Poorest countries stuck in boom/bust cycle - UN

Friday, 26 November 2010 01:13 - - {{hitsCtrl.values.hits}}

GENEVA (Reuters) - The world’s poorest countries are trapped in boom-bust cycles and their medium-term prospects are a cause for concern, the United Nations Conference on Trade and Development said in a report issued on Thursday.

The 49 states categorised as least developed countries (LDCs) weathered the global downturn better than expected, but they now need a new systematic international approach to development rather than ad hoc emergency measures to reduce their economies’ reliance on raw materials, UNCTAD said.

“They have not been able to benefit from any global trends to wean themselves away from increasing dependence on commodities,” UNCTAD Secretary-General Supachai Panitchpakdi told a briefing.

The U.N. agency said the number of people in extreme poverty had increased by 3 million a year during the 2002-2007 boom, reaching 421 million in 2007 -- twice as many as in 1980.

As a result 53 percent of LDC populations were living in poverty in 2007, it said.

During the boom years LDCs as a whole averaged growth rates of 7 percent a year but their dependence on commodities increased, while the share of manufacturing in the value-added of the economy actually declined in over half the 49 LDCs.

UNCTAD, which has often taken a sceptical view of economic deregulation and liberalisation, laid out a detailed blueprint for the reform of international development, intended for discussion at a U.N. conference on LDCs next year in Istanbul.

The new system would involve reforms in finance, trade, commodities, technology and climate change.

These include measures to promote public-private partnerships for funding, especially in infrastructure investment, and debt relief, given that some 6-10 LDCs are now facing debt distress, Supachai said. UNCTAD recommends shielding commodities-dependent states from volatility by building up reserves to stabilise prices and introducing a transaction tax on commodities derivatives to prevent speculation from inflating prices.

Supachai said this was particularly topical because excess global liquidity was now flowing into commodities markets and driving up the price of products such as wheat and maize.

Economic growth has done little to close the productivity gap in agriculture in LDCs, whose food import bill rose to $24 billion in 2008 from $9 billion in 2002, the report notes.