Progress on MDG 8 has been grossly insufficient: ex. ODA target
of 0.15%-0.20% of donors GNI to LDCs was achieved only by 9
DAC donors out of 23 (0.09% in total); only 92% of LDCs exports
is admitted free of duty in developed countries.
Lack of coherence between global econ. regime and ISM
Preferential mkt. access (in itself insufficient to overcome LDCs
weaknesses) is hampered by restrictive RoO, while preference
margins are eroded → relative preference margin.
The emergence of Southern partners and climate-change-related
industries offer new opportunities, but are not the panacea
Trade and FDI flows from Southern partners have been critical for
LDCs, esp. during the crisis, but they may also reinforce
commodity dependence. Technology transfer for climate change?
Concluding remarks
Based on past experience, meeting the MDGs in LDCs will
require a shift in development thinking
FROM
TO
 Targeting and service
delivery
 Holistic developmental
strategies
 Macroeconomic
stabilization
 Inclusive growth and
productive capacities
 Getting prices right
(AS)
 Domestic resource
mobilization (AD + AS)
 One-size-fits-all
 Policy space and ownership
 Aid-dependence and
 Mutual accountability and
voluntary contribution
adequate representation
Thank you for your attention!
This presentation draws on the forthcoming
Least Developed Countries Report 2010,
and on various other issues of the LDC Report
(www.unctad.org/ldcr)