Five obstacles facing Least Developed Countries

The Istanbul Programme of Action sets out a roadmap for the world's poorest nations to climb the development ladder – but challenges hinder progress.

Essam Yassin Mohammed's picture
Essam Yassin Mohammed is a senior researcher in IIED's Shaping Sustainable Markets research group
29 June 2016
Sewing on the street in Djibouti. The informal sector still plays an important role in most of the LDCs (Photo: Charles Roffey, Creative Commons via Flickr)

Sewing on the street in Djibouti. The informal sector still plays an important role in most of the LDCs (Photo: Charles Roffey, Creative Commons via Flickr)

We live in a world of haves and have-nots, of abject poverty and astonishing affluence. This is true of individuals, communities and nations. At the global level, so-called 'developed' countries sit at one end of the spectrum with 'least developed' countries (LDCs) – demeaning as that sounds – at the other.

LDCs: the beginnings

The LDC Group was established in the late 1960s to ensure development aid targeted those who needed it the most. The long-term aim was for these countries to emerge from extreme poverty and economic vulnerability, to eventually 'graduate'  catching up with economically better off countries. 

Some speculate that it was Henry Kissinger who was behind the group's formation, however, claiming that the then United States National Security Advisor (later Secretary of State) conceived the idea of the LDCs as a way of weakening solidarity within the Non Aligned Movement (NAM). This group of states, empowered by oil producing countries, pushed for a United Nations resolution in May 1974, calling for a new international economic order to redress global power imbalances. 

According to historian Vijay Prashad, Kissinger and his ally, the former West German chancellor Helmut Schmidt, employed the clever old trick of 'divide and rule', severing the LDCs from the Organization of the Petroleum Exporting Countries (OPEC) countries within the NAM.

Fast forward to today, we all agree on one thing – that the concept of a 'least developed' group of countries must be made history. 

This raises the fundamental question: how many of these countries have graduated so far? 

Slow progress

I recently participated in the Antalya mid-term review of the Istanbul Programme of Action (IPoA) for LDCs, a review of an ambitious 10-year plan that aims to see half of LDCs (23) graduate by 2020. But since the creation of the group, only four countries have succeeded.

On a positive note, two of those four countries (Maldives and Samoa) have graduated in the past few years, giving hope that graduation within a reasonable period of time is possible and that other LDCs will soon follow.

But amid this optimism, from my point of view, the Antalya conference highlighted five main issues that could hinder LDCs reaching this ambitious goal by 2020:

  1. Domestic resource mobilisation?
    There was strong emphasis on LDCs building capacity to mobilise financial resources locally. Tax reform – including the ability of the state to efficiently collect and manage tax revenues – could help raise finance in LDCs. What strikes me is the fact that the informal sector still constitutes a marked share of the economy in most of these countries. Yet in Antalya, discussion on the informal economy was missing. How can the informal sector be taxed?

    It is inevitable that the LDCs will continue to rely heavily on foreign assistance to harness the opportunities in the informal market, and enhance their technical and institutional capacities to mobilise resources efficiently. 

  2. Limited economic diversification?
    LDCs depend heavily on primary commodities, leaving them exposed to volatility in commodity prices. This leads to imbalances in balance of payment and economic instability. Some African countries such as Angola and Mozambique have been hit particularly hard. 

    Some suggest this economic vulnerability is a major hindrance to LDCs' graduation. I think this is an outdated argument – there isn't sufficient evidence that primary product price volatility reduces total productivity or impacts GDP growth. In fact, much evidence suggests the most limiting factors are weak human resource and unstable institutions; countries that have made sufficient investment in building their human and institutional capital have been able to withstand temporary economic shocks. 

    So, yes to economic diversification, but priority should be given to investments directed towards enhancing human and institutional capital.
  3. Lack of progress on 'means of implementation'
    Many LDCs expressed frustration at lack of global support for means of implementation, including lack of reform to persistently unfavourable trade regimes, the divergence between pledged financial assistance and monies actually delivered, and token technology transfer. For example, the G8 group of countries fell more than US$10 billion short on its Africa pledges for 2010 alone. 

    Important as it is to focus on local reforms, it is crucial that sufficient attention is given to means of implementation. Without this, the graduation of LDCs remains a mere aspiration. 

  4. Proliferation of goals and targets
    LDC delegates voiced concern about the mind-boggling number of goals and targets set by various global frameworks, including the Sustainable Development Goals, IPoA, the Paris Agreement on climate change and the Convention on Biological Diversity, to name a few.

    Keeping track of all these targets is exhausting and not necessarily the most efficient way of implementing development agendas. A coherent process with streamlined reporting mechanisms is the preferred way forward. 

  5. The private sector: high expectation
    I was also struck by the emphasis on the role of the private sector both in financing and delivering development in LDCs. This has gained attention following growing donor fatigue and dwindling Official Development Assistance (ODA). 

    Indeed, it is evident that ODA flows to LDCs have declined in real terms in the past few years. This is due to a number of reasons including a slowing economy in the developed world, corruption and 'poor governance' on the recipient side, the recent shift of resources to humanitarian crises, not to mention the rise of right-leaning populist governments in Europe. 

    But how will the private sector enhance aid effectiveness? For me, the incentives for private, for-profit stakeholders to engage in poverty eradication in the LDCs are still not clear.

These are only five of many complex challenges LDCs grapple with on a daily basis. Concerted, coherent global efforts will be needed if we are to tackle these issues – and make the group of LDCs history. 

Essam Yassin Mohammed ([email protected]) is a senior researcher in IIED's Shaping Sustainable Markets research group