UN And World Bank Call For Greater Partnership Between Governments And Business To Tackle Poverty In World's Poorest Nations
12 March 2012
The world’s poorest nations can accelerate economic growth by leveraging their comparative advantage, United Nations and economic experts heard on Friday.
During an academic round-table held at Columbia University in New York City, sponsored by the UN, World Bank, and Columbia, leading experts focused their attention on prospects for economic growth and structural change in the forty-eight least developed countries (LDCs). Since the LDC category was defined by the United Nations in 1971, just three countries have ‘graduated’ to developing country status: Botswana, Cape Verde and Maldives.
The event comes on the heels of the recently-adopted Istanbul Programme of Action for the LDCs which was adopted by UN member states last year in Turkey. The 10-year action-plan seeks to address the structural handicaps of the LDCs in a bid to eradicate chronic poverty and improve livelihoods. Governments agreed in Istanbul that bolstering productive capacity remained key to the economic transformation of the LDCs.
United Nations High Representative for the LDCs, landlocked developing countries and small island developing states, Cheick Sidi Diarra, in his introductory remarks, stated that “the Istanbul Programme of Action calls for a shift in the development paradigm, with a rebalancing of priorities between the productive sectors and social sectors as well as a balanced role of the state and the market.”
Speakers at the event highlighted that despite progress with respect to growth and achieving some of the United Nations Millennium Development Goals (MDGs), the LDCs continue to be vulnerable, mainly due to external shocks, such as volatile commodity prices and especially increasing food prices.
Justin Yifu Lin, Chief Economist and Senior Vice President of the World Bank, highlighted that the LDC group of countries grew at an average of 5.6 per cent between 2000 and 2010, the result of which has seen some countries double their incomes. He however cautioned that despite these impressive gains, unemployment levels, poverty rates and a series of natural calamities continue to pose severe constraints to development in these countries.
In what he referred to as ‘new structural economics’ Lin encouraged governments in the LDCs to consider the dual approach of upgrading both ‘hard’ and ‘soft’ infrastructure, pointing out that World Bank research suggest that if Bangladesh improved its business environment just halfway to level of India it could see its trade increase by about 38 per cent. This is comparable to a 26% reduction in the value of current tariffs on goods from Bangladesh. The World Bank economist however warned that the LDCs should steer away from replicating the industrial infrastructure of high-income countries, but instead implement a comparative advantage strategy, which attracts the start-up of new businesses in industries that are in line with the economy’s comparative edge.
He further recommended that governments collect and provide much-needed information that reduces the risks for firms to invest in new technologies. “I am convinced that, by following their comparative advantage, low-income countries facing high unemployment can seize the bonanza of the 85 million manufacturing jobs China will shed in the coming years because of fast rising wages for unskilled workers. This type of new dynamic, which is embedded in my theory of New Structural Economics that I outlined today, is highly relevant to the UN's agenda,” Lin said.
Other experts making statements in the panel discussion were Frannie Léautier, Executive Secretary of the African Capacity Building Foundation, Léonce Ndikumana, Andrew Glyn Professor of Economics at the University of Massachusetts at Amherst and Aaditya Mattoo, Research Manager, Trade and International Integration, at the World Bank.
There was agreement that increasing decent employment in the LDCs was key towards ensuring reduce endemic poverty in the LDCs. Panelists said that implementing the Istanbul Programme of Action requires focused action in key areas, with emphasis on the state in promoting change, mobilizing resources, and expanding trade opportunities.
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