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According to UNCTAD’s Least Developed Countries Report 2020, efforts to rebuild the economies of the world’s poorest nations after the pandemic will be significantly lower unless their production capacities are dramatically improved.
According to the report, the least developed countries (LDCs) with the most developed production capacities were able to better combat the fallout from the pandemic. Production capacities are the productive resources, entrepreneurial skills and production connections that together determine a country’s ability to produce goods and services and allow it to grow and develop.
“The pandemic has brutally reminded us of the urgent need to develop manufacturing capacities in least developed countries to enable them to achieve structural change, reduce exposure to external shocks and strengthen resilience,” said UNCTAD Secretary General Mukhisa Kituyi. .
He said the development of manufacturing capabilities in most LDCs has been too slow to allow them to overcome major developmental challenges and shocks such as COVID-19. The UNCTAD Production Capacity Index (PCI) shows that most least developed countries have low production capacities: their average PCI level was 40% lower than that of other developing countries (non-LDCs) between 2011 and 2018. Worst economic performance in 30 years.
The report states that the COVID-19 pandemic has hit least developed countries very hard because collectively they are the most vulnerable economies in the world. This is compounded by their very weak resilience levels. They have the least financial and institutional means to react to external shocks such as the ongoing pandemic.
An estimated 1.06 billion people live in the 47 least developed countries. Despite their large demographic weight, least developed countries represent less than 1.3% of global GDP. In 2019, the average per capita GDP in least developed countries was only $ 1,088, compared to a world average of $ 11,371.
The report predicts that the pandemic will push least developed countries to the worst economic performance of the past 30 years in 2020, with falling income levels, widespread job losses and rising tax deficits. The report warns that the crisis will reverse years of painstaking progress made by least developed countries in social areas such as poverty reduction, nutrition and education.
The number of people living in absolute poverty in least developed countries could increase by 32 million in 2020, pushing the poverty rate from 32.5% to 35.7% and limiting these countries’ chances of meeting the United Nations Sustainable Development (SDG).
People living in extreme poverty in least developed countries represent over 50% of the world’s population living on less than $ 1.90 a day and 34% of those living on less than $ 3.20 a day. How to build productive capacity in least developed countries “Bold policies to strengthen productive capacity in least developed countries should be a key pillar of any sustainable recovery from the pandemic and the long-term development strategy,” said Paul Akiwumi, director of the UNCTAD for Africa and least developed countries.
Such policies should go beyond protecting people in least developed countries from the impact of the pandemic. “They should spur an investment push to fill longstanding infrastructure gaps and support wider job creation,” Akiwumi added.
The report says that countries that lowered their levels of economic vulnerability have improved their trade or production indicators, both of which have resulted in improved manufacturing capabilities, and help drive a process of structural transformation.
Structural transformation is the process by which a country’s productive resources such as natural resources, land, labor and know-how move from low-productivity economic activities to high-productivity economic activities. Some less developed Asian countries such as Bangladesh, Cambodia, Laos, Myanmar and Nepal have made greater progress, experienced industrial growth and expanded modern service sectors, leading to large increases in labor productivity.
In contrast, structural transformation has been slower in LDCs in Africa, islands and Haiti, where agriculture and traditional service sectors generate most of the jobs and output, and low levels of productivity and growth continue to limiting living standards.
Digital revolution for manufacturing capabilities
The digital revolution has fueled the hopes of a leap forward for least developed countries – adopting modern systems without going through intermediate steps – but companies in these countries are severely disadvantaged. “Digital transformation requires technological capabilities, the acquisition of which takes time, is difficult and expensive to acquire.
It is accumulated through manufacturing experience during previous industrial revolutions, which bypassed most of the least developed countries, ”the report states. In less developed countries, the adoption of advanced technologies is still incipient and hampered by factors such as infrastructure shortages and skills shortages. Policymakers are faced with the task of transforming predictions about the positive impacts of frontier technologies for least developed countries into problem-solving strategies to promote innovation at the enterprise level.
But least developed countries can only leverage the digital revolution in the manufacturing sphere if they implement industrial policies that strengthen and develop the technological capabilities of manufacturers across all sectors, the report said. An example of an active industrial policy is the Kayoola Bus initiative initiated by the government of Uganda, which established the national production of buses powered mainly by renewable energy to address the environmental and health problems of transport-related air pollution.
The world shouldn’t leave less developed countries behind
The report calls on the international community to support the efforts of least developed countries with adequate financial resources, to leave them sufficient political space to plan and implement their own policy choices and to adopt more effective international support measures, particularly in technology transfer. . UNCTAD believes that least developed countries are the litmus test of the Sustainable Development Goals: if they are to be successful globally, they will have to be achieved in the countries furthest from the goals, i.e. the least developed countries.
International support for least developed countries has mostly been ineffective in helping them realize structural transformation and meet development goals, the report notes. It stresses the need for new forms of international support for least developed countries, which address, among other challenges, their growing technological gaps.
These countries have struggled to maintain growth momentum during the implementation of the Istanbul Action Program (IPoA) for Least Developed Countries from 2011 to the present. The IPoA sought to double the share of least developed countries in global trade, a goal reaffirmed in the SDGs. However, this goal remains elusive, precisely because LDCs’ progress towards building capacity has been unsatisfactory.
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