Increased investment in State and productive capacities for the Least Developed Countries (LDCs) grouping is critical to their ability to respond to and recover from crises like COVID-19, as well as to progress towards sustainable development, according to UNCTAD’s Least Developed Countries Report 2021, released on Monday.
Productive capacities are defined by UNCTAD as the productive resources, entrepreneurial capabilities, and production linkages that determine a country’s capacity to generate goods and services and enable it to grow and develop.
Developing production allows LDCs around the world to support structural economic transformation, which helps to eliminate poverty and accelerate progress toward the UN Sustainable Development Goals (SDGs).
The report warns that achieving the SDGs will necessitate significant investment and spending, far beyond the financial capabilities of LDCs.
The LDC category was established by the United Nations 50 years ago. The grouping of the world’s poorest economies has grown from 25 countries in 1971 to 52 in 1991 and now stands at 46, with only six countries making enough progress to no longer be classified as LDCs.
Only a few LDCs have shown positive signs of structural transformation and considerable productivity improvements over the last two decades, according to the research.
The finance needs of LDCs are described as “daunting” in the UNCTAD report, particularly in connection to structural reform goals.
For example, the average annual investment required to achieve the 7% growth objective (SDG 8.1) is anticipated to be around $462 billion, while the average annual investment required to end extreme poverty (SDG 1.1) in LDCs is estimated to be over $485 billion, according to the report.
The annual investment necessary to double manufacturing’s proportion of GDP (SDG 9.2) is anticipated to be more than $1 trillion.
LDCs will need to expand their fiscal capacities, increase domestic resource mobilization, and improve the effectiveness of public expenditures to generate sufficient development finance, according to the report, but even this will not be enough.
According to UNCTAD, most LDCs will need three to five years or more to restore their GDP per capita levels from 2019.
Domestic recovery efforts must be bolstered by a new generation of international support measures that are more closely connected with the needs of LDCs and 21st-century realities, according to Paul Akiwumi, director of UNCTAD’s division for Africa and LDCs.
Mr. Akiwumi went on to say that expanding investment in state and production capacity should be at the center of the next programme of action for these nations, which will be adopted at the UN Conference on LDCs in January 2022.
He also advised LDC governments to tailor international development programmes to their specific national circumstances and to resolve trade-offs when developing their national development goals.