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UNCTAD Policy Brief No. 20A/2011: The LDC IV Conference: An Agenda for Action

Policy brief by UNCTAD, 2011

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The UN LDC IV Conference, to be held in Turkey in May 2011, will have three major objectives: to assess the implementation of the Brussels Programme of Action by LDCs and their development partners; to identify new challenges and opportunities for LDCs; and to agree upon the actions required at national and international levels in response to the inadequate economic and social performance of the LDCs over the last decade. This policy brief proposes elements of a broad agenda for action as an input for the Conference.

N° 20/A, February 2011

Least deveLoped countries series






An in-depth analysis of the 2011-2012 agenda for action
for LDCs is presented in UNCTAD’s annual publication
The Least Developed Countries Report 2010: Towards
a New International Development Architecture for
LDCs (LDC Report). The Report argues that a New
International Development Architecture (NIDA) for
LDCs is needed to facilitate new development paths
aimed at: a) reversing their marginalization in the global
economy and helping them to start catching up with
more developed economies; b) supporting a pattern of
accelerated economic growth and diversification which
would improve the general welfare and well-being of
all their people; and c) helping them graduate from the
LDC group.
In order to achieve these goals, LDC countries need to
do much better than in the previous decade. In spite of
the substantial progress when compared to the 1990s
(higher economic growth, more dynamic exports, fewer
macroeconomic imbalances), the LDCs, with a few
exceptions, have largely continued to suffer from certain
structural weaknesses, including increased commodity
dependence, widespread poverty, insufficient levels of
human capital, and high vulnerability to the effects of
climate change and natural disasters.
The LDCs and their development partners should
address these and other weaknesses. The LDC Report
argues that the agenda for action should encompass
three areas: a) better international support mechanisms
(ISMs) specifically designed for LDCs; b) reforms
of the global economic regimes which directly affect
development prospects of LDCs; and c) enhanced
South-South development cooperation.
There are five areas that should constitute the pillars
of the NIDA for LDCs, namely: the traditional areas
of finance and trade where international support
measures for LDCs already exist, the neglected areas
of commodities and technology, and the new area of
climate change mitigation and adaptation. These five
areas are further elaborated upon in this brief.
The LDC Report also assesses current international
support measures including the special consideration
given to LDCs in their accession to the WTO, the special
and differential treatment for LDCs in WTO agreements,
and preferential market access for LDCs. It concludes
that overall they have had largely symbolic, rather than
practical, developmental impact. Certain measures
have had limited effectiveness because of their design,
their poor implementation or a breakdown in funding.

Make financing for development in
LDCs adequate, sustained and stable
The financing of LDC development crucially depends
upon external sources, given the LDC’s limited domestic
financial resources. The role of aid is critical and will
remain so until the LDCs substantially increase their
domestic resource mobilization. The financing gap
cannot be resolved only with aid and should be placed
within a broader framework of financing for development.
Two major areas for action include: a) the provision of
resources for productive investment in LDCs; and b) the
promotion of country ownership and creation of policy
space to help mobilize and direct those resources in line
with priorities identified by the country itself.
Ultimately, the objective of aid should be to promote
greater domestic resource mobilization by using a
“matching fund” approach whereby donors agree
to match a percentage of funds collected by the
government to help LDCs reduce their dependence
on aid in the long term. In the short and medium term,
however, LDCs’ access to development finance would
be substantially increased by donor countries meeting
aid commitments (0.15-0.20% of GNI, versus the 0.09%
provided at present). In 2008, the shortfall amounted to
$23.6 billion and $43.8 billion vis-à-vis the agreed targets.
There should be a change in the composition of aid,
making more resources available for the development of
productive capacities, especially infrastructure and skills.
Innovative sources of finance for LDCs should also be
devised, for example through an additional allocation
of special drawing rights (SDR). Forty-five percent of
the new allocation of SDRs in 2009 went to the G-7
industrialized countries, with the LDCs allocated only
2.37%. The allocation mechanism should be revised
away from the IMF’s quota-based formula towards one
based on development needs, particularly those of
LDCs. South-South development cooperation is another
promising avenue for increasing the availability of
financial resources for development in LDCs. This could
be done either directly on a bilateral basis or through
regional financing schemes like funds, development
banks, and joint investment projects.

Enhance the developmental role
of trade in LDCs
In the area of trade, a successful conclusion of the Doha
Round which gives central importance to development
outcomes for all developing countries would benefit
LDCs. In addition, serious consideration should be
given to the option of reaping “early harvest” of specific

The LDC IV Conference:
An Agenda for Action
The UN LDC IV Conference, to be held in Turkey in May 2011, will have three major objectives: to assess
the implementation of the Brussels Programme of Action by LDCs and their development partners; to
identify new challenges and opportunities for LDCs; and to agree upon the actions required at national and
international levels in response to the inadequate economic and social performance of the LDCs over the last
decade. This policy brief proposes elements of a broad agenda for action as an input for the Conference.

measures that are directly relevant to the LDCs. These measures
have already been negotiated as part of the current Round and broad
agreement has been reached. This includes, among others (i) full
implementation of duty-free and quota-free (DFQF) market access for
all products originating from all LDCs, in line with Decision 36 of Annex
F of the Hong Kong WTO Ministerial Declaration, (ii) a waiver decision
on preferential and more favourable treatment for services and services
suppliers of LDCs, and (iii) an ambitious, expeditious and specific
outcome for cotton-trade-related aspects, in particular the elimination
of trade-distorting domestic support measures and export subsidies,
and the granting of DQFQ market access for cotton and cotton by-
products originating in LDCs. Providing DFQF market access for LDCs
is a part of Goal 8 of MDGs and its accelerated implementation would
be an important aspect of strengthening the Global Partnership for
Development up to the MDG target date of 2015.
To foster the development of their productive capacities, LDCs should
be empowered to use all of the flexibility currently available under WTO
rules. They should also be enabled to develop a new strategic trade
policy to support their development and poverty reduction efforts, and
to take advantage of the new opportunities associated with South-South
trade. The Enhanced Integrated Framework (EIF) offers an important
operational mechanism for ensuring that aid for trade development
in the LDCs is focused on priority activities, and is integrated within
national development and poverty reduction strategies. It is important
to accelerate the provision of aid for trade through EIF and to ensure
that it is directed at enhancing productive capacities in line with the
principle of country ownership.

Establish an international commodity policy
Given the very high dependence of many LDCs on the export of
commodities, the lack of an international commodity policy and
the negative consequences this entails affects these countries
disproportionately. While the goal in the long term should be structural
transformation leading to more diversified economies, in the short and
medium term new forms of international commodity policy are required
to reduce the volatility of commodity markets and the adverse impacts
of that volatility. That issue is also closely linked to food security and
humanitarian emergencies. Food prices are again on the rise, possibly
leading to the emergence of yet another food crisis in LDCs. As these
countries import a large share of their food needs, a debt crisis could
also arise if the recent increase in food prices continues.
Actions could include establishing a global countercyclical facility
that provides fast disbursement of aid at times of commodity price
shocks; establishing innovative commodity price stabilization schemes;
and introducing taxation measures to reduce speculation in global
commodity markets. The ability of LDCs to better manage resource
rents and avoid the Dutch disease effects should be strengthened,
and they should be provided with technical and financial assistance to
embark on resource-based industrialization and pursue diversification
of their economic structures.

Enable LDCs to acquire and develop
technological capabilities
The gap between LDCs and developed countries is perhaps the
widest in the area of technological capabilities. A new and ambitious

agenda for action, conceived and designed to enable LDCs to
acquire and develop technological capabilities, is needed since the
few existing international support measures are clearly inadequate.
The global economic regime in the area of technology in general,
and the international property rights regime in particular, should be
reformed to become more development friendly. This could be done
by creating a new balance between private and public dimensions
of knowledge, supporting an emergence of a new and coherent
reality of technology transfer that complements domestic capabilities
building, and supporting the emergence of the learning-oriented
developmental state that could facilitate knowledge-based activities.
LDC-specific ISMs in the area of technology would include
establishing a regional technology-sharing consortia, technology
licence bank for LDCs, a multi-donor trust fund for financing
enterprise innovation in LDCs, and diaspora networks to pool LDC
talents from abroad. South-South development cooperation could
also play a major role via the sharing of knowledge and experiences
of development strategies, providing finance on preferential terms for
transfer of technology to LDCs, and so on.

Create appropriate climate change mitigation
and adaptation architecture for LDCs
The scale of the climate change challenge confronting LDCs is
enormous. LDCs contribute much less to climate change than other
countries, but are more affected by the impacts of climate change
caused by varying temperatures, precipitation and natural disasters.
LDCs’ response to that challenge, including reorienting their
economies towards more climate-resilient and ecologically
sustainable paths, will require significant financial resources, and
sustainable and predictable financial flows, for supporting mitigation
and adaptation strategies. Additional investment and funding for
adaptation in LDCs is estimated to rise from $4 billion at present to
$17 billion per annum by 2030. The LDCs could only provide a small
fraction of the resources needed. The global economic regime for
dealing with climate change effects would also require a governance
structure that is transparent and representative.
LDC-specific ISMs should include the goal of making the United
Nations Framework Convention on Climate Change (UNFCCC) the
key pillar of predictable and equitable climate change framework for
LDCs. It would also be important to replenish and reform the LDC
Fund, which has so far been the main vehicle of the UNFCCC for
LDCs. Reforming the UNFCCC’s Clean Development Mechanism and
giving LDCs improved access to it would enhance their possibilities
to tap renewable energy technology and finance, both now and in
the future.
This ambitious agenda for action is intended to serve, alongside
proposals of member States and other international organizations,
as a major input to the policy debate at the UN LDC IV Conference.
Combining international support mechanisms for LDCs with a new
international framework for policy and cooperation that can deliver
more stable, equitable and inclusive development is one of the most
urgent challenges facing the international community today.

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