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UNCTAD Policy Brief No. 20/E: Poverty Reduction and Progress Towards Mdgs in the LDCs: Encouraging Signs but Much Remains to Be Done

Policy brief by UNCTAD, 2011

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This policy brief evaluates the progress of LDCs in achieving the goals set by the MDGs, especially in terms of poverty alleviation.

N° 20/E, May 2011


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Poverty Trends
Although poverty reduction is at the heart of
national and international development policies,
internationally comparable data to identify and
analyze poverty trends remain inadequate,
particularly for the LDCs. Against this background,
UNCTAD’s LDC Report has introduced some
innovations in the poverty estimates for the LDCs,
taking into account both national accounting
data on household consumption, and household
survey data. This methodology enabled estimates
of the incidence of extreme poverty (those people
living on less than $1.25 per day) and also
$2-a-day poverty in 33 LDCs, which covered 86%


of LDCs’ total population in 2007. The figures
in this policy brief are based on this data and
extrapolated to the LDCs as group assuming that
the incidence of poverty in LDCs for which data
is not available is the same as those for which we
have data.
Overall, three major periods can be identified in
poverty trends in the LDCs between 1980 and
2007 (see Chart 1). From the 1980s to the mid-
1990s, the incidence of poverty was on the rise
in both African and Asian LDCs; between 1994
and 2000, headcount rates began to decline, and
finally the rate of poverty reduction accelerated
after the year 2000.


Poverty Reduction and Progress
towards MDGs in the LDCs:
Encouraging Signs but Much
Remains to be Done
LDCs’ share of the global population living in extreme poverty has doubled since 1990. Recent
assessments indicate that substantial steps have been made at the global level towards achieving
several MDG targets by 2015. Due largely to substantial gains recorded in Asia, the outlook for poverty
reduction and educational attainment (MDGs 1, 2 and 3 respectively) appeared to be encouraging
at a world wide level, prior to the setbacks of the 2009 global recessions. Recent data also indicate
serious shortfalls in relation to health-related indicators (MDG 4 and to a lesser extent MDG 6), access
to sanitation (MDG 7), and identify serious gaps in the delivery of MDG 8 commitments by donor
countries. For LDCs, UNCTAD’s assessment of poverty reduction trends and MDG achievements (LDC
Report 2010 chapter 1) shows that some progress is certainly being made, with a slight acceleration
of achievement since 2000. However, progress remains overall rather slow, with Poverty reduction
being particularly weak, and most LDCs are off-track to meet most human development MDGs. The
level of human development indicators in the LDCs in 2007 was worse than where it was in developing
countries in 1990 for key indicators where comparisons can be made.


Source: UNCTAD Secretariat calculation based on Karshenas 2010


Chart 1: extreme poverty in the LDCs, actual data and MDG target




Chart 2: Share of people living in extreme poverty (below 1.25 $/day) in developing countries


Estimating global poverty is, of course, fraught with difficulty.
World Bank estimates of poverty in the LDCs are slightly
higher than those of the Karshenas database in both 1990 and
2007. But Karshenas’ estimates of poverty in other developing
countries are also lower and his estimates of extreme poverty
in India diverge significantly from World Bank data. In any
case, even using the World Bank data the overall trend
remains the same: the share of the global population living in
extreme poverty which is located in LDCs increased from 18%
in 1990 to 30% in 2005.
Taking these two estimates together, we can suggest that
at least one-third of the world population living in extreme
poverty now lives in LDCs and this is up from less than one-
fifth in 1990. What will be the share in 2015? What will be the
share at the end of the Istanbul Programme of Action in 2021?


Human Development Trends
Moving from income poverty to undernourishment, the data
also indicate that progress has been slow. About 34% of the
LDC population is reported to have been undernourished in
2005–2007, compared with 16% in developing countries. Since
then, some reversals in the progress against hunger have


inevitably taken place, as a consequence of the food price
hikes in mid 2008, and the fallout of the global crisis in 2009.
Turning to the other MDG indicators, the level of human
development in the LDCs appears appallingly low, comparable
to that of developing countries in 1990 (see Table 2). In terms
of progress towards specific time-bound MDG targets, the
following trends are clear:
• Regarding the target for universal primary education, both


LDCs and developing countries are only slightly off track
owing to a significant acceleration of enrolments since 2000.
However, only 59% of children in LDCs who start grade 1
reach the last grade of primary school, compared with 87%
in developing countries.


• Concerning access to safe water, developing countries are on
track to achieve the goal, but LDCs as a group are off track.
There has been no significant change in the trend of increasing
access to improved water sources in LDCs since 2000.


• Both developing countries and LDCs are off track in the rate
of progress towards the target of reducing infant mortality
and child mortality by two thirds between 1990 and 2015,


The main feature of poverty in LDCs is its all-pervasive and
persistent nature: in 2007, 53% of the population was living
on less than $1.25 a day, and 78% on less than $2 a day. This
implies that 421 million people were living in extreme poverty
in LDCs that year (see Table 1). The incidence of extreme
poverty was significantly higher in African LDCs, at 59%, than
in Asian LDCs, at 41%. For the $2/day poverty line, however,
the difference was less marked: 80% in African LDCs and 72
per cent in Asian LDCs.


Table 1: Poverty in the LDCs, selected years


1.25 $/
day poverty line


2 $/day
poverty line


Incidence Millions
of poor


Incidence Millions
of poor


1990 57.6% 301.9 82.5% 432.2


2000 58.9% 398.6 81.3% 550.0


2007 52.8% 421.4 77.5% 618.7
Source: UNCTAD Secretariat calculation based on Karshenas 2010


Notwithstanding rapid economic growth during the 2000s,
the pace of poverty reduction in the LDCs has been quite
modest, especially with respect to MDG targets. In contrast to


developing countries as a group, the LDCs remain off-target
to reduce poverty by half between 1990 and 2015. Moreover,
since the LDC population is young and increasing rapidly, the
number of people living in extreme poverty continued to rise
even during the boom, despite the decline in headcount rates.
As a consequence, given the continuation of trends since 2000
and ignoring any possible impact of the crisis, the number of
extreme poor living in LDCs by 2015 will be 439 million, whilst
if the MDG target were achieved it would be only 255 million.


LDCs as a Global Locus of Extreme Poverty


Using the Karshenas database, it is also possible to estimate
the share of the global population of people living in extreme
poverty in LDCs (see chart 2). What is apparent is that in 2007
China and India together were the main locus of extreme
poverty, accounting for 42% of the people living in extreme
poverty in all developing countries. 36% of extreme poor
people resided, on the other hand, in the LDCs, and 22% in
other developing countries (excluding China and India). Given
current trends in poverty reduction, as well as population
dynamics, it is clear that over time LDCs will become the major
locus of extreme poverty in the world. In 1990, only 18% of the
extreme poor lived in LDCs, while in 2000 the share was 27%.
What will be the share in 2020?


Source: UNCTAD Secretariat calculation based on Karshenas database




• Regarding access to improved sanitation facilities, both developing
countries and LDCs are off track, but the rate of progress in LDCs
is slower, with no significant acceleration since 2000.


• Regarding the maternal mortality rate, both LDCs and
developing countries have shown painfully slow progress.


though the rate is actually faster in LDCs than in developing
countries. However, because the former started from a very
high level of mortality rates, overall they will fall far shorter of
the target by 2015. There is no sign that there has been an
acceleration of progress since 2000.


• The slowest progress is in relation to the poverty reduction
target, where the new estimates indicate that only 4 out of
33 LDCs for which data were available are on track to halve
the incidence of extreme poverty between 1990 and 2015.


• The data also suggest that significant progress has been
made in reducing the incidence of undernourishment by
half. However, the pattern varies among LDCs: half of them
appear to be on track to achieve the target while in more than
a third progress has either stagnated or been reversed. The
slow progress in reducing malnutrition in LDCs as a group
compared with the comparatively good disaggregated
performance is because there are many small countries,
particularly small island developing States (SIDS) that have
made good progress on this indicator.


A more disaggregated picture (see Chart 3) shows that only
a handful of countries are on track to achieve the MDGs on a
broad front. Considering seven indicators for which sufficient
data are available, it is apparent that:
• The most significant progress has been made towards the


net primary school enrolment target, where half of the LDCs
are on track.


• About one third of LDCs are on track to meet the goal of
halving the proportion of people without access to safe
drinking water.


• Only one quarter of the LDCs are on track to reach the target
of reducing infant mortality by two thirds between 1990 and
2015, and a similar proportion are on track to achieve the
child mortality target.


Table 2: comparison between LDCs and developing countries for selected MDG indicators


Selected MDG Indicators Units LDCs DCs


1990 2007 or
latest data


1990 2007 or
latest data


Extreme poverty (World Bank) percent 63.3 53.4 45.7 26.6


Extreme poverty (UNCTAD) percent 57.5 52.7 40.6 21.9


Undernourishment percent 40 32 20 16


Primary school enrolment percent 52.3 78.8 79.9 88.8


Under-5 mortality rate per 1000 live
births


179.8 128.9 100.0 72.0


Infant mortality rate per 1000 live
births


112.3 82.4 68 49


Maternal mortality rate per 100’000 live
births


900 870 480 450


Access to water (share of population without) percent 46 38 29 16


Access to sanitation percent 76 64 59 48


Source: UNCTAD Secretariat calculation based on MDG 2010, Statistical Annex and Karshenas 2010


Chart 3: Number of LDCs progressing or regressing on selected MDG indicators




Source: UNCTAD Secretariat calculation based on MDG 2010, Statistical Annex




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(and in few cases services) but largely by-passed agriculture,
the sector which currently employs most people, as well
as manufacturing, the sector with the greatest potential of
increasing returns. Particularly in African LDCs, this lop-
sided pattern of structural change gave rise to major deficits
in creating productive jobs and livelihoods in relation to
expanding labour force. Prolonged agricultural stagnation,
coupled with the limited effects of growth in terms of off-
farm employment creation, largely explain why the economic
boom did not translate into poverty reduction and progress in
achieving the human development MDGs.


Second, there is a need to reconnect the MDGs to a holistic
economic development strategy. In the context of mass
poverty, a narrow focus on sound economic fundamentals,
improving the overall investment climate and targeted safety
nets has proved not to be effective enough, in spite of the
massive increase of exports and FDI. A more growth-oriented
macroeconomic policy together with a developmental
agricultural policy and developmental industrial policy are
also needed to spur the development of productive capacities
and associated expansion of productive employment, as well
as reduce commodity dependence.


Third, with a view to reducing LDCs aid dependence over the
long term, it is clear that even the present MDG achievements
will not be sustainable unless greater attention is devoted
to the mobilization of their domestic resources. This in turn
requires building up the fiscal base of their economies, as well
as scaling up the support to their productive sectors allowing
a sustained development of their productive capacities. While
specific policies to mobilize domestic resources need to be
assessed on a country-by-country basis, there is clear scope
to improve the efficiency of LDCs’ revenue collection systems,
to broaden the tax base and to strengthen the contractual
position of LDC authorities in mineral rent negotiations.


Fourth, it is clear that the largest share of people living in
extreme poverty in the developing countries is actually located
in China and India. The other developing countries have a
smaller share of the total extremely poor than the LDCs but
this does not mean that they have no poverty problem. The
international $1-a-day poverty line was originally devised
because it was representative of the national poverty lines of
the poorest countries. There are millions living on less than
$2-a-day, $3-a-day and $4-a-day in other developing countries,
which is far below the poverty line of rich countries. Improving
the human welfare of these people also matters. Moreover,
LDCs will only move up the development ladder if the more
advanced developing countries can also move up. Tackling
the global poverty problem requires an approach which deals
with the specific problems of LDCs but does not ignore other
developing countries.


+ 4 1 2 2 9 1 7 5 8 2 8 – u n c t a d p r e s s @ u n c t a d . o r g – w w w . u n c t a d . o r g


To be more precise, only seven LDCs are on track to achieve
four or more of the above targets: Ethiopia, the Lao People’s
Democratic Republic, Malawi, Maldives, Mozambique, Nepal
and Samoa.
Overall, these data indicate that the acceleration of growth
during the period of economic boom in the LDCs led to
some advances in the progress towards MDGs and poverty
reduction since 2000. However, only a handful of countries
are on track to achieve the MDGs on a broad front. There has
been significant progress in net primary enrolment and gender
parity in primary education, reflecting strong Government and
donor commitment. Poverty eradication has also advanced to
some extent. However these achievements are rather modest
in relation to policy targets. Most notably, LDCs’ growth
acceleration in the early and mid-2000s appears to have had
little impact on employment creation and overcoming food
insecurity. Finally, in the crucial areas of quality and outreach
of health services (MDGs 4 and 5) progress has been
sluggish, as also for major infrastructural investments, such
as in improving sanitation.


Impact of the Crisis
Though LDCs appear to have weathered the global economic
crisis better than initially feared, the social costs of the
downturn exacerbated the hardships already created in 2008
by the hikes in food and fuel prices. Moreover, the adverse
social consequences of the crisis are likely to be long-lasting
regardless of any rebound in macroeconomic variables,
because many of the coping strategies used by poor people
in the trough of the downturn (such as selling assets or taking
children out of school) tend to have consequences for life-
time wellbeing. Social costs will then ultimately depend on the
speed and strength of the global recovery. In view of these
factors some suggest that the downturn may have resulted
in an additional 9.5 million people living in extreme poverty in
LDCs.


Policy Implications
It must be recognized that given that several MDG targets are
defined in relative terms (for example halving the proportion of
people whose income is less than 1$ a day) poorer countries
with worse starting points are actually confronted with more
ambitious objectives. Nonetheless, it is evident that in spite
of some progress, much more must be done now in LDCs to
reach the targets. As both LDC Watch and Wolfenshohn have
put it, there can be no successful achievement of the MDGs
without the LDCs. The reduction of income poverty has been
particularly weak given the strength of the GDP boom.
The experience of the 2000s suggests four major policy
lessons. First, and foremost, whilst economic growth is a
key driver of poverty reduction and human development,
not all patterns of growth are equal. In most LDCs, the boom
typically was related to the expansion of extractive industries




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