LDCs face a big challenge

LDCs face a big challenge

They lack market access and productive capacities, the two key components for attaining growth. Least Developed Countries (LDCs) have realised the significance of international trade as a powerful mechanism for attaining economic development and reducing poverty. 

Their increasing participation in the form of G-33, G-90 and G-110 in the ongoing Doha round of negotiations indicates that they are keen to advance the objective of Doha Development Agenda, which for the first time had put the development concerns of these countries at the heart of the work programme.

Since 2001, such concerns of LDCs haven’t been adequately addressed to allow them to secure a share of world trade commensurate with their needs of economic development.

Although LDCs account for about 12 per cent of the world population, as the poorest countries within the global community, their contribution to the world trade is limited to 1 per cent trade in goods while for services it is even less.

LDCs’ current share of world trade is so miniscule, that they remain insignificant trading partners in the world for any economy. Though many resourceful and developed countries feel there is a great need to establish partnership with LDCs to benefit from natural resources that exist in LDCs and simultaneously promote economic growth for LDCs, yet such concerns are not galvanised into any concrete action so far.

What is hindering from taking such a major step is the personal interests and industry lobby in developed countries.

Many LDCs depend heavily on their agricultural sector which is the mainstay of their economies. Having agricultural negotiations as a bone of contention in WTO negotiations, the critical issues concerning LDCs such as skill development, marketability of their agricultural products, partnership with advanced economies for promoting their manufacturing and services sectors are not taking off.

Lack of access

They are also unable to benefit from the global trading system, apart from it being asymmetrical in nature due to subsidies provided immensely by advanced countries in agricultural trade.

It’s just not channelising resources which are at great command with them, but how to generate productivity and develop productive capacities and get market access to world trade to participate effectively in world market.

They currently seriously lack these dimensions such as market access and productive capacities, the two key components for attaining trade growth.

Hong Kong Ministerial conference in 2005 somewhat struck a deal whereby developed and developing countries agreed to provide duty-free-quota-free market (DFQF) access to all products originating from LDCs.

But subsequent restriction by developed countries in the Final Declaration to allow DFQF to 97 per cent of products jeopardised further the growth aspirations of these countries.

LDCs are of the opinion that with three per cent exclusion, products of their export interest such as textiles for Bangladesh and Cambodia will be seriously affected.

What is worrying is that still the United States remains the only developed country Member of the WTO to not fully implement the DFQF Decision that was taken at Hong Kong earlier and even at Bali in last December 2013.

The United States would need to increase its present coverage from 82.5 per cent towards the 97 per cent of its tariff lines. Increasingly however, exports originating from LDCs are destined for developing countries and a number of emerging economies such as India and China have already undertaken DFQF schemes. 

Global markets today are characterised by the increasing share of services and high technology products, for which LDCs are virtually ill equipped. Their exports are dominated by primary products.

The issue, therefore, is not of market access alone, rather it is the LDCs’ inability to produce marketable goods and services. This lack of capability and capacity needs to be addressed through various measures such as investments, technology transfer, capacity building, and skilled training.

The development strategy for the next decade of LDCs should complement the export-led growth strategies by focusing on the strengthened role of domestic productive capacity, diversification, enhanced investments, infrastructural development, and building technological capacity that can stimulate inclusive economic growth and structural transformation.

There should be increased attention to agriculture and rural development. Regional integration should also be given greater prominence; priority areas for support should be targeted, better matching these areas with goals and targets, and specific means and tools to reach them should be identified.

Focus on issues like good governance at national and international levels, fight against corruption, respect for human rights and gender issues are critical to the stability and progress of the LDCs.