Their ability to respond to and recover from crises such as COVID-19, and move towards sustainable development, depends on increased production capacity, according to UNCTAD’s 2021 Least Developed Countries Report , released on Monday, specifically calling for increased investment in state and production capacity for the group of least developed countries (LDCs).

“Today, LDCs are at a critical juncture,” said UNCTAD Secretary-General Rebeca Grynspan. “They need decisive support from the international community to develop their productive and institutional capacities to face traditional and new challenges.

Massive investment required

UNCTAD defines productive capacities as “the productive resources, entrepreneurial capacities and production linkages which together determine a country’s capacity to produce goods and services and enable it to grow and develop”.

The development of production enables the world’s LDCs to foster structural economic transformation, which in turn will help reduce poverty and accelerate progress towards the United Nations Sustainable Development Goals (SDGs).

The report warns that achieving the SDGs will require massive investment and spending, which goes far beyond the financial means of LDCs.

50 years of struggle

The United Nations created the category of LDCs 50 years ago. The group of the world’s weakest economies expanded from an initial number of 25 countries in 1971, peaking at 52 in 1991, and stands at 46 today, with just six countries growing enough to no longer be considered to be an LDC.

Over the past two decades, only a handful of LDCs have shown encouraging signs of structural transformation and significant improvements in productivity, according to the report.

Dark outlook

LCD screens saw the worst growth performance for about three decades in 2020. The COVID-19 pandemic has dramatically highlighted their institutional, economic and social shortcomings, the report points out.

The limited resilience of LDCs is reflected in their low COVID-19 vaccination rates, as only 2% of their population has successfully been vaccinated, compared to 41% in developed countries.

Ms Grynspan urged LDC development partners to take into account the special needs of the more than one billion people living in these countries at the next UNCTAD conference in October, under the theme of Inequality and Vulnerability to prosperity for all.

Huge financing needs

The UNCTAD report describes the financing needs of LDCs as “daunting”, especially with regard to structural transformation goals.

For example, the report estimates that the average annual investment required to meet the 7% growth target (SDG 8.1) is around $ 462 billion, while the average annual investment required to end the extreme poverty (SDG 1.1) in LDCs is estimated at $ 485. billion.

The average annual investment required to double the manufacturing sector’s share of GDP (SDG 9.2) is estimated at over $ 1,000 billion.

To generate sufficient finance for development, LDCs will need to strengthen their fiscal capacities, increase domestic resource mobilization and improve the efficiency of public spending, the report said, but warned that even this will not be enough.

“The international community has a critical role to play in supporting LDCs in their efforts to mobilize adequate financing for their sustainable development needs,” the report said.

Investment

According to UNCTAD’s analysis, most LDCs will need three to five years or more to return to the level of GDP per capita they had in 2019.

National recovery efforts must be underpinned by a new generation of international support measures that are more closely aligned with the needs of LDCs and the realities of the twenty-first century, said Paul Akiwumi, UNCTAD’s Africa division director and the least developed countries.

“Targeted industrial policy should be at the heart of LDCs’ pursuit of green growth and structural transformation, as these countries urgently need to diversify from their excessive dependence on commodities. “

Mr. Akiwumi added that increasing investments in state and productive capacities must be at the heart of the next action program for these countries for the decade 2022-2031, which will be adopted in the fifth United Nations Conference on LDCs in January 2022.

He also urged the governments of LDCs to adapt internationally negotiated programs to their unique national conditions and to resolve compromises when formulating their national development plans.


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