Ethiopian Review

Forty-nine countries, currently designated by the United National as “least developed countries” (LDCs), remain off track to meet the Millennium Development Goals (MDGs), according to “Least Developed Countries Report 2009: The State and Development Governance” released Thursday by the United Nations Conference on Trade and Development (UNCTAD).

Over thirty of the forty-nine least developed countries, including Ethiopia, Somalia and Tanzania, are in Africa. The list of LDCs is reviewed every three years by the UN Economic and Social Council, in light of recommendations by the committee for Development Policy. The criteria used by the CDP in the latest review were low income, human assets weakness and economic vulnerability.

UNCTAD argues in its report that the world economic crisis, which has hit LDCs severely, should be a point of departure for a new development approach in which the state plays a greater role.

The report says that the crisis has exposed the structural deficiencies of the world’s forty-nine poorest nations and has demonstrated their inability to achieve long-term growth and poverty reduction. It says that a reconsideration of the role of the state is necessary to overcome LDC’s structural constraints and reduce their dependence on external support.

The report sketches out an alternative economic strategy for LDC policymakers which includes institutional capacity-building and the strengthening of the market-complementing developmental state. It recommends that governance should be oriented towards fostering markets’ creative function of stimulating economic change based on a social contract that enables participation in decision-making and provides a more effective public voice.

LDCs’ export structure remained highly concentrated and dependent on primary commodities, low-skill manufactures, or tourism. Now that the crisis has hit, export earnings have fallen significantly. And, foreign direct investment inflows are declining owing to lower expectation of profitability, reduced access to credit to finance new investments.

Between 2002 and 2008, LDCs achieved strong economic growth. However, the positive economic performance was particularly related to high commodity prices, record levels of private capital inflows, increasing official development assistance and debt relief.

- By Yelibenwork Ayele | Ethiopian Reporter