Catching Up

Catching Up

What LDCs can do, and how others can help You do not have access to this content

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Paul Collier
10 Feb 2011
9781848591035 (PDF)

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Despite solid gains made during the last decade, the Least Developed Countries (LDCs) are not keeping pace with other countries and the gap between them and the rest of the developing world has in fact widened. This means that LDCs will have to progress even faster to avoid being left further behind.

In this publication, economist and award-winning author of The Bottom Billion, Paul Collier, suggests a menu of strategic policies around which governments might rally that could help LDCs to reduce this differentiation. He argues that the only actors who can lead this process are the governments of LDCs themselves working together towards clear and well-founded goals.

He emphasises the need for effective change and highlights potential future problems associated with the management of natural resources and the threat of climate change. Implementing the right policies, he argues, is essential if LDCs are to catch up and not become detached from the rest of mankind.
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  • Foreword

    Least Developed Countries (LDCs) have been recognised as a category of states that are highly disadvantaged in their development process and face a disproportionate risk of failing to overcome poverty and other consequences associated with weak human resource capacity and economic vulnerability. To help devise responses to the challenges that they face, the United Nations has hosted three special conferences on LDCs. The first two, held in Paris in 1981 and 1991, and the third, held in Brussels in 2001, adopted programmes of action calling for various measures to be undertaken by the international development community to ameliorate the circumstances of LDCs.

  • Abbreviations
  • Introduction

    The period 2000–2008 was, in retrospect, a remarkable global boom during which developing countries converged rapidly on member countries of the Organisation for Economic Cooperation and Development (OECD). Most least developed countries took part in this growth, in contrast to the previous two decades, during which they had stagnated. Per capita income rose on average by an unprecedented 4 per cent per year, and this was reflected in some of the fundamental indicators of wellbeing: for example, infant mortality dropped by around 11 per cent. Consistent with these impressive improvements in outcomes, measures of governance advanced: assessing governance is controversial, but the average score on the widely-used International Country Risk Guide (ICRG) increased by nearly 4.5 points.

  • The Challenge of Natural Resource Exploitation

    Least developed countries have long been heavily dependent upon natural resource exports. This is both a problem and an opportunity. It is a problem because natural resource extraction does not directly employ many people and so has only limited direct transmission onto the incomes and wellbeing of ordinary citizens. Further, revenues are volatile, making macroeconomic management difficult and increasing the need for social protection.

  • Using Trade Preferences to Help LDCs Break into Global Manufacturing

    Trade preferences for LDCs continue to be part of the world trading system.Under theGeneralised Systemof Preferences (GSP), LDCs have access to most OECD markets and historical ties have been recognised in schemes such as the European Union’s Lomé and Cotonou agreements. Recent years have seen several major extensions of preference schemes. The EU’s Everything butArms scheme, initiated in 2001, gave duty free access to LDCs in almost all products. TheUSAintroduced theAfricanGrowth andOpportunities Act (AGOA) in 2000, improving market access for eligible sub-Saharan African countries. The USA also operates the Caribbean Basin Initiative (CBI) and the Andean Trade Promotion Act.

  • Regional Integration

    Most LDCs remain predominantly rural. All have small economies, andmost also have small populations.As the above discussion of industrialisation indicates, modern economies are characterised by scale economies which accrue in cities. Such scale economies are not confined to manufacturing: they also apply to themany service activities which in amodern economy employ most people. Countries that are small and predominantly rural are not well placed to reap such scale economies. Their populations are spatially dispersed and their national markets are too small. The costs of being small are partly that urban scale economies cannot be achieved, and partly thatmarkets are too thin and therefore uncompetitive.

  • Innovations in Financing Development

    Until recently, the only financing for government permitted to LDCs was official development assistance. The prospects for aggregateODAare not encouraging: unprecedented fiscal pressures inOECD countries are reducing aid budgets. There is a need both to sharpen the focus of ODA onto LDCs, and to look to alternatives.

  • Climate Change, Asian Growth and Food Security in LDCs

    In low-income countries, food is half of the expenditure of ordinary people. Food security is therefore fundamental to their wellbeing. To date, the main source of food insecurity in LDCs has come from variations in domestic production consequent upon climatic shocks. However, many LDCs are already net importers of food and as their populations urbanise in coastal cities, a growing proportion of their populations will become dependent upon imported food rather than domestic production. This exposes LDCs to a further source of food insecurity, namely shocks to world supply resulting in periods of very high prices.

  • Conclusion

    The post-boomglobal economy looks to have some important differences with the half-century since LDC independence. As other developing countries rapidly converge on a crisisridden OECD, LDCs are becoming increasingly distinctive. TheOECD economies are in crisis and so aid is set to decline relative to the GDP of LDCs: new types of international finance for LDCs will need to be developed. Because other developing countries are growing rapidly, commodity prices are likely to remain high, making the management of natural resources critical, and LDCs will have a chance of being competitive in labour-intensive manufacturing, making pumppriming industrial policies valuable.

  • References and index
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