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Preferential Market Access % imports admitted duty free excluding arms and oil • Developing countries – 1996: – 2008 54% 80% • Least developed countries – 1996 – 2008 78% 81% Funding Limitations • (Enhanced) Integrated Framework: only US$1 million per LDC. Total IF/EIF expenditures 2002-2008 equivalent less than 0.1 per cent of aid for trade disbursements. • LDC Fund (climate change): only US$4 million per LDC BUT • UN system prioritizes LDCs – Expenditures on operational activities for LDCs rose from $2.4 billion in 2000 to $7 billion in 2008 – 38 per cent of expenditure on operational activities targets LDCs – Share of UN in-country expenditure on operational activities in LDCs up from 39% in 2003 to 50% in 2008 Despite Enhanced Integrated Framework, LDCs lag behind in Aid for Trade allocations Issues with Global Economic Regimes • Missing elements (commodities) • Models of trade, finance and technology inadequate for LDCs • GERs constrain policy ownership • Policy in LDCs more driven by PRSP process than BPOA • ´The right hand has been taking away what the left hand was meant to be giving´ What’s New for the Coming Decade • Internally: Employment challenge and employment transition. • Externally – Climate change – Intensifying South-South economic relationships (50% of LDCs exports to, and 62% of LDC imports from, developing countries in 2007-2008) • Lessons of experience. We know how development is done. We know how countries escape the poverty trap and achieve mass poverty reduction. How to improve international support for the LDCs in coming decade • LDCs need a new generation of international support mechanisms – Mechanisms not measures – Focus on developing productive capacities – Coherent with global economic regimes • Reforms in global economic regimes which affect development and poverty reduction in LDCs • Enhanced South-South development cooperation A New International Development Architecture for LDCs (NIDA) “NIDA is defined as a new architecture of formal and informal institutions, rules and norms, including incentives, standards and processes, which would shape international economic relations in a way that is conducive to sustained and inclusive development in LDCs” Objectives: (i) reverse marginalization and help LDCs catch-up; (ii) support a pattern of accelerated and economic growth which would improve general well-being (iii) help LDCs to graduate from LDC status THIS IS AN AID-PLUS APPROACH FOCUS ON POTENTIAL NOT SIMPLY NEED 8 principles of NIDA • New development paths based on developing productive capacities • Country ownership and policy space to enable national leadership • Strategic integration with better balance between external and domestic sources of demand and finance • Better balance between state and markets (meaning of `market-based policies´) • Greater domestic resource mobilization • Policy coherence (between pillars and between GERs and ISMs) • S-S development coooperation complementary to N-S development cooperation • LDc voice and representation in global governance Five Major Pillars of NIDA • • • • • Finance Trade Commodities Technology Climate change adapation and mitigation Finance Pillar • Key Challenges – – – – – Low domestic savings and investment Capital flight High aid dependency Weak country ownership Continuing debt overhang • Strategic Orientations/Specific Initiatives – Increase aid in line with existing commitments – Seek innovative sources of finance (e.g. SDR allocation) – Catalytic use of aid to leverage development finance • Promote domestic resource mobilization; • Increase share of aid to production/infrastructure; • Innovative uses of aid for private sector development – Improve aid effectiveness through support for country ownership • Reduce conditionalities, • Foster aid management policies at recipient country level, • Build developmental state capabilities Trade Pillar • Key Challenges – – – – – – Deep trade liberalization/low competitiveness Continuing marginalization in global economy Increasing lock-in to commodities/low skill manufactures/tourism High levels of export concentration Weak linkages to rest of the economy High levels of food imports • Strategic Orientations/Specific Initiatives – “Early harvest” from Doha Development Agenda (extension of DFQF market access) – Enable LDCs to pursue policies of strategic integration • Empower LDCs to use available flexibilities within WTO (e.g. bound rather than applied tariffs) • Improve Special and Differential Treatment within WTO – Address supply-side constraints through ensuring Enhanced Integrated Framework leads to more and more effective Aid for Trade Commodities Pillar • Key Challenges – High levels of commodity dependence coupled with absence of international commodity policy – Long-term decline in terms of trade – High and increasing volatility of commodity markets (effects of financialization) – Low resource rents and mismanagement of resource rents • Strategic Orientations/Specific Initiatives – Introduce contingency financing facilities to reduce impact of commodity price volatility – Introduce new measures to reduce commodity price volatility • Taxation of commodity derivative markets • Innovative commodity stabilization schemes – Use aid to improve ability to negotiate contracts with TNCs (e.g. improve data on LDCs’ natural resource potential) and management of resource rents through boom and bust cycles) – Use financial and technical assistance to promote greater local value-added and linkages from resource-based diversification Technology Pillar • Key Challenges – – – – – – Weak domestic technological capabilities Little technology transfer and low absorptive capabilities Poor human resources/physical infrastructure Excessive focus on intellectual property rights Donor blind-spot Poor STI state capacities and STI institutional infrastructure • Strategic Orientations/Specific Initiatives – Create a better balance between private and public dimensions of knowledge in global knowledge architecture – Support technology transfer and the development of STI capabilities at enterprise level • Implement TRIPS Article 66.2 • International Spark Initiative • Establish technology licence bank for LDCs – Invest to improve domestic knowledge systems (eg via diaspora) – Enhance dev. state capacities to promote technological learning Climate Change Pillar • Key challenges – Major environmental impacts (increasing natural disasters, higher average temperatures, reduced availability of wager resources, sea-level rise) – Low adaptive capabilities – Lack of financial resources and technologies • Strategic orientations/specific initiatives – Enhance sustainability and predictability of global climatechange-related with LDC exceptions – Improve governance of climate change finance • Increase finance to LDC Fund so that it can support adaptation programmes not projects; integrate into development strategies – Promote development of renewable energy resources (CDM) – Constructive engagement with REDD (reducing emissions from deforestation and forest degradation)tcmisegament with constru South-South Development Cooperation (transversal issue in 5 pillars) • Strengthen South-South dev cooperation with large/dynamic developing countries • Deepen regional integration • Preferential financing of technology transfer • Regional R&D hubs If NIDA implemented, significant gains in income per capita possible by 2020 The Haitian earthquake illustrates the extreme vulnerability of LDCs. The global financial and economic crisis can be considered a catastrophic event analgous to an earthquake, which not only wreaks devastation but also offers an opportunity for reconstruction and a new beginning. This work is part of a longer series Thank you To download UNCTAD Least Developed Countries Reports, http:/www.unctad.org/ldcr