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The Least Developed Countries Report 2013: Growth with employment for inclusive and sustainable development

Report by Collardeau-Angleys, Agnès; Davis, Junior; Encontre, Pierre; Paunovic, Igor; Rajalingam, Madasamyraja; Traeger, Rolf and Wicks, Heather/UNCTAD, 2013

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This Report examines the link between investment, growth and employment. More specifically, it considers how LDCs can promote growth that generates an adequate number of quality jobs and that enables them to reach what UNCTAD believes are their most urgent and pivotal goals, both now and in the post-2015 development agenda: poverty reduction, inclusive growth and sustainable development.

U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T


Growth with employment for inclusive and sustainable development


EMBARGO
The contents of this Report must not
be quoted or summarized in the print,
broadcast or electronic media before
20 November 2013, 17:00 hours GMT


THE LEAST DEVELOPED COUNTRIES
REPORT 2013




U N I T E D N AT I O N S C O N F E R E N C E O N T R A D E A N D D E V E L O P M E N T


THE LEAST DEVELOPED COUNTRIES
REPORT 2013


New York and Geneva, 2013


Growth with employment for inclusive and sustainable development




Note


Symbols of United Nations documents are composed of capital letters with figures.
Mention of such a symbol indicates a reference to a United Nations document.


The designations employed and the presentation of the material in this publication
do not imply the expression of any opinion whatsoever on the part of the Secretariat
of the United Nations concerning the legal status of any country, territory, city or
area, or of its authorities, or concerning the delimitation of its frontiers or boundaries.


Material in this publication may be freely quoted or reprinted, but full acknowledgement
is requested. A copy of the publication containing the quotation or reprint should be sent
to the UNCTAD secretariat at: Palais des Nations, CH-1211 Geneva 10, Switzerland.


The overview of this report can also be found on the Internet, in all six official languages of
the United Nations, at www.unctad.org/ldcr


UNITED NATIONS PUBLICATION


Sales No. E.13.II.D.1


ISBN 978-92-1-112864-2


eISBN 978-92-1-054116-9


ISSN 0257-7550


UNCTAD/LDC/2013


Copyright © United Nations, 2013
All rights reserved




“Don’t let your past dictate your future”


Proverb from Sierra Leone






What are the least developed countries?


Forty-nine countries are currently designated by the United Nations as “least developed countries” (LDCs).
These are: Afghanistan, Angola, Bangladesh, Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Central African
Republic, Chad, Comoros, Democratic Republic of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, the
Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lao People’s Democratic Republic, Lesotho, Liberia, Madagascar,
Malawi, Mali, Mauritania, Mozambique, Myanmar, Nepal, Niger, Rwanda, Samoa, Sao Tome and Principe,
Senegal, Sierra Leone, Solomon Islands, Somalia, South Sudan, Sudan, Timor-Leste, Togo, Tuvalu, Uganda,
United Republic of Tanzania, Vanuatu, Yemen and Zambia.


The list of LDCs is reviewed every three years by the United Nations Economic and Social Council in the light
of recommendations by the Committee for Development Policy (CDP). The following three criteria were used by
CDP in the latest review of the list, in March 2012:


(a) a per capita income criterion, based on a three-year average estimate of the gross national income (GNI)
per capita, with a threshold of $992 for possible cases of addition to the list, and a threshold of $1,190 for
graduation from LDC status;


(b) a human assets criterion, involving a composite index (the Human Assets Index) based on indicators of:
(i) nutrition (percentage of the population that is undernourished); (ii) health (child mortality rate); (iii) school
enrolment (gross secondary school enrolment ratio); and (iv) literacy (adult literacy rate); and


(c) an economic vulnerability criterion, involving a composite index (the Economic Vulnerability Index) based on
indicators of: (i) natural shocks (index of instability of agricultural production; share of the population that
has been a victim of natural disasters); (ii) trade-related shocks (index of instability of exports of goods and
services); (iii) physical exposure to shocks (share of the population living in low-lying areas); (iv) economic
exposure to shocks (share of agriculture, forestry and fisheries in gross domestic product (GDP)); index of
merchandise export concentration); (v) smallness (population in logarithm); and (vi) remoteness (index of
remoteness).


For all three criteria, different thresholds are used for identifying cases of addition to, and graduation from, the
list of LDCs. A country will qualify to be added to the list if it meets the addition thresholds on all three criteria
and does not have a population greater than 75 million. Qualification for addition to the list will effectively lead to
LDC status only if the Government of the relevant country accepts this status. A country will normally qualify for
graduation from LDC status if it has met graduation thresholds under at least two of the three criteria in at least
two consecutive triennial reviews of the list. However, if the per capita GNI of an LDC has risen to a level at least
double the graduation threshold, the country will be deemed eligible for graduation regardless of its performance
under the other two criteria.


The General Assembly, through a resolution adopted on 18 December 2012, endorsed (with immediate
effect) CDP's March 2012 recommendation to add South Sudan to the list of LDCs. South Sudan became an
independent State on 9 July 2011 and a Member State of the United Nations five days later.


Only three countries have so far graduated from LDC status: Botswana in December 1994, Cape Verde in
December 2007 and Maldives in January 2011. In March 2009, CDP recommended the graduation of Equatorial
Guinea. This recommendation was accepted by the Council in July 2009, but as of September 2013, the Assembly
had not confirmed the decision. In September 2010, the Assembly, giving due consideration to the unprecedented
losses Samoa suffered as a result of the Pacific Ocean tsunami of 29 September 2009, decided to defer to 1
January 2014 the graduation of that country. The Council in July 2012 endorsed CDP's recommendation to
graduate Vanuatu from LDC status, a decision the Assembly had not yet confirmed as of September 2013.


After a recommendation to graduate a country has been endorsed by the Economic and Social Council and
confirmed by the General Assembly, the graduating country is granted a three-year grace period before graduation
effectively takes place. This grace period, during which the country remains an LDC, is designed to enable the
graduating State and its development and trading partners to agree on a “smooth transition” strategy, so that the
loss of LDC status at the time of graduation does not disrupt the country’s socio-economic progress. A "smooth
transition" measure generally implies extending for a number of years after graduation, for the benefit of the
graduated country, a concession from which the country used to benefit by virtue of its LDC status.




Acknowledgements


The Least Developed Countries Report 2013 was prepared by a team consisting of Agnès Collardeau-Angleys,
Junior Davis, Pierre Encontre, Igor Paunovic, Madasamyraja Rajalingam, Rolf Traeger and Heather Wicks (the LDC
Report team). The work was carried out under the guidance and supervision of Taffere Tesfachew, Director, Division
for Africa, Least Developed Countries and Special Programmes, who also made significant inputs to the structure
and content of the Report.


An ad hoc expert group meeting on “Growth with employment for inclusive and sustainable development”
was held in Geneva on 3 and 4 July 2013 to peer-review the Report and its specific inputs. It brought together
specialists in the fields of labour economics, development policies, public works, industrial policy and financing
for development. The participants in the meeting were: Ludovico Alcorta (United Nations Industrial Development
Organization), Christoph Ernst (International Labour Office), Charles Gore (University of Glasgow), Massimiliano La
Marca (International Labour Office), Woori Lee (International Labour Office), Moazam Mahmood (International Labour
Office), Pedro Martins (Overseas Development Institute), Irmgard Nübler (International Labour Office) and Aurelio
Parisotto (International Labour Office), as well as the members of the LDC Report team and the following UNCTAD
colleagues: Chantal Dupasquier, Mahmoud Elkhafif, Samuel Gayi, Ricardo Gottschalk, Kalman Kalotay, Jörg Mayer,
Patrick Osakwe and Astrit Sulstarova. The papers reviewed at the meeting had been prepared by Junior Davis, Igor
Paunovic and Rolf Traeger.


The Report draws on background papers prepared by Chalapurath Chandrasekhar, Jayati Ghosh and Anna
McCord. Jayati Ghosh provided the substantive editing and contributed to the overall Report. Evangelia Bourmpoula,
Marie-Claire Sodergren and Christina Wieser (International Labour Office) made available the ILO Laborsta and
Employment Trends (EMP/TRENDS) econometric model databases.


Erica Meltzer edited the text. Sophie Combette designed the cover. Heather Wicks and Maria Bovey provided
secretarial support.


Madasamyraja Rajalingam did the overall layout, graphics and desktop publishing.




Contents


What are the least developed countries? ............................................................................................................. v


Explanatory notes................................................................................................................................................xi


Abbreviations ..................................................................................................................................................... xii


Classifications used in this Report...................................................................................................................... xiv


Overview ........................................................................................................................................................ I-XIII


CHAPTER 1: Recent Trends and Outlook for the LDCs.................................................................................................... 1


A. Introduction ...................................................................................................................................................2


B. Recent trends in the global economy and implications for the LDCs...........................................................3


1. Global growth and international trade .........................................................................................................3


2. Recent trends in financial flows...................................................................................................................4


3. Recent trends in commodity prices ............................................................................................................5


4. Recent developments in special and differential treatment of the LDCs.......................................................6


C. Recent economic performance of the LDCs.................................................................................................7


1. Trends in the real economy.........................................................................................................................7


2. Trends in current account and international trade .....................................................................................10


3. Trends in external finance .........................................................................................................................15


D. Outlook for the LDCs ..................................................................................................................................18


Notes................................................................................................................................................................22


References .......................................................................................................................................................22


CHAPTER 2: Exploring Demographic Dynamics in the LDCs....................................................................................... 23


A. Rationale for addressing growth with employment for inclusive and sustainable development
in the LDCs..................................................................................................................................................24


B. Exploring demographic dynamics in the LDCs...........................................................................................28


1. Key demographic trends in the LDCs .......................................................................................................28


2. Urbanization and rural–urban labour migration .........................................................................................36


3. Conclusions .............................................................................................................................................39


Appendix 1 .......................................................................................................................................................41


Notes................................................................................................................................................................42


References .......................................................................................................................................................43


CHAPTER 3: Employment Trends in LDCs.......................................................................................................................... 45


A. The quantity of employment in the LDCs....................................................................................................46


1. Introduction ..............................................................................................................................................46


2. The LDC employment challenge...............................................................................................................46


3. Gross employment trends in the LDCs .....................................................................................................47


4. Sectoral distribution of employment by status ..........................................................................................49


5. LDC labour productivity ............................................................................................................................55




The Least Developed Countries Report 2013viii


6. Labour force participation rates ...............................................................................................................59


7. LDC employment-to-population ratios......................................................................................................61


8. Rural non-farm employment: panacea, or Pandora’s box? .......................................................................63


9. Unemployment and inactivity....................................................................................................................67


B. The quality of employment in the LDCs......................................................................................................70


1. The LDC working poor .............................................................................................................................70


2. Employment status and vulnerable work in the LDCs ...............................................................................71


3. Informal sector employment .....................................................................................................................75


C. Employment growth and estimated net job creation ..................................................................................76


D. Conclusions.................................................................................................................................................85


Notes................................................................................................................................................................88


References .......................................................................................................................................................89


CHAPTER 4: A Framework for Linking Employment Creation and Development of Productive
Capacities in the LDCs ..................................................................................................................................... 93


A. Introduction .................................................................................................................................................94


B. Investing to develop productive capacities: capital accumulation ............................................................97


1. Capital accumulation and the role of the investment-growth-employment nexus ......................................97


2. The nexus in the short term: the primary role of the public sector ...........................................................102


3. The nexus in the long term: the primary role of the private sector ...........................................................105


4. Formation of human capital ....................................................................................................................106


C. Enterprise development and technological change..................................................................................108


1. Enterprise development and the employment challenge: Firm size matters.............................................109


2. Technological change and the employment challenge: the choice of technology matters........................110


D. Structural change .....................................................................................................................................113


1. Structural change and employment challenge: the three-pronged approach ..........................................113


2. Agriculture and the employment challenge: modernizing subsistence activities in rural areas ..................117


3. Tradable activities: the employment challenge in an open economy........................................................121


4. Non-tradable activities: the employment challenge in low-productivity activities ......................................122


E. How to adjust the framework to conditions in different LDCs ..................................................................123


1. Fuel and mineral producers and exporters..............................................................................................124


2. Producers and exporters of agricultural products ...................................................................................124


3. Producers and exporters of manufactured goods...................................................................................125


4. Small island developing States ...............................................................................................................126


F. Conclusions...............................................................................................................................................126


Notes..............................................................................................................................................................128


References .....................................................................................................................................................129


CHAPTER 5: Policies for Employment-Intensive Growth in the LDCs ................................................................... 131


A. Introduction ...............................................................................................................................................132


B. Macroeconomic strategies .......................................................................................................................134




ixCONTENTS


C. Managing the external sector ...................................................................................................................139


D. State-led employment creation.................................................................................................................141


E. Enterprise development ............................................................................................................................146


1. Industrial policies ....................................................................................................................................146


2. Policies to foster entrepreneurship..........................................................................................................153


F. Summary and conclusions........................................................................................................................160


G. International support measure: Bolstering youth employment in LDCs through private sector
development .............................................................................................................................................162


Notes..............................................................................................................................................................164


References .....................................................................................................................................................164


Statistical Tables on the Least Developed Countries ................................................................................................. 169


Boxes


1. Graduation of Samoa from LDC status........................................................................................................11


2. Changing growth model in China and possible consequences for the LDCs .............................................20


3. Observations on rural non-farm employment in Bangladesh ......................................................................52


4. Focusing on smaller-scale projects to foster job creation: the case of Mozambique................................155


Charts


1. Terms of trade indices of LDCs, regional groups of LDCs and ODCs, 2000–2012 ...................................12


2. Food, meat and cereal price indices, January 2005-June 2013................................................................14


3. Concentration indices of exports of country groups, selected years ........................................................15


4. Private financial flows to the LDCs, 2000–2012.........................................................................................16


5. Official capital flows to LDCs, 2000–2011 .................................................................................................17


6. LDC population, 1970–2050 ......................................................................................................................29


7. Average annual population growth rate in the LDCs, 1970–2012..............................................................30


8. Average annual increase in the LDC working-age population 2010-2050.................................................31


9. LDC population by age groups, 1990–2050 ..............................................................................................33


10. LDC dependency ratios, 2010 and 2050 ...................................................................................................34


11. Youth population, (10–24 years), 1950–2050 .............................................................................................35


12. Age distribution of LDC and ODC populations, 2015 and 2050................................................................36


13. LDC rural-urban population trends and forecasts, 1970–2050..................................................................37


14. LDC GDP, employment and population growth trends, 2000–2018 ..........................................................47


15. Labour force dynamics in the LDCs, 1990–2020.......................................................................................48


16. Growth of agricultural and non-agricultural labour force in LDCs, 1990–2020..........................................51


17. Employment in major economic sectors, 2000–2018................................................................................53


18. LDC labour productivity, by country groups and by export specialization, 2000–2012 ............................56


19. LDC output per worker as a share of more developed economies, 1990–2012 .......................................57


20. Agricultural labour productivity trends in LDCs, developed and other developing countries,
1985–2011..................................................................................................................................................58


21. LDC labour force participation rates by gender and region, 2012.............................................................60


22. LDC Labour force participation rates, by region and age, 1980–2009 ......................................................61




The Least Developed Countries Report 2013x


23. Labour force participation rates for women in LDCs, 1990–2012 .............................................................62


24. Employment-to-population ratios, LDC regional averages by gender, 2012.............................................63


25. Youth and adult employment-to-population ratios in selected LDCs, 2000 to 2012.................................64


26. Household participation and shares in rural non-farm income-generating activities in four
selected LDCs............................................................................................................................................66


27. LDC total unemployment rate by region, gender and youth, 1991–2012..................................................68


28. LDC inactivity rates for youths and working-age population, 2009...........................................................69


29. Share of the working poor in LDCs living on less than $1.25 per day in total employment, 2000–2017 ..71


30. Share of vulnerable employment in LDCs and ODCs, 2000–2018 ............................................................72


31. Distribution of employment by status in selected LDCs, 2012..................................................................73


32. Employment by economic class in the LDCs and ODCs (various years)...................................................75


33. Growth elasticity of employment in LDCs, 2004–2008..............................................................................78


34. Elasticity of total employment to total GDP in the LDCs, 2000–2008 .......................................................80


35. Policy framework for linking development of productive capacities with employment creation
in LDCs.......................................................................................................................................................96


36. Investment ratios in LDCs and ODCs, 1985–2011 ....................................................................................98


37. The investment-growth-employment nexus in a closed economy ............................................................99


38. Primary sector as a share of GDP, 2009–2011.........................................................................................116


39. Rural population as a share of total population, 2010–2012 ...................................................................119


40. Cereal yield in LDCs and ODCs, 1990–2011 ...........................................................................................120


Tables


1. Real GDP and real GDP per capita growth rates for LDCs, advanced economies,
emerging and developing economies and world, selected years................................................................3


2. Price indices for selected primary commodities of importance to LDCs, 2008–2013.................................6


3. Real GDP and real GDP per capita growth rates for LDCs, by groups, selected years ..............................7


4. Exports and imports of merchandise and services in LDCs......................................................................12


5. Composition of merchandise exports and imports in LDCs, average 2010–2012 ....................................13


6. Real GDP growth rates for LDCs, developing and advanced economies, selected years and forecasts .18


7. Broad demographic trends in the LDCs, 1980–2011.................................................................................32


8. LDC distribution of population and labour, 2000–2020 .............................................................................37


9. Urbanization and pressure on land in the LDCs, 1980–2011.....................................................................38


10. Changing locus of the labour force in LDCs 1990–2020 ...........................................................................50


11. Sectoral share of total employment for selected LDCs, various years ......................................................54


12. Labour force participation rates, 1980–2009 .............................................................................................59


13. LDC Inactivity rates, 1980–2009 ................................................................................................................69


14. Employment and poverty dynamics in the LDCs, 2000–2018 ...................................................................70


15. Distribution of employment by status, 2012 ..............................................................................................73


16. Contribution of informal sector to total non-agricultural employment in selected LDCs...........................77


17. Decomposition of GDP per capita in selected LDCs, 2000–2010 .............................................................81


18. Growth decomposition, percentage contribution to total growth in GDP..................................................83


19. Indicators of human capital formation in LDCs and ODCs, 1995 and 2011............................................107




xiCONTENTS


Annex Tables


1. Indicators on LDCs development, 2012...................................................................................................170


2. Real GDP growth rates for individual LDCs, selected years....................................................................171


3. Real GDP per capita growth rates for individual LDCs, selected years...................................................172


4. Gross capital formation, gross domestic savings and resource gap in LDCs,by country,
and by LDC groups, selected years.........................................................................................................173


5. Share of value added in main economic sectors in LDCs, by country and country groups,
1999–2001 and 2009–2011......................................................................................................................174


6. Foreign direct investment inflows to LDCs, selected years .....................................................................175


7. Total workers remittances to LDCs, by country and groups....................................................................176


8. Selected indicators on debt burden in LDCs...........................................................................................177


9. Indicators on area and population, 2011 .................................................................................................178


10. Selected indicators on education and labour, 2011.................................................................................179


11. Selected indicators on demography in LDCs ..........................................................................................180


12. LDC selected population indicators, 2012...............................................................................................181


13. New entrants to the labour market in LDCs ............................................................................................182


14. Total employment trends in LDCs............................................................................................................183


15. Countries and data sources for LDC sub-sample RNF income analysis.................................................184


EXPLANATORY NOTES


The term “dollars” ($) refers to United States dollars unless otherwise stated. The term “billion” signifies 1,000
million.


Annual rates of growth and changes refer to compound rates. Exports are valued f.o.b. (free on board) and
imports c.i.f. (cost, insurance, freight) unless otherwise specified.


Use of a dash (–) between dates representing years, e.g. 1981–1990, signifies the full period involved, including
the initial and final years. An oblique stroke (/) between two years, e.g. 1991/92, signifies a fiscal or crop year.


The term “least developed country” (LDC) refers, throughout this report, to a country included in the United Nations
list of least developed countries.


In the tables:


Two dots (..) indicate that the data are not available, or are not separately reported.


One dot (.) indicates that the data are not applicable.


A hyphen (-) indicates that the amount is nil or negligible.


Details and percentages do not necessarily add up to totals, because of rounding.




The Least Developed Countries Report 2013xii


Abbreviations


AfDB African Development Bank


AFRICATIP Association Africaine des Agences d’Exécution des Travaux d’Intérêt Public


AGETIP Agence d’Exécution des Travaux d’Intérêt Public contre le Sous-emploi


CDP Committee for Development Policy


DAC Development Assistance Committee


EAP economically active population


ECOWAS Economic Community of West African States


EIF Enhanced Integrated Framework


EIIPs Employment-Intensive Investment Programmes


EMP/TRENDS Employment Trends


EPZ export processing zone


ERRA Ethiopian Rural Roads Authority


EU European Union


EVI Economic Vulnerability Index


FAO Food and Agriculture Organization of the United Nations


FDI foreign direct investment


GDP gross domestic product


GNI gross national income


GVC global value chain


HIPC Heavily Indebted Poor Countries Initiative


HYV high-yielding variety


ICT information and communication technology


ILO International Labour Organization


IMF International Monetary Fund


IPoA Istanbul Programme of Action (IPoA) for the Least Developed Countries for the Decade 2011–2020


IPR Investment Policy Review


IPRs intellectual property rights


ISIC International Standard Industrial Classification


ISM international support measure


JoGGs Job Generation and Growth Decomposition Tool


KEP Karnali Employment Programme


KILM Key Indicators of the Labour Market


LDC least developed country


LDC-IV Fourth United Nations Conference on the Least Developed Countries


LDCR Least Developed Countries Report


LFPR labour force participation rate


LIC low income country


LSMS Living Standards Measurement Study


MDG Millennium Development Goal




xiiiCONTENTS


MDRI Multilateral Debt Relief Initiative


MSE micro and small enterprise


MSME micro, small and medium-sized enterprise


NEETs Not in education, employment or training


NEPAD New Partnership for Africa’s Development


NGO non-governmental organization


NICs newly industrialized countries


ODA official development assistance


ODCs other developing countries


OECD Organisation for Economic Co-operation and Development


ppm parts per million


PPP purchasing power parity


PSNP Productive Safety Nets Programme


PWPs public works programmes


R&D research and development


RIGA Rural Income Generating Activities


RNF rural non-farm


RNFE rural non-farm economy


SADC Southern Africa Development Community


SDRs special drawing rights


SIDS small island developing States


SMEs small and medium-sized enterprises


SSA Sub-Saharan Africa


TNC transnational corporation


TRIPS Trade-related Aspects of Intellectual Property Rights


UNCTAD United Nations Conference on Trade and Development


UN/DESA United Nations Department of Economic and Social Affairs


UNECA United Nations Economic Commission for Africa


UNEP United Nations Environment Programme


UNFPA United Nations Population Fund


UNICEF The United Nations Children’s Fund


UNIDO United Nations Industrial Development Organization


VAT Value Added Tax


VUP Vision 2020 Umurenge Programme


WDI World Development Indicators


WEO World Economic Outlook


WESP World Economic and Social Prospects


WFP World Food Programme


WIR World Investment Report


WTO World Trade Organization




The Least Developed Countries Report 2013xiv


Classifications used in this Report


Least developed countries


Geographical/structural classification


Unless otherwise specified, in this Report the least developed countries (LDCs) are classified according to a
combination of geographical and structural criteria. Therefore, the small island LDCs which geographically are in
Africa or Asia are grouped together with the Pacific islands, due to their structural similarities. Haiti and Madagascar,
which are regarded as large island States, are grouped together with the African LDCs. South Sudan declared its
independence on 9 July 2011, and became both an independent state and a Member of the United Nations on
14 July 2011. Therefore, from 2011, data for South Sudan and Sudan (officially the Republic of the Sudan), where
available, are shown under the appropriate country name. For periods prior to the independence of South Sudan in
2011, data for Sudan (former) include those for South Sudan unless otherwise indicated. The resulting groups are as
follows:


African LDCs and Haiti: Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Democratic Republic
of the Congo, Djibouti, Equatorial Guinea, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Lesotho, Liberia,
Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Sierra Leone, Somalia, Sudan (former)
or South Sudan and Sudan, Togo, Uganda, United Republic of Tanzania, Zambia.


Asian LDCs: Afghanistan, Bangladesh, Bhutan, Cambodia, Lao People’s Democratic Republic, Myanmar, Nepal,
Yemen.


Island LDCs: Comoros, Kiribati, Samoa, Sao Tome and Principe, Solomon Islands, Timor-Leste, Tuvalu, Vanuatu.


Export specialization


For the purpose of analysing current trends in chapter 1, UNCTAD has classified the LDCs into six export specialization
categories, according to which type of exports accounted for at least 45 per cent of total exports of goods and
services in 2010–2012. The group composition is as follows:


Agricultural and Food exporters: Guinea-Bissau, Malawi, Solomon Islands, Somalia.


Fuel exporters: Angola, Chad, Equatorial Guinea, Sudan, Yemen.


Manufactures exporters: Bangladesh, Bhutan, Cambodia, Haiti, Lesotho.


Mineral exporters: Democratic Republic of the Congo, Eritrea, Guinea, Mali, Mauritania, Mozambique, Zambia.


Mixed exporters: Benin, Burkina Faso, Central African Republic, Kiribati, Lao People’s Democratic Republic, Myanmar,
Niger, Senegal, Sierra Leone, Togo, United Republic of Tanzania.


Services exporters: Afghanistan, Burundi, Comoros, Djibouti, Ethiopia, Gambia, Liberia, Madagascar, Nepal, Rwanda,
Samoa, Sao Tome and Principe, Timor-Leste, Tuvalu, Vanuatu, Uganda.


Other groups of countries and territories


Developed economies: Andorra, Austria, Australia, Belgium, Bulgaria, Bermuda, Canada, Cyprus, Czech Republic,
Denmark, Estonia, Faeroe Islands, Finland, France, Germany, Gibraltar, Greece, Greenland, Holy See, Hungary,
Iceland, Ireland, Italy, Israel, Japan, Latvia, Lithuania, Luxembourg, Malta, Netherlands, New Zealand, Norway,
Poland, Portugal, Romania, Saint Pierre and Miquelon, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland,
United Kingdom, United States.


Other developing countries (ODCs): All developing countries (as classified by the United Nations) which are not LDCs.


Transition economies: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Croatia, Georgia, Kazakhstan,
Kyrgyzstan, Moldova, Montenegro, Russian Federation, Serbia, Tajikistan, The former Yugoslav Republic of
Macedonia, Turkmenistan, Ukraine, Uzbekistan.




xvCONTENTS


Product classification


Goods: The figures provided below are the codes of the Standard International Trade Classification (SITC), revision 3.


Agriculture and Food: section 0, 1, 2 and 4 excluding divisions 27 and 28.


Minerals: section 27, 28 and 68 and groups 667 and 971.


Fuels: section 3.


Manufactures: section 5 to 8 excluding group 667.


Section 9 (Commodities and transactions not classified elsewhere in the SITC) has been included only in the total
export of goods and services, but not in the goods classification above, except for group 971 (Gold, non-monetary
(excluding gold ores and concentrates)), which has been included in Minerals.


Services: Total services cover the following main categories: transport, travel, communications, construction,
insurance, financial services, computer and information services, royalties and license fees, other business services,
personal, cultural, recreational and government services.


Taxonomy of LDCs according to their employment challenges


The UNCTAD secretariat has classified LDCs according to their employment challenges on the basis of three criteria:
1. geographical location of the population (which provides a proxy of the type of economic activity available to the
labour force); 2. structure of output; and 3. structure of exports.


Rural economies: Countries whose rural population is higher than 60 per cent and/or whose primary sector
contributes more than 50 per cent of gross value added (GVA) and which do not fall under one of the categories
below: Afghanistan, Burkina Faso, Burundi, Central African Republic, Ethiopia, Guinea-Bissau, Lao People’s
Democratic Republic, Liberia, Madagascar, Malawi, Nepal, Niger, Rwanda, Sierra Leone, Somalia, United Republic
of Tanzania, Uganda.


Small island developing States: LDCs recognized as members of the SIDS category by the United Nations: Comoros,
Kiribati, Samoa, Sao Tome and Principe, Solomon Islands, Tuvalu, Vanuatu.


Fuels producers and exporters: Countries whose mining, utilities and construction sector accounts for more than 25
per cent of GVA and/or whose fuel exports account for more than 45 per cent of total exports of goods and services:
Angola, Bhutan, Chad, Equatorial Guinea, Sudan, Timor-Leste, Yemen.


Minerals producers and exporters: Countries whose mining, utilities and construction sector accounts for more than
25 per cent of GVA and/or whose mineral exports account for more than 45 per cent of total exports of goods and
services: Democratic Republic of the Congo, Eritrea, Guinea, Mali, Mauritania, Mozambique, Zambia.


Major manufactures producers and exporters: Countries whose manufacturing sector accounts for more than 15 per
cent of GVA and/or whose manufactures exports account for more than 45 per cent of total exports of goods and
services: Bangladesh, Cambodia, Haiti, Lesotho, Myanmar.


Five LDCs for which data were available have not been classified because they do not fall into any of the above
categories. According to their export specialization, they are mixed exporters (Benin, Senegal and Togo) or service
exporters (Djibouti and Gambia). Data for South Sudan are not yet available, but it can be surmised that it would have
been classified as fuels producer and exporter.


Data were drawn from UNCTAD’s UNCTADStat and FAO’s FAOSTAT databases and the time coverage for data was
2009–2012.






OVERVIEW




The Least Developed Countries Report 2013II


Introduction


Despite the sluggish global economic performance of recent years, the least developed countries (LDCs) in general
have enjoyed moderate economic growth. Per capita income for the group as a whole has been expanding steadily,
raising hopes that some of them may even be able to graduate from the category within the decade. However, there
are worrying signs that this growth trend has not been inclusive and that its contribution to poverty reduction has
been limited. The main explanation for the lack of inclusiveness is that growth in LDCs has not generated enough
“quality” jobs — that is, jobs offering higher wages and better working conditions — especially for the young. Creating
employment opportunities is critical because of the fundamental role that work plays in economic development and
in people’s lives. Not only does it influence income, aggregate demand and investment decisions, it is also the best
and most dignified pathway out of poverty.


Since the onset of the global financial and economic crisis in 2008, employment generation — and especially the
phenomenon of jobless growth — has increasingly been recognized as a major policy concern worldwide. This is
particularly true of the LDCs, where the challenges posed by demographic patterns, persistent poverty, accelerated
urbanization and rising inequalities make the absence of remunerative employment a source of significant social and
political tension. Not all LDCs are rich in mineral resources or other natural endowments. For most of these countries,
their most valuable asset is their people, in particular the young. It is only by engaging their people in productive
employment that LDCs can achieve lasting and constructive growth.


This Report examines the link between investment, growth and employment. More specifically, it considers how
LDCs can promote growth that generates an adequate number of quality jobs and that enables them to reach what
UNCTAD believes are their most urgent and pivotal goals, both now and in the post-2015 development agenda:
poverty reduction, inclusive growth and sustainable development.


Recent economic trends and outlook for the LDCs


With the global economy still struggling to return to a strong and sustained growth path, the external environment
faced by the LDCs has been less propitious in the past five years than previously. The recent slowdown of world
trade, which is now at a near-standstill, has weakened the demand for LDC imports, most notably in the case of
developed countries but also in emerging economies. In addition to weaker demand for their exports, the LDCs have
been confronted with a heightened volatility of commodity prices and capital flows.


As a result, economic growth in the LDCs has been weaker by a full two percentage points in the past five years
(2009–2013) than during the previous boom period (2002–2008). It has also been below the target rate of 7-per-
cent annual growth established in the Istanbul Programme of Action (IPoA) for the Least Developed Countries for the
Decade 2011–2020.


Despite the slow global recovery, however, real gross domestic product (GDP) growth in the LDCs has picked up
somewhat, from 4.5 per cent in 2011 to 5.3 per cent in 2012. International Monetary Fund (IMF) forecasts point to
a similar growth rate in 2013, in the 5-to-6 per cent range. The real GDP growth rates for different groups of LDCs
continued recent trends in 2012, with African LDCs lagging behind their Asian and island counterparts. The growth
rates of African LDCs’ real GDP per capita have also lagged, a result of their higher population growth rate.


The heterogeneous performance of LDC groups has been reflected not only in real GDP growth rates, but also
in the growth rates of individual countries. There were 15 countries with growth rates exceeding 6 per cent, but also
10 countries with growth rates below 3 per cent. Given the high population growth rate, the latter countries had
stagnant or negative growth in per capita terms. This has severe consequences for their poverty reduction, for their
achievement of the Millennium Development Goals (MDGs) and more broadly for their human development. Three
LDCs experienced a recession in 2012, since they had negative growth rates of real GDP.


The heterogeneity in real GDP growth rates among the LDCs is a consequence of wide disparities in other
macroeconomic indicators. Most notably, and most importantly for economic growth, the rates of gross capital
formation differ widely across individual LDCs. The IPoA identified a gross capital formation rate of 25 per cent of
GDP as a prerequisite for attaining real GDP growth rates of 7 per cent. Seventeen LDCs managed to reach, or even




IIIOVERVIEW


exceed, that benchmark in 2011. However, 31 others had an investment rate below the 25-per cent benchmark, and
the rate in still other LDCs was even below the 10-per cent mark. Given the close relationship between investment
and economic growth, these countries’ growth prospects are not very bright.


Analysing developments over the course of a decade allows us to explore the extent and direction of the process of
structural change in the LDCs. For these countries as a group, the average share of agriculture in GDP declined from
31.4 per cent in 1999–2001 to 25.6 per cent in 2009–2011. The share of manufacturing stayed the same, at around
10 per cent of GDP, while the average share of services declined somewhat. More generally, the trends suggest
that for the LDCs as a group, over the period between 1999–2001 and 2009–2011 — which was characterized by
the most rapid economic growth in decades — there was little structural change of the type that results in strong
increases in productivity, incomes, technological intensity and high value added.


The current account deficit for the LDCs as a group also widened substantially, from $10.5 billion in 2011 to
$28.8 billion in 2012. The deterioration of their current account was due mainly to a significant worsening of the
merchandise trade balance, which expanded from a $3.7-billion deficit in 2011 to a much larger one of $18.5 billion
in 2012. Their terms of trade continued to improve in the three years since the sharp deterioration of 2009. In 2011
and 2012 they reached a higher level than during the previous peak of 2008, just before the adverse impact of the
crisis was first felt.


With respect to exports, the strong growth of about 25 per cent in both 2010 and 2011 stalled to a mere 0.6 per
cent in 2012 for the LDCs as a group. This is in line with the worldwide deceleration of trade in goods mentioned
earlier. While imports expanded by 21.9 per cent in 2011, one year later their growth had slowed to 7.8 per cent.
Nonetheless, that was enough to widen the LDCs’ merchandise trade deficit substantially.


External finance is of particular importance to the LDCs, given their low level of domestic savings relative to
investment. Inflows of foreign direct investment (FDI) to LDCs hit a record high of almost $26 billion in 2012, about 20
per cent more than in 2011. Inflows to African LDCs and Haiti rose from $16.9 billion to $19.8 billion over the same
period. Asian LDCs also saw an increase, from $4.2 billion to $5.6 billion, while island LDCs suffered a reversal, from
$320 million to $235 million.


The flow of workers’ remittances to LDCs continued to expand in 2012, reaching a new record of $30.5 billion.
Remittances to these countries are much more stable than FDI inflows, and have risen even during the worst stage of
the crisis. With respect to regional distribution, remittances are mostly a feature of Asian LDCs, where they increased
from $16.3 billion in 2010 to $17.8 billion a year later.


After playing an important countercyclical role during the financial crisis, official development assistance (ODA)
to the LDCs began to decline in 2011. According to data from the Development Assistance Committee (DAC) of
the Organisation for Economic Co-operation and Development (OECD), net ODA disbursements from all donors to
LDCs, excluding debt relief, fell slightly, from $41.7 billion in 2010 to $41.6 billion in 2011. According to preliminary
data for 2012, bilateral net ODA to the LDCs shrunk by 12.8 per cent in real terms. If these estimates are confirmed,
they will mark the largest decline in ODA to LDCs since 1997.


The total external debt of the LDCs expanded in 2012 to an estimated $183 billion, up 6.7 per cent in nominal
terms from 2011. The debt-to-GDP ratio grew slightly as well, from 26.3 per cent in 2011 to 26.7 per cent in 2012,
while the ratio of total debt to exports rose from 78.7 to 82.5 per cent; both ratios were higher than those in other
developing countries. The stock of short-term debt was up by $2.5 billion in 2012, a 14-per-cent increase.


According to IMF forecasts, real GDP worldwide will expand by 3.3 per cent in 2013, a slight improvement over
the 3.2 per cent of 2012. For the LDCs as a group, IMF forecasts a 5.7-per-cent growth rate for 2013, compared to
5.3 per cent for emerging and developing economies. The growth of the world economy should increase to 4.0 per
cent in 2014 and to around 4.5 per cent in the subsequent four years. LDC growth should be around 6 per cent in
the medium term.


For the LDCs, international trade has been the single most important channel of transmission of the recessionary
impulses from the developed countries since the start of the crisis. The recent slowdown of world trade will thus have
further negative impacts on the LDCs’ prospects. While the demand for imported goods in developed countries has
been weak at best, the LDCs have avoided a sharp deceleration of growth by relying more on their domestic demand
and on South-South trade. Both will continue to be necessary in the future, but the recent deceleration of economic
growth in the large emerging economies will seriously limit further possibilities for such reorientation.




The Least Developed Countries Report 2013IV


The availability of external financing is another precondition for strong growth of real GDP in the LDCs. As the
analysis in chapter 1 of this Report suggests, external financing has undergone considerable fluctuations since the
beginning of the crisis. Moreover, the prospect of a tighter monetary policy in developed countries over the course
of 2014 and 2015 will change the relative profitability of investments between developed and developing countries’
assets. Reduction in the interest rate differential between the two country groupings will also make it more difficult
to finance the current account deficits. LDCs with large such deficits should start now to prepare for these future
developments.


The third major factor affecting the external conditions for the LDCs is movements in international commodity
prices. IMF projections suggest continued declines for prices of both oil and non-fuel primary commodities over the
long term. But the short-term outlook for commodity prices is highly uncertain, not only because of possible supply-
side disruptions (such as energy and food), but also because of demand uncertainties.


Against this background, the outlook for the LDCs in the short to medium term is not very good. Even if none of
the downside risks materialize and the IMF growth rate forecasts prove accurate, the growth of the LDCs as a group
will be below the 7-per-cent IPoA target. In that scenario, responding effectively to the employment challenge, whose
future magnitude is analysed in this Report, will be even more difficult for the LDCs.


Demographic dynamics in the LDCs


Demographic change affects the environmental and socio-economic development of all countries, but especially
the most vulnerable of the LDCs. Although the proportion of people in these countries who live on less than US$
1.25 per day (i.e., in extreme poverty) has declined, the number has continued to rise due to high population growth.


The LDCs face a stark demographic challenge as their population, about 60 per cent of which is currently under
25 years of age, is projected to double to 1.7 billion by 2050. The LDC youth population (aged 15 to 24 years) is
expected to soar from 168 million in 2010 to 300 million by 2050, an increase of 131.7 million. By 2050, one in four
youths (aged 15–24 years) worldwide will live in an LDC.


As to the LDC working-age population, it will increase on average by 15.7 million people per year between 2010
and 2050, and in 11 LDCs, by at least 0.5 million a year. The projected increases are highest in African LDCs —
Democratic Republic of the Congo, Ethiopia, Uganda and United Republic of Tanzania — where that population
will expand by more than 1 million people a year. If, as expected, an additional 630 million people (equivalent to 37
per cent of the LDC population in 2050) enter the labour market by 2050, this will pose a major employment and
development challenge for the LDCs.


LDC population growth rates also greatly surpass those of other country groupings: At 2.2 per cent per annum
in 2011, they were roughly double those of other developing countries (ODCs) (1.2 per cent), and five times those
of developed countries (0.4 per cent). Furthermore, LDCs have the highest fertility rates in the world, averaging 4.4
children per woman during the period 2005–2010, as compared to 2.4 in ODCs and 1.7 in developed countries.


For most LDCs, the realization of a potential demographic dividend (where the dependency ratio is at its lowest)
will require increased investment in the training, education and employment of youths. Although LDC primary and
secondary education enrolment and youth literacy rates have improved since 1990, they are still below the equivalent
levels in ODCs and developed countries. In the medium term, LDC demographic growth dynamics, together with the
expanding youth bulge, will mean declining dependency ratios but a growing labour supply.


Urbanization trends are another key factor in LDC demographics. The level of urbanization in LDCs in 2010 was
28 per cent, or about 20 percentage points below the world average (50.5 per cent). LDC urbanization should reach
39 per cent by 2020, largely as a result of rising rural–urban migration, high fertility rates and population growth.


Many LDCs are now at a critical stage of development where population growth is high and the nature of
the employment challenge, especially in rural areas, is changing. In the past, most new labour markets entrants
were typically absorbed in low-productivity agriculture. However, as population densities rise, farm sizes decline,
and farmers increasingly shift towards the cultivation of more ecologically fragile land, both on-farm incomes and
agricultural productivity are likely to remain perilously low. Because of these factors, the LDCs’ urbanization and
emigration rates are expected to remain high.




VOVERVIEW


Given the clear demographic challenges highlighted in this Report, then, the LDCs will need to make significant
efforts to generate a sufficient quantity of jobs and offer decent employment opportunities to their young population
in the medium term. The potential benefits arising from the demographic dividend are not automatic. Successful
exploitation of the potential will depend on the ability of the LDC economies to absorb and productively employ both
new labour market entrants and those who are presently unemployed or underemployed.


Employment challenges in the LDCs:
Creating quality employment in sufficient quantities


The central employment challenge in the LDCs is to create productive jobs and livelihoods for the millions of
people who enter the labour force each year. Given the above-mentioned demographic trends, the scale of this
challenge will be even greater in the coming years. To illustrate the magnitude of the problem, it is worth considering
the estimated number of new labour market entrants in selected countries. In Ethiopia, for example, there were an
estimated 1.4 million new entrants to the labour force in 2005, and their number will increase to 3.2 million by 2050.
Similarly, in Haiti, new entrants in 2005 numbered about 204,000 — a figure that will reach 229,000 by 2035. In
Bangladesh, there were 2.9 million new entrants in 2005, and this number will peak at 3.1 million by 2020 before
beginning to decline. These are the numbers of productive and decent jobs and livelihoods which will have to be
created in these countries each year. If this is not achieved, the likelihood is that poverty and international emigration
rates will rise.


Indeed, the relative slackness of the LDC labour market largely explains why the 2002–2008 boom had relatively
weak effects on poverty reduction in the LDCs. Although the incidence of extreme poverty declined from 59 to 53 per
cent between 2000 and 2007, a period when GDP growth approached an average 7 per cent per year, the impact of
growth on the incidence of poverty has been slower than that experienced in other developing regions. The relatively
poor performance of the agricultural sector in most LDCs has been particularly detrimental, given that the poverty
elasticity of growth in agriculture is typically much higher than the corresponding elasticity of growth in other sectors
of the economy.


In most LDCs, the main source of employment for the growing labour force is still agriculture, largely through
people cultivating new land. However, LDCs have been facing persistent constraints on agricultural growth, such
as shrinking investment in research and development, missing and imperfect factor markets, and limited access to
producer-risk mitigation tools, as well as poor infrastructure. With rising population growth, declining agricultural farm
sizes and low productivity, agricultural production is becoming a less viable livelihood for the rural poor. In addition,
most LDC farmers cannot afford the means for sustainable intensification of agricultural production. More and more
young people are seeking work outside agriculture, and urban centres are increasingly becoming the main attraction.


Therefore, the LDC population is not only growing rapidly but is also quickly urbanizing. More of the LDC
population than ever before is entering the labour market. The convergence of these trends makes the current
decade critical for these countries, particularly with regard to employment. There is thus a clear need to strengthen
the link between employment and growth. During the period 2000–2012, LDC employment growth was 2.9 per
cent per annum, a rate slightly above the population growth rate but well below their average GDP growth rates for
the period (7 per cent). Employment growth in the African and island LDCs also outpaced the LDC average and will
continue to do so until at least 2018.


Furthermore, the historic labour productivity divide between LDCs and ODCs remains substantial, although it has
narrowed since 2000. LDC output per worker in 2012 (in constant 1990 international $) was just 22 per cent of the
level in ODCs, 10 per cent of the European Union (EU) average and 7 per cent of the level in North America. The
agricultural labour productivity gap between LDCs, ODCs and developed economies has also widened since 1985.
Agricultural labour productivity fell in over a third of the LDCs (10 of the 27 for which there were comparable data)
between 1985–1987 and 2009–2011.


Raising agricultural productivity is a sine qua non for LDC development and for the structural transformation of the
sector. Increased agricultural labour productivity in these countries has the potential to both raise the real incomes of
rural households and stimulate demand for rural non-farm goods and services. The employment-creating potential of
investment in rural irrigation, drainage, provision of feeder channels, local land reclamation, forestation and so forth is
considerable. This can be boosted if such investment, including through public work programmes, is embedded in a
well-designed and well-targeted employment strategy.




The Least Developed Countries Report 2013VI


The LDCs have a high labour force participation rate — an average 75 per cent, as compared to 68 per cent in
ODCs. However, these figures should be interpreted with caution. The lack of a social security system, and limited
family support due to low incomes, means that the poor in LDCs have no option but to seek work — no matter what
kind of work. Generally low average earnings also mean that more members of a household need to enter the labour
market in order to provide sufficient income to sustain the entire household. The LDCs’ high labour force participation
rate is thus largely a reflection of the desperate need of the poor to work for their survival, rather than an indicator of
a well-functioning and effective labour market.


A breakdown of the labour force participation rate by gender and age group provides further insights into the
distribution of the economically active population in LDCs. Although this distribution varies between different groups
of LDCs, in general, women in the LDCs have a high propensity to work in the labour market. This is partly because
women work predominantly in the informal sector (housekeeping, child-rearing, farming, etc.). Between 1990 and
2012, an estimated 290 million women entered the LDC labour force. During this period, women’s labour force
participation rates in LDCs rose by 3 percentage points, from 59 to 62 per cent on average.


An important source of income and employment for the poor in LDCs, and for women in particular, is rural non-
farm economic activities. These activities are closely linked to farming, the food chain and the production of goods
and services (often non-tradable) for local rural markets. With increasing urbanization and improvements in rural-
urban transport networks, rural non-farm activities also produce goods and services (both non-tradable and tradable)
for distant markets. There are no accurate data based on household surveys of full- or part-time employment in rural
non-farm activities in LDCs. Based on estimates, however, the rural non-farm economy accounts for about 30 per
cent of full-time rural employment in Asia, 45 per cent in Latin America, 20 per cent in West Asia and 40–45 per cent
in Africa. In fact, as GDP per capita levels increase, the share of rural on-farm (agricultural) income typically falls as the
share of rural non-agricultural income rises. But evidence from case studies suggests that although rural non-farm
employment is increasingly important in LDCs, on-farm production and jobs remain the mainstay for most of these
countries.


On the positive side, indicators for vulnerable employment and working poor have improved somewhat since
2000. Nonetheless, vulnerable employment still accounts for about 80 per cent of total employment in the LDCs. By
2017, African LDCs will have the highest share of working poor in the LDCs as a group. In addition, for the group
as a whole, the gender gap in vulnerable employment is not only wide but has increased marginally, averaging 11
percentage points during the period 2000–2012. In 2012, 85 per cent of women and 73 per cent of men on average
were in vulnerable employment.


In LDCs, vulnerability of jobs and the incidence of working poor are closely linked to unemployment, which in
these countries has a disproportionate effect on young people joining the labour force. In most LDCs, the youth
unemployment rate (i.e., for those aged 15–24 years) is higher than the average LDC rate for both men and women,
and in most cases is almost twice that rate. LDC youths typically find work in the informal sector, but often these
jobs do not pay reasonable wages, improve skills or offer much job security. More than 70 per cent of youths in
the Democratic Republic of Congo, Ethiopia, Malawi, Mali, Rwanda, Senegal and Uganda are either self-employed
or contributing to family work. If the growing LDC youth population could be provided with the necessary skills,
education and decent jobs, it could become a major force of production for meeting global and domestic demand
and a significant driver of local consumption and investment.


Sadly, the LDCs’ record for generating decent jobs, even in times of growth, is far from impressive. To the contrary,
the evidence shows that countries with faster GDP growth achieved this with relatively less employment creation. In
addition, employment elasticity declined in about half of the LDCs in the period 2000–2008, and that elasticity tended
to fall more frequently in precisely those LDCs that were growing faster. Although the reported LDC employment
elasticities to growth have generally not been very low by international standards, given the demographic and
economic challenges which these countries are likely to face, these elasticities will probably not be enough to reach
the necessary employment levels.


This Report shows that during the period 2000–2010, the employment rate made a positive contribution to GDP
per capita in only 3 of 11 LDCs surveyed: Cambodia (accounting for 9 per cent of the change in GDP per capita),
Sierra Leone (6.3 per cent) and United Republic of Tanzania (4.7 per cent). This may reflect substantial positive
changes for these economies in terms of the number of youths who continue their education for longer periods of
time, which helps to build future productive capacities. But the Report also demonstrates that economic growth in
the LDCs has tended over time to become less effective in terms of employment generation.




VIIOVERVIEW


The available labour market and informal sector information for LDCs is sparse, however. There is an urgent need
for more data collection and statistical analyses, which should figure prominently in the post-2015 debate on the
Millennium Development Goals (MDGs).


Policy framework for linking employment creation
and development of productive capacities in the LDCs


For the past three decades, LDCs were advised to focus on economic growth as a strategy for economic
diversification, poverty reduction and economic development. In hindsight, this appears to have been sound policy
advice, since it is highly unlikely that LDCs will achieve economic and social development and halve their poverty
levels in line with internationally agreed goals without a sustained period of growth. In fact, in recognition of this
likely scenario, the IPoA states (paragraph 28) that in order for LDCs to achieve “sustained, equitable and inclusive
economic growth […] to at least the level of 7 per cent per annum”, they should strengthen their productive capacity
in all sectors through structural transformation and overcome their marginalization through effective integration into
the global economy.


The market-based reforms and policies pursued by the LDCs in the past two decades were motivated by this
advice and were based on the assumption that a combination of macroeconomic austerity, rapid liberalization,
privatization and deregulation would attract investment in sufficient quantity to generate rapid output growth, which
in turn would automatically create jobs of adequate quantity and quality. But it is now evident that economic growth,
although necessary, by itself neither guarantees job creation nor automatically results in inclusive development. To
the contrary, it may even lead in some cases to an intensification of social inequality, rising unemployment and an
increased incidence of poverty. In short, if employment creation and inclusive growth are the ultimate objectives,
then the type of growth matters. It is evident that growth resulting from labour-intensive activities or originating in
areas where the poor live is more likely to create jobs and contribute to inclusiveness than growth based on capital-
intensive investments.


This Report proposes a policy framework that links investment with growth and employment creation to generate
inclusive and sustainable development. The framework is based on the assumption that maximizing the employment
creation potential of growth will not happen without the development of productive capacities. While initiatives to
provide jobs through government-sponsored or internationally sponsored programmes might be valuable sources
of employment in the short term, they do not provide long-term, sustainable solutions to the LDC employment
challenge.


The proposed framework builds on two sets of ideas and concepts developed through UNCTAD’s analytical work
on LDCs and other developing countries.


First, it hypothesizes that:


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Second, it provides a definition of productive capacity that is broad enough to incorporate all the elements
essential for a country to build the competencies needed to produce goods and services but that is also sufficiently
focused to identify priority areas for policies.


What is meant by productive capacities? At UNCTAD, the development of the concept in the LDC context was
linked to earlier efforts to understand how structurally weak and underdeveloped economies like LDCs promote
economic growth and how they initiate and then accelerate the growth process. Such efforts also sought to
understand what the key factors or capabilities are that enable such economies to produce goods they can consume
or sell, and what kinds of productive activities create quality jobs that contribute to poverty reduction.


The analytical work carried out at UNCTAD in search of answers to these questions led to the identification of a
number of basic elements of productive capacity. Productive capacities are the productive resources, entrepreneurial
capabilities and production linkages which together determine a country’s capacity to produce goods and services
and enable it to grow and develop.




The Least Developed Countries Report 2013VIII


Productive resources are factors of production and include natural resources, human resources, financial capital
and physical capital.


Entrepreneurial capabilities are the skills, technology, knowledge and information needed to mobilize resources in
order to build domestic enterprises that transform inputs into outputs – outputs that can competitively meet present
and future demand. They also include abilities to invest, innovate, upgrade and create goods and services. As such,
they refer to the competencies and technological learning needed to induce economic change.


Production linkages are flows of goods and services in the form of backward and forward linkages, flows of
information and knowledge and flows of productive resources among enterprises and sectors of activities.


These three elements together determine not only the overall capacity of a country to produce goods and services,
but also which goods and services a country can produce and sell. In this respect, therefore, productive capacities
are country-specific and differ enormously from one country to the other. They also determine the quantity and the
quality of the goods and services which a country can produce at a given time. Such potential production is obviously
limited in the short term, but could be expanded in the medium and long term.


Based on this notion of productive capacity, in effect, a country’s productive capacities are developing when that
country shows improvements or progress in all these areas — when, in other words, its productive resources are
expanding, it is acquiring technological and entrepreneurial capabilities and it is also creating production linkages.
All of these improvements will enable the country to produce a growing array of goods and services and to create
jobs and integrate beneficially into the global economy on the basis of an internal growth momentum. If this type
of development continues, then the country will have productive capacities which enable it to create jobs that pay
higher wages and to acquire the capability needed to produce an increasing range of higher value added goods and
services both efficiently and competitively.


The development of productive capacities occurs through three closely related core economic processes that
all countries have to undergo if they are to achieve sustained development. These are: the investment necessary
to build domestic capital stock (physical capital, human capital, and so forth), which economists refer to as capital
accumulation; structural change (or structural transformation); and building the capabilities of the domestic enterprise
sector.


Is it possible to conceive of a dynamic process that brings the different elements together in a virtuous circle?
Such a process could, for example, use enterprise development to transform productive structures into higher value-
added activities that involve more skilled and technology-intensive production, which in turn results in higher incomes
that can fuel demand and stimulate new investment. Such capital accumulation in turn enables the development
of new activities and further diversification of the economy away from traditional sectors, thereby intensifying the
process of structural change. The question is how to integrate these synergies into a framework for optimizing
employment, which also requires choosing policies that do not contradict one another.


The policy framework for maximizing employment creation proposed in this Report aims to achieve that objective.
It does so by identifying the set of policies which Governments should implement if they wish to establish a strong link
between growth, employment creation and the development of productive capacities. The policy framework is based
on a pragmatic assessment of the challenges facing LDCs and on an explicit recognition that the key to inclusive
development is not simply higher rates of economic growth but also a higher employment intensity of growth.


In terms of capital accumulation, the new element in the proposed framework is that it not only values policies for
their potential to stimulate an investment-growth nexus but also adds employment as a third and integral element
of the nexus. Thus, for LDC policymakers the primary goal of capital accumulation would be to promote growth
with employment. This has implications for the manner in which resources are mobilized and investment decisions
are taken. The critical entry point for creating a strong and sustainable investment-growth-employment nexus is
investment. The aim would be — initially through public investment in priority areas (and particularly in infrastructure)
— to set in motion a virtuous circle in which investment boosts growth and growth creates employment, which, in
turn, entails increased income for workers, giving rise to consumption that supports the expansion of the aggregate
demand. Import leakages apart, expanded aggregate demand ideally creates incentives for new or additional
investment to meet the growing demand. This circle could then be reiterated at a higher level of investment, growth,
employment and income.




IXOVERVIEW


Given that most LDCs are very open economies, they would not be able to put the nexus in motion in the whole
economy. However, the non-tradable sector is still relatively insulated, and policy space there is larger than in other
parts of the economy. Initially, therefore, the most pragmatic approach would be to start to stimulate the process
of capital accumulation via that nexus in the non-tradable sector. Over time, and as domestic firms develop their
technological and learning capabilities, it would be possible gradually to extend the nexus to modern services that
have become tradable because of technological innovations, import substitution activities and exporting activities.


Given the relatively weak private sector in many LDCs, it is more likely and realistic that in the short to medium
term, the investment push required to kick-start the growth process will originate in the public sector. The idea here
is not to encourage public ownership, which would amount to returning to failed policies of the past. Rather, the idea
is to ensure that the capital-mobilizing power of the State is used to provide the initial investment impulses needed to
drive the virtuous cycle in the short term. In other words, while public investment is crucial for kick-starting the nexus,
it should be limited to the short and medium term. In the long term, the private sector should have the primary role
in the nexus, and the responsibility of the public sector would then be reduced to supporting the efficient functioning
of the nexus through appropriate policies and incentives aimed at encouraging private-sector investment in priority
areas.


While the sectors to which initial public investment should be directed will necessarily be country-specific,
investment in infrastructure seems to be a natural starting point, since the lack of adequate infrastructure in most
LDCs is a serious bottleneck to enterprise development and productive capacity-building. Both goals could be
achieved using the factor of production that is abundant, namely, labour. The prerequisite for this is a reorientation
of policies on infrastructure investment to ensure that technically viable, cost-effective and employment-intensive
options are used instead of more capital-intensive ones. In other words, there is a need for adopting appropriate
technology.


Social services are also strong candidates for initiating an investment-growth-employment nexus driven by public
investment. Millions of LDC citizens still have very poor or inadequate access to the most basic requirements of decent
life, such as nutrition, sanitation, electricity, water, transport and communication, health services and education.
Other sectors that could be targeted because of their potential to create employment are construction, expansion of
services in rural areas, textile and leather production, and food processing.


The policy framework also assigns greater importance to the upgrading of firms and farms of all sizes, in view
of their potential role in contributing to growth, creating productive capacities and generating jobs for both unskilled
and skilled workers. In most LDCs the distribution of enterprises by size is heavily skewed towards micro- and small
enterprises, typically operating in the informal sector. At the other extreme are a small number of large firms, most of
which are either State-owned enterprises or large private firms, frequently owned or controlled by foreigners. These
large firms tend to be found in the most profitable sectors, such as extractive industries, air transport and modern
financial activities, where a large size is needed to make capital-intensive investments. Medium-size firms are typically
absent. This “missing middle” in the LDCs — as in many other developing countries — is a result of the inability of
small firms to grow and attain minimum efficient production sizes. Thus, the most important task in the context of the
LDCs is the creation of the missing middle.


Policies aimed specifically at helping enterprises to grow in size can be divided into four groups: policies for
formalization of firms, policies for financing of firms, policies for strengthening the organizational and entrepreneurial
capacities of firms, and policies for overcoming failures in information and cooperation (policies to encourage
networking and clustering). If successful, these policies will enable micro- and small enterprises to grow and become
medium-sized or even large enterprises. Their growth will hopefully create employment for large numbers of workers
and will thus be employment-intensive. This is simply because, in order to reach the optimum size of production,
these enterprises need to increase the scale of production with the existing technology and methods of production.
The benefits associated with economies of scale will then induce these firms to grow further. At the same time,
the creation of medium-sized enterprises will foster conditions for technological progress. Once medium-sized
enterprises have increased the scale of production beyond the optimal point with the existing production processes,
they will be forced to innovate in order to maintain their profitability.


The policy framework proposed here suggests that enterprise development should be accompanied by the
adoption of active policies to influence technological choice in different types of activities. A differentiation of the types
of technology choice and corresponding policies is required in order to accommodate the frequently conflicting policy
goals of technological progress and employment creation. Two different strategies should thus be followed: one for




The Least Developed Countries Report 2013X


the modern sectors, involving acquisition of advanced technologies from developed countries, and another for the
rest, involving so-called “appropriate” technology.


In terms of structural change, the challenge for LDCs is not that their economic structure is static, but rather that
in most cases it is changing in a manner not conducive to building productive capacities and creating quality jobs in
sufficient quantity. In order to position the LDCs’ economies on a job-rich growth and inclusive development path, the
policy framework recommends a three-pronged approach to employment creation that focuses on the generation
of foreign exchange through investment in both capital- and labour-intensive tradable activities; the expansion of the
non-tradable sector and the concomitant creation of jobs; and productivity improvement in agriculture in general and
subsistence agriculture in particular.


The three-pronged approach to employment creation recognizes that the process of structural change should
ideally be led by the consolidation and expansion of the modernizing core of the economy, composed of high value
added knowledge-intensive and competitive activities in manufacturing, mining, mechanized agriculture and modern
services. In terms of labour, ideally this should be achieved through the transfer of workers from low-productivity,
poorly paid work to more productive and better employment in other sectors (i.e., intersectoral transfer of labour).


However, the expansion of the modern sector needs to be complemented by an improvement in the quantity
and quality of jobs in the remaining sectors of the economy. Given the prevalence of working poverty in LDCs, this
implies raising productivity in traditional activities. All opportunities to improve livelihood opportunities and create
employment in labour-intensive activities in these other sectors should be explored and promoted.


The logic behind the three-pronged approach to employment creation is that the increase in productivity in
agriculture releases labour which should be absorbed by the rest of the economy, that is, tradable and non-tradable
activities. Since the tradables are subject to intense competition, the extent to which they can absorb labour is limited.
In other words, the choice of capital-labour ratio tends to be exogenously determined. As a consequence, non-
tradable activities would have to provide the bulk of employment opportunities for new entrants and also for those
released from subsistence activities. These sectors include infrastructure and housing; basic services (education,
health, sanitation, communication, public administration); technical services, repair and maintenance, and most
transportation services; insurance services, property and commercial brokerage; personal, social and community
services; public administration; security and defence. Since these activities do not generally face international
competition, the policy space to influence outcomes in these sectors is larger than in the tradable sector. This implies
that there are much greater possibilities for increasing the employment intensity of growth in these activities.


However, it is important for policy to focus not only on employment generation, but also on productive transformation
– in each of these sectors separately, and also in the economy as a whole. The three-pronged approach proposed
here emphasizes that employment creation is crucial, but that it should be pursued simultaneously with modernization
of economic activities and increase of productivity. The latter would ensure that not only the quantity of employment,
but also the quality of jobs, improves.


The framework developed in this Report should not be viewed as a one-size-fits-all solution for the employment
challenge faced by the LDCs. There is considerable room for diversity in applying the framework across LDCs,
reflecting differences in resource endowments, size, geographical location, production structure and export structure.
Such diversity implies different starting points and different policy choices. Policymakers in each country should
carefully examine the specificities of their economies before deciding how to use the framework.


Policies for employment-rich growth


Policies for employment-rich growth in LDCs should have two complementary objectives: expanding the number
of jobs so as to absorb the growing labour force and the youth bulge, and raising the incomes generated by these
jobs (by means of productivity gains) so as to combat the generalized prevalence of poverty and underemployment.
Reaching these objectives will involve implementing a range of mutually supportive policies aimed at building
productive capacity and fostering structural transformation. Policy interventions should cover three broad areas:
macroeconomic policies, enterprise development and technological learning, and public-sector investment and
actions for job creation.




XIOVERVIEW


Macroeconomic policies


Inclusive development calls for a macroeconomic policy approach that goes beyond the narrower goal of
macroeconomic stability. This broader approach calls for expanding the number of instruments and coordinating
macroeconomic policies with other policies to stimulate the development of productive capacities. In this context,
fiscal policy becomes more important than monetary policy. It should target financing public investment in physical
and human capital by accelerating public investment in infrastructure and raising spending on education and training.
To do so will require strengthening government capacity to mobilize and manage fiscal revenues, whether domestic
or external. At the national level, this can be done initially through domestic resource mobilization, which entails
changes in fiscal policy and tax administration. The measures most likely to raise fiscal revenues in the LDCs include
the following: (i) introducing value added tax (VAT), reducing VAT exemptions and raising the VAT rate on luxury
consumption; (ii) raising excise taxes on alcohol, tobacco and vehicles; (iii) reducing tax holidays and exemptions
for corporations and high-income expatriates; (iv) increasing taxation on urban property (where the wealthiest live);
(v) reforming the taxation of the financial sector; and (vi) refraining from further tariff cuts until alternative sources
of revenue are put in place. Tax administration and collection, in turn, can be made more efficient, by streamlining
information management, cross-checking statements and declarations and setting up a special unit for high-income
taxpayers.


For resource-rich LDCs, fiscal revenue can be increased by modifying the extremely favourable terms currently
offered to foreign investors in agriculture and mining. This may involve imposing a tax on land leased for large-scale
investment projects, raising existing land taxes or revising the taxation of activities undertaken by those projects.
Governments with mining resources can raise their revenues by adopting higher levies, royalties, income taxes or
export taxes. LDC authorities should also strengthen the mobilization of external resources from both traditional and
non-traditional aid donors and from multilateral and regional financial institutions.


Although fiscal policy may be more important than monetary policy in developing productive capacities, monetary
policy is still critical. It should, however, be less fixated on attaining an inflation rate in the low single digits than
on targeting full employment of productive resources and providing reasonable macroeconomic stability. Credit
policy is of crucial importance in the LDCs, particularly for micro-, small- and medium-sized enterprises, which are
typically credit-constrained in these countries. In that regard, public development banks can play an important role by
providing credit when private financial institutions fail to do so.


LDCs are particularly vulnerable to external shocks. To protect themselves from such risks, they should also
develop a capital account management system, including residence requirements on capital expatriation and stricter
regulation of external borrowing. Large commodity-exporting countries may also consider setting up a stabilization
fund to protect themselves against strong fluctuations in international commodity prices


Enterprise development


Private sector development is a sine qua non for large-scale employment generation in LDCs, since it generates
the bulk of jobs, both today and tomorrow. The main policies for developing their private sector are industrial policy,
enterprise policy, rural development policies, and education and training policies


Industrial policy is designed to steer the economy towards structural transformation, by moving to higher-
productivity activities both among and within sectors. There are two types of strategies that LDCs can pursue to
bolster the employment intensity of growth. The first is to build on activities of existing comparative advantage, by
fostering backward and forward linkages and technological upgrading in these sectors. This typically means focusing
on natural resource-based activities. Agriculture can be the basis for developing downstream industries, such as
food processing, geared mainly to domestic and regional markets, but also global markets. It can also yield other
types of products (e.g. agricultural raw materials) that can be further processed before exporting. To this end, such
measures as the provision of industrial extension services, temporary export tariffs and support to firm clustering (see
below) can be applied. Internationally, these actions should be complemented by enhanced regional cooperation
on some agricultural commodity chains of production, processing and marketing (e.g. rice, maize, wheat, sugar,
meat and dairy products) which have the potential to meet increasing regional demand through regional integration




The Least Developed Countries Report 2013XII


schemes. Governments should act simultaneously on transport, logistical, processing and market infrastructure to
nurture regional value chains.


A second type of industrial policy strategy aims at changing the capital-labour ratio of the economy, by attracting
investment in labour-intensive industries. Some LDCs will be able to take advantage of the window of opportunity
opened by China’s likely delocalization of the lower end of its manufacturing industry, through a combination of
integrating domestic firms into manufacturing global value chains (GVCs) and attracting foreign direct investment
(FDI). Domestically, this strategy should be complemented by policies on clustering, export promotion and labour
costs. Clustering allows firms to benefit from technological and managerial economies of scale (externalities) and act
collectively. Policymakers can support industrial clusters by ensuring a superior supply of infrastructure, logistical,
customs, financial and legal services; providing preferential access to land; and facilitating easier administrative
procedures. LDCs can promote exports (especially non-traditional exports) by means of export processing zones,
export subsidies, public provision of trade finance, and trade promotion organizations. Labour costs can be kept
competitive by ensuring an adequate supply of wage goods and services, particularly food (by means of agricultural
policy – see below) and transport, housing and so forth.


International integration through global value chains (GVCs) and FDI will have a lasting developmental effect
only if such undertakings are complemented by fostering continuous technological capacity-building on the part of
participating domestic firms (so as to avoid being locked in to labour-intensive, lower-productivity activities). Policies
should also target the creation of linkages with other domestic firms that can learn and upgrade through interactive
learning. In some cases, authorities may have to negotiate with foreign investors in order to induce domestic linkages
and technology transfer to local firms.


Effective enterprise policy measures for stimulating the development of urban-based micro- and small enterprises
(MSEs) include facilitating their access to capital and helping them upgrade into formal status. Policymakers need
to expand the financing made available to these firms through national development banks or commercial banks.
The former should open special credit lines for MSEs. Authorities can counteract the risk aversion of commercial
banks and encourage them to expand their lending to MSEs by: (a) subsidizing or providing loan guarantees for
commercial bank credit to such firms; (b) enacting lower asset-based reserve requirements for this market segment
than for other types of lending; and (c) linking formal and informal financial institutions (e.g. rotating savings and
credit societies), which have more information on borrowers’ risks and operate with lower transaction costs. Public
and private financial institutions should select those MSEs with high growth potential, based on current profitability
and entrepreneurs’ profiles. In order to facilitate the entry of MSEs to the formal sector, LDC authorities can simplify
procedures and requirements for registry and reporting operations, reduce the cost of registry, allow for gradual
compliance of regulations and establish a department or semi-autonomous body to lend managerial support and
advice to MSEs.


Rural development policy is a special challenge, given the dismally low level of productivity of rural areas, and
requires action on infrastructure, technology and financing. The State needs to invest heavily in rural infrastructure,
especially irrigation, electricity, transport, storage (warehousing) and communication (ICTs) in order to boost rural
productivity and foster backward and forward linkages of farms. Rural extension services need to be established
or rehabilitated to provide advice and training on cultivation techniques, water management, choice of seeds and/
or crops, warehousing, conditions of land quality and water access, avoiding soil degradation, and techniques for
meeting market requirements. The technology content of such services should actively involve local communities and
combine modern technology with traditional or indigenous knowledge systems. The services should focus on scale-
neutral technologies that can be applied by smallholders. While typically provided by State institutions, the latter
may also work with domestic and international non-governmental organizations (NGOs) and farmer associations in
delivering extension services. The main upstream policy direction involves increased funding of national or regional
agricultural research centres that deal with agro-ecological zones or strategic food products. To this end, funding by
regional partners should be pooled and possibly backed by international donors.


Providing rural producers with access to capital and finance requires offering both seasonal and long-term finance
to farmers and rural non-farm economic agents. This should be undertaken by agricultural development banks, State
banks, post office financial services, community credit cooperatives (which have better knowledge of borrowers’
creditworthiness) and, in some cases, commercial banks. Such institutions also have the capacity to mobilize rural
savings and turn them into credit. Larger financial institutions may also set up specialized rural/microfinance units.
State-sponsored credit provision, in turn, may entail establishing or rehabilitating rural development banks that
can offer financial services not provided by commercial banks or other financial institutions. Using insurance and




XIIIOVERVIEW


Public sector-led job creation


Dr. Mukhisa Kituyi


Secretary-General of UNCTAD


warehouse receipt schemes is one way of allowing farmers to turn their agricultural produce into collateral. Where
mining is concerned, building linkages is more challenging, but this can be done by encouraging local firms to
provide inputs like labour-intensive services (catering, cleaning, etc.).


Most of the above-mentioned instruments of industrial, enterprise and rural development policy are targeted
policies. They need to be complemented by horizontal policy measures aimed at increasing the knowledge intensity
of the LDC economies, so as to make them more adaptable and better prepared to meet the requirements of a
modern economy. This leads us to education and training policy. In primary education, the priority is to improve
quality. In secondary and tertiary education and in technical and vocational training, LDCs need to both expand the
supply of services and improve the quality. This includes revising curricula and teaching methods in order to make the
labour force more adaptable and innovative, and adjusting education policies to meet future domestic labour market
requirements.


There are three other policy measures for raising the knowledge intensity of the economy. The first is to foster
cooperation between academia (university and research institutions) and businesses (e.g. in the context of clusters).
The second is to set up or strengthen standard-setting bodies (e.g. for quality and sanitary certification), either
through government initiative or through partnerships between government and industry or sectoral associations.
The third is to apply tax breaks or training levies in order to provide industry-specific training for the labour force.


But in addition to involving the private sector, the State itself must play a role in generating jobs, either directly or
indirectly, especially in the earlier phases of development. Since infrastructure work is a non-tradable type of activity,
and since it finances the bulk of projects, the State can influence the choice of technique so as to ensure the adoption
of labour-intensive production processes. These have several advantages over capital-intensive technologies: they
generate more jobs, have lower costs, can contribute to local enterprise development and capacity-building, provide
more readily available maintenance and repair services, and can generate foreign exchange savings.






1CHAPTER
RECENT TRENDS AND


OUTLOOK FOR THE LDCS




The Least Developed Countries Report 20132


A. Introduction


The performance of the least developed countries (LDCs) in terms of
economic growth has been weaker by a full two percentage points in the past
five years (2009–2013) than during the previous boom period (2002–2008). It
has also been below the target rate of 7-per-cent annual growth established in
the Istanbul Programme of Action (IPoA) for the Least Developed Countries for
the Decade 2011–2020. This chapter analyses recent macroeconomic trends in
the LDCs and assesses some of the factors behind their weaker performance.


The chapter shows that with the global economy still struggling to return
to a strong and sustained growth path, the external environment faced by the
LDCs has been less propitious in the past five years than in the previous period.
The recent slowdown of world trade to a near standstill has weakened the
demand for LDC imports, most notably in the case of developed countries, but
also in emerging economies, which are affected by weak demand in developed
countries as well. In addition to weaker demand for their exports, the LDCs have
been faced with heightened volatility of commodity prices and capital flows.
In particular, the international prices of many commodities have declined from
their peaks of 2011, adversely affecting those LDCs which are characterized by
high levels of commodity dependence. External financing has also been volatile
recently, and less available than in the previous period.


Apart from the recent slower growth of their real GDP, the LDCs’ investment
and savings rates have continued to be insufficient for robust economic growth
and rapid poverty reduction, and are also below the rates of other developing
countries (ODCs). In addition, the process of structural change in most LDCs
has advanced only very slowly, and in some cases has stalled. For the LDCs
as a group, the share of agriculture and services in gross domestic product
(GDP) declined somewhat during the first decade of the century, while the share
of industry expanded. Within industry, however, manufacturing has stagnated,
but non-manufacturing activities have expanded strongly. Critically, the share
of the manufacturing sector in GDP has diminished in half of the LDCs over
the period concerned. Thus, LDCs are still characterized by weak development
of manufacturing industries, high levels of commodity dependence, heavy
dependence on external financing and inadequate integration into the global
economy.


These structural weaknesses of the LDCs are likely to remain unchanged,
given that the prospects for the global economy continue to be fraught with
uncertainties and risks and that slow growth is likely to persist at least through
2015. The outlook for the LDCs is accordingly not very good. Even if the
downside risks do not materialize, the GDP growth rate in these countries will
be lower than the IPoA target, and as such insufficient for substantial progress
to be made in development and poverty reduction. Responding effectively to
the employment challenge — the main topic of this Report — will be even more
difficult for the LDCs given the current outlook.


This chapter is organized into three sections. Section B provides a brief
analysis of recent trends in the global economy and their implications for the
LDCs. Section C looks at recent economic performance in the LDCs. Where
data are available, the section identifies the overall pattern for the LDCs as
a group, regional differences between African, Asian and island LDCs, and
variations among individual LDCs. Section D discusses the short-term outlook
for the global economy and the LDCs.


The performance of the LDCs in
terms of economic growth has been


weaker by a full two percentage
points in the past five years (2009–


2013) than during the previous
boom period (2002–2008).


Structural weaknesses of the LDCs
are likely to remain unchanged, given


that the prospects for the global
economy continue to be fraught with
uncertainties and risks and that slow


growth is likely to persist at least
through 2015.




3CHAPTER 1. Recent Trends and Outlook for the LDCs


B. Recent trends in the global economy
and implications for the LDCs


1. GLOBAL GROWTH AND INTERNATIONAL TRADE


As pointed out in the Trade and Development Report 2013 (UNCTAD, 2013a)
of the United Nations Conference on Trade and Development (UNCTAD), the
global economy is still struggling to return to a strong and sustained growth
path. More than five years after the start of the global financial crisis the growth
of the global economy has still not returned to pre-crisis levels. Economic activity
in many countries, and particularly in developed economies, continues to suffer
from the impacts of the financial and economic crisis that began in 2008,
resulting from busts in the housing and financial markets of the major developed
countries. Weak growth may also be due to the current macroeconomic policy
stance, characterized by fiscal consolidation in many countries, both developed
and developing.


The growth rate of world output, at around 3.2 per cent in 2012 and 2013,
was about one and a half percentage points lower than in the period 2002–2008
(table 1).1 In addition, the global economy has been decelerating continuously
since 2010. While the coordinated macroeconomic effort of policymakers in
many countries to support growth in the wake of the financial crisis resulted in
a vigorous rebound that year, the withdrawal of fiscal stimulus while the private
sector was still very weak led to strong deceleration in 2011. Deceleration has
continued since then in both developed and developing countries, although the
growth rate in the former has been substantially lower than in the latter.


Slow growth in the United States and Japan, and recession in the European
Union, means that developing countries continue to be the main growth drivers,
accounting for about two thirds of global growth in 2011–2013. In several
developing countries, growth has been driven more by domestic demand than
by exports since external demand has been weak, especially in developed
economies (UNCTAD, 2013a). The growth in LDCs, at an average 5 per cent
since 2009, has been substantially lower than in the boom period of 2002–2008,
when it reached 7.5 per cent. In per capita terms, real GDP growth rate in the
LDCs has hovered at around 3 per cent from 2009 to date, or two percentage
points lower than in the previous period.


Economic activity in developed countries in 2013 has begun to show signs
of divergence, and has been characterized by the World Economic Outlook
of the International Monetary Fund (IMF) (International Monetary Fund, 2013)
as a “three-speed” recovery. The continuing difficulties in the European Union
of resolving the sovereign debt crisis while the private sector goes through


Table 1. Real GDP and real GDP per capita growth rates for LDCs, advanced economies,
emerging and developing economies and world, selected years


Real GDP Growth Real GDP per capita growth


2002–
2008


2009 2010 2011 2012 2013
2002-
2008


2009 2010 2011 2012 2013


LDCs 7.5 5.0 5.6 4.5 5.3 5.7 5.0 2.6 3.3 3.2 2.9 3.4
Advanced economies 2.5 -3.5 3.0 1.6 1.2 1.2 1.8 -4.1 2.5 1.1 0.8 0.8
Emerging and developing economies 7.6 2.7 7.6 6.4 5.1 5.3 6.1 1.3 6.2 5.5 3.7 4.0
World 4.7 -0.6 5.2 4.0 3.2 3.3 3.3 -1.8 4.0 3.0 1.9 2.1
Source: UNCTAD secretariat calculations based on IMF, World Economic Outlook database, April 2013.
Notes: The LDCs’ growth is calculated as the weighted average of each country’s real growth (base year 2000); data for 2012 are preliminary


and are forecasted for 2013.


More than five years after the start of
the global financial crisis the growth
of the global economy has still not


returned to pre-crisis levels.


Developing countries continue to be
the main growth drivers, accounting
for about two thirds of global growth


in 2011–2013.




The Least Developed Countries Report 20134


the process of deleveraging have resulted in economic contraction for two
consecutive years. The policy stance, characterized by expansionary monetary
policy coupled with fiscal austerity, has not provided the necessary support in
what has been termed a “balance-sheet recession”. Some observers (Koo,
2011) find remarkable similarities between the Japanese experience of the past
two decades and the recent problems faced by many advanced countries,
particularly in Europe.


Experience shows that economies need a long time to recover from the
balance-sheet recession caused by financial crisis, as the private sector must
pay down its debt in the process of deleveraging (Reinhart and Rogoff, 2009).
That process could go on for many years and could well induce a sort of “debt
trauma”, whereby the private sector remains reluctant to borrow money even
after its balance sheet is fully repaired. Until the private sector is both willing and
able to borrow again, the economy will operate at less than full potential. A clear
policy direction which is suggested by this characterization is that fiscal support
of the aggregate demand is needed to overcome the adverse effects of the
balance-sheet recession.


In the United States, the economic situation has started to improve, slowly
but steadily. Growth rates of around 2 per cent in the past couple of years have
been the result of an accommodative monetary and fiscal policy. In contrast with
the European insistence on early fiscal consolidation, the United States fiscal
policy supported the process of private-sector deleveraging with fiscal deficits
on the order of 10 per cent of GDP. Fiscal consolidation began only in the spring
of 2013, when the fiscal drag on the economy had less chances of derailing the
incipient recovery. Japan, in turn, has been radically changing the policy mix
since early 2013, providing a strong fiscal stimulus in conjunction with monetary
policy expansion aimed at reviving economic growth and curbing deflationary
trends. While the full impact of these policies cannot be ascertained at the time
of writing, early signs in terms of growth rebound are positive.


International trade in goods has not returned to the rapid growth rate of the
pre-crisis years. Like the growth of real GDP, it rebounded strongly in 2010 and
has been decelerating continuously since then. Trade in goods measured by
volume expanded by 5.3 per cent in 2011 and by only 1.7 per cent in 2012. Most
of that slowdown was due to lethargic economic activity in developed countries,
particularly in Europe. As a result, exports from developing countries increased
by 6.0 per cent in 2011 and just 3.6 per cent in 2012. This downward trend
in international trade highlights the vulnerabilities of developing countries, and
particularly of the LDCs, given their export-led strategy, at a time of lacklustre
growth in developed countries. With a view to responding effectively to that
adverse trend, Trade and Development Report 2013 (UNCTAD, 2013a) explored
the options for a gradual shift in the relative importance of sources of growth
towards a greater emphasis on domestic sources.


2. RECENT TRENDS IN FINANCIAL FLOWS


As with international trade, private capital flows recovered quickly in 2010,
helped by sharp cuts in interest rates and unorthodox monetary expansion
(known as quantitative easing) in many developed countries. However, they have
lost their pre-crisis momentum and have become unstable and uneven. In terms
of magnitude, McKinsey Global Institute (Lund et al., 2013) reports that cross-
border capital flows remain 60 per cent below their pre-crisis peak. Regarding
instability, large capital inflows to many emerging economies in 2011 and 2012
turned into sudden outflows in the second quarter of 2013, as the first signs
of a probable reversal of quantitative easing emerged in developed countries.
This demonstrates how unstable these flows are and how easily they could


Economies need a long time to
recover from the balance-sheet


recession caused by financial crisis,
as the private sector must pay down


its debt in the process
of deleveraging.


International trade in goods has not
returned to the rapid growth rate of
the pre-crisis years; measured by


volume, it expanded by 5.3 per cent
in 2011 and by only 1.7 per cent


in 2012.


Private capital flows have become
unstable and uneven; large inflows


to many emerging economies in
2011 and 2012 turned into sudden
outflows in the second quarter of


2013.




5CHAPTER 1. Recent Trends and Outlook for the LDCs


derail years of painstaking work to create stable macroeconomic conditions in
developing countries.


The crisis in developed countries, however, did not have a sizeable impact
on total flows of workers’ remittances to developing countries. While the
growth rate of remittances slowed down, the total amount continued to grow
throughout the period 2009–2012. This points to their countercyclical nature,
which is in contrast to other types of private capital flows. In the case of the
LDCs, moreover, some two thirds of the total amount of remittances comes from
other developing countries (UNCTAD, 2012a). Since their economies continued
to grow at a reasonable pace, there is no reason for remittances to the LDCs to
decelerate significantly.


Flows of foreign direct investment (FDI), in contrast, are proving to be less
resilient than remittances. According to UNCTAD’s World Investment Report
2013 (UNCTAD, 2013b), global FDI fell 18 per cent in 2012; FDI recovery is on
a bumpy road and may take longer than expected. In the case of the LDCs,
however, FDI increased in 2011 and 2012, following two years of stagnation.
Finally, flows of official development assistance (ODA) from member countries
of the Development Assistance Committee (DAC) of the Organization for
Economic Cooperation and Development (OECD) declined in both 2011 and
2012, reflecting a more conservative fiscal policy stance in developed countries.


As a result of these diverse trends, developing countries and economies
in transition continue to make substantial net financial transfers to developed
countries. In 2012, these net outflows were estimated at $845 billion, down from
$1 trillion in 2011. The LDCs, however, received positive net transfers on the
order of $17 billion in 2012 (United Nations, 2013).


3. RECENT TRENDS IN COMMODITY PRICES


Commodity prices are particularly important for many LDCs, given the
predominance of commodities in these countries’ total exports. After a
precipitous fall in 2008 and early 2009, commodity prices have recovered strongly
on the back of four different factors. First, the demand for many commodities
remained buoyant, reflecting the shift from export- to investment-led growth in
China in response to the global crisis (Akyüz, 2013). Second, accommodative
monetary policy has flooded the developed economies with liquidity at a time
when investment opportunities there have been scarce. In response, inflows of
financial capital to commodity markets have intensified, driving up commodity
prices. Third, the “Arab Spring” that began in 2011 resulted in disruptions of
oil production in several producing countries, most notably in North Africa and
the Middle East, driving up the price of oil despite increasing supply capacity in
North America. Lastly, weather disruptions, including the worst drought in the
United States in more than half a century, kept food prices high throughout the
period (United Nations, 2013). For all these reasons, commodity prices have
stayed high and have played a major role in supporting the growth of real GDP
in the LDCs in the past four years. Recent commodity price trends, however,
reflect a slight drop from the peaks of early 2011, possibly because of the slower
growth of the world economy (table 2).


It is important to emphasize that most commodity prices are still substantially
higher than the average prices during the commodity price boom of 2002–2008.
This is particularly the case for food and oil prices, both of which have been
fluctuating within a narrow band very close to their respective peaks of 2011
and 2012. Prices of other commodities, most notably some metals and ores,
have been declining recently due to weaker demand, the uncertain outlook for
global economic activity and improved supply prospects.


While the growth rate of remittances
slowed down, the total amount


continued to grow throughout the
period 2009–2012.


Flows of foreign direct investment
are proving to be less resilient than


remittances.


Commodity prices have stayed high
and have played a major role in


supporting the growth of real GDP in
the LDCs in the past four years.


Recent commodity price trends
reflect a slight drop from the peaks


of early 2011, possibly because
of the slower growth of the world


economy.




The Least Developed Countries Report 20136


4. RECENT DEVELOPMENTS IN SPECIAL AND
DIFFERENTIAL TREATMENT OF THE LDCS


International support measures have been specifically designed and adopted
by the international community to help the LDCs promote development and
poverty reduction and reduce their marginalization and vulnerability in today’s
global economy. Some of these measures have been stipulated as provisions
in multilateral agreements aimed at giving the LDCs flexibility in implementation
or in meeting obligations. The preparatory negotiations for the Ninth Ministerial
Conference of the World Trade Organization (WTO), to be held in December
2013 in Bali, have taken up several issues of interest to the LDCs, such as
duty-free, quota-free access, services waivers, rules of origin and cotton-related
issues. Although at the time of writing the outcome of the negotiations was not
known, there has been progress in several of these areas.


One concrete result concerns the special and differential treatment of the
LDCs in the area of intellectual property rights (IPRs). The WTO Council on Trade-
related Aspects of Intellectual Property Rights (TRIPS) adopted in June 2013 a
decision to extend the time period allotted for the LDCs to implement the TRIPS
Agreement. This Agreement (art. 66.1) states that in view of the special needs
and requirements of the LDCs, their economic, financial and administrative
constraints, and their need for flexibility to create a viable technological base, the
LDCs shall not be required to apply the provisions of the Agreement for a period
that can be extended by the TRIPS Council. In practice, this means the LDCs
are not obliged to implement many of the Agreement’s provisions until 1 July
2021, or until they cease to be an LDC, whichever is earlier. The importance of
the decision lies in the fact that the LDCs retain their policy space and continue
to benefit from this international support measure in order to overcome their
productive capacity constraints and develop their technological capabilities.


On the negative side, it is important to emphasize that the world crossed
a key threshold in relation to climate change in May 2013, when the


Table 2. Price indices for selected primary commodities of importance to LDCs, 2008–2013
(Price indices, 2000=100)


2008 2009 2010 2011 2012
2013


Standard
deviation


%
change


Q1 Q2
2000–
2012


2000–
2012


All food 236 216 232 273 269 260 253 66.8 169.0
Wheat 288 197 204 276 275 280 272 67.3 175.5
Rice 344 289 256 271 285 280 270 91.0 184.7
Sugar 156 222 260 318 263 227 214 79.4 163.4
Fish meal 274 298 409 372 377 452 441 106.5 277.4
Coffee, Arabicas 163 166 228 321 220 182 174 73.4 120.4
Coffee, Robustas 252 183 200 275 263 260 246 75.4 162.6
Cocoa beans 291 325 353 336 269 249 260 81.5 169.5
Tea 109 127 125 140 141 129 107 24.2 40.6


Agricultural raw materials 198 163 226 289 223 216 202 59.9 122.6
Tobacco 120 142 144 150 144 147 146 23.4 44.0
Cotton 121 106 175 258 150 152 157 49.0 50.4
Non-coniferous woods 154 154 161 158 153 150 160 23.8 53.2


Minerals, ores and metals 332 232 327 375 322 332 303 109.5 221.9
Iron ore 83 100 184 210 161 186 157 .. ..
Aluminium 166 107 140 155 130 129 118 30.5 30.4
Copper 384 283 416 487 438 437 410 152.1 338.5
Gold 312 349 440 562 598 584 507 174.2 498.1


Crude petroleum 344 219 280 368 372 372 352 106.5 272.1
Source: UNCTADstat, Commodity Price Bulletin, August 2013.


The WTO Council on Trade-related
Aspects of Intellectual Property
Rights (TRIPS) adopted in June


2013 a decision to extend the time
period allotted for the LDCs to


implement the TRIPS Agreement.


The importance of the decision lies
in the fact that the LDCs retain their
policy space and continue to benefit


from this international support
measure in order to overcome their


productive capacity constraints
and develop their technological


capabilities.




7CHAPTER 1. Recent Trends and Outlook for the LDCs


concentration of carbon dioxide reached 400 parts per million (ppm) in two
separate measurements, one at a Hawaii measurement station and the other in
Switzerland. The global average is expected to exceed the 400 ppm mark within
a year. Unfortunately, this event has not received due media coverage, despite
the fact that the impacts of climate change are already being felt in the increased
frequency of extreme weather events in many parts of the world. At the current
rate of increase of carbon dioxide emissions into the atmosphere, the goal
of staying below the 450-ppm threshold is unlikely to be achieved. Given the
direct link between the carbon dioxide concentration in the atmosphere and the
Earth’s temperature, the average world temperature will likely rise by more than
two degrees Celsius by the end of the century, causing irreversible changes in
the global climate.


Regrettably, the LDCs are more vulnerable to climate change than other
countries, and are expected to bear the greatest burden of adjusting to its effects
(UNCTAD, 2010). The recent crossing of the 400-ppm threshold should provide
a wake-up call to the international community to change the course of events
while the alterations to climate are still reversible. It should also be taken up by
the LDCs themselves, which should renew their efforts to place the issue higher
on the agenda of the international community and to devise national strategies
to respond to this enormous challenge.2


C. Recent economic performance of the LDCs


1. TRENDS IN THE REAL ECONOMY


Despite the slow global recovery, real GDP growth in the LDCs has
picked up somewhat, from 4.5 per cent in 2011 to 5.3 per cent in 2012. As was
the case in other developing countries, more robust domestic demand in the
LDCs partially compensated for feeble external demand (UNCTAD, 2013a). IMF
forecasts for 2013 point to a similar growth rate for the LDCs, in the 5-to-6 per
cent range. It is worth repeating that these growth rates, although much higher
than in developed countries, are a full two percentage points lower than the
LDCs’ performance during the boom period, and are also below the target rate
of 7-per-cent annual growth established in the IPoA (table 3).


The real GDP growth rates of different groups of LDCs continued recent
trends, with African LDCs lagging behind their Asian and island counterparts.
These trends have now been in place for four consecutive years, unlike in the


Table 3. Real GDP and real GDP per capita growth rates for LDCs, by groups, selected years
Real GDP Growth Real GDP per capita growth


2002–
2008


2009 2010 2011 2012 2013
2002-
2008


2009 2010 2011 2012 2013


Total LDCs 7.5 5.0 5.6 4.5 5.3 5.7 5.0 2.6 3.3 3.2 2.9 3.4
African LDCs and Haiti 7.5 4.2 4.9 4.4 4.8 5.6 4.8 1.5 2.2 3.4 2.1 3.0
Asian LDCs 7.5 5.9 6.4 4.6 5.8 5.7 5.5 4.1 4.7 2.9 4.1 4.0
Island LDCs 4.9 2.7 5.5 6.8 5.7 5.8 2.7 0.6 2.9 4.5 3.5 3.6


Food and agriculture exporters 5.2 6.1 6.3 5.4 2.0 5.1 2.7 3.2 3.4 2.5 -0.8 2.2
Fuel exporters 9.2 3.0 4.0 -1.1 2.2 3.9 6.2 0.2 1.2 5.5 -0.5 1.1
Manufactures exporters 6.2 5.3 5.9 6.5 6.0 6.1 4.8 4.1 4.8 5.4 4.7 5.1
Mineral exporters 5.6 4.0 6.1 5.9 5.7 7.1 2.8 1.2 3.3 3.1 2.9 4.2
Services exporters 8.7 7.8 6.1 6.0 5.7 5.0 5.9 5.2 3.5 3.5 3.1 2.4
Mixed exporters 7.8 4.5 6.0 5.2 6.7 6.6 5.2 1.9 3.4 2.6 4.4 4.3
Source: UNCTAD secretariat calculations based on IMF, World Economic Outlook database, April 2013.
Notes: The LDCs’ growth is calculated as the weighted average of each country’s real growth (base year 2000); data for 2012 are preliminary


and are forecasted for 2013.


The world crossed a key threshold
in relation to climate change in May


2013, when the concentration of
carbon dioxide reached 400 parts


per million.


Despite the slow global recovery,
real GDP growth in the LDCs has


picked up somewhat, from 4.5 per
cent in 2011 to 5.3 per cent in 2012.




The Least Developed Countries Report 20138


previous period, when the African LDCs had been growing at the same pace
as the Asian LDCs. In addition, the growth rates of African LDCs’ real GDP per
capita show a larger lag due to their higher population growth rate.


In terms of growth performance of groups based on export specialization,
the fuel-exporting LDCs continued to record growth rates below those of other
groups. One of the reasons is undoubtedly their extreme dependence on just
one export product (ranging from 76.2 per cent of total exports in the case of
Yemen to 96.6 per cent in the case of Angola), which means that any disruption
of production and any price variation has a disproportionate influence on the
performance of the economy as a whole. Food and agriculture exporters also
registered low growth rates in 2012, in part because of erratic weather patterns.
The performance of other groups of LDCs has been much more stable in the
past four years, with only slight variations from one year to another.


The heterogeneous performance of LDC groups has been reflected not only
in real GDP growth rates, but also in the growth rates of individual countries.
In effect, there were 15 countries with growth rates exceeding 6 per cent, but
also 10 countries with growth rates below 3 per cent. Given the high population
growth rate, the latter countries had stagnant or negative growth in per capita
terms. This has severe consequences for their poverty reduction, for their
achievement of the Millennium Development Goals (MDGs), and more broadly
for their human development. Three LDCs were in a recession in 2012, since
they had negative growth rates of real GDP.


The heterogeneity in real GDP growth rates among the LDCs is a
consequence of wide disparities in other macroeconomic indicators. Most
notably, and most importantly for economic growth, the rates of gross capital
formation differ widely across individual LDCs (annex table 4). The IPoA has
identified a gross capital formation rate of 25 per cent of GDP as a prerequisite
for attaining real GDP growth rates of 7 per cent. Seventeen LDCs managed
to reach, or even exceed, that benchmark in 2011. However, 31 others had an
investment rate below the 25-per-cent benchmark, and the rate in several LDCs
was even below the 10-per-cent mark. Given the close relationship between
investment and economic growth, these countries’ growth prospects are not
very bright.


In addition, the gross domestic savings rate was lower than the gross capital
formation rate in 40 of the 48 LDCs in 2011. In other words, these countries
had a negative external resource gap, which means that they had to rely on
external financing to close the gap between investment and domestic savings.
This makes these LDCs not only dependent on external financing, but also
vulnerable to fluctuations in different sources of external financing. Given that
some such sources are less stable and predictable than others (see section
3 below on trends in external finance), the structure of external financing of
individual countries is important for mitigating that vulnerability.


While the average gross capital formation rate for LDCs was equivalent
to 22 per cent of GDP in 2011, in developing countries excluding the LDCs
it represented 32.8 per cent, almost 11 percentage points higher. The LDCs
thus lag substantially behind other developing countries in creating potential for
future growth.3 Moreover, the gross domestic savings rate in other developing
countries was 35.9 per cent of GDP, 15 percentage points higher than in the
LDCs. As a consequence, other developing countries on average do not depend
on external financing for investment and hence are much less vulnerable to
external shocks than the LDCs.


The fact that most energy-exporting LDCs are located in Africa also explains
the regional differences in gross domestic savings rates. African LDCs, mostly


There were 15 LDCs with growth
rates exceeding 6 per cent, but also


10 with growth rates below 3 per
cent.


31 LDCs had an investment rate
below the 25-per-cent benchmark,
and the rate in several LDCs was
even below the 10-per-cent mark.


The gross domestic savings rate
was lower than the gross capital


formation rate in 40 of the 48 LDCs
in 2011, which means that they had
to rely on external financing to close


the gap between investment and
domestic savings.




9CHAPTER 1. Recent Trends and Outlook for the LDCs


because of the energy exporters among them, had gross domestic savings rates
equivalent to 23.8 per cent of GDP in 2011, in contrast to Asian LDCs, whose
rate was only 15.1 per cent. Thus, African LDCs on average have higher gross
domestic savings rates than gross capital formation rates. Within that group,
however, there are pronounced differences. Asian LDCs, in turn, have a negative
external resource gap equivalent to six percentage points of GDP. The data for
island LDCs reveal a very high gross domestic savings rate of 38.6 per cent of
GDP and a low gross capital formation rate of 15.4 per cent. These averages are
due mostly to Timor-Leste, a large energy producer with characteristics atypical
of small island developing States (SIDS).


Going beyond macroeconomic indicators to examine developments over
a decade allows us to explore the extent and direction of the process of
structural change in the LDCs (annex table 5). The evidence shows that the
share of agriculture in GDP decreased in 33 LDCs and increased in 14 of
them from 1999–2001 to 2009–2011.4 During the same periods, the share of
manufacturing increased in only 19 LDCs, stayed the same in 3, and decreased
in 25. The share of non-manufacturing activities, in turn, increased in 32 LDCs,
stayed the same in 1, and decreased in 14. Finally, the share of services in GDP
increased in 28 LDCs, remained unchanged in 1, and declined in 18 of them in
the same periods.


One of the most broadly confirmed stylized facts in economics is that
the value added of agriculture in the national economy decreases in relative
terms as the country develops. Thus, the fact that the share of agriculture in
GDP increased in 14 LDCs over the past decade is a striking finding which
reflects a lack of structural change towards higher value added activities, higher
productivity, higher incomes and technologically more sophisticated activities
in these economies. The data on manufacturing as a share of GDP point in a
similar direction, namely, that in the recent past, this critical area of economic
activity lost part of its previous share in GDP in more than half of the LDCs.
Given that manufacturing played the main role in the industrialization and
development of developed countries and in the first- and second-tier newly
industrialized countries (NICs), economic growth that results in a decreasing
share of manufacturing in the LDCs does not bode well for their development
prospects.


The fact that non-manufacturing activities within industry (mining and
quarrying, electricity, gas, water and sanitary services, and construction) now
constitute a larger share in GDP in more than two thirds of the LDCs points
to a process of greater specialization based on static comparative advantage.
This apparent shift away from manufacturing towards activities based on the
LDCs’ existing comparative advantage is probably a result of the commodity
price boom. Similarly, the falling share of services in the GDP of 18 LDCs is also
a sign that there has been little structural change in many LDCs even at a time
when their economic growth was higher than in any other decade.


For the LDCs as a group, the average share of agriculture declined from
31.4 per cent of GDP in 1999–2001 to 25.6 per cent in 2009–2011. The share
of manufacturing stayed the same, at around 10 per cent of GDP. Once again,
however, there are notable regional differences. While the share of manufacturing
in African LDCs decreased slightly, from an already low value of 8.0 per cent of
GDP to 7.5 per cent, its share in Asian LDCs increased from 12.7 per cent
to 15.2 per cent. The data for non-manufacturing activities reflect exactly the
opposite movement. In the African LDCs, the share went from 16.5 per cent to
27.3 per cent of GDP, while in the Asian LDCs it stayed the same, at 12.1 per
cent. The data thus confirm the existence of two different strategies of economic
development, one based mostly on extractive industries and the other on labour-


The share of agriculture in GDP
decreased in 33 LDCs and increased


in 14 of them between 1999–2001
and 2009–2011.


The share of manufacturing
increased in only 19 LDCs, stayed


the same in 3, and decreased in 25.


The share of services in GDP
increased in 28 LDCs, remained
unchanged in 1, and declined in


18 of them.


For the LDCs as a group, the
average share of agriculture


declined from 31.4 per cent of
GDP in 1999–2001 to 25.6 per cent


in 2009–2011 while the share of
manufacturing stayed the same, at


around 10 per cent of GDP.




The Least Developed Countries Report 201310


intensive manufacturing. On average, the share of services declined somewhat
in the African LDCs and increased in the Asian LDCs.


More generally, the trends suggest that for the LDCs as a group, over the
period between 1999–2001 and 2009–2011 — which was characterized by the
most rapid economic growth in decades — there was little structural change of
the type that results in strong increases in productivity, incomes, technological
intensity and high value added. Overall, the share of both agriculture and services
has been declining slowly in these countries, while that of industry is expanding.
Within industry, however, manufacturing stagnated, while non-manufacturing
activities expanded vigorously over the 10-year period. Much of the increase of
industrial value added is concentrated in mining industries and in the exploitation
of crude oil, gas and hydroelectric power, rather than in manufacturing. The
overall lack of a dynamic process of structural change is characteristic mainly
of the African LDCs. The Asian LDCs, in turn, are following the path of other
successful East and South-East Asian economies, although at a slower pace.


2. TRENDS IN CURRENT ACCOUNT AND INTERNATIONAL TRADE


According to available preliminary data, the current account deficit
for the LDCs as a group widened substantially, from $10.5 billion in 2011 to
$28.8 billion in 2012. Most of the increase was due to the African LDCs and
Haiti, where the deficit rose from $9.2 billion to $26.1 billion over the same two
years. In terms of GDP, the current account deficit of the African LDCs widened
from 5.0 per cent in 2011 to 13.2 per cent in 2012. Asian LDCs also recorded
a larger deficit, expanding from $3.2 billion to $4.3 billion in the same period.
The surplus of island LDCs, by contrast, shrunk from $1.9 billion to $1.6 billion,
although this is due entirely to the surplus of Timor-Leste. Excluding the data
from that country, this group of LDCs registered a deficit of some $300 million in
2012. Only seven LDCs, mostly energy exporters, recorded a current account
surplus in 2012.


The deterioration of the LDCs’ current account was mainly due to a strong
worsening of the merchandise trade balance, which expanded from a $3.7-billion
deficit in 2011 to a much larger one of $18.5 billion in 2012 for the LDCs as
a group. The surplus of African LDCs plummeted from $22.2 billion to $11.9
billion, while the deficit of Asian LDCs widened from $24.5 billion to $29.0 billion
in the same period.


The terms of trade for the LDCs as a group continued to improve in the three
years since their sharp deterioration of 2009 (chart 1). In 2011 and 2012 they
reached a higher level than during the previous peak of 2008, just before the
adverse impact of the crisis was felt. However, the terms of trade for regional
groups reveal pronounced differences. The African LDCs have benefited from
an unprecedented improvement in their terms of trade with the rest of the
world. High commodity prices are the most important factor in these positive
developments. However, despite their favourable terms of trade, their real GDP
growth rate has been lower than that of the Asian and island LDCs.


The terms of trade for the Asian LDCs also improved somewhat in 2012,
although both that year and during the boom period of 2002–2008 they were
below the levels of 2000. A similar evolution can be seen in the terms of trade of
the island LDCs, which have worsened since 2000 and deteriorated somewhat
in 2012 from the previous year’s levels. Comparing the LDCs as a group with
other developing countries, we see that the terms of trade improved significantly
in the former from 2000 to 2012 but improved only slightly in the latter.


For the LDCs as a group, over the
period between 1999–2001 and


2009–2011 — characterized by the
most rapid economic growth in


decades — there was little structural
change of the type that results in
strong increases in productivity,
incomes, technological intensity


and high value added.


The current account deficit for
the LDCs as a group widened


substantially, from $10.5 billion in
2011 to $28.8 billion in 2012.


The deterioration of the LDCs’
current account was mainly due


to a strong worsening of the
merchandise trade balance, from a


$3.7-billion deficit in 2011 to a much
larger one of $18.5 billion in 2012.


The terms of trade for the LDCs
as a group continued to improve


in the three years since their sharp
deterioration of 2009.




11CHAPTER 1. Recent Trends and Outlook for the LDCs


Box 1. Graduation of Samoa from LDC status


The IPoA adopted at the Fourth United Nations Conference on the Least Developed Countries (LDC-IV) in Istanbul, Turkey,
in 2011 is the international community’s main document on the LDCs for the decade 2011–2020. Its overarching goal is to
overcome the structural challenges faced by LDCs in order to eradicate poverty, achieve internationally agreed development
goals and enable graduation from the LDC category. More specifically, national policies and international support measures
should focus on enabling half the number of LDCs to meet the criteria for graduation by 2020 (United Nations, 2011, paras.
27-28).


The LDC category is a United Nations grouping of countries based on three criteria: a) income; b) human assets; and c)
economic vulnerability. Each country needs to meet graduation thresholds in at least two criteria in order to graduate.1 The
decision on graduation is made by the United Nations Economic and Social Council based on recommendations from the
Committee for Development Policy (CDP). The main novelty of the IPoA is its explicit inclusion of targets for graduation. A
prospect of graduation can be a powerful motivating force for pursuing more rapid structural change and development of
productive capacities in the LDCs, as well as an opportunity for addressing the employment challenge analysed in this Report.


Within that context, the news that Samoa will graduate from LDC status is indeed cause for celebration. It also constitutes
recognition of the progress made by LDCs over the past decade and should motivate other LDCs to focus their efforts on
reaching graduation thresholds. Samoa was among the 25 countries included in the first group of LDCs when the category
was formally established by the United Nations in 1971. By 2012, Samoa stood at 242 per cent of the graduation threshold for
per capita income, with an estimated per capita GNI of $3,220 that year, when the threshold was $1,190. Economic progress
was steady in the first decade of the twenty-first century, albeit without spectacular growth: real GDP growth rates were
negative in 2008 and 2009, and the years that followed the tragic tsunami of September 2009 were ones of slow recovery.
The two main factors in Samoa’s rise above the graduation line were: (a) the successful specialization of the economy in
international services, notably tourism; and (b) the multiplier impact of a steady flow of remittances (equivalent to 82 per cent
of total exports in 2011) and ODA inflows.


The steady progress with respect to the human asset criterion over the past 20 years has been the other main factor
in the country’s graduation. At 141 per cent of the graduation threshold in 2012, the country is the LDC with the highest
human capital status. Samoa’s situation with respect to the economic vulnerability criterion is of a different nature: at 63 per
cent of the graduation threshold in 2012, the economy is among the 30 per cent most vulnerable LDCs. As indicated by the
disaster victim ratio — a new component of the Economic Vulnerability Index (EVI) — Samoa was much affected by natural
disasters in the past two decades, twice more than comparable small island developing States. According to another new
component of the EVI, the ratio of low-lying areas, Samoans are 72 per cent more exposed to sea-related risks than other
LDCs. Despite the increased vulnerability to natural shocks overall, 2012 was a year of slightly improved performance under
this indicator: the country was seen as having scored points in resilience-building, as evidenced by the limited instability in
overall exports in the long run.


By virtue of the graduation rule under which a country that has stood above two graduation thresholds in at least two
consecutive reviews of the list will qualify for graduation, CDP in March 2006 recommended Samoa’s graduation from LDC
status. The Economic and Social Council endorsed this recommendation in July 2007, and the General Assembly confirmed
that decision through resolution 62/97 of 17 December 2007. In another resolution in September 2010 (64/295), the Assembly
decided to defer Samoa’s graduation to 1 January 2014, owing to the “unique disruption” caused by the 2009 tsunami. The
year 2013 is the third and last year of the country’s normal grace period before graduation. Samoa has been actively engaged,
with its development partners, in preparing a “smooth transition” to post-LDC life.


Samoa’s relative economic prosperity owes little to LDC-specific benefits, however, as the latter do not involve concessions
in the area of trade in services. International tourism and business-related services in 2011 accounted for 78 per cent of
the country’s total export earnings. Also in 2011, tuna, its largest merchandise export, ranked only fifth among the sources
of export earnings, with 2.5 per cent of relevant total receipts. (Exports of wiring sets to Australia and New Zealand for the
automobile industry are counted as re-exports, although some value addition does take place in Samoa in the single factory
making up this sector.)


As a service-dominated economy, Samoa is not likely to be harmed by its upcoming loss of LDC status. Preferential access
to the Australian and New Zealand markets will not be affected either by this change of status or by the possible advent of
reciprocal free trade arrangements between South Pacific States and the region’s two large preference givers. At the same
time, Samoa’s exports to the EU are very small, and the EU’s smooth transition policy on market access would automatically
benefit Samoa for at least three years. Trade-related technical assistance under the Enhanced Integrated Framework (EIF)
for LDCs will continue to be received by the country for a number of years after graduation, as will United Nations budget
support for Samoan delegations to major United Nations events.


As we celebrate the graduation of Samoa from the LDC category, however, one more country has been added to the list.
The latest official addition to the category was South Sudan, which was admitted on 18 December 2012 when the General
Assembly endorsed with immediate effect CDP’s March 2012 recommendation to add that newly independent country to
the list. This is a potent reminder that there are countries and populations in need of special attention from the international
community in supporting their development strategies to address their development needs and specific challenges and
overcome their structural vulnerabilities.
1 According to the graduation rule established by the United Nations, a first-time performance above two graduation thresholds makes the


country “pre-eligible” for graduation, while “full eligibility” will take place after a second observation of the same performance has been made
in the subsequent consecutive triennial review of the list of LDCs.




The Least Developed Countries Report 201312


Chart 1. Terms of trade indices of LDCs, regional groups of LDCs and ODCs, 2000–2012
(Index, 2000=100)


80


100


120


140


160


180


200


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


ODCs LDCs


In
de


x


African LDCs and Haiti Asian LDCs
Island LDCs


Source: UNCTAD secretariat calculations, based on UNCTADstat database.


Table 4. Exports and imports of merchandise and services in LDCs


Country groups 2008 2009 2010 2011 2012
Change


2011
Change


2012
Merchandise trade


Merchandise exports LDCs total 167'907.6 127'672.3 162'436.8 203'004.4 204'310.8 25.0 0.6
African LDCs and Haiti 129'832.7 92'392.6 117'021.8 146'797.3 148'138.5 25.4 0.9
Asian LDCs 37'690.7 34'974.1 45'030.6 55'613.1 55'512.9 23.5 -0.2
Island LDCs 384.1 305.6 384.4 594.0 659.4 54.5 11.0


Merchandise imports LDCs total 162'074.1 153'444.1 169'565.8 206'736.0 222'777.2 21.9 7.8
African LDCs and Haiti 106'739.0 101'054.3 106'005.5 124'573.6 136'149.6 17.5 9.3
Asian LDCs 53'758.9 50'907.3 61'828.9 80'180.9 84'552.1 29.7 5.5
Island LDCs 1'576.3 1'482.6 1'731.4 1'981.5 2'075.5 14.4 4.7


Merchandise trade
balance


LDCs total 5'833.46 -25'771.85 -7'128.96 -3'731.63 -18'466.42 47.7 -394.9
African LDCs and Haiti 23'093.80 -8'661.74 11'016.31 22'223.65 11'988.90 101.7 -46.1
Asian LDCs -16'068.21 -15'933.17 -16'798.25 -24'567.76 -29'039.20 -46.3 -18.2
Island LDCs -1'192.13 -1'176.94 -1'347.03 -1'387.51 -1'416.11 -3.0 -2.1


2008 2009 2010 2011 2012
change


2011
change


2012
Services trade


Service exports LDCs total 20'706.6 21'534.9 25'002.2 29'744.1 30'373.3 19.0 2.1
African LDCs and Haiti 13'719.4 12'834.8 13'839.6 17'443.8 17'756.1 26.0 1.8
Asian LDCs 6'435.5 8'105.7 10'463.5 11'537.2 11'795.8 10.3 2.2
Island LDCs 551.7 594.4 699.2 763.0 821.3 9.1 7.6


Service imports LDCs total 58'895.7 54'536.0 60'550.4 71'904.7 74'847.8 18.8 4.1
African LDCs and Haiti 49'099.4 44'298.4 47'905.4 57'091.7 59'228.1 19.2 3.7
Asian LDCs 8'804.6 8'941.1 11'018.9 12'672.0 13'398.7 15.0 5.7
Island LDCs 991.7 1296.5 1626.1 2141.0 2221.0 31.7 3.7


Service trade balance LDCs total -38'189.2 -33'001.1 -35'548.2 -42'160.5 -44'474.6 -18.6 -5.5
African LDCs and Haiti -35'380.1 -31'463.5 -34'065.8 -39'647.9 -41'472.1 -16.4 -4.6
Asian LDCs -2'369.1 -835.5 -555.4 -1'134.8 -1'602.8 -104.3 -41.2
Island LDCs -440.0 -702.1 -927.0 -1'377.9 -1'399.7 -48.6 -1.6


Source: UNCTAD secretariat calculations, based on UNCTADstat database, July 2013.




13CHAPTER 1. Recent Trends and Outlook for the LDCs


The widening of the merchandise trade deficit was driven by developments
on both export and import fronts (table 4). With respect to exports, the strong
growth of about 25 per cent in both 2010 and 2011 stalled to a mere 0.6
per cent in 2012 for the LDCs as a group. This is in line with the worldwide
deceleration of trade in goods mentioned earlier. Exports of goods from the
Asian LDCs actually declined in 2012, although by only 0.2 per cent. Those from
island LDCs, by contrast, grew by 11 per cent. Imports to the LDCs as a group
also slowed, but not as much as exports. While imports expanded 21.9 per cent
in 2011, one year later their growth had slowed to 7.8 per cent. Nonetheless,
that was enough to worsen the LDCs’ merchandise trade deficit substantially.


Trends in the trade balance of services were broadly the same. The deficit
increased from $42.1 billion in 2011 to $44.5 billion in 2012. Exports of services,
which expanded by 19 per cent in 2011, had barely advanced one year later
(2.1 per cent). The change in the growth rate of services imports was almost as
significant, from a robust expansion of 18.8 per cent in 2011 to only a 4.1-per-
cent increase in 2012.


The composition of LDCs’ merchandise exports reflects the dominant
position of fuels, which account for more than half of the total (table 5). However,
their predominance is the result of merchandise exports from the African LDCs,
whose share is around 65 per cent. In the case of the Asian LDCs, fuels account
for only one fifth of the total, whereas manufactured goods, at around 57 per
cent of the total, are the main export item. In particular, textile fibres, yarn, fabrics
and clothing amount to about half of all merchandise exports from the Asian
LDCs.


Exports of ores and metals, at 17.4 per cent, are the second largest export
item from the African LDCs, followed by food (8.5 per cent) and manufactured
goods (6.1 per cent). The export structure of the island LDCs is dominated by
agricultural raw materials (44 per cent) and food (29.5 per cent). Manufactured
goods are in third place, with 13.4 per cent.


The largest items in the import structure of the LDCs as a group are food
(36.9 per cent) and agricultural raw materials (22 per cent). The fact that their
combined imports account for 60 per cent of all LDC imports reflects the
neglect of agriculture, a topic which is more broadly discussed in chapters 4
and 5 of this Report. Fuels account for 18 per cent of imports of goods, while
the share of manufactured goods is around 15 per cent of the total. Imports
of manufactured goods in the LDCs are composed primarily of machinery and
transport equipment.


Table 5. Composition of merchandise exports and imports in LDCs, average 2010–2012
(Percentage of total exports and imports)


Exports Imports


LDCs
African
LDCs and


Haiti


Asian
LDCs


Island
LDCs


LDCs
African
LDCs and


Haiti


Asian
LDCs


Island
LDCs


All food 8.5 8.5 8.3 29.5 36.9 34.7 40.3 40.2
Agricultural raw materials 3.3 2.7 4.5 44.0 22.0 20.8 23.7 25.4
Fuels 52.8 64.8 22.7 2.0 18.0 17.5 18.6 23.2
Ores and metals 14.3 17.4 6.4 7.7 1.9 1.2 3.1 1.5
Manufactured goods 20.3 6.1 56.9 13.4 14.9 13.9 16.5 14.8
Chemical products 1.4 1.4 1.3 0.9 2.5 2.2 3.1 0.7
Machinery and transport equipment 1.6 1.6 1.4 10.2 61.3 64.0 57.2 53.5
Other manufactured goods 17.4 3.1 54.2 2.2 10.2 10.2 10.2 5.0
Memo item:


Textile fibres, yarn, fabrics and clothing 15.9 2.9 49.5 0.3 24.9 23.9 26.8 18.8
Source: UNCTAD secretariat calculations, based on UNCTADstat database, July 2013.


With respect to exports, the strong
growth of about 25 per cent in both
2010 and 2011 stalled to a mere 0.6


per cent in 2012.


The composition of LDCs’
merchandise exports reflects the
dominant position of fuels, which
account for more than half of the


total.


The largest items in the import
structure of the LDCs as a group are
food (36.9 per cent) and agricultural


raw materials (22 per cent).




The Least Developed Countries Report 201314


The increasing share of food in total LDC imports points to the impact of
changes in international food prices on the LDCs’ trade balance. As shown in
chart 2, food prices increased sharply in 2007 and 2008, before experiencing
a downward correction in 2009 and 2010. Since then, however, they have
rebounded rapidly, and in 2011 reached a level higher than in the previous peak
during the so-called triple crisis (food, fuel and financial). Unlike other commodity
prices, international food prices have not fallen substantially from that peak, and
are still more than double those of the 2002–2004 average. In the composite
food price index, the price index of cereals is more important for the LDCs
than indices of other types of food, given that cereals predominate in LDC food
consumption. As shown in chart 2, cereal prices are almost one and a half times
higher today than their 2002–2004 average. The persistence of high food prices
and the strong dependence of the LDCs on food imports5 point to a need to
reverse the long-standing neglect of agriculture. High prices of food, especially
of cereals, remain a major problem for poor people everywhere, and particularly
in the LDCs.


An analysis of concentration indices of LDC exports (chart 3) shows that
the long-lasting trend towards higher concentration has recently been reversed.
In effect, the concentration index of exports of the LDCs as a group followed
a strong upward trend from 1995 to 2008, when it reached a value of 0.54.6


However, since the onset of the crisis, the concentration of exports as measured
by the concentration index for the LDCs as a group has gone down to 0.41.
When considered by regional groupings, the African LDCs have the highest
concentration index, followed by island LDCs, while that of the Asian LDCs is
the lowest of all LDC groups. The index has recently decreased in both African
and Asian LDCs, while it has increased in island LDCs.


It is not immediately clear why the concentration of exports from the LDCs as
a group has declined in recent years. Commodity prices have remained high, in


Chart 2. Food, meat and cereal price indices, January 2005-June 2013
(Index, 2002–2004=100)


50


100


150


200


250


300


1/2005 11/2005 9/2006 7/2007 5/2008 3/2009 1/2010 11/2010 9/2011 7/2012 5/2013


Food


In
de


x


Meat Cereals


Source: UNCTAD secretariat calculations, based on FAO Food Price Index, July 2013.


The persistence of high food prices
and the strong dependence of the
LDCs on food imports point to a


need to reverse the long-standing
neglect of agriculture. High prices


of food, especially of cereals, remain
a major problem for poor people


everywhere, and particularly
in the LDCs.




15CHAPTER 1. Recent Trends and Outlook for the LDCs


many cases even higher than in the boom period of 2002–2008, and are thus an
unlikely factor of change. In any case, the falling concentration index of exports
is a welcome development, as it suggests that the LDCs today have a more
diversified export structure than before the crisis.


3. TRENDS IN EXTERNAL FINANCE


External finance is of particular importance to the LDCs given their low level of
domestic savings relative to investment. In the absence of external finance, that
gap would have to be closed by a reduction in investment. Availability of external
finance, however, makes possible a higher level of investment than could be
financed solely by domestic savings. Both the level and the composition of
external finance are important, as some forms are more volatile than others.
Portfolio investment, for example, is generally much more volatile and more
unpredictable than FDI.


Recent private capital flows to the LDCs have followed the same pattern
as those to developing countries in general. The abundance of liquidity in
developed countries caused by expansionary monetary policy, coupled with a
dearth of opportunities to invest in developed countries where the private sector
is undergoing a painful deleveraging process, resulted in a recomposition of
investor portfolios, which up to the spring of 2013 had been favouring assets
in developing economies. That search for higher yields has also benefited the
LDCs. As shown in chart 4, private financial flows to the LDCs have been
increasing steadily, reaching $56.3 billion in 2012, a 16-per-cent increase over
the previous year.


FDI inflows to LDCs hit a record high of almost $26 billion in 2012, which is
about 20 per cent more than in 2011 (annex table 6). Inflows to African LDCs
and Haiti rose from $16.9 billion in 2011 to $19.8 billion last year. Asian LDCs


Chart 3. Concentration indices of exports of country groups, selected years


0


0.1


0.2


0.3


0.4


0.5


0.6


0.7


Developed
economies


Developing
economies


excluding LDCs


LDCs African LDCs
and Haiti


Asian LDCs Island LDCs


1995 2000 2008 2012


Source: UNCTAD secretariat calculations, based on UNCTADstat database.


Private financial flows to the LDCs
have been increasing steadily,
reaching $56.3 billion in 2012,
a 16-per-cent increase over


the previous year.


FDI inflows to LDCs hit a record
high of almost $26 billion in 2012,


which is about 20 per cent
more than in 2011.




The Least Developed Countries Report 201316


also saw an increase, from $4.2 billion to $5.6 billion, while the island LDCs
suffered a reversal, from $320 million to $235 million. FDI outflows from LDCs
increased at a much higher rate of around 66 per cent, to $5 billion in 2012. As a
result, net FDI inflows to more than 20 LDCs were negative. These negative net
flows were particularly high in Angola, where they totalled $6.9 billion.


The share of LDCs in global FDI inflows grew from 1.3 per cent in 2011
to 1.9 per cent in 2012. A long-standing feature of those inflows is their high
concentration in just a few countries. In 2012, five countries had inflows of
over $2.0 billion each, namely, Mozambique, Democratic Republic of the
Congo, Sudan, Myanmar and Equatorial Guinea. Also on the negative side, the
estimated value of greenfield investment projects in LDCs amounted to only
$22 billion, the lowest level in six years, due to a pronounced contraction of
announced projects in the primary sector and related processing industries.
Since the estimated value of greenfield investment projects is indicative of future
trends, this does not bode well for the value of FDI inflows in the future.7


The share of investments in extractive industries and related processing
activities in total greenfield investments in the LDCs has been declining, from
over 80 per cent of the total in 2003–2005 to around 30 per cent in 2012
(UNCTAD, 2013b). As a result, manufacturing and services are gaining ground.
Investment in transport and logistics includes oil pipelines, petroleum bulk
stations and terminals, which are support services for the extractive activities.
Financial services represented one fourth of all greenfield projects in the LDCs in
2012, concentrated primarily in retail banking.


The flow of workers’ remittances to the LDCs continued to expand in 2012,
reaching a new record of $30.5 billion. Remittances to these countries are much
more stable than FDI inflows (chart 4), and have risen even during the worst
stage of the crisis. With respect to regional distribution, remittances are mostly a
feature of Asian LDCs, where they increased from $16.3 billion in 2010 to $17.8


Chart 4. Private financial flows to the LDCs, 2000–2012
(Millions of current dollars)


-5,000


0


5,000


10,000


15,000


20,000


25,000


30,000


35,000


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


M
illi


on
s


of
c


ur
re


nt
d


ol
la


rs


Portfolio equity, net inflows Remittances Inward FDI


Source: UNCTAD secretariat calculations, based on UNCTADstat database for the FDI, World Development Indicators for portfolio invest-
ment and World Bank for remittances.


The share of investments in
extractive industries and related


processing activities in total
greenfield investments in the LDCs


has been declining, from over 80 per
cent of the total in 2003–2005
to around 30 per cent in 2012.


The flow of workers’ remittances to
the LDCs continued to expand in


2012, reaching a new record
of $30.5 billion.




17CHAPTER 1. Recent Trends and Outlook for the LDCs


billion a year later (annex table 7). The figures for the Asian LDCs are heavily
dominated by flows to Bangladesh, which receives around 40 per cent of all
remittance flows to the LDCs. In 2011, Bangladesh took in almost $12 billion in
remittances, and some preliminary estimates place the 2012 figure at over $14
billion. Remittances to the African LDCs grew by some $800 million in 2012 over
the $8.1 billion received in 2010.


Remittances are especially important for smaller countries, where they
account for a large share of gross national income (GNI). In Samoa, for example,
their share of GNI was 23.9 per cent; in Lesotho and Haiti, 23.7 per cent.
Workers’ remittances also represent a large share of GNI in Nepal, Gambia
and Senegal (more than 10 per cent), and in Togo, Guinea-Bissau and Kiribati
(between 5 and 10 per cent). For the LDCs as a group, remittances account for
4.4 per cent of GNI. In the African LDCs, the figure is 2.5 per cent, and in the
Asian LDCs, 7.4 per cent.


After playing an important countercyclical role during the financial crisis, ODA
to the LDCs began to decline in 2011 (chart 5). According to DAC data, the net
ODA disbursement from all donors to LDCs, excluding debt relief, fell slightly,
from $41.7 billion in 2010 to $41.6 billion in 2011. Preliminary data for 2012
show that bilateral net ODA to the LDCs fell by 12.8% in real terms. If these
estimates are confirmed, they would mark the largest decline of ODA to the
LDCs since 1997.


Moreover, 2012 was the first time since 1996–1997 that ODA to all developing
countries declined for two consecutive years. According to OECD, the decline
is part of a broader set of recent austerity measures adopted by policymakers
in traditional donor countries. The aid provided by DAC members amounted to
0.29 per cent of their combined GNI, way below the 0.7-per-cent target.


The total external debt of the LDCs expanded in 2012 to an estimated $183
billion, up 6.7 per cent in nominal terms from 2011. The debt-to-GDP ratio grew


Chart 5. Official capital flows to LDCs, 2000–2011
(Millions of current dollars)


0


5,000


10,000


15,000


20,000


25,000


30,000


35,000


40,000


45,000


50,000


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011


M
illi


on
s


of
c


ur
re


nt
d


ol
la


rs


Net ODA disbursement, excluding debt Net debt relief


Source: UNCTAD secretariat calculations, based on OECD-DAC, International Development Statistics, online, August 2013.


After playing an important
countercyclical role during the


financial crisis, ODA to the LDCs
began to decline.


The net ODA disbursement from
all donors to LDCs, excluding debt
relief, fell slightly, from $41.7 billion


in 2010 to $41.6 billion in 2011.




The Least Developed Countries Report 201318


slightly, from 26.6 per cent in 2011 to 26.7 per cent in 2012, while the ratio of
total debt to exports increased from 78.7 per cent to 82.5 per cent. Both ratios
were higher than those in other developing countries. However, average debt
service as a percentage of GDP and exports remained lower than for ODCs,
since most (more than 80 per cent) of LDC external debt is long-term, on highly
concessional terms. The stock of short-term debt was up by $2.5 billion in
2012, an increase of 14 per cent.


As of mid-2013, there were 2 LDCs in debt distress (Myanmar and Sudan)
and 10 at high risk of debt distress.8 Meanwhile, both Comoros and Guinea
have reached the completion point under the Heavily Indebted Poor Countries
Initiative (HIPC). As a result of debt cancellation obtained from the Paris Club,
the latter two countries are no longer considered to be in debt distress. While a
combination of relatively strong growth, prudent macroeconomic management,
and debt relief has brought down the debt burden of many LDCs, public debt
ratios have been rising in many post-HIPC and Multilateral Debt Relief Initiative
(MDRI) countries. The increase in debt-to-GDP ratios following MDRI has
been quite significant in Benin, Ghana, Senegal and Malawi, where it is more a
reflection of a sharp exchange rate depreciation in 2012 than of new borrowing.


In general, the LDCs have fewer opportunities and less sources of financing
than other developing countries. With few exceptions, their domestic debt
markets are not sufficiently developed, especially in the long maturity segment,
and funds that can be mobilized domestically for investment are constrained by
the limited amount of savings. Developing a domestic debt market is costly in
terms of financial and human resources and in most cases takes many years.
In the meantime, current account imbalances suggest that external capital will
continue to play a key role in financing development for the LDCs.


D. Outlook for the LDCs


According to IMF forecasts, real GDP worldwide will expand by 3.3 per cent
in 2013, a slight improvement over the 3.2 per cent of 2012. For the LDCs
as a group, IMF forecasts a 5.7-per-cent growth rate for 2013, compared to
5.3 per cent for emerging and developing economies. The growth of the world
economy should increase to 4.0 per cent in 2014 and to around 4.5 per cent
in the subsequent four years. LDC growth should be around 6 per cent in the
medium term (table 6).


However, these forecasts may be overly optimistic. Five years after the onset
of the global crisis, economic conditions remain precarious in most developed
countries, with high sovereign debt, high unemployment, a low or negative
growth rate of real GDP, and an ongoing deleveraging process in the private
sector. In addition, the adjustments currently being implemented in many


Table 6. Real GDP growth rates for LDCs, developing and advanced economies, selected years and forecasts
(Annual weighted averages, percentages)


2002–2008 2009–2012 2013 2014 2015 2016 2017 2018
Total LDCs 7.5 5.1 5.7 6.2 6.4 6.4 6.1 6.4


African LDCs and Haiti 7.5 4.6 5.6 6.1 6.3 6.0 5.6 6.0
Asian LDCs 7.5 5.7 5.7 6.2 6.6 6.7 6.8 6.8
Island LDCs 4.9 5.2 5.8 6.2 7.7 8.7 6.3 5.5


Memo Items:
Advanced economies 2.5 0.6 1.2 2.2 2.6 2.6 2.6 2.5
Emerging and developing economies 7.6 5.4 5.3 5.7 6.0 6.1 6.1 6.2
World 4.7 2.9 3.3 4.0 4.4 4.5 4.5 4.5


Source: UNCTAD secretariat calculations based on IMF, World Economic Outlook database, April 2013.
Notes: The LDCs’ growth is calculated as the weighted average of each country’s real growth (base year 2000); data for 2012 are preliminary


and are forecasted for 2013-2018.


The total external debt of the LDCs
expanded in 2012 to an estimated


$183 billion, up 6.7 per cent in
nominal terms from 2011. The debt-


to-GDP ratio grew slightly, from
26.6 per cent in 2011 to
26.7 per cent in 2012.


As of mid-2013, there were 2 LDCs
in debt distress (Myanmar and


Sudan) and 10 at high risk of debt
distress.


For the LDCs as a group, IMF
forecasts a 5.7-per-cent growth rate


for 2013.




19CHAPTER 1. Recent Trends and Outlook for the LDCs


developed countries are deflationary in nature. Debtor countries are forced to
reduce expenditure, while there is no obligation on the part of creditor countries
to expand. The result is a shortfall in demand at the global level. It is not clear
when the crisis in the developed countries will be over or how the LDCs will fare
if these weaknesses are sustained for several years.


Another problem, which is structural in nature, is the changing share of
labour and capital in total income. Over the past three decades, labour income
in the world economy has been rising slower than growth of world output.
As a result, the wage share has been declining relative to profits. However,
wage income represents a large part of total income, particularly in developed
countries (around two thirds of the total), and is therefore the biggest source of
demand for goods and services. A reduction of wage share has negative effects
on household consumption. To the extent that investment in new capacities
is driven by expectations of future demand, lower consumption acts as a
disincentive for new investment. Income inequality issues are thus bound to
have an impact on the pace of future economic growth, not only in developed
but also in developing economies (UNCTAD, 2012c).


For the LDCs, international trade has been the single most important channel
of transmission of the recessionary impulses from the developed countries
since the start of the crisis. The recent slowdown of world trade will thus have
further negative impacts on the prospects of the LDCs. While the demand
for imported goods in developed countries has been weak at best, the LDCs
have avoided a sharp deceleration of growth by relying more on their domestic
demand and on South-South trade. Both will be necessary in the future, but
the recent deceleration of economic growth in the large emerging economies
means that further possibilities for such reorientation are currently limited. In
addition, changes in the growth model of China will have repercussions that will
differ among individual LDCs according to their specialization pattern (see box
2 below).


The availability of external financing is another precondition for strong growth
of real GDP in the LDCs. As the analysis throughout this chapter has suggested,
external financing has been subject to strong fluctuations since the beginning
of the crisis. Moreover, the prospect of a tighter monetary policy in developed
countries over the course of 2014 and 2015 will change the relative profitability
of investments between developed and developing countries’ assets. This has
already begun to provoke some pull-out from the emerging and developing
countries as of the second quarter of 2013. Reduction in the interest rate
differential between developed and developing countries will make financing
the current account deficits more difficult. LDCs with large such deficits should
start now to prepare for these future developments. Moreover, countries that
peg their exchange rate to the United States dollar can expect their currency to
appreciate, making imports cheaper and exporting more difficult.


The third major factor affecting the external conditions for the LDCs is
movements in international commodity prices. Changing international prices
have long been recognized as a major external source of a country’s vulnerability.
IMF projections in WEO 2013 (International Monetary Fund, 2013) suggest
continued declines for prices of both oil and non-fuel primary commodities.
But the short-term outlook for commodity prices is highly uncertain, not only
because of possible supply-side disruptions (energy, food), but also because of
demand uncertainties.


Moving beyond the short term, three main scenarios are possible for the
“commodity supercycle” (for details and references see discussion in UNCTAD,
2013a, chapter 2). The most optimistic is that the expansionary phase of
the supercycle still has many years to run. A less optimistic scenario is that


It is not clear when the crisis in
the developed countries will be
over or how the LDCs will fare if


these weaknesses are sustained for
several years.


For the LDCs, international trade
has been the single most important


channel of transmission of the
recessionary impulses from the


developed countries since the start
of the crisis. The recent slowdown
of world trade will thus have further
negative impacts on the prospects


of the LDCs.


Reduction in the interest rate
differential between developed


and developing countries will make
financing the current account


deficits more difficult. LDCs with
large such deficits should start
now to prepare for these future


developments.


The short-term outlook for
commodity prices is highly


uncertain, not only because of
possible supply-side disruptions


(energy, food), but also because of
demand uncertainties.




The Least Developed Countries Report 201320


commodity prices have entered a calmer and more stable phase of growth, but
will nevertheless remain at their relatively high recent levels. The most pessimistic
scenario is that the supercycle has come to an end and that international
commodity prices will decrease substantially in the midterm.


While it is impossible to know what the future holds, two unrelated
developments will certainly influence the course of international commodity
prices. One is the changing growth model in China (see box 2 below), and the
other is the new method based on hydraulic fracturing for extracting oil and gas
that is remaking world energy markets. Regarding the latter, crude production in
the United States increased 14 per cent in 2012 (British Petroleum, 2013). This
was a major factor in keeping oil prices from rising sharply, despite a second
consecutive year of large oil supply disruptions in many parts of the world, but
most notably in North Africa and the Middle East.


Of crucial importance is the fact that North America is forecast to become
self-sufficient in energy production by the end of the decade (Citigroup, 2013).
As a result, oil prices in the medium term should decrease and are likely to
fluctuate within a range that is significantly below recent movements in the
vicinity of $100 per barrel. This will have a significant impact on the fuel-exporting
LDCs, whose income from oil could be substantially reduced. Preparing for
such a scenario should start now and should provide buffers for a time of lower


Box 2. Changing growth model in China and possible consequences for the LDCs


Chinese growth over the past 30 years has been investment- and export-led. Given that the country possessed surplus
labour characteristic of the Lewis model1, heavy investment in new factories, construction and infrastructure has been
possible without incurring diminishing returns. Wages have been kept low thanks to competition from this reserve army of
surplus labour even as the economy has grown richer. Exports have increased at rates even higher than GDP growth rates.


However, much of the contribution to growth from shifting resources from agriculture to industry has already occurred
in China. Some analysts (for example, Schellekens, 2013) suggest that China has already passed the Lewis turning point
at which it is no longer possible to tap into a surplus pool of low-wage labour without raising wages. This suggests that the
recent slowdown in growth from more than 10 per cent to 7 per cent is structural in nature.


In addition, in November 2012 the Government announced at the 18th National Congress of the Communist Party of China
that it will seek to alter the pattern of growth in the next five years. Domestic sources of growth, particularly consumption, will
be emphasized, while exports and investment will receive lower priority. China will also try to move up the value chain. As a
result, the structure of production and exports will progressively shift from resource- and labour-intensive activities to more
sophisticated and technologically more advanced products.


One of the factors relevant for LDCs is the expected lower resource intensity of future Chinese production. The pattern of
Chinese import demand may change, moving away from commodities, which would have major consequences for international
commodity prices. In effect, just as Chinese demand for commodities caused an upsurge of prices in the previous decade,
weaker demand is likely to have the opposite effect on prices (Akyüz, 2010).


A second factor is that the income elasticity of China’s imports is expected to rise as the country becomes richer
(Schellekens, 2013), which will open up new opportunities for exporters from other countries. In particular, the demand for
protein-based food will continue to grow, offering the potential for LDCs to increase their livestock production and exports.


A third factor is the increase in China’s labour costs and its intention to move towards more sophisticated and technologically
advanced goods, which will create opportunities for LDCs in many tradable sectors where Chinese producers previously
dominated international markets. Thus, labour-intensive manufacturing industries in the LDCs could become competitive
internationally, and could even supply such goods to the Chinese domestic market.


In short, China’s rebalancing towards more consumer-led growth and away from investment- and export-led growth will
produce both winners and losers. For the LDCs, this presents opportunities but also potential risks. As to which countries
would be able to benefit from that shift, this is a matter not only of endowments and the current structure of economic
activities but also of policies.


1 The Lewis model is a dual-sector model in development economics, named after Sir W. Arthur Lewis, winner of the Nobel Memorial Prize in
Economics, who first analysed it. The model explains the growth in developing economies in terms of a labour transition from the subsistence
(agriculture) sector to the capitalist (modern) sector. Its main characteristic is the existence of surplus labour in the subsistence sector. Hence,
when the capitalist sector expands, labourers move from the subsistence sector to the capitalist sector, holding down wages. This makes
it possible to earn extra profits in the capitalist sector and reinvest them in capital stock until the surplus labour from the subsistence sector
has been completely absorbed.


Of crucial importance is the fact that
North America is forecast to become
self-sufficient in energy production


by the end of the decade...


... this will have a significant
impact on the fuel-exporting LDCs,


whose income from oil could be
substantially reduced.




21CHAPTER 1. Recent Trends and Outlook for the LDCs


prices. In addition, resources from oil exports should be used for diversification
of economic activities so as to decrease vulnerability to and dependence on oil-
related shocks.


In addition to longer-term shifts related to changes in the Chinese growth
model, the outlook for the global economy is also clouded by the prospect of
downside risks linked to current trends in emerging economies. Some analysts
fear that because of the credit and property bubbles created by the response to
the global crisis in 2008, some major emerging economies, in particular China,
are now displaying symptoms similar to those of the sub-prime crisis in the United
States five years ago (Akyüz, 2013). If there is a crisis in the Chinese banking
system, for example, the country’s growth could decelerate substantially at a
time when there are no other countries or regions to support world demand. Even
if the banking crisis hypothesis is less likely in China because of its ownership
structure, a slowdown in emerging economies in general and in China’s growth
in particular could have adverse consequences for the global economy.


Finally, the policy mix in many countries has been turning towards fiscal
austerity. This is the case not only in developed countries but in developing
countries as well. One of the key findings of a review of public expenditures
and adjustment measures in 181 countries (Ortiz and Cummins, 2013) is that
fiscal contraction is most severe in the developing world. Overall, 68 developing
countries are projected to cut public spending by an average 3.7 per cent of GDP
during the period 2013–2015. Moreover, one fourth of them will reduce such
expenditure to below pre-crisis levels. These authors accordingly characterize
the current global conjuncture as the “age of austerity”.


Against this background, the outlook for the LDCs in the short to medium
term is not very good. Even if none of the downside risks materialize and the IMF
growth rate forecasts prove accurate, the growth of the LDCs as a group will be
below the 7-per-cent IPoA target. In that scenario, responding effectively to the
employment challenge, whose future magnitude is analysed in chapters 2 and
3, will be even more difficult in the LDCs.


The policy mix in many countries
has been turning towards fiscal


austerity...


... overall, 68 developing countries
are projected to cut public spending
by an average 3.7 per cent of GDP


during the period 2013–2015.


Against this background, the outlook
for the LDCs in the short to medium


term is not very good.




The Least Developed Countries Report 201322


Notes


1 The growth rates reported in tables 1, 3 and 6, as well as annex tables 2 and 3, are from
the International Monetary Fund. As such, they may differ, at times even substantially,
from those reported by individual LDCs. The IMF data have been used instead of the
data reported by countries themselves in order to ensure consistency and to present
forecasts for individual LDCs and different groups of countries.


2 For the Agenda for Action and concrete proposals on the financing of climate change
adaptation and mitigation in the LDCs, see UNCTAD (2010), chapter 7.


3 The data for ODCs are heavily biased by China’s very high capital formation rate.
When that country is excluded, the difference between ODCs and LDCs is closer to
five percentage points of GDP. A similar caveat applies to the savings rate.


4 The data for Timor-Leste for 1999–2001 are not available, so it is not possible to
determine whether there was a change in the structure or not.


5 For data on food security and dependency on commodities in general in developing
countries, see UNCTAD’s The State of Commodity Dependence 2012 (UNCTAD,
2012b).


6 The concentration index of exports is also called the Herfindahl-Hirschmann index. It
normalizes the values to a range, from 0 (the most diversified exports) to 1 (the most
concentrated exports).


7 Owing to the data collection method applied in the greenfield project database, the
announced values of projects tend to overestimate the actual, realized investment
values, since not all announced projects are realized.


8 A borrower in debt distress is one that is already experiencing repayment difficulties.


References


Akyüz Y (2010). Export Dependence and Sustainability of Growth in China and the East
Asian Production Network. South Centre Research Paper No. 27.South Centre. Geneva.


Akyüz Y (2013). Waving or Drowning: Developing Countries after the Financial Crisis. South
Centre Research Paper No. 48.South Centre. Geneva.


British Petroleum (2013). BP statistical review of world energy 2013. London.
Citigroup (2013). Energy 2020: independence day. Citi Global Perspectives & Solutions.
International Monetary Fund (2013). World Economic Outlook 2013: Hopes, Realities,


Risks. International Monetary Fund. Washington, DC.
Koo R (2011). The world in balance sheet recession: causes, cure, and politics. Real-


world economics review. (58):19–37.
Lund S et al. (2013). Financial globalization: retreat or reset? McKinsey Global Institute.
Ortiz I and Cummins M (2013). The Age of Austerity: A Review of Public Expenditures


and Adjustment Measures in 181 Countries. Initiative for Policy Dialogue and the
South Centre. New York and Geneva.


Reinhart CM and Rogoff KS (2009). This Time Is Different: Eight Centuries of Financial
Folly. Princeton University Press. Princeton.


Schellekens P (2013). A Changing China: Implications for Developing Countries.
Economic Premise, 118. Poverty Reduction and Economic Management Network.
World Bank. Washington DC.


UNCTAD (2010). The Least Developed Countries Report 2010: Towards a New
International Development Architecture for LDCs. United Nations publication. Sales
No. E.10.II.D.5. New York and Geneva.


UNCTAD (2012a). The Least Developed Countries Report 2012: Harnessing Remittances
and Diaspora Knowledge to Build Productive Capacities. United Nations publication.
Sales No. E.12.II.D.18. New York and Geneva.


UNCTAD (2012b). The state of commodity dependence 2012. United Nations. Geneva.
UNCTAD (2012c). Trade and Development Report, 2012: Policies for Inclusive and


Balanced Growth. United Nations. New York and Geneva.
UNCTAD (2013a). Trade and Development Report 2013: Adjusting to the Changing


Dynamics of the World Economy. United Nations publication. Sales No. E .13.II .D.3.
New York and Geneva.


UNCTAD (2013b). World Investment Report 2013: Global Value Chains: Investment
and Trade for Development. United Nations Conference on Trade and Development
(UNCTAD). New York and Geneva.


United Nations (2011). Programme of action for the least developed countries for the
decade 2011–2020. No. A/CONF.219/3/Rev.1. United Nations. New York.


United Nations (2013). World Economic Situation and Prospects 2013. United Nations
publication. Sales No. E .13.II.C.2. New York.




2CHAPTER
EXPLORING DEMOGRAPHIC
DYNAMICS IN THE LDCS




The Least Developed Countries Report 201324


A. Rationale for addressing growth with
employment for inclusive and sustainable


development in the LDCs


As explained in chapter 1, despite recently sluggish economic performance,
the LDCs have generally enjoyed more than 10 years of economic growth. Per
capita income for the group as a whole has been steadily expanding, raising
hopes that some of them may even be able to graduate from the category within
the decade. There are, however, worrying signs that this growth trend has not
been inclusive and that its contribution to poverty reduction has been limited.
The main explanation for the lack of inclusiveness is that such growth as there
has been has not generated enough “quality” jobs – that is, jobs offering higher
wages and better working conditions – especially for the young.


Jobless growth is not unique to LDCs. Many other developing countries,
including some advanced economies, have also experienced growth without
a concomitant creation of jobs. However, the special conditions of LDCs
– structurally weak economies with a high incidence of poverty, accelerating
urbanization and worrisome demographic patterns – make it imperative that
they create a sufficient number of remunerative jobs to reduce poverty and avert
any potential social and political tensions.


This chapter documents the extent to which the LDCs’ employment growth
lagged behind their rapid GDP expansion during the 2000s. That lag has
understandably generated serious concerns among LDC policymakers, which
is why the Report addresses the growth and employment nexus. Periods of
relatively rapid GDP growth, such as that experienced in the past decade, have
apparently failed not only to provide jobs for new entrants to the labour force,
but also to clear the backlog of open and disguised unemployment that typically
prevails in most LDCs. The question is: What will happen if economic growth
decelerates?


As discussed in chapter 1, the growth of GDP in the LDCs, both in the current
decade and in mid-term forecasts, points clearly to a less dynamic growth
pattern than in the previous decade. There are thus compelling reasons for a
policy emphasis on employment generation as a central development objective.
Indeed, this is increasingly recognized by LDCs as an urgent development
goal, including in the context of the post-2015 development agenda. Not all
LDCs are rich in mineral resources and other natural endowments. For most
of these countries, their most valuable asset is their people, in particular the
young. It is only by engaging their people in productive employment that they
can ensure that growth is inclusive and that it contributes to poverty reduction
and sustainable development.


What explains the failure to translate high output growth in LDCs into rapid
employment growth, and why is the employment issue such an immediate
development challenge for these countries?


There are well-known structural impediments to employment generation in
LDCs and other low-income countries, which have been well documented in the
development literature. They mainly concern the absence of capital and other
features of underdevelopment, such as infrastructural bottlenecks, which act as
constraints on development. As was noted in LDCR 2006: “One consequence
of the combination of a deficiency of domestic demand on the one hand, and
of weak capabilities, infrastructure and institutions for being internationally
competitive on the other hand, is that productive resources and entrepreneurial


The LDCs have generally enjoyed
more than 10 years of economic


growth.


Such growth as there has been has
not generated enough “quality” jobs,


especially for the young.


The LDCs’ employment growth
lagged behind their rapid GDP
expansion during the 2000s.


For most LDCs, their most valuable
asset is their people, in particular the


young. It is only by engaging their
people in productive employment
that they can ensure that growth is


inclusive.




25CHAPTER 2. Exploring Demographic Dynamics in the LDCs


capabilities are underutilized within the LDCs owing to lack of demand and
structural weaknesses. There is surplus labour, latent entrepreneurship,
untapped traditional knowledge, a vent-for-surplus through exporting and
unsurveyed natural resources. Policy thus needs to be geared to mobilizing
these underutilized potentials.”


In addition, the policy discussion of the past decade on national development
in LDCs has tended to focus on growth, changes in per capita incomes and
the structure of output, rather than on the development of productive capacity
and the level and composition of employment. This has been based on two
assumptions.


First, if GDP growth is sufficiently rapid, it will lead to productive transformation
and will generate increases in aggregate employment, even if at a somewhat
slower rate because of rising labour productivity.


Second, changes in the structure of output will be associated with changes
in the structure of the labour force in the classic manner described by Kuznets
(1973) and Kaldor (1966), so that growth through industrialization will generate
shifts in the structure of the workforce as well.


Neither of these assumptions, however, can be readily accepted today,
since it has become evident across many developing countries, including those
described as dynamic and successful, that rapid and sustained output growth
will not necessarily generate increases in aggregate employment or shifts
towards more desirable forms of employment. In rethinking their development
policy agenda, then, LDCs will need to pay closer attention to the employment
dimension, which has so far been missing from the policy discussion on growth
and economic development.


The slow growth of employment in LDCs in recent years was also a result
of the choice of sectors that were the main drivers of economic growth and the
technologies associated with the emerging production process. GDP growth
in many LDCs was primarily the product of exceptionally buoyant international
conditions during the 2000s (LDCR, 2010). The steep increase in commodity
prices which some authors termed a commodity supercycle (Kaplinsky, 2010;
Erten and Ocampo, 2012) boosted LDC exports and GDP growth. The boom
not only reinforced their existing specialization in primary commodities, but also
encouraged investment inflows and the transfer of a capital-intensive production
system. The result has been a weakened relationship between output and
employment growth.


Furthermore, macroeconomic policies aimed at restricting domestic demand
for stabilization purposes – policies that were applauded for the macroeconomic
prudence they advocated – have also had adverse effects. Restrictive monetary
policy regimes that target very low rates of inflation and reduce the credit
access of small producers, and fiscal policies that emphasize fiscal discipline
through reduced government spending, all tend to inhibit the possibilities of
local employment generation. In many LDCs, public expenditure contraction
after the global recession has been directed not only at such employment-
intensive social sectors as health and education (Ortiz et al., 2011), but also at
spending which directly affects agriculture, and which is typically a major source
of livelihood. This leads to less direct job creation by government and also has a
less direct impact through multiplier effects. These employment effects operate
in addition to other redistributive effects of public expenditure and monetary and
credit policies.


For LDCs, the employment dimension is even more pressing today because
of the demographic challenges they face, as explained in the rest of this chapter.


It has become evident across many
developing countries that rapid


and sustained output growth will
not necessarily generate increases
in aggregate employment or shifts
towards more desirable forms of


employment.


In many LDCs, public expenditure
contraction after the global


recession has been directed not only
at such employment-intensive social


sectors as health and education,
but also at spending which directly


affects agriculture.


For LDCs, the employment
dimension is even more pressing


today because of the demographic
challenges they face.




The Least Developed Countries Report 201326


Given these challenges and the predominantly youthful demographic structure
of most LDCs, there are additional reasons for the urgency of creating jobs that
meet the aspirations and requirements of the young. Improving livelihoods and
the quality of life for this growing population will require substantial investments
in education to create a more skilled labour force. It will also necessitate the
development of productive capacities through job creation to employ the
growing labour force, and the development of infrastructure and housing to
accommodate the service and amenity needs of new firms and households.
In addition, unemployment and underemployment amount to a huge waste
of national resources. If productive employment opportunities do not expand
sufficiently for the growing LDC labour force, there may also be rising pressures
for international migration from these countries, as documented and analysed in
LDCR 2012 (UNCTAD, 2012). Therefore, a central challenge for LDC economic
policymakers is to spur the creation of jobs for their rapidly expanding working-
age population and at the same time improve the quality of those jobs.


Providing decent employment for all is a major economic goal in and of itself,
since putting people to work increases current and future income, consumption
and investment for countries and for their citizens. But decent employment
has even broader non-economic benefits. The LDCs are characterized by
all-pervasive and persistent poverty. Moreover, a substantial majority of the
population suffers from income poverty, which means that even when they do
have jobs — most of which are in subsistence sectors — many people cannot
escape poverty. Reducing poverty under these conditions requires inclusive
development strategies that can generate productive employment. Creating
more jobs and better jobs — which is what decent employment is all about — is
thus the only sustainable way to alleviate poverty.


Social and political stability is another area where the benefits of high levels of
productive employment are evident. It is perhaps no coincidence that high youth
unemployment rates have become a structural characteristic of the countries
in North Africa where the so-called “Arab Spring” movements began in 2011
(Groth and Sousa-Poza, 2012; ILO, 2011). Decent employment, by contrast,
enables individuals to live the kind of lives they have reason to value. This premise
reflects the view of development as a process of enhancing individual freedoms
and of mobilizing the social commitment required to attain them (Sen, 1999).


For all these reasons, the issue of how to respond effectively to the LDC
employment challenge should be high on the agenda of policymakers in the
near future. But this Report posits that policies to address that challenge should
be different from those pursued in previous decades. They should be part of a
new development agenda and should be integrally associated with strategies
for developing productive capacities and encouraging structural transformation.


The central premise of the Report is that since the lack of productive
employment in the LDCs is a consequence of the lack of productive capacities,
employment creation on a large scale is intrinsically linked to the development
of productive capacities. Indeed, economic development is ultimately about the
transformation of productive structures — and more specifically, as discussed
here, about shifting the majority of the labour force from low-productivity, low-
technology and poorly remunerated activities to ones with higher productivity
and higher value added. It also entails a process of diversification from a
relatively small number of traditional activities to a much larger number of
modern activities. The criteria used to define the category of least developed
countries (low income, weak human assets and economic vulnerability) all stem
from this fundamental lack of economic transformation and diversification into
more productive activities. By definition, the LDCs are countries that are still in
the early or incipient stages of the process.


A central challenge for LDC
policymakers is to spur the creation
of jobs for their rapidly expanding
working-age population and at the
same time improve the quality of


those jobs.


Creating more jobs and better jobs
is the only sustainable way


to alleviate poverty.


Social and political stability is
another area where the benefits


of high levels of productive
employment are evident.




27CHAPTER 2. Exploring Demographic Dynamics in the LDCs


While this aggregate movement from productive activities with lower
technology and lower value to ones with higher technology and higher value
is essential to development, it is by no means inevitable or even unidirectional.
Reinert (2008) has shown how throughout history, and even in relatively recent
times, countries have moved in varying trajectories that do not always show
progress but that can involve slipping back even after achieving some degree
of diversification. One example is the recent pattern of growth in Africa, where
34 of the 49 LDCs are located. That growth pattern has been accompanied by
deindustrialization, as evidenced by the fact that the share of manufacturing in
Africa’s GDP shrunk from 15 per cent in 1990 to 10 per cent in 2008. The most
significant decline was observed in western Africa, where it fell from 13 per cent
to 5 per cent over the same period. So the notion of stages of development
that presumes necessary movement from one stage to the next may be too
optimistic: History, context and policies all matter critically. The increase in the
number of LDCs over the past four decades, and the slow rate of graduation
from LDC status, suggests that the forces which prevent or constrain productive
transformation and employment generation are significant and often self-
reinforcing. Nevertheless, they can be and have been overcome, as testified by
the histories of today’s developed countries and by the recent performance of
some newly industrializing countries.


Bearing these historical patterns in mind, the rest of this Report sets itself
four main tasks:


t 'JSTU JU BEESFTTFT UIF QPMJDZ EJNFOTJPO PG UIF FNQMPZNFOU DIBMMFOHF GBDFE
by the LDCs, as highlighted in the IPoA (see appendix 1), through an analysis
of the potential opportunities and challenges of the demographic projections.


t 4FDPOE JU QSPWJEFT B CBTFMJOF BTTFTTNFOU PG UIF -%$T SFDFOU MBCPVSNBSLFU
performance and of their future job creation needs.


t 5IJSE JU EFWFMPQT B QPMJDZ GSBNFXPSL XJUI FNQMPZNFOU DSFBUJPO BT B DFOUSBM
objective of economic policy, linking investment, growth and employment
creation with the development of productive capacities.


t 'PVSUI JU NBLFT TQFDJýD QPMJDZ QSPQPTBMT GPS HFOFSBUJOH FNQMPZNFOUSJDI
growth and development in the LDCs.


The rest of the chapter focuses on the demographic transition as a critical
dimension of the future employment challenges for the LDCs. The trend should
sound a wake-up call to LDC Governments and to the entire international
community.


Chapter 3 considers the quantity of employment (labour demand and supply
trends) and quality of employment (working poor and vulnerable employment) in
LDCs since 1990. It concludes with a brief discussion of the interaction between
employment and growth in these countries.


Chapter 4 suggests a policy framework that links employment creation and
the development of productive capacities in the LDCs. It builds on the ideas
developed in UNCTAD’s Trade and Development Report 2010, which proposed
a strategy for rapid employment generation in developing countries. The
strategy focused on investment dynamics coupled with policies to ensure that
productivity gains are distributed equally between labour and capital (UNCTAD,
2010a). The objective of the policy framework in this Report is to identify the
set of policies LDC Governments should implement if they wish to establish
a strong link between growth, employment creation and the development of
productive capacities. The framework is designed to provide a logical structure
and to explain the rationale for choosing or preferring certain policies or policy
approaches to others in order to meet the specific objective of increasing the
employment intensity of growth. The framework also elucidates the sequences


The central premise of the Report
is that employment creation on a
large scale is intrinsically linked


to the development of productive
capacities. Indeed, economic


development is ultimately about
the transformation of productive


structures.


History, context and policies all
matter critically. The forces which
prevent or constrain productive
transformation and employment


generation are significant and often
self-reinforcing. Nevertheless,


they can be overcome.


This Report suggests a policy
framework that links employment
creation and the development of


productive capacities in the LDCs.




The Least Developed Countries Report 201328


in which policies should be implemented and the conditions (institutional or
otherwise) under which the preferred policies may be successfully executed.
Finally, it illustrates the desired coherence and complementarity among the
policies to be implemented.


Chapter 5 then formulates a coherent set of policies for employment-
rich growth and development reflecting the key elements of the conceptual
framework, which brings together growth, development of productive capacities
and employment.


B. Exploring demographic dynamics in the LDCs


The LDCs are in the early stages of what has been termed a “demographic
transition” (Bloom et al., 2001), which refers to the transition of countries from
high birth and death rates to low birth and death rates. In developed countries,
this transition began in the eighteenth century, while for LDCs it began much
later, in the twentieth century.1 In most LDCs, life expectancy is rising due to
improvements in food supply, education and sanitation, and in the absence
of a corresponding fall in birth rates, most of these countries are experiencing
high rates of population growth. The LDC population is forecast to grow from
858 million in 2011 to 1 billion by 2020 and 1.7 billion by 2050.2 By 2050, the
LDCs should have a working-age population of 1.1 billion, compared to 469.9
million in 2010. However, large future increases in population may hinder the
creation of employment opportunities on the required scale. This could entrench
unemployment and underemployment3 while making poverty alleviation less
likely.


The LDC youth population (aged 15–24 years) is becoming better educated
and is growing fast, as it is set to rise to from 168 million in 2010 to 300 million
by 2050, an increase of 131.7 million. The African LDCs accounted for 63 per
cent of the total in 2010, a proportion that will reach 78 per cent by 2050. Of
the 46 LDCs for which data are available, only Bangladesh, Bhutan, Cambodia,
Laos, Lesotho and Myanmar are likely to experience a reduction in the youth
population during the same period. Nonetheless, overall the youth share of the
LDC working-age population will decline from 36 per cent in 2010 to 27 per cent
by 2050.


The analysis in this section of the Report focuses on the demographic
dimension of the employment challenges faced by LDCs. The section highlights
key baseline demographic trends in LDC life expectancy, fertility rates,
dependency ratios, population growth and working-age population. Although
treated here only briefly, educational enrolment, outcomes and investment are
other important elements of the demography and employment discourse, and
are discussed extensively in chapter 5. Women’s participation in the labour
force and other relevant gender issues are covered in chapter 3. This section
concludes with a discussion of the potential employment implications of rising
population densities, urbanization and migration in the LDCs.


1. KEY DEMOGRAPHIC TRENDS IN THE LDCS


Although the LDCs have the world’s highest population growth rate, at
2.2 per cent per annum — almost twice the 1.2 per cent of other developing
countries (ODCs) — this rate is slowly declining. The LDC population doubled
between 1980 and 2010 and should do so again by 2050 (see chart 6). As of
2011, the total LDC population was 858 million, approximately 12 per cent of
the world population. Some 64 per cent of that population lives in Africa (548


The LDCs are in the early stages
of what has been termed a
“demographic transition”.


The LDC population is forecast to
grow from 858 million in 2011 to


1 billion by 2020 and 1.7 billion by
2050.


The LDC youth population is set to
rise to from 168 million in 2010 to


300 million by 2050, an increase of
131.7 million.


The LDCs have the world’s highest
population growth rate, at 2.2 per


cent per annum — almost twice the
1.2 per cent of other developing


countries.




29CHAPTER 2. Exploring Demographic Dynamics in the LDCs


million), 36 per cent in Asia (306 million) and 0.4 per cent in island LDCs (3.1
million).4 The world population was 7.0 billion in 2012 and is projected to reach 9
billion by 2050, of which the LDC population will account for 19 per cent.


Within the LDC group, during the period 1970–2012, African LDCs had the
highest population growth rate at 2.8 per cent per annum, which is above the
overall LDC average of 2.5 per cent. The rates for island LDCs and Asian LDCs
were lower, at 2.4 and 2.2 per cent, respectively. Chart 7 shows the countries
with the highest population growth rates during the period 1970–2012: Djibouti
(4.1 per cent), Gambia (3.5 per cent), Uganda (3.3 per cent), Niger (3.2 per cent)
and Equatorial Guinea (3.1 per cent). Of these, the highest fertility rates were
in Uganda and Niger (6.1 and 7.0 births per woman, respectively.). During the
period 1950–2010, all five of the above-mentioned countries experienced a six-
fold population increase, as compared to a four-fold increase for the LDCs as a
group.


As mentioned earlier, between 2010 and 2050, the LDC working-age
population (i.e., those between 15 and 64 years of age) is expected to increase
by 630 million people, or an average 15.7 million people per year. By 2050, the
least developed countries will account for 19 per cent of the global working-
age population. Chart 8 shows that over the same period, in 11 LDCs that
population is likely to rise by at least 0.5 million a year. The projected increases
are highest in African LDCs: Democratic Republic of the Congo, Ethiopia, United
Republic of Tanzania and Uganda, for example, will each increase their working-
age population by more than 1 million people per annum. Of the Asian LDCs,
Bangladesh will probably have the greatest such increase (935,000 people
per annum). Whether these countries can exploit the potential “demographic
dividend”,5 however, will depend on their economies’ capacity to absorb and
productively employ new labour market entrants.


The data presented in table 7 suggest that the LDC demographic transition is
still in its early stages and is progressing at a relatively slow pace. Nonetheless,
as was the case in China, this does not mean it cannot accelerate (Feng, 2011).
Although since 1980 the LDC fertility rate has declined sharply, it remains above


Chart 6. LDC population, 1970–2050
(Absolute value, millions)


0


1


2


3


4


5


6


7


8


0


200


400


600


800


1,000


1,200


1,400


1,600


1,800


1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
African LDCs and Haiti


P
op


ul
at


io
n


in
m


illi
on


s


Asian LDCsLDCs Island LDCs (right scale)


Source: UNCTAD secretariat calculations, based on UNCTADstat database.
Note: Timor-Leste was included in the LDC category in 2003, hence the sharp rise in the Island LDCs trend that year.


Between 2010 and 2050, the LDC
working-age population is expected


to increase by an average 15.7
million people per year.


Whether these countries can
exploit the potential “demographic
dividend”, however, will depend on
their economies’ capacity to absorb
and productively employ new labour


market entrants.


The LDC fertility rate is nearly twice
the world average.




The Least Developed Countries Report 201330


four children per woman, nearly twice the world average. Alongside these high
fertility rates, however, LDCs have the world’s highest infant, child and maternal
mortality rates. Since 1980, efforts to improve the outreach of health‐care
systems across these countries have lengthened life expectancy by 10 years;
in 2011, the average was 58 years. Life expectancy in ODCs (68 years) and
developed countries (77 years), however, is still considerably higher.


Chart 7. Average annual population growth rate in the LDCs, 1970–2012


0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5


Samoa
Tuvalu


Myanmar
World
ODCs


Lesotho
Bhutan


Sierra Leone
Haiti


Somalia
Sao Tome and Principe


Kiribati
Bangladesh


Lao People’s Dem. Rep.
Asian LDCs


Cambodia
Guinea-Bissau


Mozambique
Burundi
Liberia


Central African Republic
Mali


Nepal
Rwanda


Island LDCs
LDCs


Vanuatu
Afghanistan


Guinea
Burkina Faso


Togo
African LDCs and Haiti


Senegal
Mauritania
Comoros


Zambia
Chad


Madagascar
Benin


Malawi
Solomon Islands


United Rep. of Tanzania
Angola


Dem. Rep. of the Congo
Equatorial Guinea


Niger
Uganda
Gambia
Djibouti


Percentage


Source: UNCTAD secretariat calculations, based on United Nations, Department of Economic and Social Affairs, Population Division (2012).
World Population Prospects: The 2012 Revision, CD-ROM.


LDCs have the world’s highest
infant, child and maternal mortality


rates.




31CHAPTER 2. Exploring Demographic Dynamics in the LDCs


The overall result of these trends has been a slight deceleration in the LDC
population growth rate, which remains and will likely continue to be above 2 per
cent per annum until 2020. That decline was particularly evident in the Asian
LDCs, where it fell from an average 2.5 per cent in 1990–1999 to 1.6 per cent in
2000–2012 (see annex table 12 for data on individual LDCs).


Chart 8. Average annual increase in the LDC working-age population 2010-2050
(Thousands)


0 250 500 750 1 000 1 250 1 500 1 750
Samoa


Sao Tome and Principe
Bhutan


Vanuatu
Solomon Islands


Djibouti
Equatorial Guinea


Lesotho
Comoros


Guinea-Bissau
Timor-Leste


Gambia
Lao People’s Dem. Rep.


Mauritania
Central African Republic


Myanmar
Haiti


Liberia
Togo


Cambodia
Sierra Leone


Burundi
Eritrea
Benin


Guinea
Rwanda
Somalia


Chad
Senegal


Nepal
Zambia


Mali
Angola


Burkina Faso
Mozambique


Malawi
Madagascar


Niger
Yemen


Afghanistan
Sudan (former)


Bangladesh
Uganda
Ethiopia


United Rep. of Tanzania
Dem. Rep. of the Congo


Thousands


Source: UNCTAD secretariat calculations, based on United Nations, Department of Economic and Social Affairs, Population Division (2012).
World Population Prospects: The 2012 Revision, CD-ROM.




The Least Developed Countries Report 201332


The relatively slow pace of the LDCs’ demographic transition is clear when we
consider population structure by age group, as represented in the “population
pyramid” of chart 9. Throughout the period 1990–2020, approximately half of
the people in LDCs are expected to be under 20 years of age and about 5
per cent over 60. This is a young demographic structure, which explains the
high age dependency ratio6 reported in table 7. However, there will also be a
6-percentage-point decline in the share of people under 10 years of age, and a
corresponding increase in the three age groups between 20 and 49 years. By
2030, some 46 per cent of the LDC population will be under 20 years of age and
about 6.5 per cent will be over 60 — a proportion that will almost double (to 10
per cent) between 1990 and 2050.


As stated above, change has come slowly, since 38 per cent of the LDC
population in 2015 will be under 15 years of age, 20 per cent will be between 15
and 24 years of age and 38 per cent between 25 and 64 years of age. By 2050,
29 per cent will be under 15 years of age, which is still above the projected
proportion for ODCs (see chart 12). The number of LDCs where over 40 per
cent of the population is under 15 years of age has declined, from 44 countries
in 1990 to 33 in 2010. That number should shrink further to 26 (24 of them in
Africa) by 2015 and to 4 by 2050. Despite these changes, however, there is both
a “youth bulge” and a growing working-age population in LDCs.


The data presented in chart 10 show the declining LDC dependency ratios
between 2010 (77 per cent of the working-age population) and those forecast
for 2050 (57 per cent), a trend evident since 1980. African LDCs have the highest
dependency ratios — 80 per cent in 2010 — which will shrink to around 60 per
cent by 2050. Asian LDCs are consistently below the LDC averages, accounting
for 63 per cent in 2010 and a projected 48 per cent by 2050. However, they
will remain above the ODC average for both 2010 and 2050. For Asian LDCs,
forecasts suggest a rising share of old-age dependants, who will account for 17
per cent of the total population by 2050.


As we see in chart 11, LDCs as a group will continue to experience strong
growth in the number of young people aged 10–24, which is expected to
increase sharply between 2010 and 2050. In the developed countries, by
contrast, the youth population peaked in 1980 and has been declining ever
since. The situation is similar in ODCs, whose youth population peaked in 2010
and should decline thereafter. By 2050, one in four 15–24-year-olds worldwide
will live in an LDC (see chart 12). A burgeoning youth population could have
major implications for labour markets, with a relatively low absorption rate of
new entrants, rapid urbanization and concomitant pressure on the health and
sanitation infrastructure in urban centres, which in many LDCs is already at
breaking point. Economic growth and political stability could suffer as well in
many LDCs (World Bank, 2013). On the other hand, the LDC youth population
could potentially drive growth in new and innovative directions through a rise in


Table 7. Broad demographic trends in the LDCs, 1980–2011
1980 1990 2000 2011


Population, (millions) 389.9 510.1 658.4 843.7
Population growth (annual percentage) 2.7 2.7 2.4 2.2
Life expectancy at birth, total (years) 48.5 51.1 53.2 58.4
Fertility rate, total (births per woman) 6.5 6.0 5.3 4.5
Age dependency ratio (percentage of working-age population) 92.0 91.4 86.7 78.1
Labour force participation rate, total (percentage of total population ages 15+) 74.2 73.2 73.9
Adjusted net enrolment rate, primary (percentage of primary school age children) 52.9 52.7 59.1 79.8
Primary completion rate, total (percentage of relevant age group) 36.1 40.8 45.8 63.7
School enrolment, secondary (percentage net) 12.8 14.7 23.0 32.3
Literacy rate, youth total (percentage of people ages 15-24) 56.7 65.2 72.4
Source: UNCTAD secretariat calculations, based on UNTADstat and World Development Indicators online databases.
Note: 2011 is the most recent year for available data.


By 2030, some 46 per cent of the
LDC population will be under


20 years of age.


By 2050, one in four 15–24-year-
olds worldwide will live in an LDC.


The LDC youth population could
potentially drive growth in new and


innovative directions.




33CHAPTER 2. Exploring Demographic Dynamics in the LDCs


information and communication technology (ICT) and enterprise development
and through higher levels of education, creativity, and talent, which will be crucial
to future prosperity.


As shown in chart 12, the Asian LDCs are forecast to have the lowest share
of youths in the LDC group (51 per cent of the total population in 2015 and 34
per cent in 2050). These countries are strongly influenced by drivers of change in
Bangladesh, the most populous member of the group. However, although they


Chart 9. LDC population by age groups, 1990–2050


40 30 20 10 0 10 20 30 40


0-9


10-19


20-29


30-39


40-49


50-59


+60


0-9


10-19


20-29


30-39


40-49


50-59


+60


0-9


10-19


20-29


30-39


40-49


50-59


+60


0-9


10-19


20-29


30-39


40-49


50-59


+60


0-9


10-19


20-29


30-39


40-49


50-59


+60


0-9


10-19


20-29


30-39


40-49


50-59


+60


A. 1990


40 30 20 10 0 10 20 30 40


B. 2000


Women


Percentage Percentage


Percentage Percentage


Percentage Percentage


A
ge


g
ro


up
s


A
ge


g
ro


up
s


A
ge


g
ro


up
s


Men


C. 2010


30 20 10 0 10 20 30


D. 2020


20 10 0 10 20 3030


30 20 10 0 10 20 30


E. 2030


30 20 10 0 10 20 30


F. 2050


Source: UNCTAD secretariat calculations, based on United Nations, Department of Economic and Social Affairs, Population Division (2012).
World Population Prospects: The 2012 Revision, CD-ROM.


The Asian LDCs are forecast to have
the lowest share of youths in the
LDC group (51 per cent of the
Asian LDC population in 2015


and 34 per cent in 2050).




The Least Developed Countries Report 201334


Chart 10. LDC dependency ratios, 2010 and 2050


0 20 40 60 80 100 120


A. 2010


Child dependency ratio Old-age dependency ratio


0 20 40 60 80 100 120


Haiti


Mali


Developed countries


Myanmar


ODCs


World


Bhutan


Bangladesh


Cambodia


Lao PDR


Djibouti


Asian LDCs


Nepal


Burundi


Lesotho


Vanuatu


Samoa


Equatorial Guinea


Mauritania


Solomon Islands


Togo


LDCs


Sudan


Sao Tome and Principe


Central African Rep.


Island LDCs


Eritrea


Guinea-Bissau


Ethiopia


Comoros


Rwanda


Sierra Leone


African LDCs


Guinea


Madagascar


Liberia


Senegal


Gambia


Benin


Yemen


Mozambique


Somalia


Burkina Faso


Chad


Malawi


Afghanistan


Dem. Rep. of Congo


Timor-Leste


Angola


Zambia


Uganda


Niger


United Rep. of Tanzania


Dem. Rep. of Congo


Bhutan


Bangladesh


Lao PDR


Myanmar


Cambodia


Nepal


Developed countries


ODCs


Asian LDCs


Ethiopia


World


Haiti


Burundi


Sao Tome and Principe


Djibouti


Lesotho


Togo


Solomon Islands


Vanuatu


Sierra Leone


Eritrea


Sudan


Central African Rep.


Samoa


Island LDCs


Angola


Mauritania


Equatorial Guinea


LDCs


Gambia


Afghanistan


Yemen


Senegal


Timor-Leste


Guinea


African LDCs


Mozambique


Madagascar


Benin


Guinea-Bissau


Comoros


Liberia


Chad


Rwanda


Uganda


Mali


Burkina Faso


United Rep. of Tanzania


Niger


Somalia


Malawi


Zambia


B.2050


Source: UNCTAD secretariat calculations, based on United Nations, Department of Economic and Social Affairs, Population Division (2012).
World Population Prospects: The 2012 Revision, CD-ROM.


started from a relatively low base, the Asian LDCs have a growing and significant
share of old-age dependants. The share of youths in the total population of
island LDCs, like their African counterparts, is above the LDC average (61 per
cent in 2015 and a projected 48 per cent in 2050). In LDCs where mortality
levels at young ages remain high compared to ODCs, over the next 40 years
life expectancy is still expected to be higher at birth than at older ages (UNICEF,




35CHAPTER 2. Exploring Demographic Dynamics in the LDCs


2013. In Asian LDCs, on the other hand, decreasing fertility, along with greater
life expectancy, is reshaping the population age structure by shifting the relative
weight from younger to older groups. At this point it is difficult to determine the
extent to which rising international migration contributes to the changing age
distribution, or whether it has a more significant impact than fertility and mortality
rate changes (UNCTAD, 2012).


Although the proportion of African LDC youths in the total population is
expected to decline from 60 to 50 per cent by 2050, it will remain above the
LDC average. The demographic transition will probably be slower in African
LDCs than other least developed countries. In Asian LDCs, there is already an
increasing downward trend in both the number and share of youths in the total
population, due largely to declining fertility rates. For example, in Bangladesh a
sharp drop in the fertility rate from seven children per woman during the 1970s
to three in the 1990s has slowed population growth and gradually changed
the age structure. Because of population ageing, the number of children and
young people under 15 years of age (approximately 47 million) is unlikely to
rise significantly, which should help Government in planning the education and
health systems.


A declining dependency ratio, together with a growing working-age
population, should in theory provide a demographic dividend and development
opportunity for LDCs. Bloom et al. (2003) maintain that a decline in the number
of dependants can enable households to increase investments in human capital
(particularly education and health), and that a rise in the working-age population
can potentially expand a country’s productive output. The Asian LDCs will face
the challenge of exploiting the demographic dividend earlier than other LDCs
because their socio-economic and health indicators (e.g. fertility rates) are
improving more quickly, resulting in a faster decline in the share of dependants
and an increase in the share of the working-age population.


It is clear from the foregoing that the youth bulge is set to persist in the
medium term. This will put greater pressure on the labour market, as numerous


Chart 11. Youth population, (10–24 years), 1950–2050
(Index, 2010=100)


0


20


40


60


80


100


120


140


160


180


1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
LDC


In
de


x,
2


01
0=


10
0


ODC Developed countries


Forecast


Source: UNCTAD secretariat calculations, based on United Nations, Department of Economic and Social Affairs, Population Division (2012).
World Population Prospects: The 2012 Revision, CD-ROM.


A declining dependency ratio,
together with a growing working-
age population, should in theory


provide a demographic dividend and
development opportunity for LDCs.


The youth bulge is set to persist
in the medium term. This will put
greater pressure on the labour


market.


While investment in education
is rising, employment prospects


remain uncertain.




The Least Developed Countries Report 201336


cohorts of new entrants will seek employment in the near future. The promise
of a demographic dividend requires investment in youths, their training and
their employment. Critically, over the past 20 years LDCs have made significant
investments in education, and remain on track to achieve universal primary
education and gender equality (MDGs 2 and 3, respectively). In addition, the net
primary enrolment ratio increased by more than 25 per cent over the past two
decades, reaching 80 per cent in 2011, and the secondary school enrolment
ratio rose to 32 per cent (table 7). Thus, while investment in education is rising,
employment prospects remain uncertain (see chapter 3).


2. URBANIZATION AND RURAL–URBAN LABOUR MIGRATION


Despite strong LDC growth during the period 2002–2008, very little structural
change has occurred, and progress in reducing vulnerable employment has
been limited (McKinley and Martins, 2010 and UNECA, 2010). The relationship
between demographics and employment in the LDCs is perhaps most clearly
articulated through the following drivers of change: rising urbanization, rural–
urban migration, growing pressure on natural resources and gender equality.


Chart 12. Age distribution of LDC and ODC populations, 2015 and 2050
(Millions)


256


102


1


359


1,309


210


121


65


1


187


869


145


204


146


1


351


2,569


683


20


16


0


37


411


278


0 20 40 60 80 100


African LDCs


Percentage of population (millions)


Percentage of population (millions)


Asian LDCs


Island LDCs


LDCs


Other Developing countries


Developed countries


A. Year 2015


407


95


2


504


1,185


218


234


65


1


300


808


144


552


245


3


800


3,223


613


74


66


0.5


140


1,314


459


0 20 40 60 80 100


African LDCs


Asian LDCs


Island LDCs


LDCs


Other Developing countries


Developed countries


B. Year 2050


0-14 15-24 25-64 65+


Source: UNCTAD secretariat calculations, based on United Nations, Department of Economic and Social Affairs, Population Division (2012).
World Population Prospects: The 2012 Revision, CD-ROM.


Around two thirds of the LDCs’
population live in rural areas.




37CHAPTER 2. Exploring Demographic Dynamics in the LDCs


Chart 13. LDC rural-urban population trends and forecasts, 1970–2050


0


100,000


200,000


300,000


400,000


500,000


600,000


700,000


800,000


900,000


1,000,000


1970 1980 1990 2000 2010 2020 2030 2040 2050
Rural Urban


Source: UNCTAD secretariat calculations, based on FAO, FAOSTAT, online, 30 May 2013.


Table 8. LDC distribution of population and labour, 2000–2020
Distribution of population


(percentage)
Absolute numbers


(thousands)
Average annual change


(percentage)
2000 2010 2020 2000 2010 2020 2000-2010 2011-2020


African LDCs
Rural 69.9 65.9 61.4 298 454 367 570 438 878 2.1 1.8
Urban 30.1 34.1 38.6 103 279 158 524 240 371 4.4 4.3


Asian LDCs
Rural 77.9 72.6 67.1 198 831 219 793 235 145 1.0 0.7
Urban 22.1 27.4 32.9 59 034 83 352 117 101 3.5 3.5


Island LDCs
Rural 68.2 65.4 62.5 1 757 2 185 2 626 2.2 1.9
Urban 31.8 34.6 37.5 640 909 1 322 3.6 3.8


Total LDCs
Rural 75.7 71.9 67.3 499 042 589 548 676 649 1.7 1.4
Urban 24.3 28.1 32.7 162 953 242 785 358 794 4.1 4.0


Source: UNCTAD secretariat calculations, based on FAO, FAOSTAT, online, 30 May 2013.


Most LDCs have a large rural population, although there are some exceptions
(such as Angola, Djibouti, Gambia, Liberia and Sao Tome and Principe, all of
whose rural populations account for less than 50 per cent of the total population).
Around two thirds of the LDCs’ population live in rural areas, and these zones
will probably continue to host the majority of the population until 2040 (see chart 13).


As shown in table 8, the current level of urbanization in LDCs is 28 per cent,
which is about 20 percentage points below the world average (50.5 per cent).
That level should reach 39 per cent by 2020, largely because of rising rural–
urban migration, high fertility rates and population growth. Based on the average
annual urban population growth rate of 4 per cent during 2010–2020, the LDC
urban population should expand by 116 million, with the rural population rising
by 87 million. If these demographic trends (e.g. rural–urban migration, high
fertility rates, etc.) persist, the rural population should start declining by 2035
(see chart 13).


Nevertheless, the urban population growth rate has been nearly three times
higher than that of the rural population since 1980 (see table 9). Concerns about
the pace of urbanization and its impact on living conditions in large conurbations
(especially basic infrastructure) are thus well placed, especially because such
conurbations host over 60 per cent of the urban population in sub-Saharan


The urban population growth rate
has been nearly three times higher


than that of the rural population
since 1980.


Since most people in LDCs reside
in rural areas, greater urban drift will
support higher rates of emigration,
unless major LDC urban centres


can generate higher levels of
employment.




The Least Developed Countries Report 201338


Table 9. Urbanization and pressure on land in the LDCs, 1980–2011
1980 1990 2000 2011


Population density (people per sq. km of land area) 19.2 25.2 32.6 42.6
Urban population (percentage of total) 17.3 20.9 24.3 28.3
Urban population growth (annual percentage) 5.7 4.6 3.8 3.8
Rural population (percentage of total population) 82.7 79.1 75.7 71.3
Rural population growth (annual percentage) 2.1 2.2 2.0 1.6
Agricultural land (percentage of land area) 37.1 38.1 38.6 38.3
Arable land (percentage of land area) 6.2 6.5 7.0 8.1
Arable land (hectares per person) 0.3 0.3 0.2 0.2
Forest area (percentage of land area) - 32.8 31.1 29.7
Renewable internal freshwater resources per capita (cubic metres) 12'131a 9'320b 6'685c 5'465


Source: UNCTAD secretariat calculations based on UNTADstat and World Development Indicators online databases.
Note: a 1982 data; b 1992 data; c 2002 data.


Africa (SSA) and 35 per cent in southern Asia. The rate of LDC rural–urban
migration is mounting and will continue to do so until at least 2050. It is therefore
likely that — as previously mentioned — since most people in LDCs reside in
rural areas (an average 71 per cent of the population in 2011), greater urban
drift will support higher rates of emigration, unless major LDC urban centres can
generate higher levels of employment (UNCTAD, 2012; Lewis, 1954).7 If — as
in China, India and Brazil — LDC urbanization and GDP growth rates rise, and
the outflow of resources from the rural (agricultural) sector to urban areas is
exacerbated, demand for food will grow as well. This will increase the pressure
to raise agricultural productivity in LDCs and may also encourage policymakers
to look more closely at the role played by rural–urban migration in economic
development. The urgency of this policy challenge is dramatically illustrated in
table 9, which documents the mounting pressure on natural resources.


With a population density already twice that of the 1980s, and with only
marginal expansion of the agricultural frontier (mostly in SSA), the availability
in LDCs of arable land per person may continue to decline (see table 9). In
per capita terms, renewable internal freshwater resources have also fallen by
more than one third in the space of 20 years. Furthermore, the problems posed
by the declining size of farms in terms of poverty and food security — not to
mention distributional issues — are likely to be aggravated by the potentially
disruptive effects of climate change on land productivity, especially in marginal
areas (see also chapter 3 of UNCTAD, 2009). The critical nature of this additional
policy challenge was clearly reflected in the negotiations at the United Nations
Conference on Sustainable Development (Rio+20).8 The immediate priority for
most LDCs, however, is to foster environmentally sustainable socio-economic
development and employment in those rural areas that host the majority of their
population.


The LDC rural population as a share of the total population has also declined
steadily since 1980. In the African LDCs’ urban population, the percentage
change is 4.4 per cent; in the rural population, 2.1 per cent. In Asian LDCs,
the figures are 3.5 per cent and 1.0 per cent, respectively (see table 8). In
2012, Burkina Faso, Eritrea and Uganda reported the highest urban population
growth rates in all the least developed countries (see annex table 12 for data on
individual LDCs).


As the population grows, agricultural farms decline in size and new farms
are increasingly located on marginal land.9 Mass poverty means that many
people cannot afford the means for the sustainable intensification of agricultural
production. More and more people are thus seeking work outside agriculture,
and urbanization is accelerating. Most LDCs have not been able to generate
sufficient productive off-farm jobs to absorb the growing labour force seeking
work outside agriculture. Both agricultural and non-agricultural enterprises
have been severely challenged to compete following the widespread and deep


With a population density already
twice that of the 1980s, the


availability in LDCs of arable land
per person may continue to decline.


An immediate priority for most
LDCs is to foster environmentally


sustainable socio-economic
development and employment


in those rural areas that host the
majority of their population.


Most LDCs have not been able
to generate sufficient productive


off-farm jobs to absorb the growing
labour force seeking work outside


agriculture.




39CHAPTER 2. Exploring Demographic Dynamics in the LDCs


unilateral trade liberalization and regional trade agreements that began in the
1990s.


As previously stated, rural–urban migration in LDCs is on the rise. The rural
underemployed tend to move to urban centres or other rural areas where there
is demand for labour to work as unskilled labourers. They often earn low wages
and incur extra costs for travel and accommodations. Their remittances are
often small — for example, in African LDCs whose citizens mainly migrate within
their home country or to neighbouring countries — but again, this depends on
where they move and on the prevailing wage differentials. The other qualification
is that migration can be highly uneven between regions, between villages and
within communities (UNCTAD, 2012).


Policymakers in the LDCs are hence confronted with an imperative need
both to increase agricultural productivity and to foster the creation of greater
income opportunities in high value added rural activities. In this respect,
UNEP/ILO (2012) estimates that over the next decade, the shift to sustainable
agriculture in developing countries could increase global employment by 4 per
cent, while also helping to preserve the quality of the soil and of the natural
environment. In any event, support for sustainable agricultural practices should
be complemented by more effective development of rural non‐farming activities.
Such activities provide a broad range of opportunities to promote economic
diversification, employment and potential spillovers, thereby encouraging further
transformation in the agricultural sector. A similar strategy, which necessarily
hinges on a better and more widespread provision of key infrastructure (such as
irrigation, roads and electricity), would intrinsically dampen the push factors that
lead to rapid urbanization and informalization in the LDCs and relieve some of
the pressure on agricultural land.


3. CONCLUSIONS


If the recent patterns of growth and structural change explain the LDC
“employment challenge” with respect to labour demand and sectoral reallocation,
demographic developments complement them on the labour supply side. This
chapter has highlighted the importance of the demographic dynamics underlying
LDC efforts to achieve poverty reduction, decent employment and social
development. Given their limited progress towards the Millennium Development
Goals (MDGs) (UNCTAD, 2010) and their demographic situation, the scale of the
employment challenge facing LDC policymakers cannot be overestimated.


The chapter has also highlighted the scale of the demographic challenge
faced by the LDCs: As previously mentioned, their population, about 60 per
cent of which is currently under 25 years of age, is projected to double to 1.7
billion by 2050. If, as expected, an additional 630 million people enter the LDC
labour market between 2010 and 2050, these countries will be confronted with
even greater employment and development problems. In addition, although
the proportion of people in the LDCs living on less than $1.25 per day (i.e., in
situations of extreme poverty) has fallen, the number has continued to rise due
to high population growth.


For most LDCs, the realization of a potential demographic dividend — one
where the dependency ratio is at its lowest — will depend upon the policy
mix adopted to encourage future job creation and growth. If the right socio-
economic policies are formulated — such as increased investment in health,
gender equality, training, education and employment — the LDCs will have
an opportunity to realize the demographic dividend. But despite the fact that
many LDCs have experienced high levels of economic growth since 2002,


LDCs are confronted with an
imperative need both to increase
agricultural productivity and to


foster the creation of greater income
opportunities in high value added


rural activities.


If, as expected, an additional 630
million people enter the LDC labour


market between 2010 and 2050,
these countries will be confronted
with even greater employment and


development problems.


If the right socio-economic
policies are formulated — such


as increased investment in health,
gender equality, training, education
and employment — the LDCs will
have an opportunity to realize the


demographic dividend.


However, high fertility rates and
population growth have tended to
slow the demographic transition
in LDCs, potentially delaying the


demographic dividend.




The Least Developed Countries Report 201340


the persistence of relatively high rates of population growth, poverty and low
human development indicators means that such growth has not translated
into improved living standards and decent employment for most people. As a
consequence, high fertility rates and population growth have tended to slow the
demographic transition in LDCs, potentially delaying the demographic dividend.


This chapter has also stressed the importance of human development (e.g.
access to sexual and reproductive health care, education and health services) as
part of a more balanced approach to development in LDCs. Such an approach
would stress the potential complementarities required to promote inclusive
growth and employment in LDCs. For example, although the LDCs’ primary and
secondary education enrolment and youth literacy rates have improved since
1990, they are still below the levels in ODCs and developed countries (United
Nations, 2013). In any event, the rising educational levels and youth bulge will be
crucial for future growth, innovation and employment in the LDCs.


In short, many LDCs are now at a critical stage of development, one with rapid
population growth and a changing rural employment challenge. As population
densities rise, farms decline in size and farmers increasingly cultivate more
ecologically fragile land, agricultural productivity is likely to remain perilously low.
Because of these factors, and as already noted, the rates of LDC urbanization
and emigration are expected to remain high.


Given the clear demographic challenges discussed in this chapter, the LDCs
will need to make significant efforts to generate a sufficient volume of jobs to
provide decent employment in the medium term. The benefits of the potential
demographic dividend arising from this substantial rise in population growth
are not unconditional. Successful exploitation of that dividend will depend
on the ability of the LDC economies to absorb and productively employ not
just new labour market entrants, but those who are presently unemployed or
underemployed. The sustained creation of productive employment and the
development of productive capacities will be particularly important in countries
where extreme poverty affects the majority of the population and where the
Government is unable to address the problem through redistribution (UNCTAD,
2010a; McKinley and Martins, 2010; Ravallion, 2009).


Rising educational levels and youth
bulge will be crucial for future


growth, innovation and employment
in the LDCs.


Many LDCs are now at a critical
stage of development, one with


rapid population growth and
a changing rural employment


challenge.




41CHAPTER 2. Exploring Demographic Dynamics in the LDCs


Appendix 1


This Report highlights the following key employment-related provisions of the
IPoA (United Nations, 2011):


[Principles guiding the implementation of the Programme of Action:]


t #BMBODFE SPMF PG UIF 4UBUF BOENBSLFU DPOTJEFSBUJPOT XIFSF UIF(PWFSONFOU
in least developed countries commits to design policies and institutions
with a view to achieving sustainable and inclusive economic growth that
translates into full employment, decent work opportunities and sustainable
development. The State also plays a significant role in stimulating the
private sector towards the achievement of national development objectives
and creates an appropriate enabling stable, transparent and rules-based
economic environment for the effective functioning of markets (para. 29(h)).


t 1BSUOFSTIJQT XJUI UIF QSJWBUF TFDUPS QMBZ BO JNQPSUBOU SPMF GPS QSPNPUJOH
entrepreneurship, generating employment and investment, increasing
the revenue potential, developing new technologies and enabling high,
sustained, inclusive and equitable economic growth in least developed
countries (para. 38).


t #VJMEJOH B DSJUJDBM NBTT PG WJBCMF BOE DPNQFUJUJWF QSPEVDUJWF DBQBDJUZ JO
agriculture, manufacturing and services is essential if least developed
countries are to benefit from greater integration into the global economy,
increase resilience to shocks, sustain inclusive and equitable growth as well
as poverty eradication, achieve structural transformation, and generate full
and productive employment and decent work for all (para. 44).


[Action by least developed countries:]


t 4USFOHUIFO UIF DBQBDJUZ PG EPNFTUJD ýOBODJBM JOTUJUVUJPOT UP SFBDI PVU UP
those who have no access to banking, insurance and other financial services,
including through leveraging the contribution of, among others, micro-
finance, micro-insurance, and mutual funds, in creating and expanding
financial services targeted to poor and low-income populations, as well as
small and medium-sized enterprises (para. 45.1(d)).


t 1SPNPUF XPNFOT FOUSFQSFOFVSTIJQ UP NBLF CFUUFS VTF PG VOUBQQFE
economic potential in least developed countries (para. 55.1(d)).


t 4USFOHUIFO JOTUJUVUJPOT JODMVEJOH DPPQFSBUJWFT UP CPPTU TNBMMIPMEFS GBSNFS
food production, agricultural productivity and sustainable agricultural
practices (para. 60.2(a)).


t 1SPNPUF UIF FNQPXFSNFOU PG SVSBM XPNFO BT DSJUJDBM BHFOUT GPS FOIBODJOH
agricultural and rural development and food and nutritional security and
ensuring their equal access to productive resources, land, financing,
technologies, training and markets (para. 60.2(k)).


[Policy measures on education and training … will be pursued in line with the
following goals and targets:]


t &OTVSF VOJWFSTBM BDDFTT UP GSFF QSJNBSZ FEVDBUJPO JO MFBTU EFWFMPQFE
countries by increasing the enrolment and retention rates, and also increase
access to secondary, tertiary and vocational education and skill development
training (para. 73(a)).




The Least Developed Countries Report 201342


[Action by least developed countries:]


t &OTVSF UIBU GPSNBM BOE JOGPSNBM FEVDBUJPO TZTUFNT QSPWJEF UIF TLJMMT USBJOJOH
required by the labour market, particularly for the youth to achieve full and
productive employment and decent work (para. 74.1(d)).


t 4PDJBM QSPUFDUJPO IBT CPUI TIPSU BOE MPOHUFSN CFOFýUT UP TVTUBJOBCMF
economic growth, poverty eradication and social stability. Social protection
systems, including cash transfers, public works programmes, and
unemployment benefits, protect the poor and support growth, employment
and broader economic resilience. These systems act as stabilizers for the
economy, bolster the resilience of the poor and help prevent people from
falling into poverty (para. 91).


[Action by development partners:]


t 4USFOHUIFO TVQQPSU GPS MFBTU EFWFMPQFE DPVOUSJFT BGGFDUFE CZ DPOþJDU UP
address country-specific needs and situations, including broad-based,
inclusive and rapid socio-economic development with a special focus on
rebuilding national institutions and capacity, rebuilding critical infrastructure
and generating productive employment and decent work for all (para.
130.2(l)).


Notes


1 The demographic transition comprises the following four stages, with the LDCs
currently situated between stages 2 and 3:


1. Both death and birth rates are high and approximately in balance.
2. Death rates fall rapidly due to improvements in food supply and sanitation, which


increases life expectancy. Without a corresponding fall in birth rates, countries in
this stage experience high rates of population growth.


3. Birth rates decline due to improved access to contraception, urbanization, better
wages, greater gender equality and access to education. Population growth begins
to level off. This may produce a “demographic dividend”.


4. Birth rates and death rates are both low.


2 See United Nations Department of Economic and Social Affairs, Population Division
(2012). World Population Prospects: The 2012 Revision, CD-ROM.


3 Underemployment reflects underutilization of the productive capacity of the employed
population.


4 Based on data from UNCTADstat online database, September 2013.


5 A demographic transition produces a “demographic dividend”. Many developing
countries have reached the point in their demographic transition where the largest
segment of the population is of productive working age and where the dependency
ratio declines dramatically, leading to a demographic dividend. The ratio also shrinks
significantly at the point where fertility rates continue falling and older generations
have shorter life expectancies. When combined with effective public policies, the
demographic dividend can help facilitate economic growth, reduce family pressures
and encourage women to enter the labour force.


6 The dependency ratio reflects the number of people of non-working age compared to
the number of those of working age (15–64 years old). The dependency ratio shows
the proportion of dependents per 100 members of the working-age population. A
high ratio means that those of working age — and the economy in general — face a
greater burden in supporting an ageing or youthful population. The youth dependency
ratio includes only under-15s, while the old-age pensioner dependency ratio focuses
on those over 64. The dependency ratio does not account for people aged 65+, an
increasing proportion of whom work (and are therefore not dependent), or those of
working age who are unemployed.


7 Lewis (1954) maintained that surplus labour from the traditional agricultural sector
is transferred to the modern industrial sector, whose growth over time absorbs the
surplus labour, promotes industrialization and stimulates sustained development.
Rural–urban migration is accordingly the means by which surplus labour in the




43CHAPTER 2. Exploring Demographic Dynamics in the LDCs


traditional (agricultural) sector is re-deployed to fill rising modern (urban) sector labour
demands. Migration is demand- or employment-driven rather than being driven by
wages, which are assumed to be fixed. However, the Harris-Todaro model (1970)
identified the decision to migrate as a function of wage differentials, moderated by
the availability of job opportunities. In theory, formal sector urban earnings exceed
the rural wage rate (or the marginal return to own-account farming), and potential
migrants armed with this information assess the probability of attaining urban
employment (i.e., the rate of urban employment).


8 See United Nations, The Future We Want, Rio + 20, http://www.uncsd2012.org/
rio20/about.html (10 January 2012).


9 When arable land per farmer is declining, that land is used with an increasing intensity
of inputs (especially labour and capital) per hectare, but diminishing marginal returns
lead to a fall in per capita income and living standards (Jayne et al., 2003; Jayne
and Muyanga, 2012). In addition, growing pressure on land tends to induce the
development of marginal low-quality arable land (UNCTAD, 2009).


References


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transition. Working Paper No. 8685. National Bureau of Economic Research.
Cambridge (MA).


Erten B and Ocampo JA (2012). Super-cycles of Commodity Prices Since the Mid-
nineteenth Century. DESA Working Paper No.110. United Nations, Dep. of Economic
and Social Affairs. New York.


Feng W (2011). The Future of a Demographic Overachiever: Long-Term Implications
of the Demographic Transition in China. Population and Development Review. 37:
173–190.


Groth H and Sousa-Poza A (2012). Population Dynamics in Muslim Countries: Assembling
the Jigsaw. Springer.


International Labour Office (2011). The Global Crisis: Causes, Responses and Challenges.
International Labour Office. Geneva.


Jayne T and Muyanga M (2012). Land Constraints in Kenya’s Densely Po pulated
Rural Areas: Implications for Food Policy and Institutional Reform. Presented at
the 86th Annual Conference of the UK Agricultural Economics Society. University
of Warwick, United Kingdom. 16 April. Available at http://ageconsearch.umn.edu/
bitstream/134723/2/Milu_Muyanga_Jayne-Muyanga-Land%2520Constraints%2520
in%2520Kenya%27s%2520Densely%2520Populated%2520Areas.pdf.


Jayne TS et al. (2003). Smallholder income and land distribution in Africa: implications for
poverty reduction strategies. Food Policy. 28(3):253–275.


Kaldor N (1966). Causes of the Slow Rate of Economic Growth of the United Kingdom:
An Inaugural Lecture. Cambridge University Press.


Kaplinsky R (2010). Asian Drivers, Commodities and the Terms of Trade. In: Nissanke M
and Mavrotas G, eds. Commodities, Governance and Economic Development Under
Globalization. Palgrave Macmillan. Basingstoke and New York: 117–138.


Kuznets S (1973). Modern Economic Growth: Findings and Reflections. American
Economic Review. 63(3):247–58.


Lewis WA (1954). Economic Development with Unlimited Supplies of Labour. The
Manchester School. 22(2):139–191.


McKinley T and Martins P (2010). “Empowering MDG Strategies Through Inclusive
Economic Development.” Paper prepared for UNCTAD Geneva.


Ortiz I, Chai J and Cummins M (2011). Identifying fiscal space: options for social and
economic development for children and poor households in 184 countries. Social
and Economic Policy Working Paper. United Nations Childern’s Fund (UNICEF). New
York.


Ravallion M (2009). Do poorer countries have less capacity for redistribution? One Pager
No. 97. International Policy Centre for Inclusive Growth. Brasilia.


Reinert ES (2008). How Rich Countries Got Rich and Why Poor Countries Stay Poor.
Public Affairs. New York.


Sen A (1999). Development as Freedom. Oxford University Press. Oxford.




The Least Developed Countries Report 201344


UNCTAD (2006). The Least Developed Countries Report 2006: Developing Productive
Capacities. United Nations publication. Sales No. E.06.II.D.9. New York and Geneva.


UNCTAD (2009). The Least Developed Countries Report 2009: The State and
Development Governance. United Nations publication. Sales No. E.09.II.D.9. New
York and Geneva.


UNCTAD (2010a). Trade and Development Report 2010: Employment, Globalization
and Development. United Nations publication. Sales No. E.10.II.D.3. New York and
Geneva.


UNCTAD (2010b). The Least Developed Countries Report 2010: Towards a New
International Development Architecture for LDCs. United Nations publication. Sales
No. E.10.II.D.5. New York and Geneva.


UNCTAD (2012). The Least Developed Countries Report 2012: Harnessing Remittances
and Diaspora Knowledge to Build Productive Capacities. United Nations publication.
Sales No. E.12.II.D.18. New York and Geneva.


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UNICEF. New York.


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Decade 2011–2020. Fourth United Nations Conference on the Least Developed
Countries Istanbul, 9-13 may 2011. No. A/CONF.219/3/Rev.1. United Nations. New
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World Population Prospects, the 2010 Revision (n/d). United Nations Department of
Economic and Social Affairs (UN/DESA). See http://esa.un.org/wpp/.




3CHAPTER
EMPLOYMENT TRENDS IN LDCS




The Least Developed Countries Report 201346


A. The quantity of employment in the LDCs


1. INTRODUCTION


Since the 2009 global recession, LDCs have undergone a slowdown in GDP
growth (see chapter 1). While recent growth patterns may have exacerbated
these countries’ employment challenge with respect to labour demand and
sectoral reallocation, as shown in chapter 2, socio‐demographic developments
have also had a major impact from the labour supply side. This chapter
considers the quantity of employment (labour demand and supply trends) and
quality of employment (working poor and vulnerable employment) in LDCs since
1990. The chapter concludes with a brief discussion of the interaction between
employment and growth in LDCs.


2. THE LDC EMPLOYMENT CHALLENGE


The central employment challenge in the LDCs is to create productive jobs
and livelihoods for the millions of people who are entering the labour force each
year. The scale of this challenge will be even greater in the coming years. It is
useful to illustrate what this increasing trend actually means for individual LDCs.
In 45 of the 48 LDCs for which data are available, there are rising numbers
of new entrants1 to the labour market, and those numbers will not even have
peaked by 2050. A few examples illustrate how dramatic the trend is. In Niger
there were 224,000 new entrants in 2005, a number expected to increase five-
fold (1.4 million) by 2050. In Ethiopia, there were 1.4 million new entrants in
2005, which should rise to 2.7 million by 2030 and 3.2 million by 2050 (see
annex table 13). It was estimated that in Nepal, for example, new entrants to
the labour force numbered 465,000 in 2005, a figure that is expected to peak at
633,000 by 2020. After that, the annual number will start to decline. Similarly, in
Bangladesh, there were 2.9 million new entrants in 2005; this figure will peak at
3.1 million by 2020 and decline thereafter. These are the numbers of productive
and decent jobs that will have to be created in these countries each year. If this
does not happen, the likelihood is that poverty and international emigration rates
will rise.


It is also clear that the magnitude of the employment challenge is not
only growing, but becoming increasingly complex to address. As previously
noted, the main source of employment for the growing LDC labour force has
been agriculture, largely through people cultivating new land. However, LDCs
face persistent constraints on agricultural growth — declining research and
development investment, missing and imperfect factor markets, limited access
to producer-risk mitigation tools and poor infrastructure (UNCTAD, 2013). With
rising population growth, declining agricultural farm sizes and low productivity,
agricultural production is becoming a less viable livelihood for the rural poor.
In addition, most LDC farmers cannot afford the means for sustainable
intensification of agricultural production. More people are thus seeking work
outside agriculture, and urbanization is forecast to accelerate in coming decades.


Unfortunately, the least developed countries have not been able to generate
sufficient productive off-farm jobs to absorb the growing labour force seeking
work outside agriculture. Most of these people find work in survival urban
informal activities. As shown in chart 14, LDC employment growth during the
period 2000–2012 was 2.9 per cent per annum, slightly above population
growth for the period. Employment growth in the African and island LDCs also
outpaced the LDC average and will continue to do so until at least 2018. ILO


The central employment challenge
in the LDCs is to create productive
jobs and livelihoods for the millions


of people who are entering the
labour force each year.


In 45 of the 48 LDCs for which
data are available, there are rising
numbers of new entrants to the


labour market, and those numbers
will not even have peaked by 2050.


It is also clear that the magnitude
of the employment challenge is
not only growing, but becoming
increasingly complex to address.




47CHAPTER 3. Employment Trends in LDCs


(2011) notes that employment growth for adults in LDCs during 2000–2009 was
3.2 per cent per annum, and for youths only 2.1 per cent, far below the period’s
average GDP growth levels of 7 per cent. Chart 14 also shows that average
employment growth lagged behind real GDP growth in the LDCs during the
period 2000–2012.


Existing labour market data on the LDCs are incomplete,2 which makes a
detailed empirical evaluation of labour conditions difficult. The broad description
outlined in this section is based on data from ILO, the United Nations Population
Fund (UNFPA) and the Food and Agriculture Organization of the United Nations
(FAO). First, we consider the economically active population (EAP) and break
down the LDC labour force3 into agricultural and non-agricultural sectors. Next,
we consider labour force participation, employment-to-population dynamics,
labour productivity and rural non-farm (RNF) employment. The chapter
concludes with a discussion of the quality of employment in LDCs, employment
growth and estimated net job creation in LDCs.


3. GROSS EMPLOYMENT TRENDS IN THE LDCS


This outline of gross employment trends in the LDCs is based largely on
FAO estimates of the EAP. These estimates provide a labour force classification
of the agricultural and non-agricultural sectors of the economy, the latter
encompassing all economic activities outside agriculture (mining, construction,


Chart 14. LDC GDP, employment and population growth trends, 2000–2018
(Index, 2000=100)


In
de


x,
2


00
0=


10
0


LDC employment


African LDCs and Haiti employment


Asian LDCs employment


Island LDCs employmentLDC population


LDC real GDP growth


Forecast


100


120


140


160


180


200


220


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


Source: UNCTAD secretariat calculations, based on data from ILO, Employment Trends (EMP/TRENDS) econometric model, April 2013).
Note: Data series 2013 to 2018 are preliminary projections. Real GDP data series covers the period 2000 to 2012 ($ at constant prices,


2005 and constant exchange rates, 2005).


Average employment growth lagged
behind real GDP growth in the LDCs


during the period 2000–2012.




The Least Developed Countries Report 201348


utilities, manufactures and various kinds of services). The EAP is defined as those
who furnish the supply of labour for the production of goods and services during
a specified reference period. This includes employers, self-employed workers,
salaried employees, wage earners, casual day workers, unpaid workers assisting
in a family farm or business operation, members of producers’ cooperatives and
members of the armed forces (International Labour Office, 2009).4 The terms
“EAP” and “labour force” will be used interchangeably throughout this chapter.


According to FAO estimates, the total LDC labour force comprised 364
million people in 2010. Between 2000 and 2010, it increased by 86.9 million,
and between 2010 and 2020 it is expected to grow by a further 109 million
(equivalent to 30 per cent of the 2010 labour force) to reach 474 million (chart
15). A significant share of the 30 per cent increment in the total labour force
between 2010 and 2020 will occur in Ethiopia (accounting for 12 per cent),
Bangladesh (11 per cent) and United Republic of Tanzania (9 per cent). However,
all LDCs will experience substantial growth in their labour force during the same
period. In 36 of the 48 LDCs for which data are available, the labour force
should increase by over 25 per cent. The LDCs that will experience the most
rapid growth in labour force are all African: Madagascar, Malawi, Niger, United
Republic of Tanzania and Zambia.


Chart 15 also depicts past trends and future projections for the share of the
labour force in non-agricultural activities and the distribution of the population
between urban and rural areas. In 2010, 65 per cent was engaged in agriculture
and 71 per cent lived in rural areas, both down from 2000 levels. The urbanization


Chart 15. Labour force dynamics in the LDCs, 1990–2020


0


50


100


150


200


250


300


350


400


450


500


1990 2000 2010 2020


M
illi


on
s


A. Size of total labour force


0


5


10


15


20


25


30


35


40


1990 2000 2010 2020


P
er


ce
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ag
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B. Percentage of labour force in non-agriculture


3.8


3.9


4


4.1


4.2


4.3


4.4


4.5


4.6


4.7


4.8


1990–2000 2000–2010 2010–2020 1990–2020


P
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0


5


10


15


20


25


30


35


1990 2000 2010 2020


P
er


ce
nt


ag
e


D. Percentage of population in urban areas


Source: UNCTAD secretariat estimates based on FAO, FAOStat, June 2013.


The total LDC labour force
comprised 364 million people in
2010. Between 2000 and 2010,
it increased by 86.9 million, and


between 2010 and 2020 it is
expected to grow by a further 109


million.


In 36 of the 48 LDCs for which data
are available, the labour force should


increase by over 25 per cent.




49CHAPTER 3. Employment Trends in LDCs


rate has increased as well, from 20 per cent in 1990 to 29 per cent in 2010,
while the share of the population engaged in non-agricultural activities rose from
24 per cent in 1990 to 34 per cent in 2010. The annual growth rate of the non-
agricultural labour force, however, has slowed marginally since 1990–2000, to
4.1 per cent per annum in 2010–2020 (chart 15c).


Table 10 summarizes the projected shift between 1990 and 2020 in individual
countries. In 1990, two thirds of the LDCs had less than one third of their
population living in urban areas and less than one third of their EAP engaged
outside agriculture. By 2020, however, this situation will have reversed, with the
majority of countries having over a third of their population living in urban areas
and engaged (economically active) outside agriculture. During the period 1990–
2020, some LDCs — namely, Bangladesh, Chad, Democratic Republic of the
Congo, Equatorial Guinea, Haiti, Myanmar, Sao Tome and Principe, and Yemen
— will experience a very substantial shift in both the location of their population
(largely urbanized) and the increased share of their non-agricultural labour force
in the total labour force. As previously noted, the population is not only growing
rapidly but also urbanizing quickly. More of the LDC population than ever before
is entering the labour market, and a growing proportion of the labour force is
working or seeking work outside agriculture. The convergence of these trends
makes the current decade critical for these countries, particularly with regard to
employment.


Nonetheless, agriculture will remain the major source of livelihood in the
LDCs until at least 2020. The EAP in agriculture should also continue to rise
until at least that year, when it is projected to increase to 285 million people, as
against 187 million in non-agricultural activities. Moreover, according to recent
projections of the EAP for 2010–2020, 62 million of the 109-million increase will
be outside agriculture and 47 million in agriculture (chart 16).


African LDCs and Bangladesh (as the most populous LDC) are driving
the overall pattern of change for the LDCs as a group. In African LDCs, 63
per cent of the increase in the total EAP is expected to be outside agriculture
during 2010–2020 (as against 46 per cent during 2000–2010), and in Asian
LDCs (excluding Bangladesh), 13 per cent in the 2010–2020 EAP (vs. 45 per
cent in 2000–2010). When Bangladesh is included, the projected Asian LDC
proportion rises to 37 per cent of the EAP (chart 16). Bangladesh has made
significant progress in diversifying its economy and in improving health, fertility
and educational outcomes. In addition, as the country has enjoyed a relatively
prolonged and constant inward flow of remittances since 1980, families have
increasingly reduced their reliance on cultivation and diversified into various
non-farm activities (see box 3). African LDCs, by contrast — and despite a rise
in the EAP outside agriculture — have not yet managed a sound economic
diversification. Island LDCs account for 0.4 per cent of the increase in the total
LDC EAP outside agriculture. That EAP is projected to grow faster than the
EAP in agriculture during the decade 2010–2020 in all LDCs for which data are
available (48 countries). The countries with the fastest expected growth in the
non-agricultural labour force during 2010–2020 are Chad, Malawi, Mali, Uganda
and United Republic of Tanzania in Africa; Afghanistan, Bangladesh and Yemen
in Asia; and Comoros, Sao Tome and Principe and Timor-Leste among the
island LDCs.


4. SECTORAL DISTRIBUTION OF EMPLOYMENT BY STATUS


A further decomposition of the non-agricultural labour force provides a better
picture of job creation across sectors.5 As shown in chart 17A, the agricultural
sector in 2000 accounted for 71 per cent of total employment in both LDCs and
ODCs; by 2018, it is expected to represent 63 per cent in LDCs but only 29 per
cent in ODCs. However, the industrial and services sectors are rising significantly


In 2010, 65 per cent was engaged
in agriculture and 71 per cent lived


in rural areas.


In 1990, two thirds of the LDCs
had less than one third of their
population living in urban areas


and less than one third of their EAP
engaged outside agriculture. By
2020, however, this situation will


have reversed.


The population is not only growing
rapidly but also urbanizing quickly.


According to recent projections of
the EAP for 2010–2020, 62 million
of the 109-million increase will be
outside agriculture and 47 million


in agriculture.




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: S


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tis


tic
s’


.




51CHAPTER 3. Employment Trends in LDCs


Chart 16. Growth of agricultural and non-agricultural labour force in LDCs, 1990–2020


0


10,000


20,000


30,000


40,000


50,000


60,000


70,000


1990-2000 2000-2010 2010-2020


Th
ou


sa
nd


s
of


p
er


so
ns


A. LDCs


0


5,000


10,000


15,000


20,000


25,000


30,000


35,000


40,000


45,000


1990-2000 2000-2010 2010-2020


Th
ou


sa
nd


s
of


p
er


so
ns


B. African LDCs and Haiti


0


5,000


10,000


15,000


20,000


25,000


1990-2000 2000-2010 2010-2020


Th
ou


sa
nd


s
of


p
er


so
ns


C. Asian LDCs


0


1,000


2,000


3,000


4,000


5,000


6,000


7,000


8,000


9,000


10,000


1990-2000 2000-2010 2010-2020


Th
ou


sa
nd


s
of


p
er


so
ns


D. Asian LDCs excluding Bangladesh


0


50


100


150


200


250


1990-2000 2000-2010 2010-2020


Th
ou


sa
nd


s
of


p
er


so
ns


E. Island LDCs


Agriculture Non-agriculture


Source: UNCTAD secretariat estimates based on FAO, FAOStat, June 2013.


as a share of the LDC labour force. Industry accounted for 7 per cent of total
LDC employment in 2000 and, based on recent trends, will reach 10 per cent
by 2018. Services accounted for 22 per cent of LDC employment in 2000, a
proportion likely to increase to 27 per cent by 2018. African LDCs will still have
the least diversified economies in terms of employment share, retaining above-
average levels of agricultural employment (67 per cent) and below-average levels
of industry (8 per cent) and services (25 per cent) as a share of total employment
by 2018 (chart 17B). Relatively high GDP growth rates in the LDCs have not
translated into concomitant levels of employment growth in industry; only in the
services sector has employment growth risen substantially. This reflects a shift


Relatively high GDP growth rates in
the LDCs have not translated into
concomitant levels of employment


growth in industry; only in the
services sector has employment


growth risen substantially.




The Least Developed Countries Report 201352


of labour out of low-productivity activities — mainly in agriculture — to low-
productivity activities in the services (largely non-tradable) sector. The services
sector has accounted for a greater share of the LDC labour force over time, and
that share is probably under-reported, since much of the sector is composed
of informal activities. Employment in the LDC services and industrial sectors is
rising fastest in the Asian LDCs.


Similarly, if we consider the share of employment by export specialization,
mineral exporters have the highest forecast share of agriculture in the total
labour force (74 per cent in 2013) and fuel exporters the lowest (45 per cent).
In general, fuel-exporting countries are the least diversified in the LDC group,
with among the highest export concentration ratios (UNCTAD, 2013). This


Box 3. Observations on rural non-farm employment in Bangladesh


The challenge for Bangladesh, as for other LDCs, is to create a dynamic rural economy that both attracts investment
and provides productive employment for the population. During the period 2000–2012, Bangladesh enjoyed a per capita
economic growth rate of around 4.6 per cent a year. Although exports of textiles and garments are its principal source of
foreign exchange earnings, and the industry has about 4 million employees, the agricultural sector is the largest sector in terms
of employment. Some 71 per cent of the population is rural, 46 per cent of them employed in agriculture and the remainder
in the RNF sector. The agricultural sector accounts for 21 per cent of GDP, and the RNF sector, which is driven largely by
the agricultural sector, for a further 33 per cent (World Bank, 2011). At present around 53 per cent of the rural population
is classified as poor, and the average rate of poverty reduction has been only 1 percentage point per annum, which means
that some 50 million people are still below the absolute poverty line (World Bank, 2011a). Employment creation as a means
of reducing poverty is consequently a major development challenge. Despite the preponderant role of agriculture in rural
employment, the sector cannot fully absorb the growing rural labour force or generate sufficient income to reduce poverty.1


Rural–urban migration has created job opportunities for many, but overall employment growth in rural areas since the 1990s
has been concentrated in the rural non-farm economy.


The main drivers of change in the rural economy of Bangladesh are technological innovation within agriculture, increased
linkages between rural and urban areas (improved transportation, communications, electrification), growing market linkages
and access (demand/supply), skills development, availability of financial services and rising migrant remittances (UNCTAD,
2012). Bangladesh has also undergone a continuous transformation of agricultural production since 1990 with the rising use
of high-yield varieties of rice and other cereals, the increased use of chemical fertilizers and pesticides and a rapid increase
in irrigation through both deep and shallow tube wells. While much of the supply system is privatized,2 the new technology
and market systems are widespread, and double cropping has become commonplace in many areas of the country (Toufique
and Turton, 2002; Hossain, 2004).


Rising agricultural production (involving several crop seasons) has helped to reduce seasonal vulnerability and household
dependency on one major crop per year. In addition, the steady decline in average farm size has been somewhat offset by
a rise in average production gains for rural households (Mendola, 2007; Bäckman et al., 2011). Increased production has
also affected the local labour market as demand for labour has increased, resulting in real wage increases for the landless
poor and seasonal migration within the country (World Bank, 2011a; Howes, 2002). At the national level, Bangladesh has in
recent years become self-sufficient in food grain. However, the value added of crop types and processing is often very low
and the availability of other foodstuffs (such as dairy and wheat), with the exception of rice, has not increased, which may
have negatively affected nutritional outcomes (Hossain et al., 2005).


The rural non-farm economy has emerged as a potential source of productive employment and consequently poverty
reduction in Bangladesh since the 1990s. As shown in chart 26, this economy is primarily composed of rural manufacturing,
agribusiness, livestock, fisheries, cottage industries, trade and marketing services, rural construction, transport, infrastructure
and various other services. It also comprises a highly productive dynamic sector that caters mainly to urban demand and
a low-productivity, mainly traditional sector that encompasses many of the rural poor. The latter sector is essential to many
households’ livelihoods and acts as a safety net for the poorest rural dwellers. The dynamic rural economy is composed of
specialist firms run by entrepreneurs with relatively high skill levels. These businesses tend to be small and medium-sized
enterprises (SMEs) that are larger in scope and scale than traditional household or microenterprises (World Bank, 2007). The
case of Bangladesh is important because it highlights the role of supportive technological innovation, investment and rural
infrastructure policies in promoting rural non-farm employment and diversification.


Nonetheless, the rural economy in Bangladesh still has the potential for substantial improvements, whether in the local
labour market, physical capital, land, agricultural production and distribution or marketing linkages. However, a lack of
investment in public goods, especially in remote rural areas; high barriers of entry for the poor or vulnerable groups to various
dynamic RNF markets; high transaction costs for access to existing markets; and a general asymmetry of market information
may limit this potential.


1 During the period 2000–2012, the labour force grew by an average 1.5 million people a year due to overall population growth and other
demographic changes.


2 Irrigated boro rice has become more important than traditional amon rice as the primary crop.




53CHAPTER 3. Employment Trends in LDCs


Chart 17. Employment in major economic sectors, 2000–2018
(Percentage)


0


10


20


30


40


50


60


70


80


2000 2013 2018 2000 2013 2018 2000 2013 2018


Agriculture Industry Services


A. Share of employment by sector in LDCs and ODCs


LDCs Developing countries excluding LDCs


B. Share of employment by sector in LDC country groups


0


10


20


30


40


50


60


70


80


2000 2013 2018 2000 2013 2018 2000 2013 2018


Agriculture


P
er


ce
nt


ag
e


P
er


ce
nt


ag
e


Industry Services


African LDCs and Haiti Asian LDCs Island LDCs


Source: UNCTAD secretariat calculations, based on data from ILO, Employment Trends (EMP/TRENDS) econometric model, April 2013.
Note: Forecast data presented is from 2013 to 2018. There was no data series available beyond 2018 at the time of writing.


excessive dependence on fuel exports can cause capital to migrate to the
sector, leading to exchange rate appreciation. This may in turn result in reduced
competitiveness for domestically produced goods and services, crowding out
previously productive sectors, such as agriculture.


Clearly, the agricultural sector still accounts for the dominant share of
LDC employment. However, there is some evidence of structural change in
employment, although not to the same extent as in ODCs, where the share should
fall by 17 percentage points during the period 2000–2018. By comparison, it is
likely that both African and Asian LDCs will experience less structural change
in employment — around 8 percentage points of total employment change —
over the same period. Island LDCs should undergo the least structural change
in employment in the LDC group, with around 6 percentage points of total
employment change over the period. We return to these issues later in this
chapter in the context of a broader decomposition of GDP growth in the LDCs.


Table 11 provides a further breakdown of the sectoral share of employment
for 42 LDCs. It shows that during the period 2000–2018, only one LDC


During the period 2000–2018,
only one LDC of the 42 will have


experienced a higher share of
agricultural employment in total


employment; in the 41 other
countries, that share will have


declined.




The Least Developed Countries Report 201354


Table 11. Sectoral share of total employment for selected LDCs, various years
Agriculture Percentage


point change
2000–2018


Industry Percentage
point change


2000–2018


Services Percentage
point change


2000–20182000 2013 2018 2000 2013 2018 2000 2013 2018


Total LDCs 71 65 63 -8 7 9 10 3 22 26 27 5
Afghanistan 61 54 51 -9 9 13 14 5 30 33 35 5
Angola 54 38 34 -20 7 10 12 5 39 51 54 15
Bangladesh 65 56 53 -12 11 13 15 4 25 31 33 8
Benin 45 42 39 -6 10 9 9 -1 45 50 52 7
Bhutan 80 57 47 -33 3 10 17 14 17 33 36 19
Burkina Faso 87 84 82 -5 3 3 4 1 10 13 14 4
Burundi 92 91 90 -2 2 2 3 1 6 6 7 1
Cambodia 74 72 68 -5 8 8 11 2 18 20 21 3
Central African Republic 74 74 72 -2 4 4 4 0 22 22 23 1
Chad 83 77 76 -7 2 4 5 2 15 19 20 5
Comoros 70 71 70 0 8 7 8 0 22 22 22 0
Dem. Rep. of the Congo 85 82 80 -5 2 2 3 1 13 16 17 4
Equatorial Guinea 49 38 47 -1 14 18 10 -4 38 43 43 5
Eritrea 79 79 78 -1 6 5 5 -1 15 16 17 1
Ethiopia 86 78 76 -10 4 9 10 6 10 13 14 4
Gambia 64 59 56 -8 5 5 6 1 31 36 37 7
Guinea 74 68 64 -10 7 8 10 3 19 24 27 7
Guinea-Bissau 69 68 65 -4 6 4 5 -1 25 28 30 5
Haiti 50 45 41 -9 11 11 13 2 39 43 46 7
Lao People's Dem. Republic 83 74 68 -15 4 7 10 6 13 19 22 10
Lesotho 72 66 63 -9 9 10 11 2 18 25 26 8
Liberia 55 47 45 -11 8 10 11 3 37 43 45 8
Madagascar 77 80 78 1 8 3 4 -5 15 17 18 3
Malawi 77 75 73 -4 7 8 9 2 15 17 18 2
Mali 69 65 62 -7 6 6 7 1 25 29 31 6
Mauritania 62 57 52 -10 9 10 13 4 29 33 35 6
Mozambique 82 75 73 -9 3 5 6 3 15 20 21 6
Myanmar 61 60 56 -6 13 14 16 3 26 26 28 3
Nepal 75 71 69 -6 10 12 13 2 15 17 19 4
Niger 56 54 51 -5 11 12 13 2 32 34 36 4
Rwanda 83 75 73 -10 3 5 6 3 14 20 21 7
Senegal 50 37 35 -15 13 16 17 4 37 47 48 10
Sierra Leone 72 60 57 -15 4 8 9 5 24 33 34 10
Solomon Islands 60 56 53 -7 11 13 14 3 29 31 33 4
Somalia 78 76 74 -4 4 4 4 1 18 20 22 4
Sudan (former) 41 38 36 -5 9 9 10 1 50 53 54 4
Timor-Leste 61 55 51 -10 10 12 14 4 29 33 35 6
Togo 55 53 50 -5 8 7 8 0 37 40 42 5
Uganda 71 64 60 -11 5 8 9 4 23 28 31 7
United Republic of Tanzania 82 73 70 -12 3 5 6 4 15 21 23 8
Yemen 52 50 47 -4 12 13 13 2 36 38 39 3
Zambia 72 71 68 -4 6 10 11 6 22 20 21 -2
Source: UNCTAD secretariat calculations, based on ILO Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.
Note: Sample of 42 LDCs.


(Madagascar) of the 42 will have experienced a higher share of agricultural
employment in total employment; in the 41 other countries, that share will
have declined. Angola, Bhutan, and Senegal are expected to see the largest
declines in the agricultural labour force. Bhutan, Chad, Ethiopia, Laos and
United Republic of Tanzania should have the largest increases in the share of
industrial sector employment, but this share will shrink in five other countries
(Benin, Comoros, Guinea-Bissau, Madagascar and Togo). With the exception of
Comoros and Zambia, the services sector’s share of employment is likely to rise
in the LDCs. Some countries — Bangladesh, Bhutan, Haiti, Liberia and Senegal
— should enjoy a more balanced portfolio of jobs across the different sectors,
although like most other LDCs, their industrial sector will still account for the
smallest share of total employment.




55CHAPTER 3. Employment Trends in LDCs


The estimates presented in charts 15, 16 and 17 are projections that may not
prove accurate, as they rely on international data, and national estimates may
vary. They nonetheless capture the basic dimensions of the employment and
poverty reduction challenges faced by the LDCs. Certainly, poverty reduction
requires employment creation in both the agricultural and non-agricultural
sectors. As Gurrieri and Sainz (2003) note, productive labour absorption
may occur when there are “employment changes in the economically active
population that increase the average productivity of those in work, without
increasing open unemployment and without average productivity falling in major
production branches or groupings”.


5. LDC LABOUR PRODUCTIVITY


The present section identifies trends in labour productivity using data from
various sources, including ILO, World Bank, the United Nations Statistical Division
and FAO. However, it is difficult to acquire detailed, internationally comparable
data on what LDCs produce and how people in these countries earn a living. The
following analysis is accordingly limited to the relatively broad level of sectoral
disaggregation allowed by the data, namely, agriculture, industry, manufacturing
and services. The information available on LDC wage data is similarly sparse,
and there is an urgent need for more data collection and statistical analyses,
which should figure prominently in the post-2015 MDG debate. Improved data
collection and labour market statistics should help improve government policy
analysis and planning. In any case, we show here that wage employment in
LDCs is a small share of total employment, which means that average wage
data may create a misleading impression of the labour market. Accordingly, the
focus here is more on productivity, on the assumption that productivity drives
wage adjustment (in a perfectly competitive labour market).


a. Shifts in production structure


As previously noted, there has been little structural transformation in the
LDCs as a group over the past 30 years, as most of these countries continue
to be dominated by agriculture and minor (largely informal) services activities.
Nonetheless, manufacturing and industrial activities and services have
become more important for the group as a whole. Since 2000, in the wake
of the commodity boom of 2002–2008, the types of industrial activities that
have expanded are mining and the exploitation of crude oil. Petty trade and
commercial services have grown, among services; and particularly in the Asian
LDCs, the manufacturing sector has gained quite significantly as a share of GDP
(see annex table 5).


b. Labour productivity: output per worker


Labour productivity is a key measure of economic performance, as it
highlights some of the underlying drivers of growth, particularly improvements
in human capital (e.g. skills, education and health), technological accumulation,
innovation, organization, and physical and institutional infrastructures. All of
these are critical for formulating policies to promote economic growth and
develop productive capacities.


As shown in chart 18A, the labour productivity divide between LDCs and
ODCs remains substantial, but has narrowed since 2000. Average output per
worker in the ODCs was $30,000 in 2012 (constant 2005 international $), as
compared with $5,372 in the LDCs. Thus, the average LDC worker can be said
to produce 18 per cent of the output of the average ODC worker. LDCs are not,
however, a homogeneous group, since during the period 2003–2012 African


Poverty reduction requires
employment creation in both the
agricultural and non-agricultural


sectors.


The labour productivity divide
between LDCs and ODCs remains
substantial, but has narrowed since


2000.


LDC output per worker in 2012
was just 22 per cent that of ODCs,
10 per cent that of the EU average


and 7 per cent that of North
America.




The Least Developed Countries Report 201356


Chart 18. LDC labour productivity, by country groups and by export specialization, 2000–2012
(Constant 2005 international dollars)


23,000


24,000


25,000


26,000


27,000


28,000


29,000


30,000


31,000


3,000


3,500


4,000


4,500


5,000


5,500


6,000


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012


A. LDC output per worker, by country groups


LDCs
African LDCs and Haiti


Asian LDCs
Island LDCs


Developing excluding LDCs
(right scale)


0


5,000


10,000


15,000


20,000


25,000


1,000


2,000


3,000


4,000


5,000


6,000


7,000


2000 2002 2004 2006 2008 2010 2012


C
on


st
an


t 2
00


5
in


te
rn


at
io


na
l $


C
on


st
an


t 2
00


5
in


te
rn


at
io


na
l $


B. LDC output per worker, by export specialization


Afgri-food exporters


Mineral exporters
Manufactures exporters Services exporters


Fuel exporters (right scale)


Mixed exporters


Source: UNCTAD secretariat calculations, based on data from ILO, Employment Trends (EMP/TRENDS) econometric model, April 2013.


labour productivity grew steadily6 and has been higher than levels in the Asian
and island LDCs. The oil and metals exporters in the African group may at
least partly have driven this phenomenon. The trend is even more apparent if
we consider labour productivity by export orientation. Chart 18B shows that
during the period 2000–2012 the fuel-exporting LDCs had the highest labour
productivity of the group (an average $19,800 in 2012).




57CHAPTER 3. Employment Trends in LDCs


Chart 19. LDC output per worker as a share of more developed economies, 1990–2012
(Constant 1990 international dollars)


0


5


10


15


20


25


Developing countries
excluding LDCs


European Union


P
er


ce
nt


ag
e


North America


1990 2000 2012


Source: UNCTAD secretariat calculations, based on ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013..
Note: LDC sample includes 18 countries due to limited available data.


There is also evidence of steady growth in output per worker in the
manufacturing and mixed exporter groups (an average $6,000 in 2012). For the
Asian LDCs — such as Bangladesh, Cambodia and Laos, which, together with
Haiti, account for the bulk of LDC exports in this sector — the garment industry
is a leading driver of growth and employment.


Using an alternate ILO KILM dataset, chart 19 shows that LDC output per
worker in 2012 (constant 1990 international $) was just 22 per cent that of
ODCs, 10 per cent that of the EU average and 7 per cent that of North America
(comprising Canada and the United States). Although the LDC sample covers
only 18 countries, it would appear that their average productivity levels have
increased only marginally compared to other developing economies, the EU and
North America.


Given the importance of the agricultural sector as a share of both GDP and
employment in the LDCs, we specifically consider agricultural labour productivity
in these countries. The agricultural labour productivity gap between LDCs,
ODCs and developed economies has widened since 1985. Agricultural labour
productivity fell in over a third of the LDCs (in 10 of the 27 countries for which
there were comparable data) between 1985–1987 and 2009–2011. As shown
in chart 20A, during the period 2009–2011, average labour productivity was just
7 per cent that of ODCs and 3 per cent that of developed countries. Chart 20B
shows that between 1985 and 2011, value added per worker in agriculture7


in the LDCs increased 17 per cent.8 The equivalent rise in agricultural labour
productivity in ODCs was 152 per cent, and in developed countries, 194 per cent.
In the LDC group, value added per worker is higher in Asian LDCs ($338) than
in African LDCs ($276) (see chart 20C). However, during the period 1993–2011,
what is particularly striking is the rapid rise in agricultural labour productivity in
Asian LDCs (up around 79 per cent). In African LDCs, by contrast, productivity
levels have been stagnant (up only 1 per cent), and in island LDCs these levels
actually declined by 5 per cent over the same period.


Raising agricultural productivity in the LDCs is a sine qua non for their
development and the structural transformation of the sector. The introduction of


The agricultural labour productivity
gap between LDCs, ODCs and


developed economies has widened
since 1985.


During the period 2009–2011,
average agricultural labour


productivity was just 7 per cent that
of ODCs and 3 per cent that


of developed countries.


Raising agricultural productivity in
the LDCs is a sine qua non for their


development and the structural
transformation of the sector.




The Least Developed Countries Report 201358


Chart 20. Agricultural labour productivity trends in LDCs, developed and other developing countries, 1985–2011


0


2,000


4,000


6,000


8,000


10,000


12,000


14,000


16,000


18,000


20,000


22,000


1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011


1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011


C
on


st
an


t 2
00


5
$


A. LDCs and ODCs
(Constant 2005 $)


B. LDCs and ODCs
(Index, 1985=100)


50


100


150


200


250


300


350


In
de


x


LDC ODCs Developed LDC ODCs Developed


150


200


250


300


350


400


450


500


C
on


st
an


t 2
00


5
$


C. By country groups
(Constant 2005 $)


African LDCs and Haiti Asian LDCs African LDCs and Haiti Asian LDCs


70


90


110


130


150


170


190


210


230


250


In
de


x
D. By country groups


(Index, 1985=100)


Islands


Source: UNCTAD secretariat calculations, based on UNCTADstat and World Development Indicators online databases.
Notes: The LDC group sample in A and B includes 41 countries; the ODC group sample, 65 countries; and the developed countries’ group


sample, 30 countries. Labour per worker data are based on constant 2005 dollars. Indices are based on data in constant 2005
dollars. The data series for developed countries covers the period 1985–2010. All other data cover the period 1985–2011.


innovations and technology in order to increase output per worker in the sector
could also be critical for improved food availability per capita and food security.
If LDCs can raise their relatively low levels of agricultural labour productivity,
this could lower food prices relative to agricultural incomes, thereby reducing
food expenditures and potentially increasing household budget surpluses. Such
surpluses could then be used to increase demand for rural-non-farm goods and
services. Increases in farm-based income are closely linked with increases in
non-farm income, such as from vending, petty trading and transport services.
Non-farm income is especially pronounced in broad-based smallholder-led
agricultural growth, because as local labour is hired, income is typically spent
locally (Deichmann et al., 2009; Haggblade et al., 2007; Davis, 2005). This could
have major employment generation benefits for the rural non-farm economy. In
addition, with higher agricultural labour productivity over time (following Lewis,
1954), less on-farm labour will be required to raise output levels, thus releasing
labour resources for other sectors of the economy. Greater agricultural labour
productivity in LDCs therefore has the potential to both raise the real incomes of
rural households and stimulate demand for rural non-farm goods and services.
Curiously, these factors are often overlooked by policymakers intervening in the
sector.


Greater agricultural labour
productivity in LDCs has the


potential to both raise the real
incomes of rural households and


stimulate demand for rural non-farm
goods and services.




59CHAPTER 3. Employment Trends in LDCs


6. LABOUR FORCE PARTICIPATION RATES


LDCs have a high labour force participation rate (LFPR)9 of 75 per cent on
average (table 12), as compared to 68 per cent in ODCs. With limited or no social
security in many least developed countries, the poor have no option but to seek
work, since they would starve without engaging in some sort of work, no matter
how poorly paid. To some extent, this is also a result of the significant share
of economic activity accounted for by subsistence farming in these countries.
Moreover, with earnings from work being low, more household members need
to enter the labour market to ensure that family earnings are sufficient to provide
the household with a subsistence income. One consequence is that a high
labour force participation rate is by no means indicative of a comfortable labour
market situation. Unemployment rates, however, do not reveal much, since
the poor cannot afford the luxury of choosing open unemployment when only
extremely low-paid employment is available.


A breakdown of the LFPR by gender and age group provides further insights
into the distribution of the EAP in LDCs. Women in these countries have a
high propensity to work in the labour market, especially in the informal sector
(housekeeping, child-rearing, farming and so forth). In chart 21A, the LDC labour
force participation rate in 2012 by gender and age group is an inverted-U shape,
more pronounced for men than for women. The fact that the male curve is above
the female curve reflects the higher LFPR of men in all age groups. As to the
gender dimension, the curve increases at low ages as youths leave school and
enter the labour market, and peaks in the 35–39-year age group for men and
the 40–49-year group for women. Thereafter, it decreases gradually for women
and more sharply for men as they retire from the labour market.


Chart 21B–D illustrates the extent to which the LFPR varies between LDCs
by gender and age group. In the African LDCs, the rate for both men and
women follows patterns similar to the LDC average, and gender differences are
much less accentuated than for other LDCs. Indeed, the female rate is almost
equal to the male rate for the 15–24-year age group. In African LDCs it appears
that most 15-to-24-year-olds of both genders are in the labour force, where
women remain until they reach 60–64 years of age. This pattern may reflect a
lack of social security for elderly Africans and a preponderance of agricultural
sector employment in Africa, which relies heavily on female labour. The Asian
LDCs have a much wider gender gap in labour participation rates (around 24
percentage points) for people aged 35–54 years. The difference is particularly
acute in the island LDCs (38 percentage points) (chart 21D).


If we consider the world average, we see that most men leave the labour
force between 60 and 64 years of age; most women, between 50 and 54 years.
In contrast to the LFPR for women in high-income OECD countries, in LDCs
there are no discernible peaks reflecting the age at which women leave the
labour market due to marriage and childbearing (25–29 years) or at which they
return to the labour market (45–49 years) (OECD, 2012). The overwhelming
majority of women in LDCs work in the informal sector with few employment


Table 12. Labour force participation rates, 1980–2009
(Percentage of working-age population, aged 15-64 years)a


1980 1990 2000 2009
Total LDCs 75.6 75.8 74.8 75.1
LDCs African LDCs and Haiti 77.3 76.6 77.0 77.5
Asian LDCs 73.4 74.9 71.9 71.7
Island LDCs 68.5 66.8 66.4 68.4
ODCs 70.2 70.5 69.5 68.4
Source: UNCTAD secretariat calculations, based on ILO Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.


a Weighted averages.


LDCs have a LFPR of 75 per cent
on average. With limited or no social


security in many LDCs, the poor
have no option but to seek work,
since they would starve without
engaging in some sort of work


Women in these countries have a
high propensity to work in the labour


market, especially in the informal
sector.


The overwhelming majority of
women in LDCs work in the informal
sector with few employment rights,
such as maternity leave. The age at
which most LDC youths enter the
labour force is between 15 and 24
years for both genders, whereas in
high-income OECD countries the


equivalent is 20–24 years.




The Least Developed Countries Report 201360


rights, such as maternity leave. The age at which most LDC youths enter the
labour force is between 15 and 24 years for both genders, whereas in high-
income OECD countries the equivalent is 20–24 years (OECD, 2012).


As shown in chart 22A, the LFPR has risen most for people aged between
25 and 54 years. For the LDC working-age population (15–64 years) as a whole,
however, the rate barely declined between 1990 and 2009 (by 0.7 percentage
points). Similarly, the youth rate has fallen quite sharply since 1990 for the LDC
group, by an average 4.7 percentage points, compared to a 10.9-percentage-
point decline in the ODC rate. At the LDC regional level, this drop was driven
largely by the Asian LDC group, which recorded an 11-percentage-point decline
(chart 22C). As previously noted, this may be a function of the higher rates of
primary, secondary and tertiary education enrolment and completion rates in the
LDCs (see chapter 5). There was a modest (1.5-percentage-point) rise in youth
employment in the island LDCs (chart 22D), and a modest (1-percentage-point)
decline in the African LDCs.


Between 1990 and 2012, around 290 million women entered the LDC labour
force. During this period, the labour force participation rates for women in LDCs
rose by 3 percentage points, from 59 to 62 per cent on average (chart 23).
Within the LDC group as a whole, the LFPRs are highest, and have risen the
most, in Africa and Asia (by 3 percentage points), and are the lowest in the
island LDCs (by 0.1 percentage point).


Chart 21. LDC labour force participation rates by gender and region, 2012


30


40


50


60


70


80


90


100


15-24 25-34 35-54 55-64 65+ 15-24 25-34 35-54 55-64 65+


15-24 25-34 35-54 55-64 65+ 15-24 25-34 35-54 55-64 65+


Age group Age group


Age group Age group


A. LDCs


Women Men


40


50


60


70


80


90


100
B. African LDCs


20


30


40


50


60


70


80


90


100


P
er


ce
nt


ag
e


P
er


ce
nt


ag
e


P
er


ce
nt


ag
e


P
er


ce
nt


ag
e


C. Asian LDCs


20


30


40


50


60


70


80


90


100
D. Island LDCs


Source: UNCTAD secretariat calculations, based on ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.


Between 1990 and 2012, around
290 million women entered the LDC


labour force.




61CHAPTER 3. Employment Trends in LDCs


Chart 22. LDC Labour force participation rates, by region and age, 1980–2009
(Percentage)


60


65


70


75


80


85


90


1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008


1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008


1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008


1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008


A. LDCs


60


65


70


75


80


85


90
B. African LDCs and Haiti


50


55


60


65


70


75


80


85
C. Asian LDCs


50


55


60


65


70


75


80
D. Island LDCs


45


50


55


60


65


70


75


80


85
Other developing countries


15-24 25-34 35-54 55-64


Source: UNCTAD secretariat calculations, based on ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.
Note: Weighted averages.


7. LDC EMPLOYMENT-TO-POPULATION RATIOS


The employment-to-population ratio is an indicator of the availability of jobs.10


When considered jointly with the employment level, it enables us to evaluate
the magnitude of job growth. Fluctuations in the employment level reflect net
changes in the number of people employed, while movements in the ratio are net
changes in the number of people employed relative to changes in the size of the
population. As the LDC population is growing rapidly, a rise in employment may
or may not appear as an increase in the employment-to-population ratio, while
a fall in employment is usually reflected as a decline in the ratio. In a developing-




The Least Developed Countries Report 201362


country context, a high employment-to-population ratio is often correlated with
high levels of working poverty.11


Employment-to-population ratios for the LDCs range from 54 per cent in
island LDCs to 65 per cent in African LDCs. Chart 24 shows simple averages
of available employment-to-population ratios in 2012 by region. For the LDCs
as a group, the average ratio is 65 per cent, which is much higher than the 53
per cent average for ODCs. Most ODCs and developed countries are within the
range of 50 to 60 per cent. Countries whose average ratio is above 70 per cent
tend to have a high share of the population in poverty, relying on their labour
as a means of survival. In fact, 16 of the 42 LDCs for which data are available
had employment-to-population ratios of above 70 per cent during the period
2000–2012. The following countries had both high employment-to-population
ratios (above 80 per cent) and a relatively high share of the population (above 75
per cent)12 living below the $2-per-day poverty line: Burkina Faso, Madagascar,
Nepal, Rwanda and United Republic of Tanzania.


The average female employment-to-population ratio is highest in African
LDCs, at 60.1 per cent, and lowest in island LDCs, at 38.7 per cent, which
have the lowest such ratio in the group. In Asian LDCs and some island LDCs,
women’s economic contribution may be constrained by social institutions and
cultural norms. For example, in Afghanistan and Bangladesh the difference
between the male and female employment-to-population ratio was 57 and
24 percentage points, respectively, in 2012. By contrast, men and women in
African LDCs are involved almost equally in the labour market. In some African
LDCs — namely, Burundi, Malawi, Mozambique and Rwanda — the female
ratio is higher than the male ratio. During the period 2000–2012, most LDCs
experienced an overall rise in the employment-to-population ratio. In 26 LDCs,
that ratio increased more for women than for men, and was greatest (although
starting from a relatively low base) in Afghanistan, Bhutan, Comoros, Mauritania
and Yemen. The increased female ratio may in part reflect the wider introduction
of equality legislation and increased educational and employment opportunities
for women in LDCs.


Youths in most LDCs experienced a decline in employment-to-population
ratios relative to adults between 2000 and 2012, as shown in chart 25. The only


Chart 23. Labour force participation rates for women in LDCs, 1990–2012


40


45


50


55


60


65


70


1990 1995 2000 2005 2012


P
er


ce
nt


ag
e


LDCs African LDCs Asian LDCs Island LDCs


Source: UNCTAD secretariat calculations based on ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.
Note: Sample of 46 LDCs.


For the LDCs as a group, the
average employment-to-population
ratio is 65 per cent, which is much


higher than the 53 per cent average
for ODCs.


In some African LDCs — namely,
Burundi, Malawi, Mozambique and


Rwanda — the female ratio is higher
than the male ratio.




63CHAPTER 3. Employment Trends in LDCs


exceptions were Angola, Burundi, Myanmar, Timor-Leste, Uganda and Zambia,
where both youth and adult ratios declined. A falling youth employment-to-
population ratio may be positive if the change is due to youths staying on at
school or moving into tertiary-level education, rather than becoming unemployed.
However, it is difficult to determine whether this is the case.


8. RURAL NON-FARM EMPLOYMENT: PANACEA, OR PANDORA’S BOX?


The rural non-farm economy (RNFE) may be defined as comprising all those
non-agricultural activities that generate income for rural households (including
income in kind), either through waged work or through self-employment.
In some contexts, rural non-farm activities are also major sources of local
economic growth (e.g. tourism, mining and timber processing). The RNFE is of
great importance to the rural economy because of its production linkages and
employment effects, and the income it provides to rural households represents
a substantial and sometimes growing share of rural incomes. Often this share
is particularly high for the rural poor. There is evidence that these contributions
are becoming increasingly significant for food security, poverty alleviation and
farm sector competitiveness and productivity (Dirven, 2011; World Bank, 2005;
Balcombe et al., 2005).


The RNFE can also be defined or classified according to many dimensions,
such as on-farm/off-farm, wage/self-employment and agriculturally related/
other. An ideal classification of the RNFE should capture some or all of the
following distinctions:


(i) Activities closely linked to farming and the food chain, and those not part
of that chain, since agricultural linkages are often important determinants of
the RNFE’s potential for employment and income generation;


(ii) Activities producing goods and services for the local market (often non-
tradables);


(iii) Activities producing for distant markets (tradables), since the latter have
the potential to create employment and incomes independently of the rural
economy;


Chart 24. Employment-to-population ratios, LDC regional averages by gender, 2012


30


40


50


60


70


80


African LDCs
and Haiti


Asian LDCs Island LDCs LDCs ODCs


E
m


pl
oy


m
en


t-
to


-p
op


ul
at


io
n


ra
tio


(%
)


Female Male Average


Source: UNCTAD secretariat calculations, based on ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.
Note: Sample of 46 LDCs.


Youths in most LDCs experienced
a decline in employment-to-


population ratios relative to adults
between 2000 and 2012.




The Least Developed Countries Report 201364


Chart 25. Youth and adult employment-to-population ratios in selected LDCs, 2000 to 2012
(Percentage change)


Lesotho


Uganda


Bangladesh


Lao People’s Dem. Republic


Burundi


Mozambique


Nepal


Somalia


Benin


Zambia


Rwanda


Eritrea


Burkina Faso


Madagascar


Gambia


Angola


Sudan


Dem. Rep. of the Congo


Senegal


Equatorial Guinea


Central African Republic


Bhutan


Comoros


LDCs


Chad


United Rep. of Tanzania


Myanmar


Yemen


Togo


Mali


Liberia


Ethiopia


Solomon Islands


Malawi


Guinea


Afghanistan


Guinea -Bissau


Niger


Mauritania


Timor -Leste


Haiti


Sierra Leone


Cambodia


-20 -15 -10 -5 0 5 10
Youth Adult


Source: UNCTAD secretariat calculations based on ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.


(iv) Activities that are on a sufficiently large scale, are sufficiently productive and
have enough capital to generate incomes above returns obtainable from
farming; and


(v) Activities that offer only marginal returns, since this reflects the RNFE’s
capacity to generate local economic growth. Although low-return activities
can keep households above the poverty line, they usually do not foster
growth.




65CHAPTER 3. Employment Trends in LDCs


The RNFE accounts for about 30 per cent of full-time rural employment in
Asia, 45 per cent in Latin America (Dirven, 2011), 20 per cent in West Asia
and 40–45 per cent in Africa (Haggblade et al., 2007; Davis, 2005; Stifel, 2010;
Hossain, 2004). Surveys covering part-time employment in the RNFE are
relatively scarce, but would suggest that as most rural households in Asia and
Africa are increasingly pluriactive, the share of non-farm employment may be
even higher than these estimates suggest, due in part to the under-reporting of
female part-time labour activities (Stifel, 2010). The RNFE is largely composed
of a highly heterogeneous collection of trading, agro-processing, manufacturing,
commercial and service activities, which results in its widely varying productivity
and profitability (Haggblade et al., 2007). It may be further broken down into
at least three categories: the activities undertaken; employment and the use
of labour time; and incomes generated. These clearly overlap, particularly for
incomes, since most rural income arises from payments to factors used in
activities and from employment.


The fact that most of the poor live in rural areas is as much an argument for
social welfare as for economic development. Nonetheless, the data highlight the
importance of RNF employment in providing sustainable livelihoods for many
rural LDC households. Moreover, as Haggblade et al. (2010) note, poverty-
reducing rural non-farm growth requires an aggregate increase in rural non-farm
income coupled with growing income per worker, which in turn depends on
the development of productive capacities and improved productivity of rural
tradables (e.g. agriculture, mining and tourism).


The data in chart 26 on non-agricultural income are disaggregated first into
non-farm wage and self-employment components and then by sector, indicating
which activities are more important in the LDC rural non-farm economy. Following
Davis et al. (2010), eight sectors in wage employment are identified (mining,
manufacturing, utilities, construction, commerce, transport, finance, services
and other), and nine sectors in self-employment, with the addition of agriculture
and fish processing.


As GDP per capita levels increase, the share of rural on-farm (agricultural)
income typically falls and the share of rural non-agricultural income rises
(Haggblade et al., 1989; Davis et al., 2007). Chart 26A shows that agricultural
sources of income account for significant shares (between 45 and 78 per cent)
of total household income in selected LDCs (Bangladesh, Madagascar, Malawi
and Nepal) for which we have detailed data, drawn from Davis et al. (2010)
(see annex table 15).13 On-farm sources of income tend to be more important
for African LDCs, as they typically have a less diversified economy than most
Asian LDCs (UNCTAD, 2009). If income from agricultural labour, livestock and
crop production is combined, all the LDCs in this dataset derive the majority
of household income from agricultural sources (chart 26B). Although RNF
employment is increasingly important in LDCs, on-farm production and jobs
remain the mainstay for most of them. However, as depicted in chart 26C for
Bangladesh, Malawi and Nepal, whose non-farm activity participation rates are
in excess of 45 per cent, the RNFE is a vital source of employment (see box 3).


Further examination shows that for these countries, the range of participation
in RNF wage and self-employment is quite diverse. RNF employment income from
the commerce and manufacturing sectors features very prominently, although
the services and construction sectors are also important (chart 26D). Chart 26E
shows that Bangladesh has the most diversified RNF self-employment income
by sector, whereas the commerce sector dominates in the other countries.
Agricultural processing in Bangladesh accounts for a relatively large share of
RNF self-employment income (21 per cent), in contrast to the more dominant
manufacturing sector, which represents 31 per cent of RNF wage employment
income (chart 26F). The services sector holds the dominant share in the other


The RNFE accounts for about 30 per
cent of full-time rural employment in
Asia, 45 per cent in Latin America,
20 per cent in West Asia and 40–45


per cent in Africa.


Although RNF employment is
increasingly important in LDCs, on-
farm production and jobs remain the


mainstay for most of them.




The Least Developed Countries Report 201366


Chart 26. Household participation and shares in rural non-farm income-generating activities in four selected LDCs


0


20


40


60


80


100


Bangladesh
2000


Madagascar
1993


Malawi
2004


Nepal
2003


Bangladesh
2000


Madagascar
1993


Malawi
2004


Nepal
2003


Bangladesh
2000


Madagascar
1993


Malawi
2004


Nepal
2003


Bangladesh
2000


Madagascar
1993


Malawi
2004


Nepal
2003


Bangladesh
2000


Madagascar
1993


Malawi
2004


Nepal
2003


Bangladesh
2000


Madagascar
1993


Malawi
2004


Nepal
2003


Pe
rc


en
ta


ge


Pe
rc


en
ta


ge


Pe
rc


en
ta


ge
Pe


rc
en


ta
ge


Pe
rc


en
ta


ge
Pe


rc
en


ta
ge


A. Gross rural household income shares, by sector


Agricultural total


Non-agricultural total


B. Rural household share of income from various activities
(mean of shares)


Agriculture crops Agriculture livestock
Agricultural wage employment
Non-agricultural wage employment
Non-agricultural self-employment


Transfers
Other


0


10


20


30


40


50


60


C. Percent of rural households participating
in non-farm employment


Non-agricultural wage employment


Non-agricultural self-employment


0


10


20


30


40


50


60


70


80


90


100


D. Participation in RNF wage
and self-employment by sector


Agriculture and
fish (processing) Mining
Manufacturing Utilities
Construction


Commerce


Transport


Finance
Other


Services


Agriculture and
fish (processing) Mining
Manufacturing Utilities
Construction


Commerce


Transport


Finance
Other


Services


0


10


20


30


40


50


60


70


80


90


100
E. Share of RNF self-employment income by sector


0


10


20


30


40


50


60


70


80


90


100


0


10


20


30


40


50


60


70


80


90


100
F. Share of RNF wage employment income by sector


Finance OtherServices


Mining Manufacturing Utilities


Construction Commerce Transport


Source: UNCTAD secretariat calculations, based on Davis et al., (2010, 2007).
Note: The data presented in B. Davis et al., (2010, 2009) utilize the Rural Income Generating Activities (RIGA) database, which is con-


structed from a pool of several dozen Living Standards Measurement Study (LSMS) and other multi-purpose household surveys
made available by the World Bank through a joint project with the FAO. The authors identify rurality via the domicile of the house-
hold, and not the location of the job. Participation is defined as the receipt of any household income (negative or positive) by any
household member from that income-generating activity. All the charts are based on the mean of shares which is defined as the
income shares calculated for each household, and then the mean of the household shares of each type of income is calculated.
The mean of shares reflects the household-level diversification strategy, regardless of the magnitude of income (Davis et al., 2010).




67CHAPTER 3. Employment Trends in LDCs


LDCs, especially Malawi, where it provides 57 per cent of such income. Country-
specific cultural and labour market institutions play a key role in determining
both access to non-farm employment and the associated remuneration (Barrett
et al., 2001; Davis, 2005; Hossain, 2004). In Malawi, for example, 50 per cent
of the households surveyed earned an agricultural wage, which is much higher
than the rate observed in the other LDCs because casual ganyu14 labour on
non-own farms is much more prevalent (Davis et al., 2010). There appears to be
a high rate of labour force participation in both agricultural and non-agricultural
activities, which suggests a relatively high diversity of non-farm income-earning
opportunities in rural areas. Most RNF labour market opportunities in LDCs will
initially be agriculture-linked and will often involve elements of seasonal non-
own farm labour migration. Rural construction businesses, processing mills,
manufacturing and assembly market networks are other significant sources
of non-farm wage employment. There are also many government and private-
sector opportunities for RNF employment for both unskilled and professional
workers.


When considering the importance of the RNFE for employment and
development in the LDCs, two key factors should be stressed: the potential
multiplier effects (demand-led growth linkages between the RNFE and farming),
and the integration of farming into national and international value chains, shifting
value addition to rural areas (UNCTAD, 2009). These factors should help rural
areas to take advantage of the potential benefits of trade and improve incomes
and employment opportunities.


The process of structural transformation is not identical in all LDCs and
regions, and is shaped in part by such factors as a region’s comparative
advantage in the production of tradable products (especially agriculture),
population density, infrastructure, location, and government policies. Regions
with significant recreational, mineral or trade advantages (e.g. ports or highways)
may be less dependent on agriculture as an engine of growth, and hence may
expand and diversify their RNFE much earlier in the development process.
Growth of the RNFE can also be delinked from agriculture to varying degrees
by market and trade liberalization policies that enhance non-agricultural
opportunities. Moreover, an engine of growth does not even have to be local, as
long as the local economy is open, in the sense that workers can commute and
local farm and non-farm firms can sell to the area where the engine is providing
job opportunities and generating growth (Dirven, 2011; UNCTAD, 2009; Stifel,
2010).


9. UNEMPLOYMENT AND INACTIVITY


a. Unemployment trends


Registered unemployment in LDCs did not fall significantly during the boom
period of 2002–2008. Chart 27A shows a remarkably stable unemployment rate
during the period 2000–2012, at around 5.5 per cent. Even in 2009–2010, with
the onset of the global financial and economic crisis, the rate barely changed
from the 2000–2012 average. In 2012, island LDCs had the highest rate of
unemployment (7.3 per cent on average), followed by African LDCs at 6.1 per
cent and Asian LDCs at 4.7 per cent.


Female unemployment was an average 1 percentage point higher than male
unemployment in LDCs during the period 2000–2012, which suggests that it
was largely unaffected by the relatively high rates of real GDP growth of 2002–
2008 (chart 27B). Also in 2000–2012, the gender gap in unemployment was
above 1 per cent on average in African LDCs, less than 1 per cent in Asian LDCs
and around 2 per cent in island LDCs.


There appears to be a high rate of
labour force participation in both
agricultural and non-agricultural


activities.


Most RNF labour market
opportunities in LDCs will initially


be agriculture-linked and will often
involve elements of seasonal non-


own farm labour migration.


When considering the importance
of the RNFE for employment and


development in the LDCs, two key
factors should be stressed: the


potential multiplier effects, and the
integration of farming into national


and international value chains,
shifting value addition to rural areas.


Registered unemployment in LDCs
did not fall significantly during the


boom period of 2002–2008.




The Least Developed Countries Report 201368


Generally speaking, it is the LDC youth labour force (aged 15–24 years) that
is most affected by unemployment, in disproportionate numbers, as that rate
is almost invariably higher than that of adults. In most LDCs, it is higher than
the average LDC unemployment rate for both men and women, and in most
cases is almost twice the rate (chart 27C). The relative prevalence of youth
unemployment is evident particularly in the island LDCs (16 per cent in 2011)
and Asian LDCs (10.5 per cent in 2012).


The causes of LDC youth unemployment are numerous and include the
following: (i) a skills mismatch on entering the labour market; (ii) low levels of
entrepreneurial, education and technical skills among youths (World Bank,
2013); (iii) a low absorptive capacity of the labour market for new entrants; (iv)
limited access to adequate finance, technology and markets (UNCTAD, 2010);
and (v) a lack of structural change and diversification, which reinforces the
concentration of growth in traditional capital-intensive and urban-based sectors
like mining and oil extraction (UNCTAD, 2013). These sectors typically generate
limited labour-intensive growth multipliers.


b. Inactivity rates


The inactivity rate is the proportion of the working-age population that is not
in the labour force. Inactive people are those who are outside the labour force


Chart 27. LDC total unemployment rate by region, gender and youth, 1991–2012


3.0


3.5


4.0


4.5


5.0


5.5


6.0


6.5


7.0


7.5


8.0


19
91


19
92


19
93


19
94


19
95


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09


20
10


20
11


20
12


19
91


19
92


19
93


19
94


19
95


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09


20
10


20
11


20
12


19
91


19
92


19
93


19
94


19
95


19
96


19
97


19
98


19
99


20
00


20
01


20
02


20
03


20
04


20
05


20
06


20
07


20
08


20
09


20
10


20
11


20
12


P
er


ce
nt


ag
e


P
er


ce
nt


ag
e


P
er


ce
nt


ag
e


A. LDC total unemployment rate, by region


4


5


6


7


8


9


10


11
B. LDC unemployment rate, by gender


6


7


8


9


10


11


12


13


14


15


16
C. LDC youth unemployment rate, by region


LDCs African LDCs
and Haiti


Asian
LDCs


Island
LDCs


ODCs


LDCs African LDCs
and Haiti


Asian
LDCs


Island
LDCs


ODCs


LDC Men Women Youth


Source: UNCTAD secretariat calculations, based on data from ILO, Employment Trends (EMP/TRENDS) econometric model, April 2013.


Generally speaking, it is the LDC
youth labour force that is most
affected by unemployment, in


disproportionate numbers, as that
rate is almost invariably higher


than that of adults.




69CHAPTER 3. Employment Trends in LDCs


if they are neither employed nor unemployed or are not actively seeking work.
Inactive people may include the early retired; women who leave the labour force
to raise a family and provide childcare; school or university students; the sick or
disabled, or discouraged workers. 15 Table 13 shows that although LDC inactivity
rates have been increasing since 1980, they remain lower on average (24.9
per cent) than in ODCs (30 per cent). The 2010 rate in developed economies
and the EU was 52 per cent (ILO, Key Indicators of the Labour Market (KILM),
Seventh Edition, 2013). The reason why inactivity rates are lower in LDCs and
other low-income countries than in developed countries is probably that the
option of being unemployed or inactive is unavailable to the poor.


Chart 28 compares the inactivity rates for the LDC working-age and youth
(aged 15–24 years) populations. With the exception of the island LDCs,
these rates climbed during the period 2000–2009, especially in Asian LDCs.
Nonetheless, at 38 per cent for all LDCs in 2009, the rates were well below the
ODC levels of 52 per cent, and above the working-age inactivity rates. Typically,
rising youth inactivity rates are due to the following: higher rates of young people
enrolling in education than entering the labour market; and higher rates of
discouraged workers, which is untypical of most LDCs. It is often assumed that
LDC youths do not have the option of continuing their education due to a lack of
educational infrastructure and high tuition fees. In addition, the opportunity cost
for youths — particularly from the poorest households — of continuing their


Table 13. LDC Inactivity rates, 1980–2009
(Percentage of working age population, aged 15-64 years)a


1980 1990 2000 2009
Total LDCs 24.4 24.2 25.2 24.9
LDCs African LDCs and Haiti 22.7 23.4 23.0 22.4
Asian LDCs 26.6 25.1 28.1 28.3
Island LDCs 31.5 33.2 33.6 31.6
ODCs 29.8 29.5 30.5 31.6
Source: UNCTAD secretariat calculations, based on ILO Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.


a Weighted averages.


Chart 28. LDC inactivity rates for youths and working-age population, 2009


P
er


ce
nt


ag
e


0


10


20


30


40


50


60


Island
LDCs


Asian
LDCs


Total
LDCs


(15-64)


African
LDCs &


Haiti


Island
LDCs


ODCs Total
LDCs
(youth)


African
LDCs &


Haiti


Asian
LDCs


ODCs


Working age population Youths


2000 2009


Source: UNCTAD secretariat calculations, based on data from ILO, Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.
Note: Weighted averages.


Although LDC inactivity rates have
been increasing since 1980, they
remain lower on average (24.9 per
cent) than in ODCs (30 per cent).




The Least Developed Countries Report 201370


education, as opposed to entering the labour market, is often high (World Bank,
2008). As previously noted, however, education enrolment and completion rates
have steadily risen in LDCs since 1990 (see chapter 2, table 7). Inactivity rates
increased by an average 2 percentage points between 2000 and 2009, and
rose the most (4 percentage points) in the Asian LDCs. For LDC policymakers
tackling a burgeoning youth labour force, it may be preferable to focus less on
rising inactivity rates (or declining participation rates) and more on the type of
activities in which youths can productively engage, given appropriate public-
and private-sector support.


LDCs will need comprehensive job creation programmes to address youth
unemployment and underemployment.16 Typically, their youths find work in the
informal sector, but often such jobs do not pay reasonable wages, improve
skills or offer much job security. More than 70 per cent of youths in Democratic
Republic of the Congo, Ethiopia, Malawi, Mali, Rwanda, Senegal and Uganda
are either self-employed or contributing to family work (Brookings Institute,
2012). LDC job strategies will need to encourage investment in the agricultural
sector, promote rural development and help prepare youths for employment
opportunities in urban areas.


B. The quality of employment in the LDCs


Having examined the quantity of jobs available to LDC citizens in the previous
section, we now look at the quality of those jobs, and more specifically at what
ILO has termed “decent employment”, the “working poor” and “vulnerable
employment”. Vulnerable employment is defined as the sum of contributing
family workers (unpaid work) and own-account workers as a share of total
employment. It represents around 80 per cent of total employment in LDCs
and is therefore very important for these countries (International Labour Office,
2011). Table 14 provides a detailed summary of vulnerable employment and
working-poor dynamics in the LDCs for the period 2000–2018. Each of these
indicators has improved since 2000, but from a relatively weak base, especially
in African and Asian LDCs. We explore these trends in greater detail below.


1. THE LDC WORKING POOR


The working poor are broadly defined as working persons who are unable to
earn enough to maintain either their own welfare or that of their families. More
specifically, they are persons who are working and living in households with
income below the poverty line. They comprise two distinct categories: working
people living as unrelated (non-own-family) individuals with income below the
poverty level; and working people living in families with total income below the
poverty level. As shown in chart 29, the percentage of the working poor living on


Table 14. Employment and poverty dynamics in the LDCs, 2000–2018
(Percentage)


Vulnerable employment as a
share of total employment


(percentage)


Share of extremely poor (less than
$1.25 in PPPs) in total employment


(percentage)


Total
unemployment rate


(percentage)
2000 2005 2010 2015 2018 2000 2005 2010 2015 2018 2000 2005 2010 2012


Total LDCs 86 84 82 80 79 61 50 41 33 29 5.5 5.5 5.6 5.6
ODCs 61 59 56 53 52 30 20 13 9 7 5.9 5.8 5.2 5.2
African LDCs and Haiti 86 84 82 80 79 65 55 46 38 35 6.7 6.1 6.1 6.1
Asian LDCs 85 84 81 80 79 56 43 33 24 20 3.9 4.7 4.7 4.7
Island LDCs 75 78 77 75 74 36 36 29 22 20 7.0 7.0 7.5 7.3
Source: UNCTAD secretariat calculations, based on ILO Key Indicators of the Labour Market (KILM), Seventh Edition, 2013.
Note: Data series 2013 to 2018 are preliminary projections.


For LDC policymakers tackling a
burgeoning youth labour force, it


may be preferable to focus less on
rising inactivity rates and more on


the type of activities in which youths
can productively engage, given
appropriate public- and private-


sector support.


More than 70 per cent of youths in
Democratic Republic of the Congo,


Ethiopia, Malawi, Mali, Rwanda,
Senegal and Uganda are either self-
employed or contributing to family


work.


The percentage of the working
poor living on less than $1.25 per
day is declining as a share of total


employment.




71CHAPTER 3. Employment Trends in LDCs


Chart 29. Share of the working poor in LDCs living on less than $1.25 per day in total employment, 2000–2017


0


10


20


30


40


50


60


70


2000 2002 2004 2006 2008 2010 2012 2014 2016


P
er


ce
nt


ag
e


Forecast


LDCs ODCs African LDCs and Haiti Asian LDCs Island LDCs


Source: UNCTAD secretariat calculations, based on data from ILO, Employment Trends (EMP/TRENDS) econometric model, April 2013.
Note: Data series 2013 to 2017 are preliminary projections.


less than $1.25 per day is declining as a share of total employment, from 61 per
cent in 2000 to a projected 29 per cent by 2017. However, that percentage is
still substantially above levels prevalent in ODCs, where it is expected to shrink
from 30 per cent in 2000 to 7 per cent by 2017.


African LDCs are forecast to have the highest share of working poor in the
LDC group by 2017. Among that group, Liberia and Madagascar experienced
no overall change in the share of the working poor living on less than $1.25 per
day during the period 2000–2012. The share fell the most in Sierra Leone (down
by 49 percentage points), Ethiopia (40) and Mozambique (32). Using actual and
forecast data, chart 29 shows that Asian and island LDC levels of the working
poor are likely to be below the LDC average for the period 2000–2017 and to
begin to converge by 2015. During this period, the Asian LDCs’ share of working
poor in total employment declined by 36 percentage points; the island LDCs’
share, by 16 percentage points. Of the Asian LDCs, only Yemen witnessed
an increase in the share of working poor (up 4 percentage points); Myanmar
is expected to have the largest decline in the group (down by 50 percentage
points). Among the island LDCs, the share should remain high in Comoros (at
around 43 per cent) and decline sharply in Solomon Islands and Timor-Leste
during 2000–2017.


2. EMPLOYMENT STATUS AND VULNERABLE WORK IN THE LDCS


Vulnerable employment is often characterized by inadequate earnings, low
productivity and difficult working conditions. Since 2009 the number of workers
in vulnerable employment worldwide has increased by around 100 million, and
with it global poverty (ILO, 2013). Such workers are less likely to have formal
employment arrangements and also tend to lack adequate social security and
effective representation by labour organizations (e.g. trade unions).


African LDCs are forecast to have
the highest share of working poor in


the LDC group by 2017.


Asian and island LDC levels of the
working poor are likely to be below


the LDC average for the period
2000–2017.




The Least Developed Countries Report 201372


As indicated in chart 30, during the period 2000–2018, the share of
vulnerable employment will have declined by 7 percentage points in LDCs and
9 percentage points in ODCs. However, the level of vulnerable employment is
on average 25 percentage points higher in the former than in the latter. Further
data disaggregation by export specialization shows that LDC fuel exporters
have experienced the largest reduction (11 percentage points) in vulnerable
employment. On a country group basis, the island LDCs have seen the smallest
decline (1-percentage-point change on average), and the African LDCs the
largest (7 percentage points on average). In addition, for the group as a whole,
the gender gap in vulnerable employment is not only wide but has increased
marginally, averaging 11 percentage points during the period 2000–2012. In
2012, 85 per cent of women and 73 per cent of men on average were vulnerably
employed.


ILO data on LDC employment status distinguish between two categories of the
employed: wage and salaried workers; and the self-employed. These two groups
are presented in table 15 and chart 31 as percentages of the total employed.
The self-employed are the most prevalent group in LDCs and comprise: (i)
self-employed workers with employees (employers); (ii) self-employed workers
without employees (own account-workers); and (iii) contributing family workers
(usually unpaid family workers) and members of producers’ cooperatives. The
distribution of employment by status is an important indicator for describing and
comparing LDC conditions of work, vulnerability, the informal sector and levels
of economic development.


Table 15 presents data for 2012 on the distribution of employment by status
in LDCs, ODCs and country groups, and by gender. As previously noted, women
in LDCs are concentrated primarily in the most vulnerable job categories: own-
account (44 per cent) and contributing family workers (40 per cent). Only 20
per cent of LDC men were employed as contributing family workers. The island


Chart 30. Share of vulnerable employment in LDCs and ODCs, 2000–2018


Forecast


50


55


60


65


70


75


80


85


90


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018


P
er


ce
nt


ag
e


LDCs ODCs LDC men LDC women


Source: UNCTAD secretariat calculations based on data from International Labour Organisation, Employment Trends (EMP/TRENDS)
econometric model, April 2013.


Note: Data series 2013 to 2018 are preliminary projections.


During the period 2000–2018, the
share of vulnerable employment


will have declined by 7 percentage
points in LDCs and 9 percentage


points in ODCs. However, the level
of vulnerable employment is on


average 25 percentage points higher
in the former than in the latter.


For the group as a whole,
the gender gap in vulnerable


employment is not only wide but has
increased marginally, averaging


11 percentage points during
the period 2000–2012.




73CHAPTER 3. Employment Trends in LDCs


LDCs have the highest concentration of women in the contributing family
workers category (54 per cent), 14 percentage points above the LDC average.
African LDC women are found mainly in the own-account worker category (48
per cent), and Asian women in the contributing family workers category (47 per
cent). There is also a clear gender disparity in employment in the waged/salaried
worker and employer categories, which boast the most secure jobs and the
best employment conditions. LDC men are employed at almost twice the rate
of women in these sectors, whereas in ODCs there is a greater gender balance
in employment (61 per cent of women and 63 per cent of men are employed as
waged or salaried workers).


Despite the relatively high rates of GDP growth in 2002–2008, and despite
a small rise in the share of waged and salaried workers, the level of vulnerable
employment in LDCs has not declined significantly because of the high share of
own-account and unpaid family workers in total employment.


Chart 31 shows the distribution of employment by status in nine LDCs in
2012. Based on this small sample, most LDCs had a relatively low proportion
of waged and salaried workers (22 per cent on average) and employers (1 per


Table 15. Distribution of employment by status, 2012
(Percentage of total employment)


Waged and salaried
workers


Employers
Own-account


workers
Contributing family


workers
Women Men Women Men Women Men Women Men


Total LDCs 15 26 1 2 44 52 40 20
ODCs 61 63 2 5 24 27 13 5
African LDCs and Haiti 14 25 1 2 48 53 37 20
Asian LDCs 17 30 1 1 35 53 47 16
Island LDCs 19 25 0 1 27 46 54 28
Source: UNCTAD secretariat calculations, based on data from ILO Employment Trends (EMP/TRENDS): ILO Trends econometric models,


April 2013.


Chart 31. Distribution of employment by status in selected LDCs, 2012
(As a percentage of total employment)


16 18 14 14


55


11 12


29
24


0
0


1 1


4


0
2


1


1


56


40


33


44


31


74
76 46 57


28


41


52


41


11 14
9


25
18


0


10


20


30


40


50


60


70


80


90


100


Bangladesh Cambodia Comoros Ethiopia Haiti Sierra
Leone


United
Rep. of


Tanzania


Timor-
Leste


Zambia


Wage & salary workers Employers


P
er


ce
nt


ag
e


Own-account workers Contributing family workers


Source: UNCTAD secretariat calculations, based on data from ILO, Employment Trends (EMP/TRENDS) econometric model, April 2013.


Women in LDCs are concentrated
primarily in the most vulnerable
job categories: own-account (44
per cent) and contributing family


workers (40 per cent).


The level of vulnerable employment
in LDCs has not declined significantly


because of the high share of own-
account and unpaid family workers in


total employment.




The Least Developed Countries Report 201374


cent); only in Haiti does that share exceed 30 per cent of total employment. The
proportion of own-account workers (50 per cent on average) and contributing
family workers, by contrast, is much higher (26 per cent). The predominance
of these employment categories in LDCs may reflect the importance of the
agricultural sector (which accounted for an average 65 per cent of the labour
force and 26 per cent of GDP in 2010), widespread informality and low growth
in the formal sector. Own-account workers (the self-employed) and vulnerable
employment are the main categories of the informally employed. Emigration from
rural to urban areas due to low-productivity agriculture is largely responsible for
the observed informality in these countries. The majority of workers in LDCs
with a high share of contributing family workers are doing unpaid work, often
supporting agricultural production for the market, and most of this unpaid work
is undertaken by women (International Labour Office, 2011).


In the LDC group as a whole, based on a sample of 42 countries, Somalia
(96 per cent), Guinea-Bissau (95 per cent), Central African Republic (94 per
cent), Malawi and Togo (both 90 per cent) have the highest shares of vulnerable
employment in total employment, most of it concentrated in the informal sector.
Again, it is useful to illustrate what this meant for individual LDCs in 2012: in
Bangladesh, there were 62 million in vulnerable employment; in Ethiopia, 36
million; in Myanmar, 24 million; and in United Republic of Tanzania, 19 million.


It is often argued that growth in a developing country’s middle class is an
important driver of economic and social development, with positive effects on
labour markets.17 But if this is so, is there much evidence of the trend in the
LDCs? While the assertion is beyond the scope of this Report, we discuss
the question below. Following Kapsos and Bourmpoula’s (2013) study of the
working poor, in which they introduce a model for generating national estimates
and projections of the distribution of the employed across five economic classes
for 142 developing countries over the period 1991–2017, we derive aggregate
estimates of employment by economic class for 20 LDCs from that dataset
(see chart 32). They put the developing world’s workforce into five classes, for
the first time. Those classes are defined as: the extreme working poor (< $1.25
a day), moderate working poor (< $2 a day), near poor ($2–4 a day), middle
class ($4–13 a day) and above middle class (> $13 a day).18 During the period
2000–2012, the number of workers living with their families below the $2-a-day
poverty line in the LDCs increased by 27.3 million, and by 2012 there were 246
million such people.19


As shown in chart 32, nearly two thirds of LDC workers are living on less
than $2 a day. The extremely poor account for 50 per cent of those employed in
LDCs, as compared to 14 per cent in ODCs. Near poor workers are defined as
those who are not poor but who are highly vulnerable to poverty; they account
for 17 per cent of LDC employment. Workers in the developing middle class
category are considered an emerging consumer class and are more likely to have
access to higher levels of education and health care than the aforementioned
classes. In ODCs, the near poor and developing middle class categories
account for the majority (61 per cent) of those employed. The group described
as developed middle class and above encompasses workers in developing
countries who are equivalent to the lower end of the middle class in the United
States and who are able to afford most international consumer goods (Kapsos
and Bourmpoula, 2013). Based on the data presented, there is little evidence
of a large or substantial employed middle class in the LDCs, which may have
negative implications for wider economic growth, investment and employment
generation. However, other evidence suggests that in sub-Saharan Africa and
Asia, over the past 20 years the middle class has been growing quite rapidly
(African Development Bank, 2011; Ravallion, 2009a).


Own-account workers (the
self-employed) and vulnerable


employment are the main categories
of the informally employed.


Nearly two thirds of LDC workers
are living on less than $2 a day. The
extremely poor account for 50 per


cent of those employed in LDCs, as
compared to 14 per cent in ODCs.


In ODCs, the near poor and
developing middle class categories


account for the majority (61 per
cent) of those employed.




75CHAPTER 3. Employment Trends in LDCs


3. INFORMAL SECTOR EMPLOYMENT


The informal sector may be defined as consisting of units engaged in
the production of goods or services with the primary objective of generating
employment and incomes for the persons concerned. It covers a wide range
of labour market activities that combine two main groups of activities. The first
group is made up of coping strategies (survival activities, such as casual jobs,
temporary jobs, unpaid jobs, subsistence agriculture and multiple job holding) of
individuals and families in an economic environment where alternative income
generation opportunities are scarce. The second group comprises activities that
are a product of frequently rational behaviour and unofficial earning strategies of
entrepreneurs seeking to avoid State regulations; such strategies may include
tax evasion and the avoidance of labour regulation and other government or
institutional regulations. In the informal sector, labour relations are based more on
casual employment, kinship or personal and social relations than on contractual
arrangements. In the LDCs, the informal sector is typically characterized by the
following:


t -BCPVSJOUFOTJWF MPXUFDIOPMPHZ BDUJWJUJFT *-0
t -JNJUFE JG BOZ TPDJBM QSPUFDUJPO TDIFNFT
t " QSFEPNJOBODF PG NJDSPFOUFSQSJTFT FNQMPZJOH B NBYJNVN PG ýWF QFPQMF
t " QSFWBMFODF PG VOTLJMMFE MBCPVS BMUIPVHI JO TPNF -%$T UIJT JT DIBOHJOH


(e.g. Ethiopia, Uganda and Zambia, where more graduates are entering
the informal labour market because of few formal-sector employment
opportunities) (World Bank, 2012a);


t 1SPEVDUJPO NBJOMZ GPS VSCBO PS QFSJVSCBO NBSLFUT VTJOH MPDBM SBX NBUFSJBMT
and


Chart 32. Employment by economic class in the LDCs and ODCs (various years)


1%


53%


23%


17%


6%


A. LDCs


Extremely poor (< $1.25) Moderately poor ($1.25 - $2) Near poor ($2 - $4)


Developing middle class ($4 - $13) Developed middle class (> $13)


14%


17%


29%


32%


8%


B. ODCs


Source: UNCTAD secretariat calculations, based on Kapsos and Bourmpoula (2013).
Note: The LDC sample comprises 20 LDCs: Benin, Bhutan, Burkina Faso, Burundi, Cambodia, Democratic Republic of the Congo, Guinea,


Lesotho, Liberia, Madagascar, Malawi, Mali, Mozambique, Nepal, Niger, Senegal, Sierra Leone, Timor-Leste, Togo and Uganda.
The ODC sample comprises 32 developing countries. The dataset includes several household and enterprise panel surveys and
databases for each individual country conducted during the period 2000–2011 (see Kapsos and Bourmpoula, 2013).




The Least Developed Countries Report 201376


t )FUFSPHFOFJUZ PG TDPQF TDBMF BDUJWJUJFT BOE FNQMPZFFT FH DIJMESFO
women, etc.).


Employment in the informal economy compares the estimated number of
people in informal employment to the total number of employed persons in the
non-agricultural sector. Table 16 presents available data on the importance of
informal sector firms in LDC employment. The number of persons employed in
the informal sector greatly exceeds those in informal employment outside the
informal sector. If both components of informal sector employment in informal
firms and informal (wage) employment outside informal firms as a share of non-
agricultural employment are considered, employment in the informal sector
accounts for between 40 and 82 per cent of non-agricultural employment. For
example, in Mali, employment in informal firms is especially significant, comprising
72 per cent of non-agricultural employment, while informal employment outside
informal firms is estimated at 11 per cent of non-agricultural employment. Some
83 per cent of all non-agricultural employment in Mali is in the informal sector.


The share of women employed in the informal sector in total non-agricultural
employment is much higher than for men in all LDCs except Uganda. This is
primarily because the non-agricultural informal sector there is dominated by
traditionally male occupations (such as carpentry, handicrafts and transportation
services), and gender norms continue to dictate what women are allowed to
do and whether they can work outside the marital home. In 2008, 40 per cent
of Ugandan women were unpaid family workers, mainly in agriculture (Kasirye,
2011).


Table 16 also presents cross-country data suggesting that informal
employment is associated with low income per capita and relatively high rates of
poverty. As previously noted, significant sections of the LDC population struggle
to survive and face extreme poverty with no option other than to work in the
informal sector, with little legal, employment or social welfare protection.


Employment opportunities in the formal sector are apparently not expanding
quickly enough to absorb the growing non-agricultural labour force, and
consequently the proportion of employment in the informal sector as a share of
non-agricultural employment is rising. The informal economy plays a significant
role in the LDCs’ socio-economic and political life in terms of both size and
growth. As discussed earlier, in those LDCs characterized by high rates of
population growth and/or urbanization, the informal sector tends to absorb
much of the labour force.


C. Employment growth and
estimated net job creation


As we have previously stressed, sustainable and inclusive economic
growth in the LDCs will critically depend on the creation of productive and
decent employment, which paves the way for broader social and economic
advancement. But the pattern of economic growth also matters for both job
creation and poverty reduction. Where growth is largely driven by capital-
intensive industries (e.g. mining), employment multipliers and poverty reduction
are often low. Although the LDCs’ growth performance of the past decade has
been impressive, it has failed to generate sufficient productive employment. A
broad vindication of this assertion is provided by the evolution of employment
elasticities to GDP growth, which measure the relative change in employment
associated with each percentage point of economic growth. Employment
elasticities also furnish useful information about employment and labour
productivity trends. LDCs with a fast-growing working-age population and high


Employment in the informal sector
accounts for between 40 and
82 per cent of non-agricultural


employment.


Informal employment is associated
with low income per capita and
relatively high rates of poverty.


Employment opportunities in the
formal sector are not expanding


quickly enough to absorb the
growing non-agricultural labour


force.


In those LDCs characterized by high
rates of population growth and/


or urbanization, the informal sector
tends to absorb much of the labour


force.




77CHAPTER 3. Employment Trends in LDCs


Ta
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16


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The Least Developed Countries Report 201378


rates of labour force participation need relatively high employment elasticities
because their population relies primarily on its own labour for survival. The
provision of sufficient employment opportunities for the working poor and youths
is thus a crucial government policy objective. It is worth noting that during the
“Arab Spring” of 2011 and other anti-government protests in Africa, joblessness
was a key issue in bringing youths onto the streets. Similarly, a World Bank
(2011) report notes that half of the young people who join a dissident movement
cite unemployment as the main reason for doing so.


Following Martins (2013), the elasticities20 presented in chart 33 and chart
34 should be interpreted as follows: During periods of positive economic
and employment growth, elasticities below unity suggest that employment
growth is dominated more by labour productivity growth than by broad-based
employment generation. For developing countries, employment elasticities
should be around 0.7, and for some African countries even higher, given the
rapid rise in labour force growth (Martins, 2013; Khan, 2007). In chart 33,
employment elasticities to GDP for 2004–2008 indicate that some LDCs have
been able to translate modest GDP growth into higher employment. The data
further suggest that some of the LDCs with the lowest average GDP growth per
annum during the period enjoyed the highest growth elasticities of employment.
This is the case, for example, in Burundi (1.18), Chad (1.02), Comoros (1.49),
Haiti (1.31) and Yemen (1.05). Conversely, the LDCs with the highest average
GDP growth per annum during the same period had some of the lowest growth


Chart 33. Growth elasticity of employment in LDCs, 2004–2008


Angola


Ethiopia


Myanmar


Eq. Guinea


Cambodia


Bhutan


Togo


SudanMozambique
Rwanda


Lao PDR
Uganda
Solomon Isl.


Malawi


Niger


Sierra Leone


D.R. Congo
Maldives


Zambia
Bangladesh


Gambia


Burkina Faso
Madagascar


Mali


Mauritania


Lesotho


Benin


Yemen


Senegal


Nepal


Burundi


Central African Republic


Guinea


Guinea-Bissau


Haiti


Tanzania


Chad


Comoros


0


0.2


0.4


0.6


0.8


1.0


1.2


1.4


1.6


0 2 4 6 8 10 12 14 16 18 20


Em
pl


oy
m


en
t e


la
st


ic
ity


o
f g


ro
w


th
, 2


00
4–


20
08


Average annual GDP growth (%), 2004–2008


Lowest growth quartile 2004-2008


Highest growth quartile 2004-2008


High employment


Moderate to low
employment


Source: UNCTAD secretariat calculations, based on ILO, Key Indicators of the Labour Market (KILM), Sixth Edition, 2009.


The pattern of economic growth also
matters for both job creation and


poverty reduction. Where growth is
largely driven by capital-intensive


industries (e.g. mining), employment
multipliers and poverty reduction are


often low.




79CHAPTER 3. Employment Trends in LDCs


elasticities of employment: Angola (0.20), Myanmar (0.13), Equatorial Guinea
(0.27), Mozambique (0.30) and United Republic of Tanzania (0.27). Each of these
countries averaged GDP growth rates in excess of 8 per cent per annum (above
the 2001 Brussels Programme of Action target of 7 per cent) during the period
2004–2008. The relatively low elasticities for countries like Angola, Equatorial
Guinea, Ethiopia, Mozambique and United Republic of Tanzania indicate that
their economic growth has been primarily capital-intensive — since some of
these countries are mainly energy and minerals exporters — with relatively
limited employment generation.


Nonetheless, the data suggest that some countries, such as Bhutan, Togo
and Uganda, have been better able to translate high rates of GDP growth
into employment increases, especially during the 2000s. Their elasticities for
2004–2008 were considerably higher than those for Angola, Equatorial Guinea,
Mozambique and United Republic of Tanzania.


Chart 34 shows employment elasticities to GDP covering two periods (2004–
2008 and 2000–2008) for a sample of 39 LDCs. For Bhutan (0.73), Ethiopia
(0.66), Rwanda (0.40) and Uganda (0.47), the 2000–2008 elasticities are much
higher than the 2004–2008 iteration.


Although employment elasticities to GDP are often unstable, and to some
extent depend on the pattern of growth and related policy frameworks, it is
nonetheless clear that in most LDCs those elasticities have declined over the
past decade; hence, the average 2004–2008 elasticity tends to be lower than
that for 2000–2008 (for 17 of the 39 LDCs in the sample). During the past
decade, employment elasticities to growth have declined in at least half of the
LDCs (see chart 34). When elasticity estimates are compared for the periods
1996–2000 and 2004–2008, 21 of the 39 LDCs experienced a decline in
employment elasticities to growth. This is a concern, given the high rates of
labour force growth in the LDCs (see chart 16).


Only two LDCs have negative employment elasticities to GDP: Guinea Bissau
and Mauritania. Negative elasticity, together with positive rates of economic
growth, suggests that employment decreased over the period, while labour
productivity grew faster than overall GDP. Eritrea is clearly a statistical outlier,
given its exceptionally high elasticity of employment to GDP growth (exceeding
2.0) during the period 2000–2008. This may be due to contentious government
policies, such as the National Service Programme and its concomitant Warsai-
Yikaalo Development Campaign, which are based on compulsory labour
schemes (Kibreab, 2009, World Report 2013: Eritrea, 2013).


In summary, the negative relationship depicted in chart 33 demonstrates
that those countries with faster GDP expansion grew with relatively lower
employment creation. Moreover, as Valensisi and Davis (2011a) have shown,
elasticity tended to fall more frequently precisely in those LDCs that were
growing faster. Considering the elasticities in conjunction with growth data
provides useful complementary information about productivity change. As
previously noted, McMillan and Rodrik (2011) argued that a pattern of sectoral
labour reallocation has emerged in African developing countries, with perverse
effects on aggregate labour productivity, which they term “productivity-reducing
structural change”. This is where labour has moved towards less productive
activities, such as urban services, in the informal sector, rather than towards
higher-productivity activities, which enhance growth and structural change.
However, Martins (2013) notes that in Ethiopia, although agricultural productivity
is low, much of the services sector is modern (primarily financial, business and
real estate services) and has the highest productivity levels.


Some of the LDCs with the lowest
average GDP growth per annum


during the period 2004–2008
enjoyed the highest growth
elasticities of employment.


The LDCs with the highest average
GDP growth per annum during the


same period had some of the lowest
growth elasticities of employment.


During the past decade,
employment elasticities to growth
have declined in at least half of the
LDCs. This is a concern, given the
high rates of labour force growth in


the LDCs.




The Least Developed Countries Report 201380


Chart 34. Elasticity of total employment to total GDP in the LDCs, 2000–2008


-1 0 1 2 3 4


Zambia


Yemen


Uganda


Togo


United Rep. of Tanzania


Sudan


Solomon Islands


Sierra Leone


Senegal


Rwanda


Niger


Nepal


Myanmar


Mozambique


Mauritania


Mali


Maldives


Malawi


Madagascar


Lesotho


Lao People's Dem. Rep.


Haiti


Guinea-Bissau


Guinea


Gambia


Ethiopia


Eritrea


Equatorial Guinea


Dem.Rep of Congo


Comoros


Chad


Central African Rep.


Cambodia


Burundi


Burkina Faso


Bhutan


Benin


Bangladesh


Angola


Elasticity of total employment to total GDP, average 2000–2008
Elasticity of total employment to total GDP, 2004–2008


Source: UNCTAD secretariat calculations, based on ILO, Key Indicators of the Labour Market (KILM), Sixth Edition, 2009.


A useful conceptual experiment involves computing the counterfactual effect
that growth could have had on employment if the elasticities had remained
the same as during 1996–2000. In this respect, the estimates suggest that,
ceteris paribus, nearly 25 million additional jobs could have been created in
the LDCs had all elasticities remained at their 1996–2000 levels (Valensisi and
Davis, 2011). Although the question is beyond the scope of this chapter, given
that the LDCs apparently failed to translate growth adequately into employment




81CHAPTER 3. Employment Trends in LDCs


during the boom of 2002–2008, what are the key impediments to their doing
so? Valensisi and Gauchi (2013) combine secondary labour force data with
different growth scenarios based on historical employment elasticities of growth
to assess whether achieving the IPoA target of a 7-per-cent growth rate by 2020
would actually be enough to generate sufficient employment. They show that,
even if the IPoA target is achieved, a number of LDCs will not be in a position
productively to employ all the new labour market entrants unless their pattern of
growth shifts towards more diversified employment-intensive sectors.


For the LDCs, improved labour productivity growth, especially through
structural change, may have consequences for several elements of the
labour market since intersectoral shifts of labour require different sets of skills
and mobility. If, due to a lack of appropriate training and skills and to limited
geographical mobility, LDC citizens cannot avail themselves of these job
opportunities, the process may be impeded, creating barriers to successful job-
hunting.


Table 17 presents the main data used for a decomposition of GDP growth
per capita for 11 LDCs (listed in the following paragraph) in order to explore
whether growth has translated into increased productivity and employment at
the aggregate level and by sector. Following the World Bank (2012b), to begin
the decomposition we use the equation Y/N = A/N * Y/E – where Y is total GDP,
N the total population, A the working-age population (i.e., the labour force), and
E is total employment. This approach allows us to assess the contribution of the
following factors to GDP growth: the employment rate (i.e., the employment-to-
population ratio); 21 output per worker (i.e., labour productivity); and demographic
change.


This chapter began by outlining the main employment trends in the quantity
and quality of jobs in the LDCs. Most LDCs have the potential to benefit from
a demographic dividend (fewer dependants per working-age adult), given the
rising and relatively high share of working-age population in the total population.
For this section of the chapter, we have selected 11 LDCs that are broadly
representative of the group (Angola, Bangladesh, Cambodia, Comoros,
Ethiopia, Haiti, Mozambique, Nepal, Sierra Leone, United Republic of Tanzania
and Zambia) in terms of export orientation, employment structure and data
availability, (see table 17). The results of the decomposition are quite interesting.


Table 17. Decomposition of GDP per capita in selected LDCs, 2000–2010


Sectoral
classification


LDC


Percentage change 2000–2010
Decomposition of growth in per
capita value added, percentage


contribution, 2000–2010


Total Growth in
per capita GDP
(value added,


2000 $)
Δ(Y/N)


Total
number of
employed


Total
population of
working age


Output per
worker


Employ-
ment rate


Growth
linked to


output per
worker
Δ(Y/E)


Growth linked
to changes
employment


rate
Δ(E/A)


Growth linked
to changes in
the share of
population of
working age


Δ(A/N)


Manufactures Bangladesh 54.7 24.6 25.4 42.5 -0.6 81.0 -1.5 20.5
Cambodia 84.3 39.3 31.8 50.3 5.6 66.3 9.1 24.6
Haiti -6.6 27.1 23.6 -15.0 2.8 239.4 -41.1 -98.3


Agriculture Ethiopia 80.3 36.4 36.6 67.2 -0.2 87.0 -0.3 13.3
United Rep.of Tanzania 48.7 33.7 31.2 46.6 1.9 96.3 4.7 -1.0


Mining and
minerals


Angola 91.9 36.7 40.0 92.3 -2.3 100.3 -3.7 3.4
Zambia 52.7 24.3 25.4 57.6 -0.9 107.7 -2.1 -5.6


Mixed Mozambique 71.5 27.2 27.6 73.3 -0.4 102.0 -0.7 -1.3
Sierra Leone 61.8 44.9 40.6 58.2 3.0 95.2 6.3 -1.5


Services Comoros -3.2 35.8 28.0 -6.9 6.1 219.7 -182.4 62.7
Nepal 18.8 29.9 32.2 12.3 -1.7 67.2 -10.0 42.8


Source: UNCTAD secretariat calculations, from UNCTADstat and World Development Indicators data using World Bank JoGGs (2012).
Note: Δ(Y/N): Total Growth in per capita GDP (value added, 2000 $). (Y= total GDP and N= the total population).


Δ(Y/E): Growth linked to output per worker. (E is total employment).
Δ(E/A): Growth linked to changes in the employment rate. (A is the working-age population).
Δ(A/N): Growth linked to changes in the share of population of working-age.


The estimates suggest that, ceteris
paribus, nearly 25 million additional
jobs could have been created in the
LDCs had all elasticities remained at


their 1996–2000 levels.


LDCs will not be in a position
productively to employ all the new
labour market entrants unless their


pattern of growth shifts towards
more diversified employment-


intensive sectors.




The Least Developed Countries Report 201382


For the whole period 2000–2010, Angola — the only oil exporter in the sample
— had the highest per capita GDP growth rate (91.9 per cent). This growth was
accompanied by a rise in output per worker (92.3 per cent), an increase in the
working-age population (40 per cent) and a decline in employment rates (-2.3
per cent).


Cambodia (84.3 per cent), Ethiopia (80.3 per cent), Mozambique (71.5 per
cent) and Sierra Leone (61.8 per cent) all had high per capita GDP growth rates
for the decade. Only the island and services-oriented LDCs in the sample had
relatively low or negative growth rates: Comoros (-3.2 per cent) and Haiti (-6.6
per cent).


Over the period concerned, the extractive industry economies of Angola,
Mozambique and Zambia all registered a fall in employment rates and a strong
rise in output per worker. The manufactures exporters — namely, Bangladesh,
Cambodia and Haiti — had a mixed growth and employment performance. The
employment rate declined in Bangladesh (-0.6 per cent) but grew in Cambodia
(5.6 per cent). Haiti not only registered a negative per capita GDP growth rate, it
also had a decline in output per worker (i.e., labour productivity fell), in part due
to the disastrous economic impact of the 2010 earthquake. Nonetheless, the
country’s employment rate rose by 2.8 per cent.


If we consider the contribution of demographic change (Δ(A/N)), the
employment rate (Δ(E/A)) and output per worker (Δ(Y/E)), it is clear that for all 11
countries the bulk of the growth per capita was accounted for by productivity
growth (output per worker), with minor changes in the demographic structure
and employment rate. Growth linked to changes in the share of population of
working age (demographic structure) was significant only in Nepal and to a lesser
extent in Bangladesh, Cambodia and Ethiopia. Nepal appears to be successfully
exploiting its demographic dividend, since its working-age population as a
share of the total population is rising (i.e., fewer dependants per working-age
adult) and accounted for about 42 per cent of the change in GDP per capita
during 2000–2010. Ceteris paribus, the demographic transition would thus have
generated per capita growth equivalent to 42 per cent of the actual observed
growth (table 17).


The only countries in the sample where the employment rate made a positive
contribution to GDP were Cambodia (where it accounted for 9 per cent of the
change in GDP per capita), Sierra Leone (6.3 per cent) and United Republic of
Tanzania (4.7 per cent). This may reflect important positive changes for these
economies, such as youths continuing their education for longer periods of time,
which helps build future productive capacities. A negative contribution of the
employment rate implies that had the rate not declined, then GDP per capita
would have been higher. The decomposition does not provide information about
the quality of work.


In order tentatively to explore employment, growth and structural change,
productivity growth should be decomposed into two parts: within sectors,
and across sectors (McMillan and Rodrik, 2011b). Table 18 summarizes the
results of a sectoral disaggregation of GDP and employment for three broad
sectors: agriculture, industry and services. Unfortunately, further disaggregation
was not possible because of insufficient sectoral-level employment data for the
LDCs. Where such data from household or other micro-level surveys exist (for
example, a World Bank Living Standards Measurement Study), they are often
not internationally comparable due to different sampling, data collection and
collation methodologies. For the 11 selected LDCs, we decompose growth,
changes in employment and intersectoral shifts to highlight the sectors with
potentially high employment intensity and productivity growth.


During the period 2000–2010, the
LDC extractive industry economies


registered a fall in employment
rates and a strong rise in output
per worker. The manufactures


exporters had a mixed growth and
employment performance.


The bulk of the growth per capita
was accounted for by productivity
growth (output per worker), with


minor changes in the demographic
structure and employment rate.




83CHAPTER 3. Employment Trends in LDCs


Table 18. Growth decomposition, percentage contribution to total growth in GDP (value added) per capita, 2000–2010
(Percentages)


LDC Sectoral contributions


Contribution of
within sector


changes in output
per worker


Contribution
of changes in
employment


Contributions
of inter-sectoral


shifts
Total


Bangladesh Agriculture, hunting, forestry, fishing 12.8 -22.0 13.8 4.7
Industry 19.1 5.1 6.6 30.8
Services 15.1 15.4 13.5 44.1
Subtotals 47.1 -1.5 33.9 79.5
Demographic component - - 20.5
Total 100.0
Total percentage change in value added per capita 2000–2010 54.7


Cambodia Agriculture, hunting, forestry, fishing 10.1 4.8 1.0 15.9
Industry 26.1 0.3 -1.0 25.4
Services 27.4 4.0 2.7 34.1
Subtotals 63.6 9.1 2.7 75.4
Demographic component - - 24.6
Total 100.0
Total percentage change in value added per capita 2000–2010 84.3


Ethiopia Agriculture, hunting, forestry, fishing 27.0 -3.5 1.5 25.0
Industry 10.9 0.1 0.5 11.5
Services 40.4 3.1 6.7 50.2
Subtotals 78.3 -0.3 8.7 86.7
Demographic component 13.3
Total 100.0
Total percentage change in value added per capita 2000–2010 80.3


United Rep.of
Tanzania


Agriculture, hunting, forestry, fishing 18.5 -16.8 12.4 14.2
Industry 0.0 5.7 26.5 32.3
Services 14.6 15.7 24.2 54.5
Subtotals 33.1 4.7 63.2 101.0
Demographic component -1.0
Total 100.0
Total percentage change in value added per capita 2000–2010 48.7


Angola Agriculture, hunting, forestry, fishing 14.0 -24.0 18.0 8.0
Industry 31.2 3.9 28.5 63.6
Services 17.9 16.5 -9.3 25.1
Subtotals 63.1 -3.7 37.2 96.6
Demographic component 3.4
Total 100.0
Total percentage change in value added per capita 2000–2010 91.9


Zambia Agriculture, hunting, forestry, fishing 15.9 -3.4 1.1 13.6
Industry 8.1 8.5 17.2 33.8
Services 74.1 -7.2 -8.8 58.1
Subtotals 98.2 -2.1 9.5 105.6
Demographic component -5.6
Total 100.0
Total percentage change in value added per capita 2000–2010 52.7


Mozambique Agriculture, hunting, forestry, fishing 28.2 -10.0 6.2 24.4
Industry 9.7 2.5 12.0 24.2
Services 32.2 6.8 13.6 52.6
Subtotals 70.2 -0.7 31.8 101.3
Demographic component -1.3
Total 100.0
Total percentage change in value added per capita 2000–2010 71.5


Sierra Leone Agriculture, hunting, forestry, fishing 79.7 -13.3 3.7 70.1
Industry -3.6 4.6 4.3 5.3
Services 6.2 15.0 4.9 26.1
Subtotals 82.3 6.3 12.9 101.5
Demographic component - - -1.5
Total 100.0
Total percentage change in value added per capita 2000–2010 61.8




The Least Developed Countries Report 201384


Within-sector productivity growth contributions to GDP per capita growth
during the period 2000–2010 were large (70 to 98 per cent) for most of the
selected LDCs. The main exceptions are United Republic of Tanzania and
Nepal, where the respective 63-per-cent and 37.5-per-cent contributions of
intersectoral shifts (i.e., structural change) are the largest such contributions. In
terms of within-sector contributions to GDP growth, the services sector plays
a prominent role in 6 of the 11 countries. The contribution of agriculture is still
predominant in three LDCs: United Republic of Tanzania, Sierra Leone and
Comoros. The industrial sector plays a key role in Angola and to a lesser extent
in Cambodia. Nonetheless, gains in labour productivity within sectors (especially
industry and services) are often the main driver of aggregate economic growth.
Finally, the data suggest that demographic change made a relatively small
contribution to per capita GDP growth in most of the selected LDCs, with the
exception of Comoros (62.7 per cent) and Nepal (42.8 per cent). These trends
in turn indicate that economic growth tended to become less effective in terms
of employment generation.


While these estimates represent simple orders of magnitude, the nature of
the problem can clearly not be overlooked: Relatively high rates of economic
growth in the LDCs had limited employment intensity. On the other hand, if
technological change, macroeconomic conditions and labour supply issues are
also considered, there is little doubt that the “employment challenge” faced by
LDCs is, at least to some extent, a consequence of the prevailing pattern of
structural change.


LDC Sectoral contributions


Contribution of
within sector


changes in output
per worker


Contribution
of changes in
employment


Contributions
of inter-sectoral


shifts
Total


Comoros Agriculture, hunting, forestry, fishing 104.1 -162.2 10.7 -47.4
Industry 30.0 0.6 5.9 36.5
Services 52.4 -20.9 16.6 48.1
Subtotals 186.5 -182.4 33.3 37.3
Demographic component - - 62.7
Total 100.0
Total percentage change in value added per capita 2000–2010 -3.2


Haiti Agriculture, hunting, forestry, fishing 71.1 23.6 -23.5 71.2
Industry 62.2 -6.8 -4.4 51.0
Services 138.6 -57.9 -4.6 76.1
Subtotals 271.9 -41.1 -32.5 198.3
Demographic component - - -98.3
Total 100.0
Total percentage change in value added per capita 2000–2010 -6.6


Nepal Agriculture, hunting, forestry, fishing 21.1 -24.3 9.3 6.0
Industry -9.2 4.5 3.2 -1.4
Services 17.8 9.8 25.0 52.6
Subtotals 29.6 -10.0 37.5 57.2
Demographic component - - 42.8
Total 100.0
Total percentage change in value added per capita 2000–2010 18.8


Source: Secretariat calculations based on UNCTADstat and World Development Indicators data using World Bank JoGGs (2012).


Table 18 (contd.)


Within-sector productivity growth
contributions to GDP per capita


growth during the period 2000–2010
were large for most of the selected


LDCs.


The data suggest that demographic
change made a relatively small
contribution to per capita GDP
growth in most of the selected


LDCs.




85CHAPTER 3. Employment Trends in LDCs


D. Conclusions


Following the path to full, decent employment is a challenge in any country,
let alone in those with special needs. It requires that per capita GDP is adequate
to ensure reasonable compensation and to leave a surplus for financing
investment, social security and other human development needs, while also
delivering a satisfactory profit in economies driven predominantly by private
initiative. However, per capita GDP depends, inter alia, on productivity, and
the higher the productivity, the lower the employment delivered by every unit
increment in GDP. Ensuring adequate decent work thus entails combining a
reasonably high average productivity with a rejuvenation of some traditionally
important employment-intensive areas of activity, such as agriculture, and a fast
enough rate of growth in the volume of economic activity to foster conditions for
realizing both employment expansion and reasonable compensation.


This chapter shows that relatively high rates of GDP growth in the LDCs
have not translated into concomitant levels of employment growth in industry.
Instead, the services sector has seen employment rise more vigorously. This
reflects a shift of labour from low-productivity activities (mainly in agriculture) to
low-productivity activities in the services (largely non-tradable) sector. Over time,
the services sector is thus accounting for a greater share of the LDC labour
force. Furthermore, the historic labour productivity divide between LDCs and
ODCs remains substantial, although it has narrowed since 2000. The agricultural
labour productivity gap between LDCs, ODCs and developed economies has
also widened since 1985. Increased agricultural labour productivity in LDCs has
the potential to both raise the real incomes of rural households and stimulate
demand for rural non-farm goods and services. The employment-creating
potential of investment in rural irrigation, drainage, provision of feeder channels,
local land reclamation, afforestation and so forth is considerable. This can
be strengthened if such investment is embedded in well-designed and well-
targeted employment programmes (see chapter 5).


Although RNF employment is increasingly important in LDCs, on-farm
production and jobs are still the mainstay for most LDCs. As the Report shows,
the rural non-farm economy is a vital source of employment for Bangladesh,
Malawi and Nepal, with non-farm activity participation rates in excess of 45 per
cent.


The LDCs have a high labour force participation rate because with limited
or no social security in many of these countries, the poor have no option but to
seek work. More women than ever before are part of the LDC labour force, but
this has not translated into better jobs or less gender discrimination. Similarly,
the rise in women’s employment has in most LDCs failed to generate a significant
improvement in their standard of living. A disproportionate number of women
are “contributing family workers” in vulnerable employment.


This chapter also documents the fact that indicators of vulnerable
employment and working poor have improved since 2000, but from a relatively
weak starting point. Vulnerable employment still accounts for about 80 per cent
of total employment in the LDCs.


Generally speaking, unemployment in the LDCs disproportionately affects
the youth labour force. In most LDCs, the youth unemployment rate (i.e., the
unemployment rate for those aged 15–24 years) is higher than the average LDC
unemployment rate for both men and women, and in most cases is almost twice
that rate. LDC youths typically find work in the informal sector, but often these
jobs do not pay reasonable wages, improve skills or offer much job security. If,


This chapter shows that relatively
high rates of GDP growth in the
LDCs have not translated into


concomitant levels of employment
growth in industry.


More women than ever before are
part of the LDC labour force, but this
has not translated into better jobs or


less gender discrimination.


Vulnerable employment still
accounts for about 80 per cent of


total employment in the LDCs.




The Least Developed Countries Report 201386


however, LDCs can provide the burgeoning youth population with the necessary
skills, education and decent jobs, their youth can potentially become a major
source of global and domestic consumption.


The chapter has further shown that countries with faster GDP growth
achieved this with relatively lower employment creation. Employment elasticities
declined in about half of the LDCs in the period 2000–2008, and tended to
fall more frequently in precisely those LDCs that were growing faster. Although
the reported LDC employment elasticities to growth have generally not been
very low by international standards, given the demographic and economic
challenges these countries are likely to face, these elasticities will probably not
be high enough to reach the necessary employment levels.


It is clear from the chapter’s consideration of the contribution of demographic
change, the employment rate and output per worker to per capita GDP growth
that for all of the selected LDCs, the bulk of the growth per capita was accounted
for by productivity growth (output per worker), with minor changes in the
demographic structure and employment rate. There were only three countries
in the sample where the employment rate made a positive contribution to GDP.
But the chapter also argues that economic growth has tended over time to
become less effective in terms of creating jobs.


This fact has been recognized to some extent at the multilateral level by
the inclusion of “full and productive employment” among the targets for MDG
1, especially as the functioning of the labour market is also critical to human
development and poverty reduction. But the available labour market and
informal sector information for LDCs is sparse. There is an urgent need for
more data collection and statistical analyses, which should figure prominently
in the post-2015 MDG debate. Further poverty reduction will, however, require
the sustained creation of productive employment, especially in countries where
extreme poverty affects the majority of the population and where government
is unable to address the problem through redistribution (McKinley and Martins,
2010; Ravallion, 2009b; UNCTAD, 2010).


During the 2002–2008 commodity boom, mining and quarrying thrived as
relatively capital-intensive industries, although with limited multiplier effects on
other sectors of the economy. The agricultural sector, by contrast, performed
poorly, further entrenching subsistence living standards in rural areas. Certainly,
the relatively poor performance of the agricultural sector in most LDCs has been
particularly detrimental, given that the poverty elasticity of growth in agriculture
is typically much higher than the corresponding elasticity of growth in other
sectors of the economy (Warr, 2002; Ravallion and Chen, 2004). While the
manufacturing and services sectors also grew during this period, that growth
was too weak to absorb large segments of the labour force. The bulk of urban
workers in LDCs have accordingly sought employment in services or remain
underemployed in the informal sector. McMillan and Rodrik (2011) maintain that
this pattern of sectoral labour reallocation has perverse effects on aggregate
labour productivity, which they term “productivity-reducing structural change”. In
most LDCs, rather than moving from low‐productive to highly productive sectors,
thereby enhancing the GDP per person employed, this labour reallocation tends
to perpetuate the dual nature22 of their economies, which could potentially keep
large sections of the labour force underemployed or unemployed.


Thus, much of the relatively strong economic growth performance of the
LDCs during the 2000s may have represented a lost opportunity to stimulate
employment generation and foster stronger demand for “human capital
deepening” by encouraging a shift towards more knowledge‐intensive activities.
Since 1990, these countries have made significant improvements in primary
school completion rates and literacy rates for people aged 15–24 years (see


Although the reported LDC
employment elasticities to growth
have generally not been very low
by international standards, given
the demographic and economic
challenges these countries are


likely to face, these elasticities will
probably not be high enough to


reach the necessary employment
levels.


The bulk of urban workers in
LDCs have accordingly sought


employment in services or remain
underemployed in the informal


sector.


In most LDCs, rather than moving
from low‐productive to highly
productive sectors, thereby


enhancing the GDP per person
employed, this labour reallocation


tends to perpetuate the dual nature
of their economies.




87CHAPTER 3. Employment Trends in LDCs


chapter 5). However, the critical issue for LDCs is whether their economies will
be able productively to employ new labour market entrants, thereby seizing the
window of opportunity created by the “youth bulge” and realizing the potential
benefits arising from significant long-term investments in education.




The Least Developed Countries Report 201388


Notes


1 These data reflect the group (cohort) of workers (aged 15–24 years) entering the LDC
labour market, or reaching the age when they seek an income-generating activity,
which is considered to represent 1/10 of the 15–24 year age group (Losch et al.,
2012). The annual group (cohort) of new workers highlights the weight of youth in the
labour market. The estimate also makes it possible to avoid statistical uncertainties
about whether people in developing countries actually leave the workforce after age
64 (the working-age population is usually defined as 15–64 years). This is because in
most LDCs, the labour markets include many people who continue to work after age
64, notably in the agricultural and urban informal sectors.


2 Labour market data for Sudan also include South Sudan. In the ILO Key Indicators of
the Labour Market (KILM) series, there are no available data for Djibouti, Liberia, Sao
Tome and Principe, and Somalia.


3 The labour force is the sum of the employed and the unemployed. The population not
economically active is generally classified by the reason for inactivity.


4 FAO estimates of the economically active population and the agricultural/non-
agricultural population segments are obtained by systematically applying to the total
population the series of relevant ratios, such as the proportion of economically active
population by age. The time series of estimates for the total population are provided
by the United Nations Population Division.


5 Most of the data presented here on LDC employment by sector are from ILO and
cover only the period 2000–2012. Other ILO employment forecasts cover the period
2013–2018 (International Labour Organisation, Employment Trends (EMP/TRENDS)
econometric model, April 2013).


6 During the 1990s many African LDCs introduced microeconomic reforms (such as
strengthening legal and regulatory systems and privatization) and policies to improve
their business and investment climate. These internal reforms (or structural changes)
helped spur productivity growth. In addition, urbanization is rising rapidly in African
LDCs and may in turn be boosting labour productivity (which tends to rise as workers
move from farm production to urban jobs) and investment.


7 Agriculture value added per worker is a measure of agricultural productivity. Value
added in agriculture measures the output of the agricultural sector (divisions 1–5 of
the International Standard Industrial Classification (ISIC)) less the value of intermediate
inputs. Agriculture comprises value added from forestry, hunting and fishing as well as
from the cultivation of crops and livestock production (World Development Indicators,
2013).


8 On the face of it, this outcome is somewhat surprising. However, there is growing
evidence that the adoption of technology (mainly in Asian LDCs) and expanding land
holdings (mainly in African LDCs) of small farmers result in changes in factor ratios that
in turn lead to productivity gains (Dercon and Zeitlin, 2009; Salami et al., 2010; World
Bank, 2007). However, the type of technology adopted, and the extent of access to
land, can affect productivity in different ways. For example, increased access to land
tends to lift labour productivity at the expense of land productivity, while technology
adoption tends to improve the productivity of all factors of production (Thirtle et al.,
2003; Dercon and Zeitlin, 2009; Salami et al., 2010).


9 The labour force participation rate is an indicator of the level of labour market activity.
It reflects the extent to which a country’s working-age population is economically
active and is defined as the ratio of the labour force to the working-age population,
expressed in percentage terms.


10 Additional indicators would be required in order to assess such issues as income,
working hours, informal sector employment, and underemployment, but they are not
available.


11 The term “working poverty” refers to those working persons with income below the
poverty line.


12 According to Karshenas’ (2010) LDC poverty estimates, in 2007, 53 per cent of the
population was living on less than $1.25 a day, and 78 per cent on less than $2 a day.
This means that 421 million people were living in extreme poverty in LDCs in 2007.
The incidence of extreme poverty ($1.25 a day) was significantly higher in African
LDCs, at 59 per cent, than in Asian LDCs, at 41 per cent. For the $2-a-day poverty
line, however, the difference was less marked: 80 per cent in African LDCs and 72 per
cent in Asian LDCs.




89CHAPTER 3. Employment Trends in LDCs


13 The agricultural total is the sum of the mean of shares for the following income
sources: agricultural crops, livestock and agricultural wage employment.


14 In Malawi the term ganyu describes various short-term rural labour relationships,
such as casual non-own-farm work (e.g. weeding, tillage) for other smallholders or
plantations.


15 Discouraged workers are defined as persons not in the labour force who are available
for work but do not seek work because they think they will not find a job.


16 Underemployment reflects underutilization of the productive capacity of the employed
population.


17 See, for example, Birdsall (2010) and Banerjee and Dufflo (2008), who maintain that
because the middle class tend to have greater levels of human, financial and physical
capital, growth in this group tends to lead to widespread gains in living standards due
to a higher propensity to invest in productive capacities.


18 All the dollar figures are calculated at purchasing power parity (PPP), a conversion
rate that eliminates differences between countries in the cost of goods and services.
National poverty rates are taken from the World Bank’s PovcalNet database of
internationally comparable poverty data.


19 UNCTAD secretariat calculations, based on data from ILO, Employment Trends
(EMP/TRENDS) econometric model, April 2013. This group now accounts for 62 per
cent of the LDCs’ workforce.


20 The employment elasticities presented here are derived from KILM (2004–2008 and
2000–2008) averages. No post-crisis (after 2009) elasticities have been utilized, as
they may be subject to errors and bias.


21 For a full explanation of the empirical relationship between the employment elasticity
of growth and the contribution of the employment rate methodology, see World Bank
(2012b), Job Generation and Growth Decomposition Tool (JoGGs).


22 An economy is considered to be dual when there are two distinct economic sectors
within a country that can be classified by different levels of development (for example,
the modern industrial sector and the traditional agriculture sector) and technology.


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UNCTAD (2010). The Least Developed Countries Report 2010: Towards a New
International Development Architecture for LDCs. United Nations publication. Sales
No. E.10.II.D.5. New York and Geneva.


UNCTAD (2012). The Least Developed Countries Report 2012: Harnessing Remittances
and Diaspora Knowledge to Build Productive Capacities. United Nations publication.
Sales No. E.12.II.D.18. New York and Geneva.


UNCTAD (2013). Commodities and Development Report: Perennial Problems, New
Challenges and Evolving Perspectives. United Nations Conference on Trade and
Development. New York and Geneva.


Valensisi G and Davis J (2011). Least Developed Countries and the Green Transition:
Towards a renewed political economy agenda. November. Available at http://ideas.
repec.org/p/msm/wpaper/2011-27.html (accessed 21 May 2013).


Valensisi G and Gauci A (2013). Graduated without passing? The employment dimension
and LDCs prospects under the Istanbul Programme of Action. Presented at the
Conference on Structural Change, Dynamics, and Economic Growth. Livorno,
Italy. 12 September. Available at https://editorialexpress.com/cgi-bin/conference/
download.cgi?db_name=STCHANGE&paper_id=79.


Warr PG (2002). Poverty incidence and sectoral growth: evidence from Southeast Asia.
Working Paper No. UNU-WIDER Research Paper DP2002/20. World Institute for
Development Economic Research (UNU-WIDER). Helsinki.


World Bank (2005). Pro-poor growth in the 1990s: lessons and insights from 14 countries.
World Bank. Washington (DC).


World Bank (2007a). Agriculture for Development. World Bank. Washington, D.C.


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Managers - World Bank Group. Available at http://www.enterprisesurveys.org/Data/
ExploreEconomies/2007/bangladesh#performance--size (accessed 15 July 2013).




The Least Developed Countries Report 201392


World Bank (2008). Youth in Africa’s Labor Market. Directions in development. Human
development. United Nations publication. Sales No. HD6276.A32 Y685 2008.
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World Bank (2011a). Agriculture - Bangladesh: priorities for agriculture and rural
development. Washington (DC).


World Bank (2011b). World Development Report 2011: Conflict, Security, and
Development. World Bank. Washington (DC).


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(DC).


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Sectoral Pattern of Growth and Its Employment and Productivity Intensity Reference
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World Bank (2013). World Development Report 2013: Jobs. World Bank. Washington
(DC).




4CHAPTER
A FRAMEWORK FOR LINKING
EMPLOYMENT CREATION AND
DEVELOPMENT OF PRODUCTIVE


CAPACITIES IN THE LDCS




The Least Developed Countries Report 201394


A. Introduction


For the past three decades, LDCs have been advised to focus on economic
growth as a strategy for economic diversification, poverty reduction and
economic development. In hindsight, this appears to have been sound policy
advice, since it is highly unlikely that LDCs will achieve economic and social
development and halve their poverty levels in line with internationally agreed
goals without a sustained period of growth. In fact, in recognition of this likely
scenario, the IPoA states (United Nations, 2011,para. 28) that in order for LDCs
to achieve “sustained, equitable and inclusive economic growth […] to at least
the level of 7 per cent per annum”, they should strengthen their productive
capacity in all sectors through structural transformation and overcome their
marginalization through effective integration into the global economy.


The market-based reforms and policies pursued by the LDCs over the past
two decades were motivated by this advice and were based on the assumption
that a combination of macroeconomic austerity, rapid liberalization, privatization
and deregulation would attract investment in sufficient quantity to generate
rapid output growth, which in turn would automatically create jobs of adequate
quantity and quality. As explained in chapter 3, however, it is now evident that
economic growth, although necessary, by itself neither guarantees job creation
nor automatically results in inclusive development. To the contrary, it may even
lead in some cases to an intensification of social inequality, rising unemployment
and an increased incidence of poverty. In short, if employment creation and
inclusive growth are the ultimate objectives, then the type of growth matters. It is
further evident that growth resulting from labour-intensive activities or originating
in areas where the poor live is more likely to create jobs and contribute to
inclusiveness than growth based on capital-intensive investments.


This chapter proposes a policy framework that links investment with growth
and employment creation to generate inclusive and sustainable development.
The framework is based on the premise that the employment creation potential of
growth will not be maximized without the development of productive capacities.
While initiatives to provide jobs through government- or internationally sponsored
programmes might be valuable sources of employment in the short term, they do
not provide long-term, sustainable solutions to the LDC employment challenge.


The proposed framework builds on three sets of ideas and concepts
developed through UNCTAD’s analytical work on LDCs and other developing
countries.


First, it hypothesizes that economic growth which does not create decent
jobs in sufficient quantity is unsustainable, and that job creation without the
development of productive capacities is equally unsustainable.


Second, it acknowledges that private sector development is critical for
economic growth and for creating employment and building productive
capacity. However, given the relatively weak private sector in many LDCs, it also
recognizes that in the short to medium term, the investment push required to
kick-start the growth process will likely originate in the public sector. The idea
here is not to encourage public ownership, which would amount to returning to
failed policies of the past. Rather, the idea is to ensure that the capital-mobilizing
power of the State is used to provide the initial investment impulses needed to
generate growth with employment.


Third, the policy framework provides a definition of productive capacity
that is broad enough to incorporate all the elements essential for a country to


The policies pursued by the LDCs
over the past two decades were
based on the assumption that a
combination of macroeconomic


austerity, rapid liberalization,
privatization and deregulation
would attract investment in


sufficient quantity to generate
rapid output growth, which in turn
would automatically create jobs of


adequate quantity and quality.


It is now evident that economic
growth, although necessary, by itself
neither guarantees job creation nor


automatically results in inclusive
development.


This chapter proposes a policy
framework that links investment with
growth and employment creation to
generate inclusive and sustainable


development. The framework is
based on the premise that the
employment creation potential


of growth will not be maximized
without the development of


productive capacities.




95CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


build the competencies needed to produce goods and services but that is also
sufficiently focused to identify priority areas for policies.


What is meant by productive capacities? At UNCTAD, the development of
the concept in the LDC context was linked to earlier efforts to understand how
structurally weak and underdeveloped economies like LDCs should promote
economic growth and how they should initiate and then accelerate the growth
process. Such efforts also sought to understand what are the key factors or
capabilities that enable such economies to produce goods they can consume
or sell, and what kinds of productive activities create quality jobs that contribute
to poverty reduction.


The analytical work carried out at UNCTAD in search of answers to these
questions led to the identification of a number of basic elements of productive
capacity (LDCR 2006). Productive capacities are the productive resources,
entrepreneurial capabilities and production linkages which together determine
a country’s capacity to produce goods and services and enable it to grow and
develop.


Productive resources are factors of production and include natural resources,
human resources, financial capital and physical capital.


Entrepreneurial capabilities are the skills, technology, knowledge and
information needed to mobilize resources in order to build domestic enterprises
that transform inputs into outputs — outputs that can competitively meet present
and future demand. They also include abilities to invest, innovate, upgrade
and create goods and services. As such, they refer to the competencies and
technological learning needed to induce economic change.


Production linkages are flows of goods and services in the form of backward
and forward linkages, flows of information and knowledge and flows of
productive resources among enterprises and sectors or activities.


These three elements together determine not only the overall capacity of a
country to produce goods and services, but also which goods and services a
country can produce and sell. In this respect, productive capacities are country-
specific and differ enormously from one country to the other. They also determine
the quantity and the quality of the goods and services which a country can
produce at a given time. Such potential production is obviously limited in the
short term, but could be expanded in the medium and long term.


Based on this notion of productive capacity, a country’s productive capacities
are developing when that country shows improvements or progress in all these
areas — when, in other words, its productive resources are expanding, it is
acquiring technological and entrepreneurial capabilities and it is also creating
production linkages. All of these improvements will enable the country to
produce a growing array of goods and services and to create jobs and
integrate beneficially into the global economy on the basis of an internal growth
momentum. If this type of development continues, then the country will have
productive capacities which enable it to create jobs that pay higher wages and
to acquire the capability needed to produce an increasing range of higher value
added goods and services both efficiently and competitively.


The development of productive capacities occurs through three closely
related core economic processes that all countries have to undergo if they are
to achieve sustained development. These are: the investment necessary to build
domestic capital stock (physical capital, human capital, and so forth), which
economists refer to as capital accumulation; structural change (or structural
transformation); and building the capabilities of the domestic enterprise sector.


Economic growth which does not
create decent jobs in sufficient


quantity is unsustainable, and job
creation without the development
of productive capacities is equally


unsustainable.


Productive capacities are
the productive resources,


entrepreneurial capabilities and
production linkages which together
determine a country’s capacity to
produce goods and services and
enable it to grow and develop.


The development of productive
capacities occurs through three
closely related core economic


processes: the investment necessary
to build domestic capital stock


(physical capital, human capital, and
so forth), which economists refer to
as capital accumulation; structural


change (or structural transformation);
and building the capabilities of the


domestic enterprise sector.




The Least Developed Countries Report 201396


Efforts to meet the employment challenge in the LDCs will have to involve
finding concrete ways to link the development of productive capacities with
employment creation. The policy framework proposed here is intended
to contribute to thinking about how this might be done, given the specific
conditions of a typical LDC. The main novelty in the framework is that it explicitly
links employment creation with the three processes through which productive
capacities develop. It also links capital accumulation to employment through
the investment-growth-employment nexus, links technological progress to
employment through enterprise development and links structural change to
employment through the three-pronged approach to employment creation
(chart 35).


This new policy orientation puts employment creation at the heart of
economic policies at the macro, meso and micro levels. It also involves going
beyond recent efforts to improve investment climate in the LDCs and proposes
a more active role for the State, including, but not limited to, public investment.


As concerns capital accumulation, the new element is that policies are
understood not only in terms of stimulating investment-growth nexus but also
as adding employment as a third and integral element of the nexus. Thus, for
policymakers in LDCs, the primary goal of capital accumulation is to promote
growth with employment. This has implications for the manner in which
resources are mobilized and investment decisions are taken. The critical entry
point in creating a strong and sustainable investment-growth-employment nexus
is investment. The aim — initially through public investment in priority areas (in
particular infrastructure) — is to set in motion a virtuous circle where investment
boosts growth and growth creates employment. The latter in turn generates
increased income for workers, giving rise to consumption that supports the
expansion of aggregate demand. Import leakages apart, employment-creating
growth also creates incentives for new or additional investment to meet the
growing demand, and this cycle can be repeated at a higher level of investment,
growth, employment and income.


Chart 35. Policy framework for linking development of productive capacities with employment creation in LDCs


Productive
capacities


Capital
accumulation


Technological
progress


Structural
change


Processes
through which
they develop


Policy framework
for employment


creation


Investment-growth-
employment nexus


Enterprise
development


Three-pronged
approach to
employment creation


Source: UNCTAD secretariat, adapted from UNCTAD (2006), chart 8 (p.63).


The main novelty in the framework
is that it explicitly links employment
creation with the three processes


through which productive capacities
develop.


This new policy orientation puts
employment creation at the heart


of economic policies at the macro,
meso and micro levels.




97CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


The policy framework also assigns greater importance to development
of firms and farms of all sizes, thanks to their potential role in contributing to
growth, creating productive capacities and generating jobs for both unskilled
and skilled workers. According to the policy framework, policies to encourage
micro and small firms to upgrade their production capacity and to grow in scale
are needed. Moreover, it proposes the adoption of active policies to influence
technological choice in different types of activities. The differentiation of the
types of technology choice and corresponding policies is required in order to
accommodate the frequently conflicting policy goals of technological progress
and employment creation.


In terms of structural change, the challenge for LDCs is not that their
economic structure is static, but rather that in most cases it is changing in a
manner not conducive to building productive capacities and creating quality
jobs in sufficient quantity. In order to position the LDCs’ economies on a job-rich
inclusive development path, the policy framework recommends a three-pronged
approach to employment creation that focuses on the generation of foreign
exchange through investment in both capital- and labour-intensive tradable
activities; the expansion of non-tradables sector and the concomitant creation
of jobs; and productivity improvement in agriculture in general, and subsistence
agriculture in particular.


Given that processes of capital accumulation, technological progress and
structural change are closely interrelated (UNCTAD, 2006), different aspects of
the framework for maximizing employment are also interrelated. For example,
a transformation of productive structures into more skilled and technology-
intensive production systems consistent with higher value added activities
will also result in higher incomes, thus fuelling demand and stimulating new
investment. Capital accumulation, in turn, will help develop new activities and
diversify the economy away from traditional sectors, further stimulating the
process of structural change. A framework for maximizing employment might
use that insight in order to intensify these synergies and to adopt a set of
policies that do not contradict one another. For example, if the policies that are
part of the three-pronged approach to employment creation succeed in making
wage goods cheap, that would have a very beneficial impact on the investment-
growth-employment nexus.


The next three sections of this chapter explain each element of the framework
in more detail.


B. Investing to develop productive capacities:
capital accumulation


1. CAPITAL ACCUMULATION AND THE ROLE OF
THE INVESTMENT-GROWTH-EMPLOYMENT NEXUS


Capital accumulation is the process whereby investment increases various
kinds of capital stock: physical capital, human resources, financial capital and
natural resources. The patterns and sources of investment mobilization, and the
policies applied to guide the investment process, have a direct impact on the
type of growth achieved and its impact on employment. Capital accumulation is
often seen as a function of private agents in an economy, and in fact the private
sector accounts for the bulk of capital accumulation, except for human capital
accumulation. However, historically and even in today’s developed economies,
the State has played and continues to play significant roles, both in creating


The policy framework also assigns
greater importance to development


of firms and farms of all sizes, thanks
to their potential role in contributing


to growth, creating productive
capacities and generating jobs for
both unskilled and skilled workers.


In order to position the LDCs’
economies on a job-rich inclusive


development path, the policy
framework recommends a three-


pronged approach to employment
creation.


Capital accumulation is the process
whereby investment increases
various kinds of capital stock:


physical capital, human resources,
financial capital and natural


resources.




The Least Developed Countries Report 201398


an enabling environment for capital accumulation in the private sector and
in directly engaging in capital accumulation. The need for a substantial State
role is even more evident in LDCs, since the institutions which facilitate and
foster active private corporate involvement tend to be less developed and since
private agents themselves often do not operate on the scale required for large
investments. This means that a strong investment-growth-employment nexus in
LDCs requires the involvement of a developmental State.1


As has already been noted, the policies pursued by the LDCs in the past
two decades were based on the assumption that a market-friendly environment
would attract private investment in sufficient quantity to generate rapid output
growth, which, in turn, would automatically create sufficient jobs of adequate
quality. Exceptionally buoyant external conditions for LDC exports — in the form
of the global commodity boom, strong external demand and ample external
financing – did result in higher GDP growth in the 2000s. That, in turn, led to
some increased investment, including, and in some cases mainly, by foreign
firms. The investment ratio of LDCs (i.e., gross fixed capital formation as a share
of GDP) rose from 18.5 per cent to 21.8 per cent between 2000–2001 and
2010–20112 — the highest level in over 40 years. As a result, LDCs managed
to narrow the gap between their investment ratio and that of other developing
countries, where the ratio stood at 23.5 per cent at the end of the period (chart
36).3


Although these are very positive developments, two aspects give rise to
concern. First, the increase in the LDCs’ investment ratio still falls short of the
level typically required for developing countries to sustain high growth rates over
long periods. The successful cases of long-term economic growth (i.e., growth
sustained over 30 years or more) since the mid-twentieth century have invariably
been associated with investment rates of 25 per cent or more (Spence, 2011).
In other words, even during the boom period the LDCs as a group did not attain
the desired rate of investment. This means that reaching these levels may prove
even more challenging in the coming period, when growth will likely be slower
than during the boom period of 2002–2008.


Chart 36. Investment ratios in LDCs and ODCs, 1985–2011
(Gross fixed capital formation as percentage of GDP)


10


12


14


16


18


20


22


24


26


P
er


ce
nt


ag
e


1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011


LDCs ODCs excluding China


Source: UNCTAD secretariat calculations, based on UNCTADstat database, June 2013.


A strong investment-growth-
employment nexus in LDCs requires
the involvement of a developmental


State.


The successful cases of long-term
economic growth have invariably
been associated with investment


rates of 25 per cent or more.




99CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


The second and equally important cause for concern about the LDCs’
investment patterns is the type of capital formation that took place. The pursuit
of export-led growth, coupled with policies to attract FDI, resulted in a type
of investment that primarily targeted their extractive industries. As the data
presented in chapter 1 demonstrate, the share of non-manufacturing industrial
activities in GDP (mining and quarrying, electricity, gas, water and sanitary
services, and construction) in the LDCs as a group rose from 14.5 per cent of
GDP in 1999–2001 to 22 per cent in 2009–2011. The problem is that those
investments were mostly capital-intensive, with small employment effects. So
the relatively high rates of economic growth were not accompanied by the
expected employment creation. The boom was thus characterized by jobless
growth in many LDCs.


This experience underlines the need for a policy framework in which the
primary goal of capital accumulation in the LDCs is to promote growth with
employment. This can be achieved by establishing an investment-growth-
employment nexus as a virtuous cycle in which investment boosts growth,
growth creates productive employment, productive employment generates
an expansion of aggregate demand, and the expansion of aggregate demand
creates incentives for new investment (chart 37). Obviously, supportive public
policies are required both to set this virtuous cycle in motion and to ensure that it
becomes self-sustaining. If these policies are successful, the process feeds new
rounds at higher and higher levels of GDP per capita, simultaneously providing
employment and accelerated capital accumulation.


The emphasis in this approach is on both aggregate supply and aggregate
demand, as well as on their interplay. Both of them are needed in order to
achieve a dynamic economic growth that increases the level of employment.
This is due to the close interconnectedness of aggregate supply and aggregate
demand. For example, rapid growth in aggregate demand can have positive
supply-side effects due to productivity gains generated by dynamic economies


Chart 37. The investment-growth-employment nexus in a closed economy


Investment


Consumption
(aggregage
demand)


Growth


Employment


Incomes


Source: UNCTAD secretariat.


The primary goal of capital
accumulation in the LDCs is to


promote growth with employment
by establishing an investment-
growth-employment nexus as a


virtuous cycle in which investment
boosts growth, growth creates


productive employment, productive
employment generates an


expansion of aggregate demand,
and the expansion of aggregate


demand creates incentives for new
investment.




The Least Developed Countries Report 2013100


of scale and the increased use of underutilized resources. Since underutilization
of labour is one of the main characteristics of LDC economies, there are ample
possibilities to put such a nexus in motion. Rapid growth of employment, in turn,
increases incomes and fuels consumption, boosting aggregate demand.


The nexus depicted in chart 37 can work in a perfect manner only in a closed
economy where there are no transactions with the rest of the world. In an open
economy, however, the functioning of the nexus is weakened. Import leakages
reduce the domestic demand effects of income growth. The problem of import
leakage is usually acute in LDCs, where local manufacturing production is
often poorly developed and where most activities do not operate at scales that
ensure some degree of international competitiveness. It is clear that if incomes
are spent mainly on imported goods, the incentive to invest in production for
the domestic market diminishes or disappears. Similarly, intermediate goods
industries are unlikely to emerge or expand if the production process itself
requires components that at present cannot be produced locally. Broadly
speaking, the best strategy for reducing import leakage is to develop productive
capacities, but considerable time is needed for that process to produce results.
There are, however, short-term policies for reducing leakages and making the
nexus more effective. Some of these are discussed in the following chapter.


While the nexus in chart 37 is the desired process, it is evident from recent
experience that not all investment (even investment that results in higher growth)
generates higher employment levels. The critical links in this chain are not only
those which involve jump-starting investment, but also those which ensure that
the resulting production process is associated with higher employment. A major
challenge, therefore, is how to promote and encourage the kind of investment
that spurs employment-intensive growth.


Two factors are crucial in that regard.


First, policymakers should be aware that different types of economic activities
are associated with diverse levels of employment intensity. For example, services
are generally more intensive in their use of the labour force than are activities
in the extractive industries. Thus, if investment in activities which are more
employment-intensive is promoted, the resulting GDP growth will also be more
employment-intensive. If, on the other hand, the investment is directed primarily
into extractive industries, it is highly likely that the intensity of employment will be
low. A major policy implication is that policy interventions have to be designed to
encourage investment in activities with the strongest employment effects.


Second, technology choices can increase or reduce the employment intensity
of production. The choice of technology often creates a conflict between the
objective of achieving competitiveness by acquiring advanced technology (which
invariably tends to be capital-intensive) and the objective of creating decent jobs
in sufficient quantity. These issues are discussed further in section C.


An additional policy challenge is to ensure that the virtuous cycle, once it
is on track, remains in motion and becomes sustainable. This issue is closely


The critical links in this nexus are
not only those which involve jump-
starting investment, but also those


which ensure that the resulting
production process is associated


with higher employment.


Different types of economic
activities are associated with diverse


levels of employment intensity.
A major policy implication is that
policy interventions have to be


designed to encourage investment
in activities with the strongest


employment effects.


An additional policy challenge is to
ensure that the virtuous cycle, once
it is on track, remains in motion and


becomes sustainable.


The most pragmatic approach would
be to start to stimulate the process


of capital accumulation via that
nexus in the non-tradables sector.


Given that most LDCs are very open economies, they will be unable to put
the nexus in motion in the whole economy. However, the non-tradables sector
is still relatively insulated, and policy space there is larger than in other parts
of the economy. Initially, therefore, the most pragmatic approach would be to
start to stimulate the process of capital accumulation via that nexus in the non-
tradables sector. Over time, and as domestic firms develop their technological
and learning capabilities, the nexus can be extended to modern services that
have become tradable because of technological innovations, import substitution
activities and exporting activities.




101CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


related to policies of distribution in the national economy. As emphasized in
UNCTAD (2010, page 87), “the ability to achieve sustained growth of income
and employment on the basis of productivity growth depends critically on how
the resulting gains are distributed within the economy, how much additional
wage income is spent for the consumption of domestically produced goods
and services, and whether higher profits are used for investment in activities
that simultaneously create more employment, including in some service sectors,
such as the delivery of health and education”.


In a typical LDC context, a continuous increase in domestic demand for
wage goods is a major precondition for the nexus to work and to become
sustainable. This will provide incentives for domestic food production, for local
provision of basic services and for engaging in import-substituting activities. If
local producers can count on a steady demand for their goods and services,
they will be induced to increase supply, which will in turn encourage further
investment and facilitate the growth of domestic enterprises.


There are accordingly two key requirements for a sustainable virtuous
cycle: employment-intensive activities must be sufficiently profitable, and
improvements in labour productivity must be translated into increases in wages.
Adequate profitability is necessary for further investment and increased supply,
while a growth of wages is a prerequisite for buoyant demand.


Other equally important elements essential for the nexus to work in the long
term include an enabling policy and regulatory environment and appropriate
macroeconomic policies, as follows.


First, enabling conditions (a business-friendly environment) are needed to
encourage private sector development, which is essential for generating decent
employment in sufficient quantity. The specific policies for promoting private
sector development in both the short and the long term are discussed in chapter
5.


As already noted, in view of the weak private sector in LDCs, in the short
term the State will have to play a more prominent role in mobilizing and initiating
the investment needed to kick-start the virtuous cycle. While its role in the
current “good governance” agenda is to support markets rather than to promote
economic development directly, UNCTAD has long advocated injecting a much
stronger and more direct development dimension into governance reforms so
as to enable a more active role of the State in promoting LDC development
(UNCTAD, 2009).


Second, macroeconomic policies should be appropriate to the task at
hand. The prevailing policy framework in the LDCs of the past 20 years did
not consider employment as an important macroeconomic objective. Rather,
it focused on such intermediate variables as price stability, fiscal balance and,
sometimes, external balance. These were seen as having an intrinsic value in
their own right and were considered to be principal targets of macroeconomic
policies. The instruments that were deemed sufficient for achieving these goals
were monetary and fiscal policy.


The policy framework proposed in this chapter argues that the focus
should instead be on “real macroeconomics”.4 It considers the development of
productive capacity and the deployment of labour and capital at their highest
potential level to be the paramount goals for policymakers in LDCs. The focus of
development policies in these countries should accordingly be on the long-term
sustainability and inclusiveness of growth, rather than on intermediate goals,
such as price stability. The point here is not to deny the importance of price
stability. To the contrary, controlling the rate of inflation is as critical for LDCs


In a typical LDC context, a
continuous increase in domestic


demand for wage goods is a major
precondition for the nexus to work
and to become sustainable. This


will provide incentives for domestic
food production, for local provision


of basic services and for engaging in
import-substituting activities.


There are two key requirements
for a sustainable virtuous cycle:
employment-intensive activities


must be sufficiently profitable, and
improvements in labour productivity
must be translated into increases in


wages.


Macroeconomic policies should be
appropriate to the task at hand.


The focus should be on the
development of productive capacity
and the deployment of labour and


capital at their highest potential
level.




The Least Developed Countries Report 2013102


as it is for developed economies. It is, however, important not to confuse the
means with the ends, and not to forget that poverty reduction and a higher
standard of living for the population are the immediate and also the ultimate
goals of economic policymaking for the LDCs. In short, all policy choices involve
tradeoffs, and policymakers must be aware of them and carefully weigh the
benefits and costs in implementing each policy. As discussed in chapter 5,
LDCs may need to consider a mix of policies that go beyond the traditional
monetary and fiscal policy focus. It is clear, however, that if the broader goal
of LDCs is to create more quality jobs than they have done in the past two
decades, then fiscal policy will have to play a central role in driving the public
investment-led growth process (McKinley and Martins, 2010).


A further relevant factor is the difference in the objectives and role of
macroeconomic policies between developed countries and the LDCs. The main
challenge in the former is the underutilization of existing resources, which is
often influenced by business cycles. In developing countries, by contrast, the
problem is the deficiency of productive capacities. Supply constraints in the
LDCs are much greater than in developed countries. The LDCs often face two
serious constraints on growth: a shortage of domestic savings, and a lack of
foreign exchange. The resulting dependence on foreign sources of financing
produces a much more pronounced economic volatility than is generally found
in developed countries. Moreover, the nature of growth is different. In developed
countries it is primarily the result of technological progress and its introduction
into the broader economy. In many developing countries, and the LDCs in
particular, growth is more often than not the result of a shift of resources from
less productive activities like subsistence agriculture to more productive ones
like manufacturing; of investing in physical capital; and of introducing activities
and technologies that were previously developed in more advanced economies
(Stiglitz et al., 2006). For all these reasons, when LDC policymakers consider
the range of macroeconomic policies that they deem appropriate for their
circumstances, they need to bear in mind these systematic differences between
developed economies and their own countries, and choose policies that will
help them tackle their specific problems.


2. THE NEXUS IN THE SHORT TERM:
THE PRIMARY ROLE OF THE PUBLIC SECTOR


The starting point of the nexus should be policies that promote the types
of investment which spur employment-intensive growth. Investment can come
from both domestic and foreign sources. In many LDCs, foreign investment
has been largely concentrated in extractive industries, which are mostly capital-
intensive with limited potential for job creation and which typically have few
linkages to other local sectors that could generate more jobs. Relying on foreign
investment to provide employment-intensive growth is thus not the best option.


Domestic investment can be either private or public. Given the relatively
weak development of the private sector in many LDCs, the primary investment
push should come from the public sector in the short to medium term. In these
countries, which usually have small domestic markets, the private sector may lack
the incentive to invest unless the State expands its expenditure through public
capital formation. This is especially true of public investment in infrastructure. An
expanded supply of infrastructure services tends to create externalities for the
private sector that can make its investment profitable.


From the standpoint of long-term economic growth, public investment in
infrastructure has the effect of raising living standards and inducing higher-
productivity growth (Rodríguez, 2007). In the short term, public investment


It is important not to confuse the
means with the ends, and not to
forget that poverty reduction and
a higher standard of living for the
population are the immediate and


also the ultimate goals of economic
policymaking for the LDCs.


When LDC policymakers consider
the range of macroeconomic


policies that they deem appropriate
for their circumstances, they need to
bear in mind systematic differences
between developed economies and


their own countries, and choose
policies that will help them tackle


their specific problems.


The starting point of the nexus
should be policies that promote


the types of investment which spur
employment-intensive growth.


Given the relatively weak
development of the private sector in
many LDCs, the primary investment
push should come from the public


sector.




103CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


also directly increases the demand for private sector products, because of the
purchases made by the State. In addition, it generates indirect demand because
of the employment created by public expenditure and the multiplier effects
of such expenditure. Public spending also generates more employment and
domestic demand, thereby kick-starting macroeconomic processes that can
eventually create enhanced supply as well.


Public investment can play a major role in increasing growth and domestic
employment, both over the cycle and in the medium term, by increasing
demand in the short term and enlarging the capital base of the economy. The
nature, direction and efficacy of such investment are important, as the multiplier
effects and long-term growth implications will differ accordingly. Nonetheless, it
is still important to be attentive to other structural features, such as technology
choice and institutional conditions, and to create incentives within the economy
for more productive employment generation.


Public investment can be designed to encourage certain types of private
investment, not to crowd them out. By providing key infrastructure, public
investment can turn previously uneconomical private investments into profitable
ones. Public investment in rail transport, roads, and airport and port facilities can
lower the cost of private sector involvement in almost all economic activities.
As energy and water become available thanks to public investment, private
businesses can count on a steady supply of these vital inputs and expand
their operations as well as upgrading technologically. Better infrastructure is
also crucial for attracting foreign investors, increasing a country’s chances of
becoming a market for FDI.


As to the duration of strong public sector involvement, it is important to
ensure that public sector investment plays the crucial role of providing an impulse
to the virtuous cycle in the short term. In the long term, private sector should
have the primary role in the nexus. The public sector can then influence the
process of capital accumulation within the nexus indirectly by creating incentives
for investment in certain types of activities.


Apart from the theoretical considerations, the critical role of public investment
is confirmed by the empirical evidence from successful developing and
developed economies that have had sustained catch-up growth over the long
term. All these countries invariably had public investment rates on the order of 7
per cent of GDP or higher (Spence, 2011).


The evidence for Africa5 suggests that investment in infrastructure should be
scaled up significantly. The World Bank estimates the cost for redressing Africa’s
infrastructure deficit at $38 billion worth of investment per year. An additional
$37 billion per year would be needed for operations and maintenance activities.
Hence, the overall price tag would be on the order of $75 billion per annum.
The total required spending translates into some 12 per cent of Africa’s GDP.
There is currently a funding gap of $35 billion per year. Since most LDCs are in
Africa, it is evident that the LDCs lag far behind other developing countries in
terms of infrastructure and that their investment needs are of a similar order of
magnitude.


While the theoretical discussion on the crowding-in and crowding-out effects
of public investment in infrastructure may continue for many years, the simple
fact that the LDCs have a huge gap in infrastructure suggests that pragmatic
solutions are needed. Since the private sector has been unable to fill that gap
after more than two decades of market-friendly policies to facilitate private
sector involvement, there is clearly a role for the public sector in filling the gap. In
other words, crowding out the private sector will not happen if the public sector
undertakes investment which the private sector itself is reluctant to make. Given


Public investment can play a major
role in increasing growth and


domestic employment, both over
the cycle and in the medium term,


by increasing demand and enlarging
the capital base of the economy.


Public investment can be designed
to encourage certain types of private
investment, not to crowd them out.


By providing key infrastructure,
public investment can turn


previously uneconomical private
investments into profitable ones.


It is important to ensure that public
sector investment plays the crucial
role of providing an impulse to the
virtuous cycle in the short term. In


the long term, private sector should
have the primary role in the nexus.


The simple fact that the LDCs have a
huge gap in infrastructure suggests


that pragmatic solutions are needed.




The Least Developed Countries Report 2013104


these unmet needs, it seems that only the State has the capacity to mobilize
capital and increase the investment in infrastructure in the LDCs.


Indeed, recent trends suggest that this shift may already be under way in
many LDCs. The World Bank data show that public gross fixed capital formation
(public investment) for the group of 38 LDCs6 on average stood at 7.2 per
cent of GDP over the period 1999–2001. Ten years later (2009–2011), public
investment reached on average 8.8 per cent of GDP. The boom period thus
resulted not only in higher GDP growth in the LDCs, but also in an increase
of the share of public investment in GDP. Given that both the share of public
investment in GDP and GDP itself increased during that period, the absolute
value of public investment is now substantially higher than in the early 2000s.
The commodity boom of the past decade was very likely the main source of the
increase in public revenue, which, in turn, made possible the increase of public
investment.


While the sectors to which public investment should be directed will
necessarily be country-specific, investment in infrastructure seems to be a
natural starting point since the lack of adequate infrastructure in most LDCs
represents a serious supply-side bottleneck. Government policies should try to
remove that bottleneck and at the same time create jobs. Both goals can be
achieved using the factor of production that is more abundant, namely labour.
This will depend on reorienting policies on infrastructure investment to ensure
that technically viable and cost-effective, employment-intensive options are
used instead of more capital-intensive ones. In other words, there is a need for
adopting appropriate technology.


Social services are another strong candidate for public involvement aimed
at increasing employment by kick-starting the investment-growth-employment
nexus. Millions of LDC citizens still have very poor or inadequate access to the
most basic conditions of decent life, such as nutrition, sanitation, electricity,
water, transport and communication, health services and education. The role of
the State is to provide minimally acceptable standards of living for everyone in
the LDCs. Social policy is important and desirable not only in its own right, but
also because it contributes to employment creation. To meet the basic needs of
the majority of the population, there are ample opportunities for public sector to
influence the urbanization process and help provide urban services. These are
mostly labour-intensive and can generate numerous jobs. They can also increase
the disposable income of households, which tends to reduce the precautionary
savings of the lower- and middle-income groups, thus boosting their purchasing
power (UNCTAD, 2013). Other sectors that can be targeted because of their
potential to create employment are construction, expansion of services in rural
areas, textile and leather production, and food processing.


In view of the recent increase of public investment in the LDCs, the
proposals in this chapter may be interpreted as advocating the redirection of
such investment into sectors and activities with greater employment creation,
rather than proposing a large increase in public investment. In that sense, for
some LDCs, the issue of financing may not be daunting. However, the LDCs
are not a homogenous group. For some of them, public finances have been
invigorated by rents from extractive industries, but for others the financing of
public investment may pose a major problem. For many of these countries, fiscal
space constraints will continue to make it difficult to finance the desired level
of public investment, which underscores the importance of efforts to mobilize
additional fiscal resources. Given the relatively low share of public revenue in
GDP in most LDCs, improving domestic resource mobilization may be the best
way to place the financing of public investment on sounder footing. This can be
done by strengthening fiscal revenues through tax reforms and by making tax
collection and administration more efficient.


Public gross fixed capital formation
(public investment) for the group of
38 LDCs on average stood at 7.2
per cent of GDP over the period


1999–2001. Ten years later (2009–
2011), it reached on average


8.8 per cent of GDP.


While the sectors to which public
investment should be directed will


necessarily be country-specific,
investment in infrastructure seems
to be a natural starting point since
the lack of adequate infrastructure
represents a serious supply-side


bottleneck.


Social services are another strong
candidate for public involvement


aimed at increasing employment by
kick-starting the investment-growth-


employment nexus.


In view of the recent increase of
public investment in the LDCs,


the proposals in this chapter may
be interpreted as advocating the


redirection of such investment into
sectors and activities with greater
employment creation, rather than


proposing a large increase in public
investment.




105CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


Going beyond the budgetary sources for financing public investment involves
some sort of borrowing. Many LDCs receive ODA in the form of grants and
conditional lending, which enables them to finance significant public investments.
Despite recent decrease in aid disbursements from OECD-DAC countries, ODA
will continue to be a key source for financing for most LDCs. Innovative sources
of financing based on a steady flow of workers’ remittances could also be
explored. UNCTAD (2012) considered using remittances as collateral for long-
term syndicated loans, issuing bonds securitized by future flows of remittances
and issuing so-called “diaspora” bonds. Thus, there are options for financing
public investment; the issue is which option or combination of options is the
best at any given moment for a particular country.


3. THE NEXUS IN THE LONG TERM:
THE PRIMARY ROLE OF THE PRIVATE SECTOR


Making the process sustainable in the long term will entail reducing the heavy
involvement of the public sector over time and stimulating the private sector to
assume a steadily greater role in the process of capital accumulation. It follows
that the role of the developmental State should be not only to provide investment
that spurs employment-intensive growth, but also to help create a vibrant and
strong private sector.7 This should ultimately be the target of LDC policymakers
with regard to capital accumulation.


The efforts of the developmental State to steer the economy towards a jobs-
rich path should aim at creating and managing rents in line with the objectives
of inclusive growth. When designing policies to spur employment-intensive
growth, policymakers should bear in mind the dual functions of both profits and
wages in a capitalist economy. Profits are a major incentive for investment (since
investment results in profits) and a main source of investment. For that reason
a strong investment-profits nexus in which businesses constantly reinvest their
profits would accelerate the process of capital accumulation. Policies that
reinforce the nexus therefore promote and accelerate capital accumulation,
and with it the development of productive capacities. A key determinant of the
willingness of entrepreneurs to invest in real productive capacity is the expected
profitability of a potential investment. This in turn depends on estimates as to
whether future demand will be sufficient to permit the full utilization of additional
capacity (UNCTAD, 2013).


However, not all activities result in capital accumulation that enables net job
creation. Government policies should accordingly try to reduce the possibilities
for wealth accumulation through large landholdings, moneylending and real
estate speculation, since they have very limited job-creating effects. Instead,
they should promote wealth accumulation through investment in employment-
intensive productive sectors. High profit in these sectors will simultaneously
increase both the incentives for enterprises to invest and their capacity to
finance new investment from profits. High profitability of targeted activities can
be created with such policy instruments as selective and time-bound protection,
close monitoring of interest rates and credit allocation, and fiscal instruments.
Policymakers could, for example, use such fiscal instruments as tax breaks and
special depreciation allowances to create incentives for reinvestment of profits.


Similarly, wages are a major determinant of both production costs and
consumption, and thus of aggregate demand. Government policies should
accordingly ensure that wage increases keep pace with increases in labour
productivity and that the income share of labour in GDP does not fall. If this does
not happen, the stimulus for wage-driven consumption and aggregate demand
may weaken over time, eventually diminishing the incentive to reinvest profits.
Policymakers should also try to lower the prices of wage goods, as explained


Making the process sustainable in
the long term will entail reducing


the heavy involvement of the public
sector over time and stimulating the
private sector to assume a steadily


greater role in the process of capital
accumulation.


The role of the developmental
State should be not only to provide
investment that spurs employment-
intensive growth, but also to help
create a vibrant and strong private


sector.


The efforts of the developmental
State to steer the economy towards


a jobs-rich path should aim at
creating and managing rents in


line with the objectives of inclusive
growth.


A strong investment-profits nexus in
which businesses constantly reinvest


their profits would accelerate the
process of capital accumulation.




The Least Developed Countries Report 2013106


in section D of this chapter. That would on the one hand keep wage costs for
enterprises low, thereby ensuring high profits, and on the other hand provide
workers with sufficient income to increase consumption and thus stimulate
aggregate demand. Ultimately, more jobs will be created in the nexus where
new jobs and higher real wages boost the purchasing power of households and
push up domestic demand.


Whether or not aggregate demand rises sufficiently to create net employment
depends crucially on the distribution of gains from productivity growth, which in
turn is greatly influenced by policy choices (UNCTAD, 2010). Profits and wages,
in other words, determine domestic consumption and domestic investment.
They, like government expenditure, are all sources of domestic demand, and
there is a marked interdependence among the three. While the interdependence
of consumption and investment has already been explained, it should be added
that higher public spending has a positive impact on both private consumption
and private investment by creating additional income for consumers and by
improving the conditions for private investment (UNCTAD, 2013). Since the
last component of aggregate demand — net exports — is mainly determined
exogenously in the short term, policymakers can influence only the endogenous
factors, namely, domestic consumption, domestic investment and government
expenditure. Policies that influence distributional outcomes in the economy are
thus an important component of making the investment-growth-employment
nexus work. They are endogenous to the growth process and are one of the
determinants of how capital accumulation takes place and how productive
capacities develop.


Whether or not the investment-growth-employment nexus can be put in
motion will depend primarily on the extent to which the sectoral structure of
domestic production is linked to that of domestic demand. In larger, more closed
economies, the two are relatively closely linked. In smaller, open economies, on
the other hand — as in primary commodity exporters — domestic production
is largely delinked from that of domestic demand (UNCTAD, 2013). In other
words, there is a big gap between what these countries produce and what
they consume. Thus, creating the nexus will be easier or more complicated,
depending, inter alia, on the structure of domestic production vis-à-vis the
structure of domestic demand. This is one of the reasons why it is important
to consider how this framework can be adapted to the specific conditions of
different LDCs, as examined in Section E of this chapter.


4. FORMATION OF HUMAN CAPITAL


Capital accumulation also encompasses the formation of human capital,
which is achieved mainly through formal education (at the primary, secondary
and tertiary levels), technical and vocational training, and on-the-job training. The
bulk of formal and vocational training is financed by the State in both developed
and developing countries. Education, vocational training and upgrading of
workers’ skills are thus key elements of government policies.


Human capital formation has received increasing attention since the 1990s
as the development community has become more aware of the importance of
human capital for long-term growth and development in developing countries.
Consequently, greater focus has been placed on expanding spending on
health and education in these countries, including the LDCs. This has been
reinforced by the prominence given to education and health in the human
development discourse (reflected inter alia in the Human Development Index of
the United Nations Development Programme (UNDP)) and the MDGs. A critical
consequence of this focus on human capital in developing countries has been
the consistent increase in donor financing of health and education. Total ODA


More jobs will be created in the
nexus where new jobs and higher
real wages boost the purchasing


power of households and push up
domestic demand.


Policies that influence distributional
outcomes in the economy are an
important component of making


the investment-growth-employment
nexus work.


Capital accumulation also
encompasses the formation of


human capital, which is achieved
mainly through formal education (at
the primary, secondary and tertiary


levels), technical and vocational
training, and on-the-job training.




107CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


commitments to the two areas in the LDCs soared from $2 billion in 1995–
1996 to $7.8 billion in 2010–2011.8 This has been accompanied by a growing
allocation of national budgets to these areas, financed mainly by domestically
mobilized resources.


Increased spending on education has led to continuous improvements in
the LDCs’ educational progress, which has allowed them to narrow the gap
with other developing countries, particularly in primary education. The school
enrolment ratio improved substantially between 1995 and 2010 at the primary,
secondary and tertiary levels in the LDCs. Primary school enrolment has
become almost universal, and the gap between LDCs and ODCs has virtually
been closed (table 19).


Although these positive quantitative developments have to be weighed
against the quality of schooling and education, the result is that human capital
accumulation has been accelerating in the LDCs. In principle this means that
LDC populations are gradually becoming more prepared for the requirements of
a modern production process, i.e., better skilled and more adaptable. A more
educated labour force is more productive, learns more easily, is more open to
new ideas and technologies and adapts more easily to new conditions. It also
involves the presence of much better conditions than before for implementing
the proposed policy framework. Since the ultimate goal is to create decent
employment in sufficient numbers for all, the development of a dynamic private
sector that can meet that goal will be greatly facilitated by the availability of a
better educated and more adaptable labour force.


Despite these positive developments in education and training in LDCs,
the issue of matching education and skills with available jobs — or what is
often described as the “employability” of the labour force — is emerging as
a key concern. The recent increase in LDCs’ tertiary enrolment is certainly to
be welcomed, but a significant part of that increase has occurred in private
institutions with much higher user fees. Many students, including those from
relatively poor families, invest a great deal of their own and their families’
resources in order to acquire an education that holds out the promise of a better
life.


There are, however, two problems: an absolute shortage of formal sector
jobs relative to demand, and a skills mismatch resulting in severe labour
shortages for some kinds of workers and a massive oversupply of others. Often
this is not in spite of, but because of, market forces, since both markets and


Table 19. Indicators of human capital formation in LDCs and ODCs, 1995 and 2011
Education level


Primary Secondary Tertiary
1995 2011 1995 2011 1995 2011


Gross enrolment ratio by education level (per cent)a


LDCs 68.8 104.2 17.6 40.4 2.4 8.4
African LDCs and Haiti 62.8 103.1 14.0 34.4 1.6 5.8
Asian LDCs 93.0 108.7 30.6 50.7 4.6 12.5
Island LDCs 97.4 112.6 32.4 58.7 0.8 13.2
Other developing countries 104.8 109.0 50.9 71.1 8.4 23.5
Average years of schooling by education levelb


1995 2010 1995 2010 1995 2010
LDCs 2.38 3.20 0.65 1.09 0.05 0.10
African LDCs and Haiti 2.46 3.24 0.62 1.01 0.03 0.08
Asian LDCs 2.15 3.07 0.75 1.34 0.09 0.17
Other developing countries 4.30 4.89 2.08 2.72 0.23 0.35
Source: UNCTAD Secretariat computations, based on data from World Bank, World Development Indicators online database (downloaded


in August 2013), and data from the Barro-Lee dataset (Barro and Lee, 2013).
Notes: a Averages weighted according to school age population. Data refer to the inidcated year or to the closest year for which data are


available; b Averages weighted by population. No data are available for island LDCs.


Increased spending on education
has led to continuous improvements
in the LDCs’ educational progress,
which has allowed them to narrow


the gap with other developing
countries, particularly in primary


education.


LDC populations are gradually
becoming more prepared for
the requirements of a modern
production process, i.e., better


skilled and more adaptable.




The Least Developed Countries Report 2013108


higher educational institutions tend to lag in their response to the demands of
employers for some skills, and then to oversupply others. One result is that
many young people are forced to take jobs that require less skills and training
than they have actually received, and that are at lower levels than they might
otherwise expect. This situation can create resentment and other forms of
alienation, with adverse consequences for social stability. Another result is the
emigration of qualified people — the so-called “brain drain” (UNCTAD, 2012).
A special focus on employment policies for younger people and first-time job
holders is therefore essential, as are labour market policies designed specifically
to address these issues.


Looking ahead, the main principle behind educational policies for developing
productive capacities should be to achieve some consistency with the future
labour needs of the economy. Given that the educational process encompasses
several years, today’s students will be seeking jobs in 3, 5, or even 7 to 10
years’ time. Some idea of where the economy as a whole is headed for the next
five to ten years will thus be needed to guide the educational system on the
future needs of the labour market. This would minimize the mismatch between
the skills and the knowledge of labour market entrants and the needs of that
market. It would also significantly aid the process of capital accumulation in the
LDCs by providing domestic enterprises with adequately skilled labour market
entrants.


C. Enterprise development
and technological change


Enterprise development and technological progress are the second element
of the policy framework for employment creation. As discussed earlier, enterprise
development involves the development of productive capacities through
entrepreneurial capabilities and technological progress. It is argued here that
successful enterprise development will enable the LDCs to improve both the
quantity and quality of employment creation and also embark on a technological
catch-up with more developed countries. This was recognized in the IPoA
(United Nations, 2011, para. 53), which emphasized that the private sector “is
a key to sustained, inclusive and equitable economic growth and sustainable
development in least developed countries”.


Enterprise development is the process of building domestic production
capacity through investment in new enterprises and technological progress
and the introduction of new or improved goods and services; new or improved
machinery, equipment and skills for production; and new or improved forms of
organizing production. Ultimately, wealth is created by entrepreneurs who take
the risk of borrowing capital in order to bring labour and technology together
to produce goods or services for local and/or external markets. Whether
countries succeed in developing dynamic and competitive enterprises depends
to a large extent on the effectiveness of policies for mobilizing capital, creating
virtuous supply and demand linkages, building the skills base of the economy,
encouraging technological learning and the transfer of appropriate technology,
and strengthening linkages.


The weakness of entrepreneurial capabilities has been identified as a major
obstacle to the development of productive capacities (UNCTAD, 2006).9


This weakness refers to the two main types of entrepreneurial capabilities.
The first consists of core competencies, which are the routine knowledge,
skills and information required to operate established facilities or use existing
agricultural land, including production management, quality control, repair


A special focus on employment
policies for younger people and


first-time job holders is essential, as
are labour market policies designed
specifically to address these issues.


Some idea of where the economy as
a whole is headed for the next five


to ten years will be needed to guide
the educational system on the future


needs of the labour market.


Successful enterprise development
will enable the LDCs to improve
both the quantity and quality of
employment creation and also


embark on a technological catch-up
with more developed countries.


The weakness of entrepreneurial
capabilities has been identified as a
major obstacle to the development


of productive capacities.




109CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


and maintenance of physical capital, and marketing. The second comprises
technological capabilities (or dynamic capabilities), which refer to the ability to
build and reconfigure competencies to increase productivity, competitiveness
and profitability, and to address the conditions of supply and demand in a
changing external environment (UNCTAD, 2006: 64).10 While enterprises are the
locus of innovation and technological learning, they are embedded in a broader
set of institutions that play a major role in these processes. These institutions
are referred to as “domestic knowledge systems” that enable or constrain the
creation, accumulation, use and sharing of knowledge (UNCTAD, 2007).


1. ENTERPRISE DEVELOPMENT AND THE EMPLOYMENT CHALLENGE:
FIRM SIZE MATTERS


In most LDCs the size distribution of enterprises is heavily skewed towards
microenterprises and small enterprises, which typically operate in the informal
sector. At the other extreme of the distribution are a small number of large firms,
which are often either State-owned enterprises or large private firms, frequently
owned or controlled by foreigners. These large firms tend to be found in the most
profitable sectors, such as extractive industries, air transport and modern financial
activities, where large size is needed to make capital-intensive investments. The
“missing middle” refers to the weak or non-existent development of medium-
sized domestic enterprises in the formal sector. In some cases even small-sized
enterprises are rare in the formal sector of the economy. The missing middle in
the LDCs — and in many other developing countries — is a result of the inability
of small firms to grow and attain minimum efficient production sizes. Therefore,
the dominance of large firms on the one hand, and the small size of most firms
(the missing middle) on the other, partly explains the lack of formal sector job
creation even during the recent boom period in the LDCs.


There are several reasons why microenterprises and small enterprises
are unable to grow into middle-sized enterprises. Suboptimal size can be a
constraint in itself, since it leads to lower productivity than that of larger firms,
which affects profitability and makes it harder for small firms to expand the scale
of production. Access to credit is another major issue, as small firms must often
pay much higher interest rates even for working capital, let alone investment
in fixed capital, and are constrained in the expansion of production even when
there is sufficient demand for the goods or services they supply. These firms
find it difficult to finance the acquisition of machinery and equipment and
often cannot borrow for technology acquisition. They are also more exposed
to various kinds of risk and market volatility. Weak technological capabilities
and reduced access to knowledge are often combined with less developed
organizational and managerial skills. All of this in turn encourages or even forces
greater reliance of small enterprises on informal economic relations and family,
kin or friendship networks, which only add to the legal and financial obstacles
of becoming formal enterprises. As a result, they generally do not evolve into
medium or large enterprises.


A typical feature of the LDCs in recent decades has been the expansion of
low-productivity (informal) activities to absorb excess labour. Notwithstanding
the difficulties of defining informal activities (which are also referred to as the
“informal”, “shadow” “parallel” or “underground” economy), they represent
a substantial part of GDP. According to recent estimates, informal activities
represent around 40.8 per cent of GDP in sub-Saharan Africa (Schneider et al.,
2010). While the informal economy comprises a very heterogeneous group of
activities in the LDCs, for the most part they can be characterized as subsistence
activities. They enable those engaged in such activities to earn survival-level
income at the cost of great hardship and sacrifice. The urban informal sector
includes activities that rely on modern technology and generate as much income


In most LDCs the size distribution
of enterprises is heavily skewed


towards microenterprises and small
enterprises, which typically operate


in the informal sector.


The “missing middle” refers to the
weak or non-existent development


of medium-sized domestic
enterprises in the formal sector.


A typical feature of the LDCs in
recent decades has been the
expansion of low-productivity
(informal) activities to absorb


excess labour.




The Least Developed Countries Report 2013110


as — if not more than — formal sector jobs — for example, the provision of IT-
related services from home. However, the number of people engaged in such
informal activities is relatively small.


Given that informal activities represent largely a survival strategy for the
urban poor, they should be seen as traps from which workers seek to escape,
rather than celebrated as evidence of the resilience of the poor. As suggested
by the data presented in chapter 3, around 80 per cent of all employed in
the LDCs are either self-employed or engaged in family work (unpaid work).
The preponderance of microenterprises and small enterprises, and the large
number of self-employed in the LDCs, points to a need for policies that will
help enterprises grow in size, formalize and become capable of continuously
upgrading their activities.


Policies aimed specifically at helping enterprises to grow in size can be
divided into four categories: policies for formalizing firms, policies for financing
firms, policies for strengthening the organizational and entrepreneurial capacities
of firms, and policies for overcoming failures of information and cooperation
(policies for encouraging networking and clustering). Some of these are
discussed in greater detail in chapter 5. If successful, these policies will enable
microenterprises and small enterprises to grow into medium-sized or even large
enterprises. Their growth will in turn generate employment for large number of
workers and will thus be employment-intensive. The simple reason for this is
that in order to reach the optimal size of production, these enterprises need
to increase the scale of production using existing production techniques. The
benefits associated with economies of scale will then induce these firms to
grow further. At the same time, the creation of medium-sized enterprises will
lay the groundwork for technological progress. Once medium-sized enterprises
have increased the scale of production beyond the optimal point using existing
techniques, they will be forced to innovate so as to maintain their profitability.


2. TECHNOLOGICAL CHANGE AND THE EMPLOYMENT CHALLENGE:
THE CHOICE OF TECHNOLOGY MATTERS


Technological change is the process of introducing new or improved goods
and services, new or improved machinery, equipment and skills for production,
and new or improved forms of organizing production. Technological change in
the LDCs is associated primarily with the spread of new products, technologies
and organizational strategies previously developed in more advanced
economies. Its success depends on investments of various kinds (financial,
organizational, educational, etc.) that lead to the development of competencies
and capabilities at both the enterprise level and in society as a whole. In an
open market environment, technological learning and upgrading by domestic
enterprises is a prerequisite for becoming and remaining competitive in both
domestic and external markets. Accordingly, successful economic development
can be defined as the ability to create enterprises which are capable of learning
and appropriating knowledge and in the longer term of generating new
knowledge (Amsden, 2001). Hence, technological change in LDCs requires a
greater capacity for learning and assimilation in domestic enterprises and the
domestic knowledge system in which they are embedded.


Since technological learning and upgrading are critical for enterprise
development and competitiveness, they will also have an impact on employment
creation. The choice of technology is one of the most important determinants
of the employment intensity of an economic activity. Modern technologies
developed in advanced economies will be mainly of the labour-saving, capital-
intensive type. The previous policy framework, which focused on the creation
of the investment-growth nexus based on the open economy model, tended to


Given that informal activities
represent largely a survival strategy


for the urban poor, they should
be seen as traps from which


workers seek to escape, rather
than celebrated as evidence of the


resilience of the poor.


Policies aimed specifically at helping
enterprises to grow in size can
be divided into four categories:


policies for formalizing firms, policies
for financing firms, policies for


strengthening the organizational and
entrepreneurial capacities of firms,
and policies for overcoming failures


of information and cooperation.


Technological change is the
process of introducing new or


improved goods and services, new
or improved machinery, equipment
and skills for production, and new
or improved forms of organizing


production.




111CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


encourage investment in capital-intensive techniques in the extractive sectors.
The result was limited learning and appropriation of know-how, and limited
employment generation.


Yet another outcome of recent policies is the increased heterogeneity
of technological development of sectors and firms in the LDCs. Most LDC
economies have quite varied levels of technological development. At one end
of the spectrum are the export sectors, which have to compete in international
markets. Both the choice of technology and the rate of technological progress
in these sectors are largely determined abroad and transmitted to the LDCs
through the pressures of international competition and standards set in
international value chains, rather than through domestic conditions. These
pressures to adopt international technologies apply not only to exporters, but
also to import-competing firms. Since enterprises whose products compete
with imports are forced to be internationally competitive in order to maintain
their domestic sales, technology choices (and capital-labour ratios) and other
parameters of production are to a great extent determined exogenously.


This type of international integration leads to the adoption by LDCs of
technologies that are not very far from the international technology frontier in their
respective sectors and activities. Technological progress in these activities has
been based on economies of scale and scope as a means of achieving higher
productivity and profits, and is associated with growing labour productivity. The
LDCs’ export sectors typically operate with capital-intensive and high labour
productivity technologies. This is generally the case with extractive industries and
some service sectors, including not only those geared towards export markets
(e.g. tourism), but also some sectors oriented towards domestic markets (e.g.
telecommunications and parts of the financial sector). These activities form the
so-called “modern” sector of these economies. Given the type of technology
they use, they tend to have a very limited employment-generating effect.


As a general rule, the expansion of modern-sector activities reduces the
labour intensity of economic growth (Patnaik, 2007). Some exceptions to this
rule are labour-intensive manufacturing industries whose production is destined
for exports. The LDCs’ manufacturing export sector is included in regional and
global value chains, and it must accordingly apply the international standards
of quality and production processes in which those chains operate. Still, the
segments of these chains that are located in LDCs are mainly the labour-intensive
ones, which means that they have an important employment-generating impact
on domestic economies. Commercial agriculture in LDCs — especially the
farms that produce cash crops — is subject to pressures similar to those of
other export industries in these countries. They are also likely to operate at
productivity levels which are not significantly below international standards,
although it can be surmised that they use more labour-intensive technologies
than more advanced countries.


At the other end of the technology spectrum are subsistence activities,
which operate with labour-intensive but low-productivity technologies. These
technologies are well below the international technology frontier and generate
very low earnings for their workers — many of whom are below the poverty
line. This is typically the case of subsistence agriculture in LDCs. Many urban
informal-sector activities also fit into this category. Some extractive-sector
activities can also be labour-intensive and low-productivity. This is the case of
some mining activities for which high international commodity prices induced
production by less productive, marginal mines that could be operated only on a
very small scale and with low-productivity techniques. Small-scale mining, often
by informal miners using crude techniques and damaging the environment, is a
growing phenomenon in many LDCs, especially in Africa.


Since technological learning and
upgrading are critical for enterprise
development and competitiveness,


they will also have an impact
on employment creation. The


choice of technology is one of the
most important determinants of
the employment intensity of an


economic activity.


The LDCs’ export sectors typically
operate with capital-intensive
and high labour productivity


technologies. Given the type of
technology they use, they tend to
have a very limited employment-


generating effect.


At the other end of the technology
spectrum are subsistence activities,
which operate with labour-intensive
but low-productivity technologies.
These technologies are well below
the international technology frontier
and generate very low earnings for
their workers — many of whom are


below the poverty line.




The Least Developed Countries Report 2013112


The non-tradables sectors of LDCs usually operate with technologies
that span the entire spectrum between the two extremes mentioned
above. Some activities use technologies that are not far removed from the
international technology frontier (e.g. modern services like financial services and
telecommunications). These activities typically have a limited job-generating
impact. Most jobs in the non-tradables sectors are thus to be found in such
activities as informal services (e.g. retail trade, repair services, restaurants,
transport, etc.), operating with technologies that generate low-productivity jobs
and low wages. Other non-tradables sectors — such as those involving public
service – are likely to use technologies that are situated somewhere between the
two extremes.


Given the current situation of technological heterogeneity, and the challenge of
creating decent employment in sufficient quantity, the LDCs face a stark choice.
There is a trade-off between remaining competitive in the tradable activities
with modern, capital-intensive technologies, and choosing technologies that
generate jobs in non-tradable and subsistence activities. How should an LDC
that is trying to attain growth with employment in an open economy environment
approach the choice of technology, production processes and technological
development? Two different strategies should be followed: one for the modern
sectors, involving the acquisition of advanced technologies from developed
countries, and one for the other sectors, involving so-called “appropriate”
technologies.


LDC firms and farms need to undertake technological learning in order to
upgrade their productive capabilities. They do so primarily by acquiring more
advanced technologies from abroad, generally from developed countries.
In export-oriented activities, the technologies in use (largely by transnational
corporations) are often not far below international standards. Exporting
enterprises, as well as those engaged in import-competing activities, will thus
have to continue to rely on technologies that are close to the technological
frontier.


For firms and farms whose output is geared towards domestic markets,
however, such advanced technologies may not always be appropriate. Domestic
markets in most LDCs are small and, given lower income levels, patterns of
demand are different from those prevailing in advanced economies. Hence, at
least initially, they need technologies that are appropriate to their conditions.
LDC firms are more likely to find such technologies in countries that are closer
to them in the technology space. In other words, a substantial number of LDC
firms and farms can learn and acquire technologies (such as capital equipment,
organizational know-how and types of inputs used) from other developing
countries, rather than from advanced economies, or can develop and use
home-grown technologies.


There are several characteristics of technologies developed in other
developing countries that make them more appropriate for the LDCs, at least
in activities oriented mainly towards the domestic market. They are generally
more labour-intensive, as they are developed in countries that also have surplus
labour. They are also more geared towards meeting the basic needs of the large
swathes of the population who cannot afford luxury goods and services. In
addition, they are more appropriate, since they deal with problems that arise in
similar conditions as in the LDCs, be they social, economic or climate-related.
Moreover, capital equipment acquired from other developing countries is likely to
be less costly than equipment imported from developed countries. Yet another
desirable requirement of appropriate technologies is that they should make the
greatest possible use of resources that are locally available in LDCs. The firms
that use such technologies thereby strengthen the linkages with other domestic
enterprises.


There is a trade-off between
remaining competitive in the


tradable activities with modern,
capital-intensive technologies,
and choosing technologies that


generate jobs in non-tradable and
subsistence activities.


A substantial number of LDC firms
and farms can learn and acquire


technologies from other developing
countries, rather than from advanced
economies, or can develop and use


home-grown technologies.


There are several characteristics
of technologies developed in other


developing countries that make
them more appropriate for the


LDCs, at least in activities oriented
mainly towards the domestic market.




113CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


The choice of technology not only influences employment parameters,
it also determines who will benefit from employment. Choosing appropriate
technologies and local materials creates major employment opportunities for
unskilled or semi-skilled workers and allows them to develop their own skills
and knowledge over time. It is obviously desirable to develop technologies
that give workers control over what they produce in a fulfilling manner that is
not too arduous or monotonous and that also allows for a reasonable level of
productivity.


South-South cooperation can be a vehicle for transferring appropriate
technologies to the LDCs and also for speeding up their technological
development. Although the transfer of technologies that have been developed
in advanced countries will remain the focus of efforts in most LDCs for years to
come, new, appropriate technologies developed for the South by the South can
serve as a useful complement in the short term and perhaps as an alternative
in the long term. Such technologies will be especially appropriate in the medical
sciences, agriculture and food production, and alternative energy sources. There
is already a substantial body of innovations by the South which address the
specific issues of developing countries — issues that are frequently neglected
by the North (Kaplinsky et al., 2009).


D. Structural change


1. STRUCTURAL CHANGE AND EMPLOYMENT CHALLENGE:
THE THREE-PRONGED APPROACH


Structural change is a central feature of the development process. It refers
to changes in the composition of production, employment, demand and trade;
in the pattern of inter- and intra-sectoral linkages; and in the types of flows of
goods, services, knowledge and information among enterprises (UNCTAD,
2006: 68). The relative importance of different sectors and economic activities
in a national economy is transformed as a result of these processes. Generally,
the weight of the primary sector in GDP decreases, while the shares of the
secondary and tertiary sectors increase. In addition, there is a general tendency
within the economy towards higher specialization of production. This means that
production linkages within the economy become denser and more roundabout
as a higher proportion of output is sold to other producers rather than to final
users. In other words, the use of intermediary goods and services relative to
total gross output tends to rise, as reflected in the increased density of the
input-output matrix of the economy. This is a sign of evolution towards a more
complex economic system with a higher degree of processing.


The classic pattern in today’s developed countries and some advanced
developing countries has been that new economic activities with higher
productivity emerge and activities with lower productivity decline or are
abandoned. These transformations have been accompanied by changes in
employment patterns. More people are employed in manufacturing and services,
while the number of people active in agriculture declines. There has also been a
process of migration from rural to urban areas as more and more employment
opportunities appear in cities and towns.


The recent experience of most developing countries, however, has
tended to diverge from these classic patterns, which now seem to be more
the exception than the rule (Heintz, 2010). The process of economic growth
does not necessarily follow the standard Lewis-style pattern, whereby surplus


South-South cooperation can be a
vehicle for transferring appropriate
technologies to the LDCs and also
for speeding up their technological


development.


Structural change is a central feature
of the development process. It refers


to changes in the composition of
production, employment, demand


and trade; in the pattern of inter- and
intra-sectoral linkages; and in the
types of flows of goods, services,


knowledge and information among
enterprises.


The classic pattern in today’s
developed countries and some


advanced developing countries has
been that new economic activities


with higher productivity emerge and
activities with lower productivity


decline or are abandoned.




The Least Developed Countries Report 2013114


labour from the subsistence sector is drawn into the modern sector (Lewis,
1954). Rather, even when the activities of the modern sector expand, their
employment-generating potential is often limited because technological choices
(and thereby capital-labour ratios) are driven by global competition and thus
largely determined exogenously. One of the characteristics of this different type
of structural change is the transfer of labour from low-productivity agriculture
to low-productivity service activities in urban areas. This entails a proliferation
of low-productivity employment in non-tradable activities as workers move out
of subsistence activities in agriculture, even at relatively low levels of per capita
income.


In many developing economies the services sector (tertiary sector) has
recently been acquiring a greater share of GDP well before they reach the levels
of per capita income at which this occurred in countries that are now developed.
Various studies have suggested that this is true of a wide range of developing
countries, and that the turning point at which the share of manufacturing output
and employment starts to decline is now taking place at a much lower level of
per capita income than hitherto assumed (Palma, 2006). This phenomenon is
known as “premature deindustrialization”.


For the LDC group as a whole, the dominant pattern of structural change
since the turn of the century has been a slowly declining importance of the
primary sector, not in favour of manufacturing (as in the classic pattern), but
in favour of mining and, in some cases, services. Examining the country-level
data presented in annex table 5, from 1999–2001 to 2009–2011, the relative
importance of the primary sector declined in 33 LDCs. The same number of
countries had a growing mining and energy sector (including construction). The
share of services in GDP also expanded in a majority (28) of LDCs over the
same period. Manufacturing, by contrast, expanded by more than 2 percentage
points only in the following countries: Angola, Bangladesh, Guinea, Guinea-
Bissau, Lao People’s Democratic Republic, Liberia, Madagascar, Myanmar and
Yemen.


The most significant trend in structural change for the LDCs as a group, as
analysed in chapter 1, is the slow decline in the share of the primary sector in
GDP (chart 38). There has also been a very slight decline in the share of the
tertiary sector and an increase in the secondary sector. However, the increase
of the secondary sector is due to non-manufacturing industrial activities, whose
share rose from 14.5 per cent of GDP in 1999–2001 to 22.0 per cent in 2009–
2011. Manufacturing stayed the same, at around 10 per cent of GDP. This
shows there has been very little structural change of the type that results in
strong increases in productivity, incomes, technological intensity and high value
added over the 10-year period.


The problem with the current process of structural change is that it cannot
provide the surplus population released from agriculture with productive
employment. Unlike in the past, agriculture today is unable to employ more
people since the general trend in the LDCs towards decreasing agricultural land
per worker and a larger share of the population focused on fragile lands. In
addition, the evidence from chapter 2 shows that the rate of urban population
growth in these countries has been nearly three times faster than that of
rural population growth. It follows that the main challenge is to provide the
economically active population outside agriculture with productive employment.
Unfortunately, however, current structural change has been based on growth in
non-manufacturing activities in the industrial (secondary) sector, which is mostly
capital-intensive. As a consequence, the informal sector has been absorbing the
majority of those who were unable to find productive employment elsewhere.


The recent experience of most
developing countries, however, has
tended to diverge from these classic


patterns, which now seem to be
more the exception than the rule.


One of the characteristics of this
different type of structural change
is the transfer of labour from low-


productivity agriculture to low-
productivity service activities in


urban areas.


The problem with the current
process of structural change is


that it cannot provide the surplus
population released from agriculture


with productive employment.


The informal sector has been
absorbing the majority of those


who were unable to find productive
employment elsewhere.




115CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


In short, the recent pattern of structural change in the LDCs has been
disappointing in terms of employment creation and inclusive growth. It has
resulted in a process whereby labour is released from low-productivity activities
(mostly rural) only to be underemployed in other low-productivity activities
(mostly, but not exclusively, urban, and in the informal sector). This shift of
workers from one type of low-productivity activities to another explains why
income poverty (the working poor phenomenon) is so prevalent in many LDCs,
and why vulnerable employment accounts for around 80 per cent of total
employment. For the LDCs as a group, then, there has been little structural
change of the right type, namely, the type that results in productive employment
and in substantial increases in productivity, incomes, technological change and
higher value added activities.


The manner in which structural change is shaped in a given country depends
on myriad factors, including the initial natural resource and factor endowments
of the country, the state of external demand for its products, the international
trade regime, regional integration processes in which the country participates,
and so on. But government policies can also influence the process of structural
change. The recent pattern of structural change in the LDCs is, in fact, a result
not only of the above-mentioned factors, but also of the prevailing development
strategy, together with its policy framework.


Because structural change is so critical for development and has such a
major influence on the employment situation, Governments should ensure that
the right type of structural change takes place in the LDCs. The first step in that
direction is to recognize that economic activities are not all alike in their potential
for further development of productive capacities. Since some of them result
in more spill-over effects and create more linkages, it follows that production
structure is not just a passive outcome of earlier growth but is also an active
determinant of future growth potential. Steering structural change towards more
dynamic activities is therefore crucial.


This Report has proposed a framework with a three-pronged approach
to employment creation aimed at placing the economy on a jobs-rich
development path. The approach is based on a pragmatic assessment of the
challenges facing LDCs and on an explicit recognition that the key to inclusive
development is not simply higher rates of economic growth but also a higher
employment intensity of growth. Given the heterogeneity of the production
structure of a typical LDC economy, with modern sectors at one end of the
spectrum and subsistence activities at the other, an approach is needed that
can accommodate this diversity and make sound proposals for employment
creation. The three-pronged approach to employment creation thus addresses
subsistence activities; tradables; and non-tradables.


It recognizes that the process of structural change should ideally be led
by the consolidation and expansion of the modernizing core of the economy,
composed of high-value added, knowledge-intensive and competitive activities
in manufacturing, mining, mechanized agriculture and modern services. In terms
of labour, structural change should ideally result in a transfer of workers from
low-productivity, poorly paid work to more productive and better employment in
other sectors (i.e., an intersectoral transfer of labour).


However, the expansion of the modern sector needs to be complemented
by more jobs, and better jobs, in the remaining sectors of the economy. Given
the prevalence of working poverty in LDCs, this will involve raising productivity in
traditional activities. All possible options will have to be explored and promoted
for improving livelihood opportunities and creating employment in labour-
intensive activities in these other sectors.


This Report has proposed a
framework with a three-pronged


approach to employment creation
aimed at placing the economy


on a jobs-rich development path.
The three-pronged approach to
employment creation addresses
subsistence activities, tradables,


and non-tradables.


Given the heterogeneity of the
production structure of a typical


LDC economy, with modern
sectors at one end of the spectrum


and subsistence activities at the
other, an approach is needed that
can accommodate this diversity
and make sound proposals for


employment creation.


The process of structural change
should ideally be led by the
consolidation and expansion


of the modernizing core of the
economy, composed of high-


value added, knowledge-intensive
and competitive activities in


manufacturing, mining, mechanized
agriculture and modern services.




The Least Developed Countries Report 2013116


Chart 38. Primary sector as a share of GDP, 2009–2011


Percentage
0 10 20 30 40 50 60 70 80


Equatorial Guinea


Djibouti


Timor-Leste


Lesotho


Angola


Samoa


Yemen


Eritrea


Senegal


Sao Tome and Principe


Bhutan


Bangladesh


Zambia


Haiti


Chad


Vanuatu


Tuvalu


Mauritania


Uganda


Kiribati


Guinea


Madagascar


United Rep. of Tanzania


Solomon Islands


Mozambique


Lao People's Dem.Rep.


Malawi


Afghanistan


Gambia


Sudan


Rwanda


Burkina Faso


Benin


Nepal


Burundi


Cambodia


Myanmar


Mali


Niger


Guinea-Bissau


Dem.Rep. of the Congo


Togo


Ethiopia


Comoros


Central African Rep.


Sierra Leone


Somalia


Liberia


Source: UNCTAD secretariat calculations, based on UNCTADstat database, June 2013.


The logic behind the three-pronged approach to employment creation
is that an increase in agricultural productivity releases labour that has to be
absorbed by the rest of the economy — i.e., by tradable and non-tradable
activities. Since the tradables are subject to intense competition, the extent to
which they can absorb labour is limited. In other words, the choice of capital-
labour ratio tends to be exogenously determined for enterprises producing
tradable goods and services. Non-tradable activities would accordingly have




117CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


to provide the bulk of employment opportunities both for new entrants and for
workers released from agricultural subsistence activities.


Nonetheless, it is essential for policy to focus not only on employment
generation, but also on productive transformation in each of these sectors
and in the economy as a whole. The three-pronged approach proposed here
emphasizes that employment creation is important, but that it should be
pursued in parallel with the modernization of economic activities and an increase
of productivity. The latter will ensure that not just the quantity of employment,
but also the quality, improves.


The success or failure of the three-pronged approach will ultimately depend
on whether it results in more employment creation and whether it fosters linkages
in the national economy. More developed economies are invariably characterized
by more dense economic structures where linkages are stronger and the
production process more specialized or roundabout. This was recognized long
ago by Adam Smith in his description of the process of specialization and his
analysis of how it increases productivity.


Dynamic production linkage effects occur through both demand-side and
supply-side relationships. For example, the multiplier effects of the export sector
on the rest of the economy (demand side) will depend on the existence or
absence of linkages with the rest of the national economy. If the export sector
operates as an enclave within the economy, these dynamic effects will be largely
absent. The effects on the supply side operate through positive externalities,
economies of agglomeration, economies of specialization, and technological and
knowledge spill-overs. Policies that strengthen these linkages can accelerate
structural change, and with it the development of productive capacities.


2. AGRICULTURE AND THE EMPLOYMENT CHALLENGE:
MODERNIZING SUBSISTENCE ACTIVITIES IN RURAL AREAS


Modernizing subsistence activities is a sine qua non for increasing
productivity and improving the livelihood of the majority of LDC populations.
This is particularly important in an LDC context, since a large proportion of time
spent at work is devoted to subsistence activities, and since a large number of
people are engaged in such activities, particularly agriculture. Broadly speaking,
agriculture in LDCs comprises both subsistence activities and commercial
agriculture.11 Agricultural development policies are likely to benefit both types
of activities. In the case of subsistence agriculture, they are expected to have
an impact on earnings, on poverty, but also on output levels. In the case of
commercial agriculture, successful policies are more likely to have broader
impacts on the creation of intersectoral linkages, enhanced food security, and
expansion of outputs that are traded both domestically and internationally. The
importance of both types of agriculture is analysed below in the broader context
of rural development, which is based not only on agricultural activities, but also
on rural non-farm activities.


There are five main reasons why rural development is crucial for improving the
employment situation in LDCs and why policies for employment and productivity
need to target agriculture as a priority in the short term.


First, the LDC population is largely concentrated in rural areas. In 35 LDCs,
more than 60 per cent of the population lives in rural areas, while less than half
of the population lives in urban areas in only 5 LDCs: Djibouti, Sao Tome and
Principe, Angola, Gambia and Haiti (chart 39). This means that the LDC labour
supply is largely concentrated in rural areas. Policies for expanding jobs and
increasing labour productivity and earnings thus need to target rural areas in the


The logic behind the three-pronged
approach to employment creation
is that an increase in agricultural


productivity releases labour that has
to be absorbed by the rest of the
economy — i.e., by tradable and


non-tradable activities.


Non-tradable activities would have
to provide the bulk of employment
opportunities both for new entrants


and for workers released from
agricultural subsistence activities.


Modernizing subsistence activities
is a sine qua non for increasing
productivity and improving the


livelihood of the majority of LDC
populations.




The Least Developed Countries Report 2013118


first instance. It is in rural areas that the labour force comprises workers who are
already, or who could potentially become, active in both agricultural and RNF
activities. If an immediate impact is to be made on poverty and unemployment,
rather than leaving these problems to be resolved in the long term through
the “trickle-down” effect of growth in the non-agricultural sectors, agricultural
growth will have to be stepped up considerably.


Second, the primary sector (mainly agriculture) contributes the highest share
of GDP in LDCs, as compared to other major groups of countries.12 Primary
activities account for over one fourth of GDP in the average LDC and in 29 of the
48 LDCs for which data are available (see chart 38).


Third, the productivity of rural activities is very low in most LDCs. The
concentration of the population in rural areas — where the majority of the
population in 43 LDCs lives — contrasts sharply with the contribution of
primary activities to GDP (there are only four LDCs where the primary sector
contributes more than half of GDP). This concentration is an indicator of very
low productivity in rural activities, especially agriculture. As farm sizes are
diminishing and farmers are being forced to cultivate more ecologically fragile
land under increasingly uncertain climatic conditions, agricultural livelihoods have
become less secure, more volatile and even less able to provide subsistence.
This situation is accentuated by the heightened competition of subsistence
agriculture with large-scale commercial farming, whether through more open
trade or through changes in domestic property relations and land tenure
patterns. The very low level of agricultural productivity is apparent not only within
individual LDC economies, but also when compared internationally. Not only is
there an agricultural productivity gap between LDCs and ODCs, but that gap
has been widening. In 1990, the LDCs’ cereal yield per hectare was only 61 per
cent of that of ODCs. Two decades later, the proportion was just 37 per cent
(chart 40). These very low levels of productivity, combined with the strong rural
concentration of the population in rural areas, are the main explanation for the
pervasive poverty in these countries (UNCTAD, 2004).


The fourth factor behind the importance of rural development to LDC
employment is the current pattern of rural–urban migration in most of these
countries. That pattern is driven more by expulsion forces (i.e., the dearth of
gainful employment in rural areas) than by attraction forces (because of the lack
of decently paid jobs in urban areas). Many LDCs are now at a critical stage in
which they not only must find productive jobs and livelihoods for the millions
of young people who are entering the labour force each year, but also have to
confront that task in a situation where the nature of the employment challenge
is changing. In the past, most of the new labour force was absorbed in low-
productivity livelihoods in agriculture. Recently, however, more and more people
have been seeking work outside agriculture, and urbanization is accelerating.
Many LDCs have been unable either to increase agricultural productivity
significantly or to generate productive jobs and livelihoods outside agriculture.
In the absence of non-farm employment opportunities in rural areas, young
people move to towns and cities in search of employment. This creates serious
economic and social problems, such as urban poverty, growing or persistent
informality, social dislocation and crime.


Fifth, most LDCs are characterized by food insecurity, which means they
are highly vulnerable to developments in international food markets.13 They
are immediately affected by the negative impacts of periods of high or rising
international prices, as they have been ever since the international food crisis of
2008. As high or rising international prices translate into high or rising domestic
food prices, the real earnings of workers, especially the poorer among them,
are lowered (UNCTAD, 2008), which also worsens their standard of living . In an
economy with uncertain export prospects, ensuring adequate food availability


If an immediate impact is
to be made on poverty and


unemployment, rather than leaving
these problems to be resolved


through the “trickle-down” effect
of growth in the non-agricultural


sectors, agricultural growth will have
to be stepped up considerably.


Many LDCs are now at a critical
stage in which they not only must


find productive jobs and livelihoods
for the millions of young people who


are entering the labour force each
year, but also have to confront that
task in a situation where the nature


of the employment challenge is
changing.


Many LDCs have been unable either
to increase agricultural productivity


significantly or to generate
productive jobs and livelihoods


outside agriculture.




119CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


Chart 39. Rural population as a share of total population, 2010–2012


0 20 40 60 80 100


Percentage


Djibouti


Sao Tome & Principe


Angola


Gambia


Haiti


Tuvalu


Liberia


Togo


Kiribati


Senegal


Benin


Mauritania


Sudan


Equtorial Guinea


Mozambique


Central African Rep.


Sierra Leone


Somalia


Mali


Zambia


Guinea


Dem.Rep. of the Congo


Bhutan


Lao People's Dem.Rep.


Myanmar


Comoros


Yemen


Madagascar


Guinea-Bissau


Bangladesh


Timor-Leste


Chad


Lesotho


United Rep. of Tanzania


Burkina Faso


Vanuatu


Afghanistan


Eritrea


Cambodia


Malawi


Samoa


Nepal


Rwanda


Solomon Islands


Niger


Ethiopia


Uganda


Burundi


Source: UNCTAD secretariat calculations, based on UNCTADstat database, June 2013.


for the entire population — a crucial objective in its own right — calls for stepping
up agricultural production, and food production in particular.


The ongoing analysis attests to the importance of rural activities — including
in the subsistence sector — to employment generation, poverty reduction
and more vigorous economic activity in LDCs in the short term. In future, as




The Least Developed Countries Report 2013120


agriculture and RNF activities develop, rural economic activities will make a vital
contribution to the development of productive capacities and to the employment
generation which this process gives rise.


Indeed, agricultural development has major employment-generating effects,
both in agriculture and in the rest of the economy. Strengthening linkages
between agricultural and other activities also reinforces intersectoral flows of
intermediate goods. The output of agricultural activities can serve as an input
to incipient industrial activities, and especially to food processing industries.
In fact, manufacturing activities that are not geared towards exports are highly
concentrated in food processing and beverage industries. The output of
industrial activities can also serve as input to agricultural production, e.g. in the
form of fertilizers, agricultural equipment and machinery. Agricultural surpluses
can thus be not only a prerequisite for competitive labour-intensive activities in
the rest of the economy, but also an important addition to a country’s exports.


Similarly, income growth in one sector strengthens demand for the output
of other sectors. Higher incomes in rural areas cause the domestic market to
expand, generating rising demand which can be satisfied (at least partially) by
the expanding output of domestic firms in manufacturing and services. Rising
income levels, combined with a growing population, will also create a greater
demand for food. In other words, the economy will receive an “agricultural push”
if rural incomes rise sufficiently and if strong linkages are created and maintained
between agriculture on the one hand and non-farm rural activities and urban
sectors on the other.


Rising agricultural production and productivity have the additional benefit of
allowing LDCs to reduce food insecurity and ensure a more reliable food supply
while also lessening their dependence on external sources of food supply.
Although for many LDCs, the goal of self-sufficiency in food production is not
immediately attainable, some progress towards food security is desirable in
and of itself, regardless of the complementarities and synergies with industrial
development previously described.


Chart 40. Cereal yield in LDCs and ODCs, 1990–2011


0


0.5


1.0


1.5


2.0


2.5


3.0


3.5


1990 2000 2011


To
ns


p
er


h
ec


ta
re


LDCs ODCs


Source: UNCTAD Secretariat calculations, based on data from World Bank, World Development Indicators online database (downloaded
in August 2013).


Agricultural development has major
employment-generating effects,
both in agriculture and in the rest


of the economy.


The output of agricultural activities
can serve as an input to incipient
industrial activities, and especially


to food processing industries.
The output of industrial activities
can serve as input to agricultural


production, e.g. in the form of
fertilizers, agricultural equipment and


machinery.




121CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


Agricultural development should cause the relative prices of food to fall.
The supply of basic wage goods is crucial for the non-inflationary expansion
of employment opportunities in the rest of the economy. Since wage goods
generally consist of food items, manufactured consumer goods and basic
services, food prices are major determinants of the cost of living of workers and
of the competitiveness and profitability of labour-intensive activities in the national
economy. Lowering the cost of food amounts to increasing the real wages of
workers. This in turn can have a stimulating effect on the local economy through
direct demand and multiplier effects and on the investment-growth-employment
nexus as well.


In short, effective rural development policies with a particular emphasis on
the modernization of agriculture are likely to create opportunities for employment
in both rural and urban areas. To the extent that agricultural growth leads to
a diversification of the demand pattern and hence of activities that can meet
domestic demand, the employment-generating potential of an “agricultural
push” strategy can be quite significant.


3. TRADABLE ACTIVITIES:
THE EMPLOYMENT CHALLENGE IN AN OPEN ECONOMY


The diversification and structural change of LDC economies obviously
cannot be based solely on the development of agriculture. The experience
of developed countries demonstrates the critical importance of developing
manufacturing activities and related producer services, so as to benefit from
synergies and increasing returns to scale and to provide employment for
the younger population. Modernization of agricultural production processes
generates a growing surplus of labour in rural areas, and that labour surplus
then seeks productive employment in urban centres. Improving the prospects
for subsistence workers of finding jobs in more modern activities is essential
for the structural transformation of the economy. This is the second prong of
the approach outlined in this Report, focusing on employment opportunities in
tradables sectors.


Tradable activities play a dual role in the development process. The first is
that of absorbing labour that has been freed up from the subsistence sector.
The second is that of generating foreign exchange revenues, which in turn is
necessary for importing essential goods and servicing foreign debt. The LDCs
have been focusing on the tradables sector for the past 25 years, which
has meant shifting resources to encourage exports and introducing policies
conducive to export-led growth. This shift has generally been successful in
increasing foreign exchange earnings. Export revenues rose vigorously during
the 2000s, since both the volumes exported and the prices of exported goods
expanded.


In the recent past, however, the role of the tradables sector in absorbing
labour freed up from subsistence agriculture has been fulfilled to a much lesser
extent. Where exports are based on natural resource extraction, the employment
intensity of growth has been low. In countries whose tradables sector is
dominated by export-oriented labour-intensive manufactures, by contrast, more
jobs have been generated.


The classic route of transferring labour from subsistence or other rural
activities to more productive jobs in manufacturing has been followed in
only a handful of LDCs, some of them in Asia, as well as Lesotho and Haiti.
Bangladesh, for example, has become the world’s second largest apparel
exporter, surpassed only by China. Manufacturing in some other Asian LDCs


Lowering the cost of food amounts
to increasing the real wages of
workers. This in turn can have


a stimulating effect on the local
economy through direct demand
and multiplier effects and on the
investment-growth-employment


nexus as well.


The experience of developed
countries demonstrates the


critical importance of developing
manufacturing activities and related
producer services, so as to benefit


from synergies and increasing
returns to scale and to provide
employment for the younger


population.


The classic route of transferring
labour from subsistence or other
rural activities to more productive
jobs in manufacturing has been


followed in only a handful of LDCs.




The Least Developed Countries Report 2013122


has grown through participation in the manufacturing supply chains centred
on China. The recent increase in China’s labour costs, and the rebalancing of
Chinese growth described in chapter 1, box 2, is likely to open up opportunities
for labour-intensive export activities in LDCs. Hence, there is some potential
for manufacturing to become one of the engines of employment creation in the
LDCs in the not-too-distant future.


Clearly, the LDCs cannot afford to ignore the fact that they need foreign
exchange to import capital goods, technology and other inputs required to build
their productive capacities. They must also bear in mind the need to maintain
or increase their export capacity. To be able to export, they may need to attract
FDI, which typically chooses capital-intensive technologies that do not generate
much employment. They can, however, use policies to encourage investment
in export-oriented but labour-intensive activities, particularly in manufacturing,
that can generate jobs while also contributing to export expansion and foreign
exchange earnings.


The tradables sector comprises both export-oriented and import-substituting
activities. It is true that the extent to which the LDCs can nurture the latter
activities has been substantially reduced by trade liberalization. However, this
does not mean that import-substituting activities are no longer feasible. They
simply require different sets of policies and instruments geared towards the
development of productive capacities, especially industrial policy and enterprise
development policies, as analysed in the next chapter of this Report.


4. NON-TRADABLE ACTIVITIES:
THE EMPLOYMENT CHALLENGE IN LOW-PRODUCTIVITY ACTIVITIES


The final element of the three-pronged approach is to promote employment-
intensive growth in non-tradables sectors. Given that the tradables sectors are
less likely to provide an abundance of employment opportunities for the reasons
outlined above, employment creation in non-tradable activities becomes critical.
These activities include infrastructure and housing; basic services (education,
health, sanitation, communication); technical services, repair and maintenance,
as well as most transportation services; insurance services, property and
commercial brokerage; personal, social and community services; public
administration; and security and defence. Since these activities do not generally
face international competition, the policy space for influencing outcomes in
these sectors is larger than in tradables, and accordingly they offer much greater
possibilities for increasing the employment intensity of growth.


Moreover, non-tradable activities grow as incomes grow. The share of food
in the total consumption of an individual will normally decrease as income
increases, leaving more space for non-food goods and services. Health and
education become particularly more important as incomes grow. This means
that the high growth in the LDCs over the past decade has to some extent
created demand for more and better services. However, the demand for many
of these services is currently met by activities taking place in the informal sector,
with very low productivity and remuneration. Thus, the existence of an increasing
demand for better services — a demand that is currently being matched by
a supply of lower quality — points to a need for substantially upgrading the
provision of many services in the LDCs.


Regardless of whether these activities are currently informal or formal, their
future growth can be influenced by policies. The point is that services are mostly
labour- intensive, which creates an opportunity for substantial employment
creation in the LDCs. Given the importance of services for employment creation,


The recent increase in China’s
labour costs, and the rebalancing
of Chinese growth is likely to open


up opportunities for labour-intensive
export activities in LDCs.


Given that the tradables sectors are
less likely to provide an abundance


of employment opportunities,
employment creation in non-


tradable activities becomes critical.


Since these activities do not
generally face international


competition, the policy space for
influencing outcomes in these


sectors is larger than in tradables,
and accordingly they offer much
greater possibilities for increasing


the employment intensity of growth.




123CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


Governments should foster their development. For example, policies that
incentivize the formalization and enlargement of enterprises in these sectors can
result in rapid increases in productivity because of better use of economies of
scale and scope. Increases in productivity then translate into higher incomes
for workers and a broader tax base, thereby strengthening the domestic
mobilization of resources. Governments can use their procurement policies, for
example, to promote the development of small domestic enterprises. The use
of labour-intensive techniques and domestic inputs should figure prominently
among the requirements outlined in these policies.


One essential driver of the non-tradables sector is public expenditure,
especially (but not exclusively) in the social sectors. This is typically much
more employment-generating than several other economic activities, and also
has substantial multiplier effects. Spending on the provision of proper health
facilities, for example, or ensuring good-quality and universal education,
has great employment-generating potential. There is thus a strong case for
pursuing a growth strategy that allows and encourages labour productivity
increases overall. Such a strategy should also involve a significant expansion of
public expenditure and in turn of income and employment opportunities in social
sectors that have a positive impact on the standard of living.


Given the greater policy space in non-tradables, that is one part of the
economy on which policymakers can have the greatest influence. Specifically,
they can try to put the investment-growth-employment nexus to work in the
non-tradables sector, as has been described in section B. At the same time, it
provides an example of how different elements of the policy framework can be
combined to enhance the coherence and synergies of policies.


E. How to adjust the framework
to conditions in different LDCs


The framework developed in this chapter should not be viewed as a one-size-
fits-all solution for the employment challenge in LDCs. There is considerable room
for diversity in its application, reflecting differences in each country’s resource
endowments, size, geographical location, production structure and export
structure. Such diversity implies different starting positions and also different
policy choices. There is some agricultural production, some manufacturing and
some extraction of natural resources in all the LDCs, but the proportion of each
element varies from one country to another.14


As argued in chapter 1, the weakness of aggregate demand in developed
countries will restrict the possibilities of strong export-led growth in the LDCs for
some time to come. This requires a shift towards a more domestic-demand-led
growth, particularly in economies that are large enough to sustain such a shift.
This rebalancing of growth can be achieved with direct redistributive policies and
public expenditure on more basic goods and services. However, many LDCs
are small economies and are also very specialized in their production and export
structure. As a rule, small countries lacking a broad base of natural resources
have to develop manufactured exports at an earlier stage than resource-rich
countries, where specialization in primary commodities persists to a much later
stage of development. Larger countries, on the other hand, can shift away from
specialization in primary commodities through import substitution.


Given the weakness of demand in developed countries, and the small size of
domestic markets, an increase in regional and South-South trade is likely to be
of particular importance for the smaller LDCs. Progress towards developmental


Governments can use their
procurement policies, for example,


to promote the development of
small domestic enterprises. The


use of labour-intensive techniques
and domestic inputs should figure


prominently among the requirements
outlined in these policies.


One essential driver of the
non-tradables sector is public


expenditure, especially (but not
exclusively) in the social sectors.


The framework developed in this
chapter should not be viewed as
a one-size-fits-all solution for the
employment challenge in LDCs.
There is considerable room for


diversity in its application, reflecting
differences in each country’s
resource endowments, size,


geographical location, production
structure and export structure.




The Least Developed Countries Report 2013124


regionalism — a subject that was treated extensively in LDCR 2011 — and
intensification of economic relationships between LDCs and other developing
countries might help the LDCs during the current adverse economic conjuncture.


1. FUEL AND MINERAL PRODUCERS AND EXPORTERS


There are two characteristics of fuel and mineral exporters that must be
considered when adapting the framework to their circumstances. The first is that
the production of tradables is of an enclave type, with few linkages to the rest
of the economy. These sectors have very low employment elasticity, resulting
more often than not in jobless growth. The policy challenge in these countries
is accordingly to ensure that higher prices of commodities and/or productivity
growth in the extractive sector translate into greater domestic demand and
more investment. Distribution of rents is thus crucial. Taxation systems in
such economies should have two main aims: to create sufficient incentive for
investors, and to secure a fair share of mining or fuel revenue for public use.


In addition, these sectors can help generate more and better employment
only indirectly, which calls for strengthening their linkages with the rest of the
economy. This can be accomplished by using some of the resource revenues to
improve the enabling environment for business start-ups through well-targeted
investment in infrastructure. Backward and forward linkages should also be
reinforced, in particular by creating natural resource-based production clusters.
These are sectoral and/or geographical concentrations of enterprises engaged
in interlinked activities based on the exploitation and processing of natural
resources and their supporting industries (UNECA, 2013).


The second characteristic of fuel and mineral producers and exporters is
that they usually have less of a financing constraint than other LDCs. The data
in annex table 4, show that the resource gap of fuel-exporting LDCs is positive,
which means that their savings rate is higher than their investment rate. Thus,
financing public infrastructure, social services and the like should be relatively
easy. However, the difficulty lies in managing the exchange rate due to the
“Dutch disease” effects. The influx of foreign exchange from exports and foreign
investment results in an overvalued domestic currency, effectively discouraging
non-commodity exports.


In short, the priorities for these countries should be private sector development
organized around the extractive sectors with backward and forward linkages,
and the investment-growth-employment nexus in non-tradables sector.


2. PRODUCERS AND EXPORTERS OF AGRICULTURAL PRODUCTS


Countries where conditions are auspicious for the expansion of agricultural
and food production and exports should promote these activities by shifting the
focus of public investment onto agriculture. Public investment should provide
solid infrastructure to connect the producers with major centres of consumption
(big cities and international markets). It should also encourage non-farm rural
activities, especially those related to food processing and the provision of basic
services.


In countries with large populations, it should be possible to combine
increases in agricultural incomes with the development of domestic industries by
encouraging domestic demand for intermediate and consumer goods produced
by domestic industry. In such situations, industrialization can be driven by
agricultural development rather than by exports.


The policy challenge is to ensure
that higher prices of commodities
and/or productivity growth in the


extractive sector translate into
greater domestic demand and more
investment. Distribution of rents is


thus crucial.


The priorities for these countries
should be private sector


development organized around the
extractive sectors with backward


and forward linkages, and the
investment-growth-employment
nexus in non-tradables sector.


Countries where conditions are
auspicious for the expansion of
agricultural and food production


and exports should promote these
activities by shifting the focus of


public investment onto agriculture.
Public investment should provide
solid infrastructure to connect the
producers with major centres of


consumption.




125CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


In countries with smaller populations, the primary goal for agricultural and
agro-industrial exports must be international markets. While this generates
higher standards of competitiveness and quality of goods produced — and thus
also entails a major role for the State in ensuring that the standards are met
— recent developments are creating new opportunities for exports. One such
opportunity will arise from the shift in Chinese demand for food from staples like
rice to more protein-rich food obtained from livestock. A well-planned strategy
to meet this growing demand could produce substantial payoffs in terms of both
income and employment. Countries with small populations can also develop
production for niche markets like organic food, flowers, horticulture and the like.


In short, for larger countries the development of agriculture can be coupled
with the development of domestic industry, enabling them to benefit from the
complementarities and synergies between the two. For smaller countries,
exporting agricultural surpluses and developing production for international
niche markets are viable options.


3. PRODUCERS AND EXPORTERS OF MANUFACTURED GOODS


Countries that have already established internationally competitive labour-
intensive manufacturing activities need to address three priority areas, each
of which has contradictory impacts on employment creation. The first priority
is to upgrade to more value added activities in areas where some industrial
capabilities already exist. If an economy depends almost entirely on external
markets for growth, its scope for employment creation is limited by the ability to
benefit from demand expansion in other countries or by the ability to increase
market shares. Both these options are limited in the short term, and in the longer
term depend on investments in the expansion of productive capacities. Wages
do not increase much in such economies, so domestic demand does not grow
and employment creation is limited. Informal activities may persist and even
expand in situations of relatively rapid economic growth. Industrial upgrading
is thus crucial for these economies. If successful, however, it will most likely
reduce employment creation since it would involve more modern technologies
that generally increase the capital-labour ratio.


The second priority for these countries is to cheapen wage goods, especially
food. Since their competitiveness is based on low wages, cheapening wage
goods will result in an increase in real wages, even if nominal wages do not
increase. An increase in real wages can in turn stimulate domestic demand
and help generate the investment-growth-employment nexus. Cheapening of
food, however, requires substantial investment in agriculture. The idea would
then be to promote development through an industrialization process linked in a
balanced fashion to the development of the rural economy and agriculture.


Both of these processes will produce surplus labour. In order to match
the number of persons released from agriculture and industry, the number of
employment opportunities in services must be sufficiently dynamic. This calls
for establishing the investment-growth-employment nexus in the non-tradables
sector. In addition, some of the new employment opportunities will have to
come from new manufacturing activities. In effect, enterprise profits from labour-
intensive manufacturing exports can be invested in activities that represent
backward linkages. The backward linkage dynamic is particularly important
for newly industrializing countries, since their industrialization often begins with
the assembly of inputs produced elsewhere. Pursuit of the backward linkage
dynamic for these countries is therefore essential for achieving an industrial
structure of any depth. Some of the additional employment may arise from
the opportunities that will open up as Chinese unit labour costs increase (see
chapter 1, box 2). As China becomes too expensive for some labour-intensive


For larger countries the
development of agriculture can be
coupled with the development of


domestic industry, enabling them to
benefit from the complementarities


and synergies between the
two. For smaller countries,


exporting agricultural surpluses
and developing production for
international niche markets are


viable options.


The first priority is to upgrade to
more value added activities in areas
where some industrial capabilities


already exist.


The second priority for these
countries is to cheapen wage goods,


especially food.


In order to match the number of
persons released from agriculture


and industry, the number of
employment opportunities in
services must be sufficiently


dynamic. This calls for establishing
the investment-growth-employment
nexus in the non-tradables sector.




The Least Developed Countries Report 2013126


manufacturing activities, wider opportunities will be created for other developing
countries. This may give some LDCs the chance to develop much-needed
industrial capabilities and become exporters of that type of goods. It may give
others the chance to increase their share of international markets based on their
existing industrial capabilities.


In summary, the priorities for producers and exporters of manufactured
goods should be industrial upgrading of the manufacturing sector, development
of agriculture and creation of the nexus in the non-tradables sector.


4. SMALL ISLAND DEVELOPING STATES


The structural characteristics of small island developing States make it
extremely difficult to envisage an effective policy framework for employment
creation. They are generally very small in terms of population and territory, have
no natural resources that can be exploited and exported, and are generally
located far away from major markets and developed countries. However, they
do have a potential to develop services, such as tourism and health provision.


In many developing countries, tourism is developed in a manner that
resembles the enclave economies of major natural-resource exporters, and has
negligible employment effects. A more promising strategy for SIDS would be
to develop tourism as a leading sector with linkages to local enterprises. The
provision of local food, for example, could have strong employment effects on
the local economy, while the provision of local cultural goods, such as music,
arts and crafts, could nurture creative industries.


Another promising channel for employment creation is the provision of health
and health-related services. Endowed with relatively well-educated populations,
especially in the health sector, SIDS have what is needed to position themselves
as health tourism destinations. Instead of “exporting” doctors and nurses through
migration, they can try to attract clients from more developed countries. Since
doctors and nurses receive relatively high incomes, they can create demand for
various types of goods and services that are available locally.


Creating linkages with a leading service sector is then a promising way
to increase the employment intensity of economic activities in small island
developing States.


F. Conclusions


The LDCs are likely to face an enormous employment challenge over the
next two to three decades, as discussed in chapters 2 and 3. To respond to
this challenge, their policymakers will have to find ways to stimulate employment
creation. In addition, GDP growth rates in the current decade have so far been
lower than in the previous decade, and forecasts suggest that this is likely to
continue over the next three to five years. Since employment creation was
inadequate even in the 2000s, the LDC employment challenge in the present
decade is even more overwhelming.


The aim of this chapter was to articulate as clearly as possible a policy
framework for linking employment creation with the development of productive
capacities in the LDCs. The framework is based on the recognition that
employment creation without the development of productive capacities is not
sustainable. It relates the three processes through which productive capacities
develop to three main elements that must be borne in mind in order for LDC


In many developing countries,
tourism is developed in a manner


that resembles the enclave
economies of major natural-
resource exporters, and has


negligible employment effects. A
more promising strategy for SIDS
would be to develop tourism as a


leading sector with linkages to local
enterprises.


Another promising channel for
employment creation is the provision
of health and health-related services.
Instead of “exporting” doctors and


nurses through migration, they
can try to attract clients from more


developed countries.


The framework relates the three
processes through which productive


capacities develop to three main
elements that must be borne in mind
to formulate policies geared at job-


rich growth...




127CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


policymakers to formulate policies geared at job-rich growth. These elements
are: the investment-growth-employment nexus; enterprise development and
technological change; and the three-pronged approach to employment creation.


Capital accumulation can take different forms, and in the recent past it included
the investment-growth nexus, but not employment. This chapter proposes a
framework that adds employment as a critical ingredient to the nexus. The focus
is on setting in motion a virtuous cycle where investment boosts growth, and
growth creates productive employment. Productive employment, in turn, implies
increasing incomes for workers, giving rise to consumption that supports the
expansion of aggregate demand. Sufficiently dynamic aggregate demand, for its
part, creates incentives for new investment, repeating the cycle at a higher level
of investment, growth, employment and income.


Enterprise development is the second element of the framework for
maximizing employment creation. It involves the development of productive
capacities through entrepreneurial capabilities and technological progress. It
is argued here that successful private sector development would enable the
LDCs to improve both the quantity and quality of employment creation and
also to embark on a technological catch-up with more developed countries.
The most important task in the LDC context is to create the “missing middle”.
Where technological change is concerned, policymakers need to adopt different
policies and measures according to the three main sectors of the economy.


Structural change is a central feature of the development process, and
its form and pace will also affect employment creation in the economy. To
place the economy on a job-rich development path, the chapter proposes a
framework with a three-pronged approach to employment creation. It focuses
on the consolidation and expansion of the modernizing core of the economy,
composed of high value added, knowledge-intensive and competitive activities
in industry, mining, mechanized agriculture and modern services. However,
to compensate for the often low employment intensity of growth within the
modernizing core, all possible opportunities for creating employment in labour-
intensive activities in tradable, non-tradable and subsistence sectors should be
explored and promoted.


Finally, the chapter proposes ways to adjust the framework to different types
of LDCs. As has already been noted, there is considerable room for diversity in
the application of the framework across LDCs, reflecting differences in resource
endowments, size, geographical location, production structure and export
structure. Policymakers in each country should carefully examine the specificities
of their economies and decide how to use the framework. The following chapter
discusses the main policy lines required to set up the framework developed here
in order to achieve employment-rich growth in the LDCs.


... these elements are: the
investment-growth-employment


nexus; enterprise development and
technological change; and the three-


pronged approach to employment
creation.


One of the most important tasks
in the LDC context is to create
the “missing middle”. Where


technological change is concerned,
policymakers need to adopt different


policies and measures according
to the three main sectors of the


economy.


Policymakers in each country should
carefully examine the specificities of
their economies and decide how to


use the framework.




The Least Developed Countries Report 2013128


Notes


1 The concept of the developmental State in the context of LDCs has been dealt with
extensively in UNCTAD, 2009.


2 There is little difference in this respect between African and Asian LDCs. Both groups
display a similar investment ratio, very close to the overall average. In the island LDCs,
by contrast, the rate is much lower: 17.1 per cent in 2010–2011.


3 China has been excluded from the total of other developing countries because its
exceptionally high investment ratio (45.9 per cent in 2010–2011) and the size of its
economy bias the group average.


4 The following paragraphs draw heavily on Stiglitz et al., 2006.


5 We have used the data for Africa because more recent estimates of the LDCs’
infrastructure investment needs are not available. One older estimate, provided in
UNCTAD 2006, suggests that LDCs would need annual infrastructure investment
equivalent to 7.5 and 9 per cent of GDP.


6 There are no available data are for several LDCs, most of them island LDCs.


7 Further details on this issue are provided in section C of this chapter.


8 In constant 2011 dollars. UNCTAD computations, based on data from the Creditor
Reporting System database of OECD-DAC.


9 The Least Developed Countries Report 2006 identified the underdevelopment of the
entrepreneurial sector — one particular aspect of missing institutional development,
along with a deficit of infrastructure and weak (domestic) demand stimulus – as the
main constraints on the development of productive capacities (UNCTAD, 2006).


10 A useful list, originally drawn up by UNCTAD, identifies five major kinds of technological
capabilities: investment capabilities, incremental innovation capabilities, strategic
marketing capabilities, linkage capabilities, and radical innovation capabilities.


11 This section focuses on subsistence activities within agriculture, but without
neglecting the role and importance of commercial agriculture and non-farm rural
activities. Chapter 5 includes a discussion of policies for creating jobs in non-farm
rural activities.


12 The primary sector is made up of agriculture, forestry and fishing, with agriculture the
predominant activity. The bulk of primary economic activities take place in rural areas.


13 According to FAO, as of July 2013, 23 of the 34 African LDCs , along with two Asian
LDCs and Haiti, — more than half of all LDCs — required external food assistance
due to critical problems of food insecurity (http://www.fao.org/giews/english/
hotspots/). Moreover, three fourths (26) of the 34 countries worldwide that required
external food assistance were LDCs.


14 The classification of LDCs according to their structure and employment challenges is
presented on p.xii.




129CHAPTER 4. A Framework for Linking Employment Creation and Development of Productive Capacities in the LDCs


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5CHAPTER
POLICIES FOR EMPLOYMENT-


INTENSIVE GROWTH IN THE LDCS




The Least Developed Countries Report 2013132


A. Introduction


Chapter 4 of this Report argued that in the medium to long term, the only
sustainable way of ensuring that the LDC economies generate jobs in sufficient
quantity and quality is through the development of productive capacities.
However, while in theory the private sector should generate most jobs, it is still
weakly developed in these countries. This requires a dual role for the State:
enacting policies to promote output expansion and employment creation
in the private sector, and directly generating jobs through the expansion of
public employment in socially essential or desirable activities. Achieving these
objectives will require implementing a broad range of mutually supportive policies
aimed at building productive capacity and fostering structural transformation.
Policy interventions should cover three broad areas: macroeconomic policies,
enterprise development, and public sector investment and actions for job
creation. This chapter presents the broad policy direction that LDC Governments
need to follow in order to attain employment-rich growth and to establish the
strong investment-growth-employment nexus described in chapter 4.


For LDCs, there must clearly be two complementary objectives concerning
employment: to expand the number of jobs, so as productively to absorb the
growing labour force; and to raise the labour earnings generated by these
jobs through productivity gains, which in turn implies diversifying the economy
towards higher value added activities. These objectives require a range of
mutually supportive policies — not just short-term macroeconomic or labour
market policies, but strategies aimed at structural change. This includes longer-
term policies that “should strive for an expansion of productive capacity and
an increase in the employment content of growth, to the extent that increasing
the employment content of growth does not jeopardize growth itself” (van
der Hoeven, 2013: 22). Furthermore, given the high degree of synergy and
complementarity between appropriate development policies (Rodrik and
Rosenzweig, 2010), different policies (macroeconomic, sectoral, micro, social,
trade and industrial policies) must be coherent and mutually supportive.


There are obvious constraints on policy formulation and implementation in
LDCs. One important set of constraints arises from the nature of their integration
with the global economy. Since LDCs tend to be open economies that rely
heavily on primary commodity and low value added manufactures exports, and
that are dependent on various forms of capital inflows to support the balance of
payments, they are often disproportionately affected by changes in global trade
and capital flows, as well as by flows in cross-border migration. National policies
are thus strongly conditioned by the external environment and must also be able
to respond to that environment flexibly, which often makes it more difficult to
pursue them in a systematic and planned manner.


Another frequently mentioned constraint is the supposedly limited capacity
of LDCs to design and implement policies, which is usually attributed to their
dearth of technical, human, political, financial and institutional resources and/or
to the prevailing type of governance. This has been used as a strong argument
against their industrial policies, on the grounds that government failures are
worse than market failures, especially when States do not have the capacity
to design and implement industrial policy and are not competent at “picking
winners”. It is also argued that industrial policy is liable to corruption and rent-
seeking; is associated with resource misallocation and waste; and allows the
persistence of inefficient firms. However, as has been noted in previous editions
of The Least Developed Countries Report series, several of these perceived


The State has a dual role: enacting
policies to promote output


expansion and employment creation
in the private sector, and directly


generating jobs.


For LDCs, there must clearly be
two complementary objectives


concerning employment: to expand
the number of jobs, and to raise the
labour earnings generated by these


jobs.


National policies are strongly
conditioned by the external


environment and must also be able
to respond to that environment


flexibly.




133CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


shortcomings in LDCs are themselves due to fiscal retrenchment dating back
to the structural adjustment era, weak country ownership of many policies, and
lack of interest of the international community in devoting resources to capacity-
building in most policymaking areas. Despite this, many LDCs do have islands
of excellence in public administration or executive agencies and can build on
them strategically, which would allow them incrementally to expand bureaucratic
competence and gradually build developmental States using industrial policy
(UNCTAD, 2009: 15–56). It should be recognized that industrial policy is a
learning process (Rodrik, 2004, 2008) and that policymaking capability evolves
along with productive capacities (Nelson, 1994; Freeman, 2008; Moreau, 2004;
Shimada, 2013). Indeed, this has been the experience of successful latecomer
industrializing countries (Chang, 2011). But donors can also play a useful role in
strengthening LDC policy capacity, including industrial policy (O’Connor, 2007;
UNCTAD, 2009: 46–49).


Yet another important background consideration involves technology
choice, as discussed in chapter 4. LDC policymakers are faced with potentially
contradictory priorities. On the one hand, they need to give high priority to
policies that generate more jobs. On the other hand, they need to diversify
their economies to increase labour productivity and labour earnings so as to
alleviate the pervasive problems of poverty and underemployment. Productivity
improvements are usually associated with more modern technologies which are
invariably more capital-intensive and labour-saving, and which can run counter
to the first objective of increasing employment. In other words, policymakers
often face a trade-off between efficiency and equity. However, this need not
always be the case. Ensuring adequate decent work for the labour force is
possible if reasonably rapid growth of average productivity is combined with
the rejuvenation of some traditionally important, employment-intensive activities
(such as some forms of agriculture), expansion of service activities that meet
social needs, and growth in the volume of economic activity. This has of course
been the case with countries undergoing a rapid industrialization process in
which manufacturing activities – which typically exhibit increasing returns to
scale – render rapid growth of average productivity possible.


Thus, the adoption of labour-saving technologies need not be a problem if the
volume of production expands sufficiently to generate higher absolute levels of
employment. Modern technologies that reduce the drudgery and arduousness
of work are to be desired in their own right. It is, of course, preferable if they
are associated with increases in labour productivity in society as a whole.
Accordingly, the focus must not be on preventing labour-saving technological
progress. It should rather be on ensuring that the surpluses from the activities
carried out through labour-saving technologies are mobilized (directly through
taxation or indirectly through the provision of incentives) and transferred to create
demand for more labour-intensive products. These surpluses can also be used
in a wide range of service activities, ranging from the provision of such essential
services as health, sanitation and education to entertainment and cultural
activities – anything that improves the quality of life. In this way policymakers can
reach both goals: employment expansion and improving per capita incomes.
Specific sectoral policies that can be deployed to ensure more employment are
discussed below.


With these points in mind, the rest of this chapter builds on the analytical
framework developed in chapter 4. It identifies some broad policy areas that may
be relevant for LDCs to consider in the light of the current global environment
and their own conditions, as discussed in chapters 1, 2 and 3.


Many LDCs have islands of
excellence in public administration


or executive agencies and can build
on them strategically, which would
allow them incrementally to expand


bureaucratic competence.


Ensuring adequate decent work
for the labour force is possible if


reasonably rapid growth of average
productivity is combined with the
rejuvenation of some traditionally
important, employment-intensive


activities.


The adoption of labour-saving
technologies need not be a problem
if the volume of production expands


sufficiently to generate higher
absolute levels of employment.




The Least Developed Countries Report 2013134


B. Macroeconomic strategies


This Report has argued that macroeconomic policies in LDCs need to be
reoriented away from a single-minded focus on price stability and budget balance
towards a strategy that is more focused on growth with sustainable employment
creation. This is important because macroeconomic policy frequently involves
trade-offs between different goals. For example, a quest for macroeconomic
stability focusing on inflation control may imply sacrificing employment, certainly
in the short run, and may also weaken workers’ bargaining position, depress
wages and therefore indirectly increase poverty. These short-run goals in turn
have a bearing on development policies. The quest for macroeconomic stability
may lead to less emphasis on strategies for sustainable and more inclusive
development, or for improving human development and meeting broader social
objectives. It is also often the case that price stability and correcting external
imbalances become the dominant pursuits, such that pervasive unemployment
or underemployment is allowed to persist, even though a shift in focus to make
productive employment generation the most critical goal need not generate
imbalances or instability.


Given the potential conflicts between goals and across instruments, the
choice of policy mix is not a purely technocratic exercise, but reflects political
choices and has social implications. There are strong distributional implications,
especially with respect to asset and income distribution and the differential
provision of public goods and services across groups in the population. These
implications relate not only to differences across economic classes and social
groups, but also to gender differences. Such effects may vary depending on
the characteristics of the country, such as the degree of indexation of wage
incomes; how investors, especially foreign ones, respond to changes in local
conditions; the particular activities in which employment is generated or lost;
and so on.


Short-run macroeconomic policies and longer-term growth strategies
are inextricably linked, not separate and independent. Over the past decade,
most LDCs have followed “prudent” and fiscally restrained macroeconomic
policies. While some have attributed the higher rates of income growth in
this period to such a strategy, it is more likely that rising commodity exports
and a favourable external environment were responsible. What is clear is that
if the LDCs’ development strategy is to shift towards a greater emphasis on
productive employment generation and sustainable economic diversification, it
will require supportive macroeconomic policies. In addition, a major concern of
macroeconomic policy must be the reduction of economic volatility, which is
undesirable for many reasons.


In this context, fiscal policies become quite prominent. Public spending
and taxation are key instruments for shaping the distribution of income in the
economy, strengthening the process of capital accumulation and placing the
economy on a job-rich growth path. They are also the main instruments for
establishing linkages between enterprises in modern sectors and the rest of
the economy, thus making the process of structural change more dynamic
and headed in the right direction. They can help accelerate diversification of
economic activities and develop sectors that are of strategic importance for
national development.


Fiscal policy can favour employment-intensive economic growth particularly
through investment by the State. Public investment in physical and social
infrastructure is absolutely critical for LDCs, as it improves both aggregate
supply and aggregate demand conditions. Public investment in roads, railroads,


Macroeconomic policies in LDCs
need to be reoriented away from
a single-minded focus on price


stability and budget balance towards
a strategy that is more focused on


growth with sustainable employment
creation.


Over the past decade, most LDCs
have followed “prudent” and fiscally
restrained macroeconomic policies.


Public spending and taxation
are key instruments for shaping
the distribution of income in the


economy, strengthening the process
of capital accumulation and placing
the economy on a job-rich growth


path.




135CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


irrigation systems or public goods in urban areas creates physical capital, thereby
expanding the country’s productive capacities. Not all such investments need be
executed by the public sector; they can be implemented by private involvement
driven by public expenditure. This in turn provides more opportunities for
private investment in activities that have become profitable because of the new
infrastructure. Both of these effects expand the aggregate supply. At the same
time, the employment created by public investment means additional incomes
for workers, with positive multiplier effects, which boosts aggregate demand.


In many LDCs the public sector is a major purchaser of goods and services
and the largest formal sector employer in the economy. So public spending in
general (both investment and consumption) already has a crucial influence on
many markets for goods and services, as well as on the labour market. This
means that government procurement policy (relying more on locally produced
inputs and output, for example) can be used to induce employment creation in
the economy and create possibilities for expansion of SMEs, once again with
positive multiplier effects.


Maximizing the benefits accruing from public investment and other public
spending obviously requires fiscal space — the ability to mobilize resources
from internal and external sources so as to meet the requirements of public
expenditure. Broadening the available fiscal space in turn requires diversifying
the sources of financing of the public sector and especially strengthening
domestic resource mobilization (UNCTAD, 2009: 57–90). Possible actions in this
regard include broadening the tax base, improving the collection system and
making the tax system more progressive. Tax administration and enforcement
can be improved by making more public resources available for such activities.
Reforming the tax administration by improving information management and
cross-checking statements and declarations leads to greater efficiency in tax
collection.1 Setting up a special unit for high-income taxpayers has also been
found to be helpful. Reducing or eliminating exemptions and loopholes, as
well as enticing more businesses to join the formal sector, can go a long way
towards broadening the tax base. It may be useful to combine the carrots of
some incentives for tax payment with sticks of better enforcement. In all cases,
however, revenues will rise only if the Government has the political will, makes
its intentions clear and is consistent and determined about tax administration.


It is important to diversify the sources of tax revenue rather than relying
on a single indirect tax, such as value added tax (VAT). The principle should
generally be to rely as far as possible on rules-based and non-discretionary
tax instruments that are corruption-resistant and have lower transaction costs.
Some specific tax measures that have proven effective include:


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luxury consumption;


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tightening administration and through greater use of information technology;


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on luxury consumption;


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expatriates;


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t 3FWJTJOH BOE JNQMFNFOUJOH UIF UBYBUJPO PG UIF ýOBODJBM TFDUPS XIFSF JU JT
reasonably developed), possibly through measures like transaction taxes on
financial transactions; and


The employment created by public
investment means additional


incomes for workers, with positive
multiplier effects, which boosts


aggregate demand.


Public spending has a crucial
influence on many markets for
goods and services, as well as


on the labour market.


Broadening the available fiscal
space requires diversifying the


sources of financing of the public
sector and especially strengthening


domestic resource mobilization.


The principle should generally be
to rely as far as possible on rules-
based and non-discretionary tax
instruments that are corruption-


resistant and have lower transaction
costs.




The Least Developed Countries Report 2013136


t 3FGSBJOJOH GSPN GVSUIFS USBEF UBSJGG DVUT VOUJM BMUFSOBUJWF TPVSDFT PG SFWFOVF
are put in place.


For LDCs rich in energy and mineral resources, domestic resource
mobilization may be achieved particularly through improvements in the capture
and redistribution of resource rents (UNCTAD, 2010a: 199–203; UNCTAD,
2010b: 155–158). It is now more widely accepted that “In cases where the
allocation of exploitation rights was flawed, governments should renegotiate
the concession to restore a proper balance between private return and public
revenue” (Commission on Growth and Development, 2008: 80). Resource-rich
LDCs can increase fiscal revenue by reversing the current practice of offering
extremely favourable terms to foreign investors in agriculture and mining. In the
case of agriculture, this can involve imposing a tax on land leased for large-scale
investment projects or raising the existing lease on land, as well as revising the
taxation on the activity undertaken by such projects. Where mining is concerned,
Governments can raise their revenues by adopting higher levies, royalties,
income taxes or, in specific cases, export taxes. These can be usefully directed
towards strengthening human capital formation and expanding infrastructure,
which provide the long-term basis for economic diversification. This is especially
critical because the resources generating these rents are exhaustible.


At the same time, LDC Governments can strive to strengthen the mobilization
of external resources from both traditional and non-traditional sources. This
includes negotiating for a non-reduction in ODA from traditional donors in
the present context and, at a later stage, for an increase. A matching funds
approach may also be considered, which provides an incentive for domestic
revenue rising in order to obtain additional ODA. As proposed by the United
Nations Department of Economic and Social Affairs, it is also worth working
towards international consensus on non-traditional forms of development
finance, such as a currency transaction tax; regular allocations of IMF special
drawing rights (SDRs); and the use of “idle” SDRs (UN/DESA, 2012). Another
non-traditional source of development finance is the channelling of a fraction
of the resources of Sovereign Wealth Funds to LDCs, either directly or through
regional development banks, as proposed by UNCTAD. A simple calculation
estimated that through the latter alternative, if 1 per cent of the assets from
those funds were directed to the capital base of regional development banks,
this could mobilize an additional $84 billion in their annual lending capacity
(UNCTAD, 2011: 109–123).


Diversification of donors is a real possibility, given recent changes in the
international economy, so LDCs can look beyond traditional donors to raise
more financial assistance from partner Governments in the South.2 Multilateral
financial institutions can also provide additional resources for public investment.
Regional funding of infrastructure can boost labour-intensive public works
projects, e.g. in the context of regional integration schemes or of internationally
funded border-crossing infrastructure projects, as was the case in the Greater
Mekong Subregion of South-East Asia (UNCTAD, 2011: 102–104).


Since many LDCs continue to rely on ODA for a substantial part of their
public spending, it is important to use such aid effectively. Until quite recently,
aid inflows to many of these countries were not put to good use because of
a fear of the adverse effects of currency appreciation and the perceived need
to keep higher levels of foreign exchange reserves in order to guard against
potential financial crises. While the recent decline in global economic activity
has reduced this tendency to some extent, it is still essential to ensure that
ODA translates into higher public investment, preferably in areas where there are
shortages or which form bottlenecks for production, or in areas where existing
levels of provision are socially suboptimal.


Resource-rich LDCs can increase
fiscal revenue by reversing the


current practice of offering
extremely favourable terms to


foreign investors in agriculture and
mining.


LDC Governments can strive to
strengthen the mobilization of
external resources from both
traditional and non-traditional


sources.


Regional funding of infrastructure
can boost labour-intensive public
works projects, e.g. in the context
of regional integration schemes or
of internationally funded border-
crossing infrastructure projects.




137CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


While fiscal sustainability is a crucial medium-term issue, there should be
some flexibility with respect to fiscal targets, especially when deficits are the
result of productive public expenditure, and during economic downswings.
Rigid rules on fiscal deficits in the short run reduce the possibility of effective
countercyclical policies, which are likely to become important once again in
the uncertain global environment. The general rule for developing countries to
maintain fiscal sustainability should be for the public sector deficit not to exceed
the long-term trend growth rate of the economy, while allowing for short-term
cyclical variations (UNCTAD, 2013a).


The extent to which the LDCs can use the fiscal stance to address short-
run situations of excess capacity or cyclical downswing is typically more limited
than in developed countries. However, even this reduced policy space can and
should be used as effectively as possible. For example, many LDCs adopted
countercyclical measures, mostly of a fiscal nature, during the strong downturn
in 2008–2009 (Brixiová et al., 2011; IMF, 2010). A case could also be made for
a fiscal deficit composed entirely of public capital investment, as long as the
social rate of return from such investment exceeds the rate of interest, which
can effectively be financed through borrowing in exactly the same way as private
investors do. This is particularly important, as noted above, in physical and
social infrastructure, where public investment is essential since the presence
of externalities means that the private sector is not likely to invest at socially
optimal levels. A simple rule would be to limit debt financing in the medium term
to the level of expenditure for public investment (UNCTAD, 2013a).


Monetary policy is not only about price stabilization and inflation control,
but should be an integral part of macroeconomic and overall development
strategies. Particularly in LDCs, it should aim at expanding credit for investments
that are considered necessary or strategic, improving livelihood conditions in
sectors that employ a large proportion of the labour force, such as agriculture,
and generating more productive employment by providing institutional credit to
small-scale producers in all sectors. The primary function of financial markets
in providing financial intermediation for development should never be forgotten.


That is why basing monetary policy solely on inflation targeting is problematic.
It is true that macroeconomic instability expressed in high inflation can kill growth.
However, macroeconomic stability (when broadly defined so as not to be focused
on a narrow target, such as inflation) is only a necessary condition for growth, not
a sufficient one. Periods of accelerated growth can be associated with moderate
or even intense inflation when supply constraints are encountered. Indeed, there
is no conclusive evidence that moderate inflation has adverse effects on growth
(Stiglitz et al., 2006), but the distributive implications can certainly be adverse,
especially in LDCs where most incomes are not indexed to inflation. In such
cases, the focus of policymakers must be on preventing inflation from becoming
excessive. This can be addressed by the following:


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example in agricultural production;


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control inflation;


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directed at the poor, such as public provision of certain basic needs; and


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build up in the system, thereby causing higher rates of inflation over time.


While fiscal sustainability is a crucial
medium-term issue, there should be
some flexibility with respect to fiscal


targets.


A case could also be made for a
fiscal deficit composed entirely of


public capital investment, as long as
the social rate of return from such


investment exceeds the rate
of interest.


Monetary policy should aim at
expanding credit for investments
and generating more productive


employment.


Macroeconomic stability is only a
necessary condition for growth, not


a sufficient one.




The Least Developed Countries Report 2013138


One alternative to a monetary policy fixated on attaining an inflation rate in the
low single digits is a macroeconomic strategy that targets those real variables
that are important for a particular country. These can include aggregate growth,
productive investment, employment generation and poverty reduction. Monetary
policy must be part of the overall macroeconomic policy directed towards these
targets, rather than operating on a separate track of addressing monetary
variables only. It should be coordinated and aligned with fiscal and exchange
rate policies. Since the chosen target must be met within other constraints,
interest rate management will not suffice; other instruments will have to be used
by the central bank, including directed credit. Policymakers should avoid being
fixated on one particular target and should be prepared to adjust targets and
instruments depending on the requirements of changing situations.


The volume of credit is often a more critical variable than monetary supply,
especially in LDCs where money markets and capital markets are less developed
and relatively few households and enterprises have access to borrowing from
formal institutions for consumption and investment. This is especially critical for
MSEs and farms that cannot provide collateral for credit and are thus deemed
not creditworthy by the banking sector. Microfinance institutions are valuable
channels in this respect for small enterprises to access formal credit lines. Indeed,
in many LDCs, and Bangladesh in particular, such institutions have served
as effective instruments for including a large group of poor people in formal
financial channels. Despite their benefits, however, these channels cannot be
relied on as sources of credit mobilization for productive asset creation and the
development of a dynamic enterprise sector. High interest rates, short gestation
periods and the small size of loans tend to militate against their usefulness in
poverty reduction and asset creation. Proper financial inclusion is likely to require
larger financial institutions, some form of subsidy, as well as creative and flexible
approaches by central banks and regulatory regimes to ensure that different
banks (e.g. commercial, cooperative, development) reach excluded groups like
women, as well as micro, small and medium-sized enterprises (MSMEs), self-
employed workers, peasants and those without land titles or other collateral.


Productive diversification involves ensuring that MSMEs receive bank loans
on similar terms as large capital. To this end, policymakers need to adopt a more
ambitious and creative approach to the expansion of financial service provision,
which is designed to facilitate access to credit for sectors and activities that are
relatively deprived but that are of great importance for the economy. Relevant
policy instruments in this regard include:


t %JSFDUFE DSFEJU SVMFT UIBU SFRVJSF CBOLT UP EFWPUF TPNF QSPQPSUJPO PG UIFJS
lending to such priority sectors;


t 4VCTJEJFT UP DPWFS UIF IJHIFS USBOTBDUJPO DPTUT BTTPDJBUFE XJUI TVDI
lending;


t 1VCMJD HVBSBOUFFT GPS DFSUBJO UZQFT PG DSFEJU


t %JSFDU QSPWJTJPO PG DSFEJU CZ QVCMJD ýOBODJBM JOTUJUVUJPOT FH EFWFMPQNFOU
banks);


t &ODPVSBHFNFOU PG DPPQFSBUJWF CBOLT BOE DPNNVOJUZ CBOLT BOE


t 3FýOBODJOH PG DPNNFSDJBM MPBOT XIFSF OFDFTTBSZ


The volume of credit is often a
more critical variable than monetary


supply.


Microfinance cannot be relied on
as sources of credit mobilization
for productive asset creation and


the development of a dynamic
enterprise sector.


Productive diversification involves
ensuring that small and medium-


sized enterprises receive bank loans
on similar terms as large capital.




139CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


C. Managing the external sector


Most LDCs need some flexibility in exchange rates for trade purposes, but
find it difficult to deal with the consequences of high volatility. “Intermediate”
exchange rate regimes, such as managed floats, thus work best, since they allow
Governments to adjust the level of the exchange rate to external conditions and
to the current policy priorities of the domestic economy. These managed floats
are best maintained through a combination of capital account and banking policy
measures, along with the more usual open market operations of the central
bank in purchasing or selling currency in the foreign exchange market. To make
such a regime successful, capital flows need to be “managed” through a range
of market-based and other measures, in terms of both inflows and outflows, so
as to prevent excessive volatility and possible crises.


A competitive exchange rate can be a crucial instrument for attaining growth
with employment in a global economy (Frenkel, 2004). It changes the relative
prices to a point where importing goods are expensive, thereby stimulating
import-substituting activities in the national economy. It also stimulates exports,
especially manufactured goods, since it makes these activities more competitive
on international markets. A competitive exchange rate further facilitates a
creation of linkages between the export sectors and the rest of the economy by
making domestically produced inputs cheaper than imported ones. However,
since a cheap currency is also a way of keeping domestic incomes lower, such
a strategy needs to be carefully calibrated.


Indeed, since LDCs still have some leeway with respect to trade policy
instruments – unlike other developing-country members of the WTO – it is useful
to remember that combinations of tariffs and subsidies amount to systems of
multiple exchange rates. While it is not always desirable to have too many of
these operating within an economy, they can allow competitive exchange rates
to be delivered to particular priority sectors without making essential imports
more expensive domestically. This raises the issue of managing the trade
account, an area that has been inadequately explored in recent times by LDC
Governments. Most trade policies have been evaluated in terms of the extent
and timing of trade liberalization through removal of quantitative restrictions,
reduction of tariffs and elimination of export subsidies. This process has been
accelerated by changes in the multilateral trading system, and even more by the
proliferation of regional trading agreements that have pushed for greater trade
liberalization. It can be argued that for LDCs the process has gone far enough,
and that from the standpoint of productive diversification and in the context of the
need for more domestic employment generation, there is untapped potential in
terms of the flexibilities still available to LDCs in global trade. LDC Governments
should accordingly consider the matter of trade policy more creatively and in an
integrated manner, and look to regional arrangements as a way to stimulate the
development of synergies across productive sectors.


Since capital flows are generally procyclical (Gallagher et al., 2012), their
impact on developing countries is destabilizing, fuelling excessive optimism in
good times and exacerbating the bust during crises. Capital account regulations
can thus be a useful and at times crucial component of maximizing the benefits
while minimizing the costs of free capital flows in the LDCs. Even the IMF, which
for decades insisted on full capital account liberalization, has endorsed some
use of capital account regulations (IMF, 2011). The successful experience with
capital account management in a number of countries (Brazil, Chile, Colombia,
Malaysia, Republic of Korea and Thailand, to name a few) shows that developing
countries can and should shield themselves from these external shocks. Since


Capital flows need to be “managed”
through a range of market-based
and other measures, in terms of
both inflows and outflows, so as


to prevent excessive volatility and
possible crises.


A competitive exchange rate can
be a crucial instrument for attaining
growth with employment in a global


economy.


LDC Governments should consider
trade policy more creatively, and


look to regional arrangements as a
way to stimulate the development of
synergies across productive sectors.


Capital account regulations can be a
useful component of maximizing the
benefits while minimizing the costs


of free capital flows.




The Least Developed Countries Report 2013140


a restrictive monetary policy will serve only to exacerbate the problem during
booms (by exacerbating inflows of capital and appreciation pressures), the
alternative is to adopt some form of capital account regulation to manage an
open capital account. Where inflows are concerned, instruments can include
minimum stay requirements, unremunerated reserve requirements, differential
tax rates on returns to portfolio capital and taxes on new debt inflows. For
dealing with capital outflows, instruments can include taxes on capital outflows
and regulating the amounts of non-profit capital which foreigners can send
abroad.


LDCs are increasingly buffeted by dramatic changes in global markets over
which they have no control. Developing countries in general, and the LDCs in
particular, suffer more from external shocks than developed countries. LDC
economies are smaller and less diversified. They tend to be very dependent
on external financing, so they are exposed to greater capital account shocks.
They are also more open to trade than many developed countries, and their
export structure is more concentrated in a few products. Finally, many of these
countries are exposed to strong fluctuations in international commodity prices,
either as exporters or importers. For all these reasons, economic volatility is
greater and thus more damaging in the LDCs than in developed countries.


Within LDC economies, the distributive effects of external shocks also tend
to be adverse. There are direct costs of income variability in the presence of
imperfect capital and insurance markets, so that income smoothing over the
economic cycle is imperfect and downswings are associated with consumption
declines, especially among the poor. Generally speaking, in all countries the
poor bear the brunt of economic fluctuations: They suffer most in slumps,
through higher unemployment and lower real wages, and they gain the least
from booms, which are typically associated with increases in wealth, in returns
to capital and in salaries of professional and skilled workers.


The question is, as noted in chapter 4, how LDC Governments are to cope
with such externally generated volatility. While fiscal and monetary policies
remain the basic levers to ensure changes in aggregate economic activity over
the course of a cycle, other measures can be quite effective. In particular there
are some “automatic stabilizers” that LDCs can and should use. For example,
progressive taxation that is more proactive during slumps reduces the negative
fiscal impact on the poor. Welfare programmes and social protection policies —
including unemployment insurance schemes, worker protection, special access
to non-collateral-based credit, public distribution systems for food and other
necessities, income support for female-headed worker households, and so on
— all operate to ensure that consumption does not fall as much as it otherwise
would during a downswing. Automatic adjustments of tariffs to external prices,
for example through a variable tariff system within the tariff bindings required by
WTO, can reduce the impact of global price volatility on domestic producers
and consumers.


In addition to these automatic stabilizers, there are other ways of responding
to booms that can potentially dampen cyclical processes. For example, a
counter-cyclical tax, such as an export tax, allows Government to generate
more revenue during periods of export boom, which can then be set aside
for a price stabilization fund in case export prices slump in future. Taxes on
capital inflows can be limited to equity and portfolio capital, as opposed to
“greenfield” investment, in periods when such inflows are high. In situations
of clear overheating and build-up of speculative bubbles, it is important to
restrict activities that are likely to be associated with boom/bust cycles, such
as speculative real estate, through such measures as the imposition of higher
capital gains taxes and bank regulations that restrict the extent of lending to the
real estate sector.


LDCs are increasingly buffeted by
dramatic changes in global markets


over which they have no control.


Within LDC economies, the
distributive effects of external
shocks tend to be adverse.


Taxes on capital inflows can be
limited to equity and portfolio


capital, as opposed to “greenfield”
investment, in periods when such


inflows are high.




141CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


In some LDCs, stabilization funds may be a particularly effective instrument
for managing volatility, and particularly volatility caused by strong fluctuation in
international prices, which is a typical feature of commodities. They can also
help insulate economies from large, destabilizing inflows of foreign exchange, in
several ways. In periods of relatively large capital inflows, they can help prevent
an excessive appreciation of the exchange rate, thus avoiding the detrimental
effects of the Dutch disease. They can preclude the overheating of the economy
during boom periods, thus helping to control inflationary pressures. They can
thwart the forming of bubbles, especially in real estate, which would ideally
make the economy less prone to booms and busts. Finally, by maintaining a
steady level of fiscal revenue, they can smooth fiscal expenditure, so that public
investment can be maintained or even increased during a major downturn,
expenditure on social services does not have to be cut, and so on. Stabilization
funds are especially appropriate for the large commodity exporters among the
LDCs. Many large commodity exporters — such as Chile, Islamic Republic
of Iran, Kuwait, Norway, Oman, Papua New Guinea, Russian Federation and
the Bolivarian Republic of Venezuela — have established stabilization funds
with explicit macroeconomic stabilization objectives. When the price of the
commodities they export is high, revenue is accumulated in the fund. When the
price is low, the accumulated revenue can be used to smooth out government
expenditure.


D. State-led employment creation


Given the pervasive structural weakness of the private sector in LDCs,
the State needs to play a stronger role than in other developing countries in
supporting employment generation both directly and indirectly (e.g. through
publicly supported investment and public employment). As argued in chapter
4, the role of the State will have to be more prominent in the short to medium
term in order to kick-start a growth process that can create a strong investment-
growth-employment nexus. A more dynamic approach to public investment
recognizes that it is not just complementary to private sector investment but may
also be a necessary addition. Griffin (1996) has noted that there are many ways
in which government investment in physical capital can be made much more
labour-intensive, thereby increasing employment, saving on foreign exchange
and raising the overall rate of return in the economy.


The role of infrastructure development in aggregate growth is widely
recognized, as the provision of such infrastructure as energy (electricity provision)
and transport (roads) increases market opportunities, reduces costs and raises
productivity in manufacturing and services firms (Bigsten and Söderbom,
2005; Shiferaw et al., 2012a, 2012b). Usually, however, such investments are
not seen in terms of their employment effects. In fact, because they appear to
be mostly heavily capital-intensive in nature, it is generally presumed that their
direct employment effects are negligible and that it is only indirectly, through
their impact on overall development, that they can influence job creation.
Nonetheless, there are several ways in which public infrastructure spending
can be more directly employment-generating and can have higher multiplier
effects within local economies. Infrastructure works are doubly blessed, in that
they create and sustain employment while at the same time improving living
conditions and laying the foundation for long-term growth. Indeed, there is much
greater scope than is generally recognized for developing infrastructure by using
available surplus labour in LDCs. In urban areas, for example, labour-intensive
techniques can be used for such works as improving streets and access ways,
water supply, sewerage, sanitation and waste management, flood protection
measures, and repair and maintenance of a range of public infrastructure. In


In some LDCs, stabilization funds
may be a particularly effective


instrument for managing volatility,
caused by strong fluctuation in


international prices of commodities.


Public investment is not just
complementary to private sector


investment but may also be a
necessary addition.


Public infrastructure spending can
be more directly employment-


generating and can have higher
multiplier effects within local


economies.


Infrastructure works are doubly
blessed, in that they create and


sustain employment while at
the same time improving living


conditions and laying the foundation
for long-term growth.




The Least Developed Countries Report 2013142


fact, labour-intensive methods can also be effective (and cheap) in operations
of large-scale infrastructure works that are typically seen as the preserve of
equipment-intensive companies, such as bush-clearing and digging for the
construction of dams and highways. The employment creation potential of
investment in irrigation, drainage, provision of feeder channels, building, local
land reclamation, afforestation and so forth is considerable.


Construction is a particularly fruitful area for encouraging more labour-
intensive activities through direct public procurement practices and fiscal
incentives. Building activities that use local materials, local technologies and local
small-scale enterprises have much greater potential to generate employment.
If local and small-scale manufacturers of building materials are encouraged,
they are likely to have larger multiplier effects than large-scale, capital-intensive
technologies, because they are generally more likely to use locally manufactured
tools and machinery and are typically marketed and transported by small-scale
enterprises. All of this can reduce the overall costs of construction, lead to
ecologically sounder and more appropriate types of buildings and also generate
more employment. Studies in several countries and infrastructure sectors show
that employment-intensive investment in infrastructure is significantly less costly
in financial terms than equipment-intensive techniques, without compromising
on quality. It can also reduce foreign exchange requirements substantially, create
several times as much employment for the same level of investment; permit
the employment of more people at all skills levels; and create strongly positive
indirect income multiplier effects.


Government provision of public goods and services has been an essential
part of the development process in developing countries that grew in a sustained
manner over long periods in the post-Second World War period. Spending
in areas such as education and health has the double economic benefit of
helping to strengthen the human resources base of the economy and being
labour-intensive. Governments can thus contribute directly to the generation
of all kinds of jobs, unskilled, semi-skilled and skilled. Emphasizing expansion
and better delivery in the provision of public services, especially in nutrition,
sanitation, health and education, not only allows for improved material and
social conditions, but also has positive employment effects directly and through
the multiplier process. Indeed, this was an important and unrecognized feature
of successful Asian industrialization, from Japan and the east Asian NICs to
(most recently) China. The public provision of affordable and reasonably good-
quality housing, transport facilities, basic food, education and basic health care
all operated to improve the living conditions of workers. Indirectly, it helped
reduce the money wages that individual employers need to pay workers. This
not only cut overall labour costs for private employers but also provided greater
flexibility for producers competing in external markets, since a significant part of
their fixed costs was effectively reduced.


Labour-intensive public works programmes (PWPs) were initially intended
more as safety nets, especially in response to natural or economic emergencies
(e.g. droughts, floods or harvest failure). More recently, however, they have been
increasingly adopted as labour-based infrastructure programmes in response to
the situation of chronic underemployment and unemployment in LDCs. In the
past decade several developing countries, including LDCs, have adopted a new
generation of employment creation programmes, which pay fair wages and strive
to produce useful and durable assets that benefit participants directly. In many
cases they also provide training to beneficiary workers and endeavour to involve
local communities in decision-making and managing projects and programmes
(Devereux and Salomon, 2006). Some of these programmes are envisaged as
part of national (or regional) development strategies. They have also been seen
as counter-cyclical mechanisms to respond to the global financial crisis, since
they stimulate domestic demand even as they generate benefits from increases


Construction is a particularly fruitful
area for encouraging more labour-


intensive activities.


Building activities that use local
materials, local technologies and
local small-scale enterprises have
much greater potential to generate


employment.


Employment-intensive investment
in infrastructure is significantly


less costly in financial terms than
equipment-intensive techniques,
without compromising on quality.


In the past decade LDCs have
adopted a new generation of


employment creation programmes,
which pay fair wages and strive to
produce useful and durable assets
that benefit participants directly.




143CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


in infrastructure spending and provide temporary income to those affected by
the crisis.


Most PWPs in LDCs are introduced and designed by donors and funded
either through donor grants or loans. There are still some domestically funded
PWPs in operation that were developed independently, such as the Karnali
Employment Programme in Nepal. The Vision 2020 Umurenge Programme in
Rwanda, which is partly donor-funded, was jointly developed with donor inputs.


PWPs tend to have as their primary objective the provision of social assistance
for poor households with working-age members who are unable to find work or
pursue their normal livelihood activities due to some form of acute or chronic
disruption in the labour market, or a deficit in labour demand. They are typically
designed to provide basic income to support household consumption and
prevent the distress-selling of assets to meet subsistence needs. They frequently
involve the creation or maintenance of potentially productive infrastructure,
such as roads or irrigation systems, which are also meant to contribute to the
livelihoods of participants and the broader community.


PWPs that provide a single short episode of employment are usually designed
for consumption-smoothing, in response to temporary labour market or
livelihood disruption which may result from natural disasters (such as droughts,
floods or hurricanes), humanitarian situations (such as conflict) or short-term
economic crises. These programmes are primarily concerned with the provision
of what are referred to as safety nets, basic “risk-coping” social protection and
the prevention of distress-selling of assets. Such programmes typically offer
short-term employment – in Sub-Saharan Africa, for an average of four months
(McCord and Slater, 2009) – but may be extended in humanitarian situations
where normal livelihood activity has been suspended. In such programmes, the
objective of ensuring a timely wage transfer (in kind or cash) is more important
than that of asset provision, which may in some instances be essentially a
“make-work” activity carried out primarily to satisfy the work conditionality. For
this reason, the quality of assets created under such programmes is often of
secondary importance to the rapid provision of wage employment for those
affected by a crisis. This type of programme is typical of those implemented
widely in southern Asia in response to natural disasters that temporarily affect
formal and informal household income-earning opportunities and subsistence
production. It is also the dominant form of PWP in SSA. In that region, however,
such programmes are implemented not only in response to acute crises but
also in situations of chronic poverty, underemployment and unemployment,
where their short duration renders them less likely to have a significant impact
on poverty.


Other PWPs target increasing local employment opportunities, or employment
created per unit invested in infrastructure provision, usually in the construction
sector through the adoption of labour-intensive construction techniques. Such
programmes do not necessarily require significant additional funding but rather
a shift in the factor intensity of existing expenditure from capital to labour. Some
infrastructure-based PWPs concern activities which are already predominantly
labour-intensive, such as housing construction, and where there are only marginal
gains to be made from further labour intensification (McCutcheon and Taylor
Parkins, 2003). However, other infrastructure development can be made using
either capital- or labour-intensive approaches. Studies carried out in Cambodia,
Ghana, Madagascar and Thailand have found that labour-intensive techniques
led to two to five times more employment creation than alternative techniques
(Devereux and Salomon, 2006). In the case of Senegal, an estimated 13 times
more jobs were created thanks to the adoption of labour-intensive techniques,
than with conventional techniques (Majeres, 2003). In Cambodia, it was found


Public work programmes frequently
involve the creation or maintenance


of potentially productive
infrastructure, which are also meant


to contribute to the livelihoods
of participants and the broader


community.


In SSA, such programmes are
implemented not only in response to
acute crises but also in situations of
chronic poverty, underemployment


and unemployment.


Other PWPs target increasing
local employment opportunities,
or employment created per unit


invested in infrastructure provision.


Labour-intensive techniques led to
two to five times more employment
creation than alternative techniques.




The Least Developed Countries Report 2013144


that labour-based rural road works required nearly 5,000 unskilled workdays per
km, compared to 200 workdays on an equipment-based operation (Munters,
2003: 45).


This approach may be particularly appropriate when used in conjunction with
the large-scale investment in infrastructure that has been taking place in many
countries as a stimulus in response to the global financial crisis. Obviously, the
efficiency of adopting this approach rather than conventional capital-intensive
approaches will depend on the nature of the assets being created. Furthermore,
contractors may not always comply with contractual obligations, due to the
higher cost implications of shifting factor intensity. In such cases PWPs can be
implemented as a complement to private sector employment creation, so as to
reach those least successful in gaining market-based employment.


If PWPs are to be part of a long-term employment strategy, there are strategic
choices to be made regarding the priority group for employment. Youth might
be the priority in contexts where youth not in employment, education or training
are a major concern, where youth are excluded from private sector employment,
and where social or political stability are key concerns. Demobilized soldiers
or urban populations might be the priority in other contexts, with the poorest
being selected only where poverty reduction and social protection are key
policy objectives. Examples of this type of intervention include the work of the
Ethiopian Rural Roads Authority, the Agence d’Exécution des Travaux d’Intérêt
Public contre le sous-emploi in Senegal, the Association Africaine des Agences
d’Exécution des Travaux d’Intérêt Public throughout western Africa, and ILO’s
Employment-Intensive Investment Programmes.


Beyond poverty alleviation and employment creation, PWPs may also have
as their objectives environmental sustainability and contributing to the structural
transformation of the economy. Still other objectives include skills development
through work experience and on-the-job training, accumulation of financial and
material assets, promotion of livelihoods, stimulation of economic growth through
the promotion of demand and creation of productive assets, and maintenance
of the social and political order in the context of unacceptably high levels of
unemployment and poverty. While multiple programme goals relating to poverty
reduction, employment creation, structural transformation and environmental
sustainability are not necessarily conflicting, optimal outcomes for each may
demand alternative designs.


It is often argued that the use of labour-intensive techniques entails a loss of
quality of the assets created, but this need not be the case. The quality of assets
depends on the correct identification, design, specification and implementation
of the construction process, all of which differ if labour-intensive approaches are
used. For example, executing capital-intensive designs using labour-intensive
processes will not result in successful outcomes, so the whole process needs
to be approached differently if good-quality outcomes are to be ensured
(McCutcheon and Taylor Parkins, 2003). If the processes are appropriately
designed from the outset and adequately resourced, there is no necessary
trade-off between factor intensity and asset quality. Quality is also affected by
the availability of agricultural and engineering capacities at local level and by the
adequacy of resources allocated to the capital component of asset creation.


Coordination among different agents in the implementation of PWPs
is also a critical issue. Such agents include various levels of government
(national, regional, district and village); ministries and departments (such
as those responsible for welfare, public works, transport, environment and
agriculture); donors; civil society organizations, and so forth. This is a particularly
acute challenge in LDCs, where government and donor harmonization and
coordination are not always present. Coordination is an especially important


PWPs can be implemented as
a complement to private sector


employment creation, so as to reach
those least successful in gaining


market-based employment.


Youth might be the priority in
contexts where youth not in


employment, education or training
are a major concern


PWPs may also have as their
objectives environmental


sustainability and contributing to
the structural transformation


of the economy.


If the processes are appropriately
designed from the outset and


adequately resourced, there is no
necessary trade-off between factor


intensity and asset quality.




145CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


concern when PWPs also incorporate environmental goals in their design
and implementation. One example is the Vision 2020 Umurenge Programme
in Rwanda, where multi-year PWP employment of the poorest is combined
with the promotion of more environmentally sustainable agriculture based on
the terracing of hillsides, which potentially results in sustained productivity
increases and greater environmental sustainability of agriculture (depending on
which crops are adopted). Environmental goals are also part of the Productive
Safety Net Programme in Ethiopia. The creation of riverine protection or bunds
against inundation (as in the World Food Programme’s Food for Work projects
in Nepal) may also generate sustained environmental benefits that can promote
livelihoods over time and hence have poverty reduction benefits that accrue
beyond the period of project employment.


Policymakers often hope that participation in PWPs will allow workers
to “graduate” from poverty and from dependence on publicly funded jobs.
However, given the structural, rather than frictional, nature of unemployment in
many LDCs, it is not clear that PWP training and/or workplace experience will be
sufficient to enable labour market incorporation after such employment. This is
likely only where such programmes are combined with other interventions, in a
broadly conducive national labour and economic context. Indeed, to the extent
that such employment is well targeted at the poorest, it is less likely to result in
significant graduation, while the macroeconomic and labour market outcomes
are more likely to be indirect, operating through the multiplier effects of additional
incomes leading to higher effective demand in the areas where the programme
is implemented. There are well-documented cases of the immediate impacts of
PWPs on local production; such cases involve, for example, the emergence of
small-scale markets on paydays. These tend to be short-term impacts, however,
since most PWPs continue for short periods. The poorer the participants and
the more marginalized the area where the programme is implemented, the less
likely the programme is to contribute to deliver economic spillover effects unless
it is implemented on a sustained basis and a significant scale.


Even so, PWPs in rural areas have been found to contribute to rural
development through public investment in agricultural infrastructure (e.g.
rural roads and irrigation). This has generated greater agricultural production
and productivity in the vicinity of the created assets. Moreover, improved
communication and transport resulting from new or improved transport
infrastructure have contributed to the creation of local markets and to better
access to existing markets (Devereux and Salomon, 2006). Large-scale ongoing
implementation through an employment-intensive programme (or through an
employment guarantee scheme) is more likely to deliver secondary economic
benefits, including an increase in the reservation wage of casual day labourers
or accumulation and microenterprise development. It has been suggested
that “tiny transfers equal tiny impacts, but moderate transfers can have major
impacts” (Devereux, 2002: 672). Employing fewer people at higher wages for
extended periods of time allows programme participants to invest in production
and assets, although it may also create resentment and tension on the part of
excluded community members. This means that fixing wages is a crucial aspect
of PWP design and implementation.


Despite their numerous advantages, there are still several constraints in
adopting and implementing PWPs effectively in LDCs. One issue is finance:
Labour-intensive public works tend to be relatively costly if they are sufficiently
large-scale. The cost for the Ethiopian programme, for instance, was an
estimated 2 per cent of the country’s GDP in 2006. Of course, if this results in
significant positive multiplier effects, then some of this cost may be recouped
through increased tax revenues in the subsequent period. Funding sources
must nevertheless be identified, especially as the lingering effects of the 2008–
2009 crisis have led to generalized fiscal restrictions (or retrenchment), making


There are cases of immediate
impacts of PWPs on local


production, such as the emergence
of small-scale markets on paydays.


PWPs in rural areas have been found
to contribute to rural development


through public investment in
agricultural infrastructure, which


has generated greater agricultural
production and productivity.


Employing fewer people at higher
wages for extended periods of time
allows programme participants to
invest in production and assets.




The Least Developed Countries Report 2013146


it more difficult to obtain funding for PWPs in LDCs. Institutional capacity is yet
another concern, since effective implementation of such programmes requires
the technical and operational capacity to choose, prepare, manage and
supervise the works, organize the production process, become familiar with
the techniques, access the required equipment and tools, manage small-scale
contracts, coordinate the actions of different government levels and channel
resources to the poor.


This partly explains why it is challenging to achieve all the intended goals.
In some instances the challenge of providing mass employment through PWPs
has not been met. Some of these programmes have thus become de facto
cash transfer programmes, providing the wage transfer without fulfilling the
work requirement. In addition to issues of financing and institutional capacity,
LDCs are further constrained by the orientation of the macroeconomic and other
(“development”) policies they have been following for over two decades. For
the most part these policies are geared domestically towards macroeconomic
stability and, externally, towards international integration. Employment creation
is still not at centre-stage in the national policymaking of most developing
countries, including LDCs. This reinforces the argument that PWPs must be part
of a broader economic policy package that combines macroeconomic, trade
and industrial policies to meet the basic goal of productive employment creation
and diversification to higher value added activities.


E. Enterprise development


Private activities account for the bulk of employment in LDCs today, and will
clearly continue to do so in future. The challenge for their Governments is to
enable and encourage the private sector to generate more diversified and higher
value added activities which will provide sufficient productive employment to
the growing labour force. Three broad policy areas are relevant in this context:
industrial policies, enterprise policies and rural development policies. Each of
these is considered in turn.


1. INDUSTRIAL POLICIES


Industrial policy in general refers to government attempts to change the
structures and patterns of production in an economy, and in particular to
diversify production towards higher value added activities. In the late twentieth
century this type of intervention was frowned on in mainstream policy circles,
although industrial policy remained in use in many of the more successful
developing countries, such as China. Recently, however, there has been
a revival of interest in industrial policies, with more analysts arguing for their
usefulness and desirability (e.g. Lin and Monga, 2010; Lin, 2011; OECD, 2013).
There is greater recognition that several developing countries have improved
their capacity to design and implement industrial policies (te Velde et al., 2011).
At the same time, the growing marketability of a new wave of innovations in
green technology, energy, water, nanotechnology and genetics (Wade, 2010)
has created new possibilities. But in order to exploit these opportunities, firms
must be forward-looking and prepared (Pérez and Soete, 1988; Pérez, 2001).
This requires the coordination of industrial policy, especially in an LDC context.
New challenges — such as those resulting from climate change — require
structural changes in the economy of both developed and developing countries
on a scale and speed that market forces are incapable of implementing alone,
which therefore requires State action. Indeed, even some developed countries
have recently become much more active in their own industrial policy (Rodrik,


PWPs must be part of a broader
economic policy package that


combines macroeconomic, trade
and industrial policies.


Private activities account for the bulk
of employment in LDCs today, and


will clearly continue to do so
in future.


The challenge for LDC Governments
is to enable and encourage the


private sector to generate higher
value added activities which will


provide sufficient productive
employment to the growing


labour force.


Industrial policy refers to
government attempts to change
the structures and patterns of


production in an economy.




147CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


2010), under the pressures of the international economic and financial crisis,
environmental challenges and concerns about their deindustrialization.


At the same time, the implementation of effective industrial policy has also
become more complex and difficult in recent years, particularly in view of the
fragmentation of production due to the rise of global value chains. For LDCs
wishing to benefit from positive integration into such production chains, a more
nuanced but still systematic approach will be required, one that encourages
domestic entrepreneurship and innovation. Industrial policy must accordingly be
flexible, adapted to specific contexts and constantly responding to changing
global and domestic conditions. Ideally, support should be provided in a time-
bound and possibly phased manner, while ensuring consistency across different
sets of policies.


The broad priorities of industrial policy in LDCs can be summarized as follows
(UNCTAD, 2009: 141–179; Ocampo, 2007):


t 5P JOWFTU JO EZOBNJDBMMZ HSPXJOH TFDUPST PG UIF FDPOPNZ BOE FODPVSBHF
diversification, so that at least part of the growing domestic demand is met
by domestic supply, rather than by imports;


t 5P EFWFMPQ BOE TUSFOHUIFO .4.&T XIFSF NPTU FNQMPZNFOU JT HFOFSBUFE


t 5P CVJME MJOLBHFT UIBU DBO CSJEHF UIF WBSJPVT EJWJEFT UIBU QFSNFBUF UIF
enterprise sector: micro vs. medium and large; formal vs. informal; national
vs. foreign; and modern vs. traditional;


Industrial policy instruments are usually classified as being functional or
selective. Functional instruments typically aim at correcting market failures and
are applied throughout an economy, for example by providing credit, education
and training, and by spurring competition, research and development. Once
Governments have endeavoured to correct market failures, it is the firms that
will decide how far they wish to innovate and upgrade technologically. Selective
or vertical measures, by contrast, aim at shifting to new and dynamic activities
and/or localized technological upgrading. They are targeted at specific (sub)
sectors or firms. Government provides financial support for such measures
during learning periods and helps start-ups with training, export marketing and
the general coordination of export activities. Obviously, an important criterion
for the selection of activities to be supported by industrial policy is the labour
intensity of the activities and/or their potential to generate jobs either directly or
indirectly.


Two different but possibly complementary approaches to using such
instruments can be considered. The incremental approach builds on existing
activities in the economy to seek areas where backward and forward linkages
and supporting activities can be developed. Agriculture, for example, can be
used as the basis for developing downstream industries, such as food processing
for local, regional and global markets and processing agricultural raw materials
before export. Policies to encourage more local processing include bans
or tariffs on raw unprocessed exports, support to industrial clusters for such
activities and industrial extension services that provide both technological and
marketing support. For example, export tariffs have spurred the downstream
processing of cashew nuts in Mozambique and raw hides and skins in Ethiopia
(Krause and Kaufmann, 2011; Altenburg, 2010). Similar policies can be devised
for such other primary activities as mining, as was done for diamond processing
in Botswana. Such efforts are likely to be more successful if they are combined
with the development of local production clusters based on natural resources
and the development of engineering capabilities for domestic production
(Ramos, 1998).


The implementation of effective
industrial policy has also become


more complex and difficult in recent
years, in view of the fragmentation


of production.


An important criterion for the
selection of activities to be


supported by industrial policy is the
labour intensity of the activities and/
or their potential to generate jobs.


The incremental approach to
industrial policy builds on existing
activities in the economy to seek


areas where backward and
forward linkages.




The Least Developed Countries Report 2013148


In such strategies, however, care must be taken to recognize situations in
which upstream and downstream industries require very different endowments.
The garment industry, for example, is typically labour-intensive, whereas
the industry that produces textiles, yarns and accessories is increasingly
capital-intensive, with large economies of scale and scope. This makes the
development of backward linkages in textiles for the garments sector much
more difficult in most LDCs (Adhikari and Yamamoto, 2007). Instead, LDCs
are more likely to succeed by upgrading within the garment industry itself and/
or by exploiting niche markets (Altenburg, 2011). Mozambique, for instance,
tried to establish backward linkages from large-scale foreign firms in mining
(e.g. the aluminium smelter), but with only limited success, due to a dearth of
the requisite entrepreneurial capabilities among domestic firms (Krause and
Kaufmann, 2011).


A less traditional approach to industrial policy is more forward-looking,
involving the identification of new areas of specialization, in order to enter into
such activities relatively swiftly and to benefit from the rising potential in global
markets for such production. In this case, because the distance in the product
space between new and existing activities is large, the risk is high but the
strategy potentially rewarding. Public intervention is necessary in such cases
because early entrants into new products, technologies or markets have to bear
all the costs of discovery but are unable to internalize all the benefits, requiring
some form of State support (Hausmann and Rodrik, 2003). Government
agencies typically decide what are the promising sectors or activities and
concentrate their policy attention accordingly. This can, however, also be
accomplished through collaboration between public and private agents, such as
entrepreneurs and their representative bodies, market analysts and civil society
representatives, in such forums as deliberation councils, sector roundtables and
private-public venture funds, making use of internal and external expertise. This
has been successfully applied in the case of the cut flower industry in Ethiopia.
The initiative for exporting these products came from the private sector, but
it was backed by Government, which provided low-cost access to suitable
land, negotiated freight costs with the national airline and established a national
horticulture development agency.


Governments can also encourage businesses innovation (such as seeking
new markets and alternative business models) through business plan
competitions, coaching innovative start-up companies and offering incentives to
the local business sector or the diaspora. This is the core of UNCTAD’s proposal
for a new international support measure for LDCs, the Investing in Diaspora
Knowledge Transfer initiative (UNCTAD, 2012: 147–150), which consists
of a collaborative effort between the national Government and international
organizations to back the investment of the LDC diasporas in innovative and
knowledge-intensive activities.


Industrial policy formulation and execution in LDCs tends to follow a top-down
approach, with Governments taking the lead on priority areas and programmes.
Successful industrial policies, however, require a continuous dialogue among
Governments, businesses (including MSEs) and workers. Beyond general
business complaints about financing, high taxes, corruption, infrastructure
services and so forth, this dialogue should highlight coordination failures that
constrain enterprise development, such as the local unavailability of a low- cost
input critical to a specific industry, which can in turn prompt government action
to encourage production of the specific input (O’Connor, 2007). The dialogue
can be especially fruitful when it is focused on specific industries and when
the Government is willing to change its policies in response to specific needs.
Just such continuous dialogue and interaction among the government agencies
responsible for industrial policy and businesses (both sectoral chambers and


LDCs are likely to succeed by
upgrading within the garment


industry itself and/or by exploiting
niche markets.


A less traditional approach to
industrial policy is more forward-


looking, involving the identification
of new areas of specialization, in
order to enter into such activities


relatively swiftly.


Governments can also encourage
businesses innovation through
business plan competitions,
coaching innovative start-up


companies and offering incentives
to the local business sector or the


diaspora.


Successful industrial policies require
a continuous dialogue among


Governments, businesses (including
MSEs) and workers.




149CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


individual firms) was crucial for structural change and upgrading in the successful
industrializers of east Asia. Studies of the performance of enterprises from seven
SSA countries (five of them LDCs) have found that State-business relationships
enhance firm productivity by about 25–35 per cent (Qureshi and te Velde,
2012). Furthermore, some form of balance between the State and business
actors is needed to avoid the State being captured by particular interests or
rent-seeking (Wade, 2010). This entails ensuring that the private sector meets its
commitments in exchange for receiving favourable policy measures.


It is increasingly recognized that knowledge generation and dissemination
must be critical features of industrial policy, and this is very much so in the LDCs.
The best way to enhance the knowledge intensity of economies is through
education, technical and vocational training and skills upgrading through on-
the-job training. Since LDCs are still lagging behind in these areas despite recent
progress, this remains a crucial focus. In secondary and tertiary education and
technical and vocational training, LDCs need to expand the supply and improve
the quality of services. This includes revising curricula and teaching methods
in order to make the labour force more adaptable and innovative and so as to
adapt educational policies to foreseeable domestic labour market requirements.
Policies must also adapt the form of education and the content of curricula
so as to provide students and apprentices with such skills as “learning to
learn”, “learning to change” and the ability to do creative teamwork and think
innovatively (Pérez, 2001; Adesida and Karuri-Sebina, 2013). Ideally, given the
gestation lags in producing graduates, educational planners should have some
idea of where the economy as a whole is headed over the coming 5 to 10 years
in order to guide the educational system with respect to the future needs of the
labour market.


The disconnect between academic research and the private sector has
frequently been highlighted as a weakness in domestic knowledge systems
(UNCTAD, 2006: 246–255; Adesida and Karuri-Sebina, 2013). It is therefore
important for universities and research centres to strengthen their links with
businesses of all sizes. Instruments to reach this goal include:


t "EPQUJOH DVSSJDVMB UIBU GPDVT PO FOUSFQSFOFVSTIJQ EFWFMPQNFOU JO WPDBUJPOBM
training and universities;


t &OBDUJOH UBY CSFBLT PS USBJOJOH MFWJFT JO PSEFS UP GVOE JOEVTUSZTQFDJýD
training of the labour force (with such training possibly provided by dedicated
training centres);


t $SFBUJOH FJUIFS OBUJPOBMMZ PS SFHJPOBMMZ TUBOEBSETFUUJOH CPEJFT FH GPS
quality and sanitary certification), whether by government initiative or through
partnerships between Government and industry or sectoral associations.


The role of external donors deserves consideration as well, since multilateral
and bilateral donors have traditionally exerted a very strong influence on industrial
policymaking in LDCs. Since the structural adjustment era, these countries have
been advised to avoid any industrial policy that called for greater, and more direct,
State involvement in economic development. More recently, however, there has
been more external support for industrial policy in LDCs, including the financing
of programmes for upgrading technical and vocational training systems, cluster
and value chain initiatives and building trade capacity. In some cases, industrial
policy programmes are not only funded but also executed by donors. While this
marks the beginning of a positive shift in donors’ attitudes, it is still fraught with
some of the challenges that characterize official aid more generally: for example,
limited alignment with country priorities; donors establishing parallel agencies
and implementation bodies that weaken State capabilities by attracting the
most qualified professionals; limited coordination among donors; intensive use


Some form of balance between the
State and business actors is needed
to avoid the State being captured by
particular interests or rent-seeking.


The best way to enhance the
knowledge intensity of economies


is through education, technical
and vocational training and skills


upgrading through on-the-job
training.


Policies must also adapt the form
of education and the content of


curricula so as to provide students
and apprentices with such skills as
“learning to learn”, and the ability to


do creative teamwork.


It is important for universities and
research centres to strengthen their


links with businesses of all sizes.




The Least Developed Countries Report 2013150


of donor-related experts with limited domestic capacity-building, etc. (UNCTAD,
2008: 93–134; Altenburg, 2011). In order to contribute more effectively in this
regard, donors should step up their funding of capacity-building in industrial
policymaking and avoid setting up parallel structures, making greater use instead
of national and local administrative structures. Most importantly, donors should
align their interventions with country priorities, policies and national development
plans.


In a sluggish world economy, LDCs have the option of relying on regional
markets as potential sources of trade expansion and growth. There is
considerable potential for joint action to mobilize common resources, develop
common development goals, invest in regional public goods and leverage
those of development partners (including multilateral institutions, bilateral
donors, and partners in the South ) that are in a position to assist development-
focused regional integration. While there have been some moves towards such
“developmental regionalism” (UNCTAD, 2011) — notably the Greater Mekong
initiative that includes Cambodia and Laos in South-East Asia – such experiences
are still rare among LDCs. Regional integration in the regions where LDCs are
found in larger numbers has generally been weak. Although many institutions
and action plans have been established, implementation has typically been very
low.


At the time of writing, the Southern Africa Development Community has
been holding initial discussions on the desirability of a regional industrial policy,
but there has been little if any concrete action (Zarenda, 2012). In June 2010 the
Economic Community of West African States adopted the West African Common
Industrial Policy with very ambitious targets (e.g. raising the contribution of
manufacturing to regional GDP from the current 6 per cent to 20 per cent by
2030), but its implementation is still in very early stages. However, in the specific
case of agro-processing industries, African countries have launched an initiative
of agricultural commodity chains of production, processing and marketing (e.g.
rice, maize, wheat, sugar, meat and dairy products) that could potentially meet
increasing regional demand in the context of regional integration schemes
(UNECA and African Union, 2009).


Another type of industrial policy strategy is intended to change the capital-
labour ratio of the economy by attracting investment in labour-intensive industries
like garments. This has been especially effective in creating jobs and contributing
to poverty reduction in some LDCs (Bangladesh, Cambodia, Haiti and Lesotho)
and several ODCs (including Viet Nam). Typically, these activities have the
additional benefits of raising female participation in the labour force. By providing
women with better-paid jobs, these new activities free them from subsistence
activities, informal low-productivity activities or inactivity. The challenge for all
these countries is to ensure the survival and possibly the expansion of these
industries in the face of fierce international competition. In order to do so, they
have endeavoured to keep their labour costs low (e.g. Bangladesh) or to brand
their country as a “socially responsible” production location (Cambodia). Another
alternative has been to exploit product niche marketing, as has been done by
Sri Lanka.


Apart from goods exports, tourism is another area with potential for
business expansion and employment generation in rural areas. In most LDCs,
where international tourism is already concentrated in rural areas, the sector
can be focused to develop non-farm rural activities and generate jobs, as
long as attention is given to creating backward and forward linkages and to
environmental sustainability (UNCTAD, 2013c). Ecotourism is a particularly
promising niche sector. Uganda, for instance, has recently implemented a set
of policies for sustainable tourism that includes the promotion of local linkages
through domestic entrepreneurship, the participation of local communities in


Donors should step up their funding
of capacity-building in industrial


policymaking and make greater use
of national and local administrative


structures.


LDCs have the option of relying
on regional markets as potential
sources of trade expansion and


growth.


Another type of industrial policy
strategy is intended to change the
capital-labour ratio of the economy
by attracting investment in labour-


intensive industries.


Apart from goods exports, tourism
is another area with potential
for business expansion and


employment generation in rural
areas.




151CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


both the planning and execution stages. As a result, these communities receive
20 per cent of gate fees around protected areas and are trained to act as guides
and provide accommodations. Furthermore, regional cooperation is conducted
by promoting the East African Community as a single tourism destination and
by facilitating tourists’ displacements within the region. Such cooperation also
involves investment incentives for the sector (including import tariff waivers for
tourism vehicles), public investment in infrastructure and close collaboration
between public sectoral authorities and local stakeholders. This set of initiatives
has resulted in an increase in tourist arrivals and tourism receipts since 2010,
and tourism now absorbs 14 per cent of the labour force in formal employment
and 21 per cent of informal sector employment (Aulo, 2013).


One recent development that may open further opportunities for some LDCs
is the transition of China — by far the world’s largest exporter of labour-intensive
manufactures — to a different phase of development. Its labour costs are
rising, and the composition of its export basket is moving towards higher value
added and more knowledge-intensive products. At the same time there is an
incipient movement to offshore production at the lower end of labour-intensive
manufacturing to labour-abundant and low-labour-cost countries (OECD,
2013). These developments in China may make it possible for some LDCs to
capture a part of this manufacturing activity. Some LDCs may take advantage of
the window of opportunity presented by China’s likely delocalization of the lower
end of its manufacturing industry through a combination of attracting FDI and
integrating domestic firms into global manufacturing value chains.


The LDCs that are best placed to take advantage of these changes in the
geography of international manufacturing are those that present most of the
following characteristics: low wages, large workforces, and the skills needed to
produce goods (especially garments) rapidly and in large quantities for global
retailers (Financial Times, 2013), as well as good transport and communication
connections to other countries. These features — and especially the last one
— are an advantage for those LDCs that already possess some experience
of manufacturing production and exports and that are geographically close
to dynamic poles of economic growth (such as Bangladesh, Cambodia, Lao
People’s Democratic Republic and Myanmar). However, several African LDCs —
especially the most labour-abundant among them, like Ethiopia — can also take
policy action to seize these opportunities. They may exploit this potential despite
the fact that most of them have limited experience in large-scale manufacturing
for global markets and that significant development is thus likely to take longer.
Relevant initiatives include improving communication and transport infrastructure
and ensuring agricultural development, both of which help to keep labour
costs low. Domestically, this strategy should be complemented by policies
on clustering, export promotion and labour cost containment. Labour costs
can remain competitive by ensuring an adequate supply of wage goods and
services, especially food (by means of agricultural policy, as explained below),
transport and housing. Enacting policy measures to foster FDI, joint ventures
or technology licensing is another plausible option for LDCs whose producers
lack international competitiveness in basic manufacturing but have a reasonable
transport and communication infrastructure (Schmitz, 2007). Preferential access
to major consumer markets may constitute another favourable factor.


In the rush to seize these opportunities, however, LDCs should beware of
running a race to the bottom. This may happen if they continue their present
policies for attracting FDI — policies that have formed the backbone of the LDC
growth model for more than two decades. Generous incentives, tax breaks
and other incitements often turn out to be more advantageous to international
investors than to host countries. The LDC experience shows that they have
attracted substantial amounts of FDI, but that most of it went to export-oriented


Some LDCs may take advantage
of the window of opportunity
presented by China’s likely


delocalization of the lower end of
its manufacturing industry.


Several African LDCs — especially
the most labour-abundant among


them — can also take policy action
to seize these opportunities.


Domestically, this strategy should
be complemented by policies on
clustering, export promotion and


labour cost containment.


In the rush to seize these
opportunities LDCs should beware


of running a race to the bottom.




The Least Developed Countries Report 2013152


enclaves producing primary commodities or labour-intensive manufactures. The
latter type of FDI, but not the former, generates a substantial number of jobs. In
both cases, however, the enclaves develop very limited linkages to the rest of
the domestic economy and therefore have limited technological and productivity
effects. LDCs should reorient their FDI policy to stimulate the creation of
backward and forward linkages between transnational corporations (TNCs) and
domestic enterprises. Such linkages would bring benefits not only in stronger
employment creation, but also in technological, organizational, knowledge
and other spillovers. Policymakers can enhance the benefits deriving from FDI
through proper policies. They need to integrate the export manufacturing sector
into national development policies and avoid the creation of export enclaves.
Lall (1995) suggests the use of soft “target and guide” instruments, such as
bringing in firms to make investments that fit the country’s upgrading strategy
and persuading them to engage in technology transfer.


The challenges for LDCs in expanding the benefits they derive from FDI are
closely related to those of obtaining developmental effects from participation in
global value chains (GVCs). GVCs are now ubiquitous in the global economy,
and LDCs are increasingly a part of them. From a development and policy
standpoint, the question is not whether these countries should participate in
GVCs but how they should do so (UNCTAD, 2013b: 148–210). The option
of joining GVCs is typically feasible for firms that have basic production skills
but lack access to major markets and marketing know-how (Schmitz, 2007).
Such firms tend to agglomerate in those regions within a country that are best
served by infrastructure and international connections. This presupposes prior
government action to ensure that these general conditions are available.


LDCs today face three major types of risks from their form of integration
into GVCs. First, some of the major benefits derived from traditional forms of
industrialization (linkages, externalities, multiplier effects, etc.) are largely absent
from this type of industrial growth. The potential benefits of participation in
GVCs — employment, income, exports, technology and the like — depend on
where the country is positioned within the chain and on what type of activities
it engages in. Second, given the fragmentation of the production process and
the dearth of backward and forward linkages, LDCs risk remaining locked
into the lowest rungs on the GVC ladders. These are the stages that are less
knowledge-intensive and that generate the least value added. Even more
worrying is the fact that these stages have the least potential for upgrading.
This is because the ability of local enterprises to capture value depends largely
on power relationships in the chain. Since TNCs can choose suppliers from any
number of countries, they are in a strong position to dictate the terms of their
relationships with local suppliers in LDCs. These concerns are confirmed by an
analysis of LDC export patterns, which shows that these countries do indeed
remain locked into the lower levels of GVC processing and that there are very
few examples of product upgrading (UNCTAD, 2007: 11–50). The third major
risk of LDC involvement in GVCs is that the stages of their integration are typically
labour-intensive. Although this contributes significantly to job generation, the
quality of the jobs and of the associated working conditions can be appalling.
The environmental and physical safety impacts have also been adverse at times.
These shortcomings have been highlighted by recent accidents in firms that
operate in Bangladesh and are part of GVCs.


LDC policymakers can, however, overcome these problems by following two
parallel strategies. First, they can manage their country’s integration into GVCs
in such a way as to raise its developmental impact, by embedding GVCs in the
country’s overall development strategy, building domestic productive capacities,
implementing a strong environmental, social and governance framework and
synergizing trade and investment policies and institutions (UNCTAD, 2013b:
175–210). Achieving these goals is obviously difficult in view of the prevailing


The challenges for LDCs in
expanding the benefits they derive


from FDI are closely related to those
of obtaining developmental effects


from participation in GVCs.


The potential benefits of
participation in GVCs – employment,


income, exports, technology –
depend on where the country is


positioned within the chain and on
what type of activities it engages in.


LDCs remain locked into the lower
levels of GVC processing and there
are very few examples of product


upgrading.


LDC policymakers can manage
their country’s integration into
GVCs in such a way as to raise
its developmental impact, by


embedding GVCs in the country’s
overall development strategy.




153CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


asymmetric power relationships, so the role of the LDC State should be to
prioritize national development objectives. Authorities need to negotiate with
foreign investors in order to obtain the creation of domestic linkages and
technology transfer to local firms, since international integration through GVCs
and FDI have a lasting developmental effect only when they are complemented
by continuous technological capability-building by participating domestic firms
(so as to avoid being locked into labour-intensive, lower-productivity activities).
Policies should also target the creation of linkages with other domestic firms that
can learn and upgrade through these linkages.


2. POLICIES TO FOSTER ENTREPRENEURSHIP


The LDCs, even more than other developing countries, have to cope
with structural weaknesses and a lack of development in the private sector,
which calls for policies to enhance private capital accumulation, employment
generation and technological progress. Such policies must encompass different
types and sizes of enterprise, since policies for MSME development obviously
differ substantially from those for attracting FDI.


a. Financial services


One major element of the required policies is to enable access to finance.
The failure of commercial banks to provide adequate financing to private firms in
LDCs — especially MSMEs — is a major obstacle to enterprise development in
these countries, as discussed in chapter 4. The State must thus play a leading
role in financial allocations, not only to regulate finance and guard against financial
fragility and failure, but also to use the financial system to direct investment
towards sectors and technologies at appropriate scales of production. Financial
policy should be designed so that financial services reach not only MSMEs,
but such excluded groups as women, self-employed workers, peasants and
those without land titles or other collateral. In order to lift the financing constraint
on enterprise development, several alternatives can be considered by LDC
policymakers. They include:


t State development banks. Such banks can provide long-term financing
to domestic companies (including SMEs, start-ups and innovative firms),
possibly on more favourable terms than market institutions. They can
supply other financial services like short-term loans and co-financing. They
can help build industrial clusters to provide synergies and economies of
scale to MSMEs. Effective development banks can also work closely with
domestic firms by mentoring productive activities, offering other forms of
SME promotion and support and helping to reduce financial volatility.


t Venture capital. Government can act as a venture capitalist when it finances
projects by taking a participation in the firm’s equity, rather than by providing
loans. The stakes can be sold on the market once the company is on a solid
footing. This alternative is more appropriate for larger firms and projects than
for MSMEs.


t Commercial banks. Government can encourage lending to MSMEs by (i)
providing banks with subsidies; (ii) enacting lower asset-based reserve
requirements for this market segment than for other types of lending; (iii)
fostering cooperation between formal and informal financial institutions,
such as rotating savings and credit societies, which typically have better
information on borrowers’ risks and operate with lower transaction costs;
and (iv) providing official credit guarantees to encourage loans to desired
sectors and categories of borrowers, with a focus on neglected sectors with
high employment intensity. These options are obviously more feasible where


Authorities need to negotiate with
foreign investors in order to obtain
the creation of domestic linkages
and technology transfer to local


firms.


Financial policy should be designed
so that financial services reach
MSMEs and excluded groups.


State development banks can
provide long-term financing to
domestic companies on more
favourable terms than market


institutions.




The Least Developed Countries Report 2013154


commercial banking is relatively well developed and spread throughout the
country.


t Microfinance. While microfinance can have a positive short-term impact on
employment in petty trade and services, and often provides a safety net and
consumption smoothing, microfinance per se is not an appropriate financing
model for enterprise development, as it relies on interest rates that are too
high and repayment periods that are too short for long-term productive
investment (Chowdhury, 2009; Schoar, 2010). As noted earlier, it does not
allow for productive asset creation or enable viable economic activities to
flourish.


t Ensuring financial access on reasonable terms to households and
consumers, especially through access to banking services, credit, and risk
cover and insurance products. This is important because it feeds back by
spurring demand and further output growth and by raising welfare.


b. Enterprise support services


A second major element of policies to encourage entrepreneurial development
in the LDCs is enterprise support services. The availability of public infrastructure
is obviously a critical issue in this regard, and transport and communications
infrastructure, as well as the provision of such basic amenities as electricity
and water, are clearly important. Technical assistance to impart and enhance
the managerial, technical and financial skills needed to establish and manage
MSMEs can be crucial as well. Partnerships should be envisaged between State
development finance institutions, the private sector and aid agencies to provide
such services-building in managerial skills. Public authorities can also help
businesses to strengthen MSME activities by establishing industrial extension
services and firm support institutions, which provide advice on business
development, management skills, technology options and choice. This can
be further reflected in policies that encourage the expansion of those MSMEs
with the most potential to grow either individually or in clusters, by giving them
preferential access to credit and insurance and better access to technology,
organizational systems and other useful knowledge.


c. Reaching critical firm size


Smaller firms are usually more effective in terms of the number of jobs they
create per unit of investment, but they tend to lack the economies of scale that
would allow them to compete effectively in domestic and global markets. The
creation of industrial clusters is one way of lessening this difficulty. Successful
clusters have many positive effects for individual participating firms (UNIDO,
2009). First, there are the agglomeration effects through networks of suppliers,
labour market effects, knowledge spillovers, external and scale economies,
which also help to establish backward and forward linkages. Second, clusters
make it easier to provide the required infrastructure and amenities that are
essential for efficient production. Third, clusters help boost the productivity of
MSMEs, as was evident in a study of manufacturing firms in Ethiopia (Siba et
al., 2012). Fourth, clusters have positive effects on formalization. Finally, they
facilitate collective action by participating firms.


In this context, LDC Governments have different alternatives for supporting
firm clustering. They can provide a superior supply of infrastructure, logistic,
Customs, financial and legal services, offer preferential access to land and
facilitate administrative procedures. They can ensure an enabling regulatory
framework that facilitates the creation and operation of small firms (Schmitz
and Nadvi, 1999). Several countries have established export processing zones


Microfinance per se is not an
appropriate financing model for


enterprise development.


Technical assistance to impart and
enhance the managerial, technical


and financial skills needed to
establish and manage MSMEs can


be crucial.


Smaller firms are usually more
effective in terms of the number
of jobs they create per unit of


investment, but they tend to lack the
economies of scale that would allow


them to compete effectively.


LDC Governments have different
alternatives for supporting firm


clustering.




155CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


(EPZs), which provide a clear focus for government investment and institutional
reform designed to encourage the location of firms in a particular area.
Several such zones have succeeded in creating manufacturing employment
and increasing exports, although they are often associated with fiscal losses
because of the tax incentives provided. Another major shortcoming is that
they have not been able to foster learning by domestic firms or to generate
spillovers to other domestic firms (UNCTAD, 2007: 36–42). This calls for paying
more attention to ensuring that clusters and EPZs are embedded in the national
economy through linkages, labour movement and spillovers. Other mechanisms
for encouraging clustering are firm incubators and science parks. Government
measures can also provide support by boosting demand for these firms’ output
and by targeting public procurement to that segment in order to encourage
their upgrading. This was successfully done for the government acquisition of
school uniforms and furniture in Brazil (Tendler and Amorim, 1996). The extreme
form of clustering is cooperatives, which are essentially another organizational
form. If they are to function well and remain strong, they must be treated as the
businesses they are (as associations of small producers/consumers/suppliers)
and kept free of political or bureaucratic control.


One way to enhance enterprise development in LDCs is to foster the
creation and strengthening of linkages between firms of different types, so as
to bridge the gaps and disconnects that typically exist in the business sector of
these countries and which largely explain the existence of the missing middle.
Mozambique, for example, has implemented policies to foster the development
of local small-scale suppliers to its large-scale aluminium smelter, although
these have not yet reaped the expected benefits in terms of linkage creation and
enterprise development (Krause and Kaufmann, 2011). Clearly, targets must
be realistic in view of the currently limited entrepreneurial capabilities of small
businesses and other constraints on their operations.


Box 4. Focusing on smaller-scale projects to foster job creation: the case of Mozambique


Mozambique has been one of the fastest-growing LDCs of the past 20 years. Its average GDP growth has exceeded
7 per cent since 1993. Structural reforms, sound macroeconomic policies, an opening to the global economy and political
stability have contributed to this growth by attracting large foreign investment projects. A major breakthrough occurred in
the mid-1990s, when a consortium of investors decided to establish the large-scale aluminium smelter Mozal. More recently,
other mega-projects, mostly in mining, have generated large FDI inflows.


Despite the positive contribution of these large projects, which directly and indirectly generated less than 5,000 jobs
for a labour force of about 9 million people, Mozambique’s development challenges remain formidable. To overcome them,
UNCTAD’s Investment Policy Review (IPR) of Mozambique advised looking beyond mega-projects as a source of growth,
economic diversification and job creation. Promoting investment on a more modest scale, attracting smaller TNCs and building
linkages with national investors were suggested as strategic priorities.


While acknowledging the importance of large projects, the IPR recognized that smaller investments can contribute more
meaningfully to such social objectives as creating employment and distributing economic activity more widely. To this end, it
recommended addressing the inherent regulatory bias against smaller investors. They should, for instance, have access to
the same incentives as those currently reserved for mega-projects. Moreover, time-consuming and burdensome regulatory
procedures should be streamlined to create a more competitive environment for smaller operators. This can be accomplished,
among other things, through a review of licensing procedures and the introduction of e-governance tools.


Mozambique has a large untapped development potential for investment projects in a wide range of activities, such
as agriculture, agro-processing, tourism, selected manufacturing and services, infrastructure and logistics. Placing the
development of smaller projects at the heart of the investment policy debate can go a long way towards achieving the
country’s development goals.
Source: Based on UNCTAD (2012). Investment Policy Review of Mozambique. (UNCTAD/DIAE/PCB2012/1). United Nations publication,


Geneva and New York. Available at http://unctad.org/en/PublicationsLibrary/diaepcb2012d1_en.pdf (14 October 2013).


LDC policymaker need to pay more
attention to ensuring that clusters
and EPZs are embedded in the


national economy through linkages,
labour movement and spillovers.




The Least Developed Countries Report 2013156


d. Regulation and formalization


Economic growth on its own need not and has not reduced high informality
rates, and so most employment in LDCs tends to be in informal activities.
But there are high costs of informality, including the high cost of finance, less
access to utilities, lack of social and legal protection and limited bargaining
power or competitive edge. Formalization is often proposed as a way to assist
enterprise development in LDCs, as in other developing countries. Its benefits
include enforceable contracts; access to formal financial and other services;
legally recognized rights; better access to public utilities, infrastructure, services,
social protection; and membership in formal associations, providing “voice”
(Sundaram, 2007). Ideally, formalization should help increase the productivity
and competitiveness of informal firms, while offering the protection and rights
that most workers in the informal sector do not have.


Rather than taking a punitive approach to suppressing informality, the best
way to achieve formalization of informal enterprises is to offer them support
by simplifying the path to formality. Strategies can include the requirement of
gradual and progressive compliance with rules and regulations, encouraged by
inspections, instead of sanctions; improving business accounting; simplifying
bureaucratic procedures; extending legal protection; recognizing labour relations
and promoting better practices; and ensuring better access to institutional credit.
In this context, a general policy orientation worth emphasizing is the need to
simplify regulatory frameworks in the LDCs. Onerous procedures for setting up
firms, importing machinery and intermediate goods, paying taxes and the like,
discourage business activity of small and medium-sized enterprises alike. While
there have been many recent efforts to improve the business and investment
climate for large foreign firms, such efforts should be extended to all types and
sizes of firms and not just the large ones.


e. Rural development policies


Rural development is one of the main pillars of policies to create more and
better jobs in LDCs, given the high proportion of the population still living in
rural areas and whose livelihood depends on the opportunities they provide.
Developing the rural economy is not limited to agricultural production and
productivity: Expanding RNF activities plays a substantial complementary role.
Despite the importance for present and future economic and development
outcomes, both agriculture and other rural economic activities have been
relatively neglected in LDCs over the past 30 years. This has contributed to
declining agricultural productivity, feeble agricultural production growth and
depressed rural incomes (UNCTAD, 2009: 91–140). This situation must be
reversed if LDCs are to promote structural change. Overturning the widespread
urban bias that led to the neglect of investment in rural areas has to be a starting
point for policy intervention. In recent decades, such countries as China, Viet
Nam and Indonesia have reversed the previous urban bias, and all of them have
benefited in terms of lifting the overall GDP growth rates. Similarly, among the
LDCs, recent successful initiatives to improve agricultural productivity in Ethiopia,
Malawi and Rwanda have demonstrated how agriculture can be effectively
revitalized in relatively short periods of time (ILO, 2011: 27–51).


Agriculture is not a “bargain sector” in which high returns can be secured
with little expenditure. Rather, as is true of industry, investment is crucial,
and in the LDCs public investment is especially important in this regard. The
Comprehensive Africa Agriculture Development Programme, led by NEPAD, has
agreed that a targeted 10 per cent of government budgets should be allocated
to agriculture. However, setting the right priorities for productive spending is
equally critical, as investment in agricultural research and development, rural


The best way to achieve
formalization of informal enterprises


is to offer them support by
simplifying the path to formality.


While there have been many recent
efforts to improve the business
and investment climate for large


foreign firms, such efforts should be
extended to all types and sizes of


firms.


Rural development is one of the
main pillars of policies to create


more and better jobs in LDCs, given
the high proportion of the population


still living in rural areas.


Recent successful LDC initiatives
to improve agricultural productivity
have demonstrated how agriculture


can be effectively revitalized in
relatively short periods of time.




157CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


infrastructure and education have the greatest impact on productivity and
growth.


Since the late 1990s several African LDCs have introduced programmes that
heavily subsidize input price (fertilizer, and in some cases seeds) to producers,
targeting smaller-scale farmers (in Malawi, Rwanda, United Republic of Tanzania
and Zambia) or all farmers (in Burkina Faso, Senegal and Mali). Based on the
available evidence, such programmes have been effective in raising fertilizer use,
average yields and agricultural production, but their success is highly dependent
on implementation. In the case of seeds, the programmes have attracted
additional seed growers and expanded the number of varieties supplied. This
varied experience suggests that these subsidies should not be prolonged over
the long term (because of their high fiscal cost), but can and should play a role
in boosting rural earnings and helping markets take off over the medium term.
Procurement and distribution of subsidized fertilizers should be market-friendly,
so as to enhance and not inhibit input market development. Moreover, the new
generation of input subsidies (“smart” subsidies) brings innovations in design
(e.g. targeting and vouchers) to support the most constrained farmers and
encourage the development of input markets (Druilhe and Barreiro-Hurlé, 2012;
Chirwa and Dorward, 2013). Governments may also organize bulk purchases of
(imported) fertilizers in order to achieve economies of scale and reduce the price
of this input.3


In terms of improving rural infrastructure, it is increasingly evident that public
investment must provide the lead in the development of transport, irrigation,
warehousing, energy, marketing, communications and so forth, especially in
remote areas. This is warranted on two grounds. First, it has multiplier effects,
since it increases overall productivity in agriculture and thus facilitates overall
structural change. Second, it develops the externalities described in chapter
4 of this Report, thereby contributing to employment generation, enterprise
development and capacity-building.


As for micro- and small agricultural enterprises, access to institutional finance
on reasonable terms is perhaps even more crucial to making cultivation viable.
Policies are needed to make institutional credit available to all farmers, including
tenants, women farmers and those without clear land titles (if necessary with
some subsidies to cover the higher risks and transaction costs associated with
such lending). Some strategies for expanding credit access in farming include:


t 1SPWJEJOH TFBTPOBM BOE MPOHUFSN ýOBODF UP GBSNFST BOE 3/' FDPOPNJD
agents by agricultural development banks, State banks, postal banks,
community credit cooperatives (which are more familiar with borrowers’
creditworthiness) and, in some cases, commercial banks. These institutions
are also an instrument for mobilizing rural savings, and may sometimes
establish specialized rural / microfinance units;


t 3FIBCJMJUBUJOH FYJTUJOH SVSBM EFWFMPQNFOU CBOLT BOE UIF DSFBUJPO PG TVDI
institutions where none exists, in order to offer financial services not provided
by commercial banks and other financial institutions;


t &ODPVSBHJOH UIF QSPWJTJPO PG ýOBODJBM TFSWJDFT DSFEJU BOE FYUFOTJPO TFSWJDFT
by means of contract farming and outgrower schemes to both smallholders
and large-scale producers;


t 1SPWJEJOH TVCTJEJFT GPS BOE VOEFSXSJUJOH TFBTPOBM ýOBODF BOE


t *OJUJBUJOH JOTVSBODF BOE XBSFIPVTF SFDFJQU TDIFNFT XIJDI NBLF JU QPTTJCMF
to turn agricultural produce into collateral.


Programmes to subsidize fertilizers
and seeds have been effective in


raising fertilizer use, average yields
and agricultural production.


Public investment must provide
the lead in the development
of rural transport, irrigation,


warehousing, energy, marketing and
communications.


Policies are needed to make
institutional credit available to all


farmers, including tenants, women
farmers and those without clear


land titles.




The Least Developed Countries Report 2013158


A major factor in the viability of cultivation is the effective use of available
agricultural technologies, which means that extension services are extremely
important. In order to achieve higher agricultural yields and stronger productivity
growth, farmers need to learn and adopt innovations in their cultivation techniques,
water management, choice of seeds and/or crops, warehousing, etc. This calls
for Governments to provide support services, such as rural extension services,
which diffuse new knowledge to farmers and help them learn and adopt
innovations. Ideally, such services should actively involve local communities
and use traditional or indigenous knowledge systems that are appropriate to
smallholder farm sizes, including scale-neutral technologies. Extension activities
should also encompass environmental management, which includes paying
attention to conditions of land quality and water access, particularly with regard
to the equitable spread of irrigation and avoiding soil degradation. However,
not all technologies are developed with the specific concerns of local farmers
in mind, and extension services should thus be combined with an emphasis on
stronger research activities that are sensitive to local problems and requirements.
To the extent possible, LDC Governments should seek to create and/or increase
funding for national or regional research centres created on the basis of agro-
ecological zones or strategic food commodities, and indeed many of these need
not be so expensive to develop.


In addition, agricultural policies should foster stronger backward and forward
linkages of the sector. Such linkages should encompass backward linkages
between agriculture and input markets, including access to appropriate inputs,
so as to encourage cheaper and more sustainable input use, with better
regulation and monitoring of private input supply. Forward linkages include
development and proliferation of better post-harvest technologies, such as
warehousing and storage, transport and preliminary processing of agricultural
items. More efficient marketing channels improve access to markets and
protect farmers from high volatility in output prices. This points to the need for
partnerships between the State, farmers’ organizations and NGOs to carry out
some of the functions previously performed by agricultural marketing boards
(e.g. finance and technological extension services as well as marketing). It is a
mistake to believe that large corporate retail can provide an effective substitute,
as the experience of several developing countries suggests otherwise. Where
institutions for marketing agricultural products are missing or inefficient, and/
or where local traders exert detrimental market power over small producers,
Government can establish public trading facilities and market data systems,
promote public cooperatives and set up warehouses in order to limit the traders’
power. Some possible strategies in this regard include:


t &ODPVSBHJOH GBSNFST HSPVQT BOE PUIFS MPDBM DPPQFSBUJWFT UP PSHBOJ[F UIF
supply of inputs, machinery and credit;


t %FWFMPQJOH MPDBM NBSLFUT GPS UIF NBSLFUJOH PG BHSJDVMUVSBM QSPEVDF CZ
investing in the physical installations and liaising with local economic agents;


t 1SJPSJUJ[JOH BDUJWJUJFT UIBU UBSHFU MPDBM BOE JOUFSOBUJPOBM SFHJPOBM NBSLFUT


t *NQSPWJOH UIF BDDFTT PG UIF SVSBM QPQVMBUJPO UP QSPEVDU BOE GBDUPST NBSLFUT


t 'PTUFSJOH UIF EFWFMPQNFOU PG DPNNPOJOUFSFTU QSPEVDFST BTTPDJBUJPOT BOE
cooperatives;


t %FWJTJOH BOE JNQMFNFOUJOH þFYJCMF BOE JOOPWBUJWF DSPTTTFDUPSBM JOTUJUVUJPOBM
arrangements;


t 8IFSF OBUVSBM HBT JT QSFTFOU QSPWJEJOH JOEVTUSJBM QPMJDZ JODFOUJWFT GPS UIF
production of fertilizers, and where it is not, organizing bulk purchase of
(imported) fertilizers; and


Agricultural extension services
should actively involve local


communities and use traditional
or indigenous knowledge systems
that are appropriate to smallholder
farm sizes, including scale-neutral


technologies.


LDC Governments should seek to
create and/or increase funding for


national or regional research centres
created on the basis of agro-


ecological zones or strategic food
commodities.


There is a need for partnerships
between the State, farmers’


organizations and NGOs to carry
out some of the functions previously
performed by agricultural marketing


boards.




159CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


t 6TJOH JOQVU TVQQMZ BOE TVCTJEJFT UP QSPWJEF DSFEJU PS TVCTJEJFT GPS TFFE BOE
fertilizer acquisition.


Some of the challenges faced by agricultural development in LDCs are
the security of tenure, conflict management, excessive centralization of land
administration and lack of access to land. Several LDCs have tackled these
challenges through such programmes and measures as decentralization of
land administration to subnational levels, improved land registries and titling,
establishment of institutional mechanisms to solve land tenure conflicts, and
land reform. For example: The Ugandan Constitution of 1995 transferred titles
from the State directly to landholders. Malawi and Mozambique both adopted
land redistribution policies favouring the landless and de facto occupants, while
Niger’s 1986 rural code provides for mechanisms to resolve land tenure conflicts.
Decentralization was achieved through land boards in Uganda, rural councils in
Senegal, land commissions in Niger and land committees in Lesotho (UNECA,
2005: 129–166). Wider access to land through land reform and/or more
secure rights (whether individual or collective, proprietary or not) creates better
incentives for agricultural investment and is therefore likely to result in increased
employment in agriculture. The mix of measures to be enacted naturally needs to
be adapted to local conditions, the local institutional setting and local traditions.
Nevertheless, since the mid-2000s several LDCs have been entering into lease
or sale agreements involving large patches of land for commercial agriculture
development by foreign investors (so-called “land grab” operations), without
fully privatizing land markets. In order to reduce the conflicts and insecurities
these might engender, it is important to establish new, decentralized bodies that
bring local communities and customary leaders together with Government in the
management of land, land rights and land disputes.


LDCs with the potential for developing cash crops for export can exploit
niche markets for agricultural goods — including biofuels, “fair trade”, “organic”,
certified timber and sustainable products — that enjoy a growing market,
especially in developed countries. Coffee growers from Latin America, Africa
and Asia are benefiting from this trend. One such example is the Oromo Coffee
Company, from Ethiopia, which exploits ethically conscious niche markets in
developed countries (Newland and Taylor, 2010). Similarly, enhancing regional
cooperation in some agricultural commodity chains of production, processing
and marketing (such as rice, maize, wheat, sugar, meat and dairy products) can
potentially meet increasing regional demand (UNECA and African Union, 2009).


As noted earlier, the development of non-farm activities is crucial for the LDCs
not just to provide other means of productive employment but also to improve
the quality of life of the rural population. Employment creation in RNF activities
was a crucial labour absorber during the structural transformation process
in such Asian countries as Bangladesh, Viet Nam and India (Khan, 2007).
Typically, government and donor interventions to support RNF employment
have emphasized self-employment (Davis, 2004). The empirical evidence
shows, however, that in rural Latin America and south Asia, non-farm wage
employment is equally, if not more, significant (Barrett et al., 2001; Haggblade
et al., 2007; Carlo Azzarri, 2009). The excessive focus on self-employment may
result from perceptions of its less exploitative nature and its strategic importance
for poverty reduction, but these perceptions can be debated. Greater balance
between the promotion of self-employment and support to SME development
has implications for the spatial focus of government interventions – for example,
making greater use of rural town centres as an entry point, since SMEs tend to
be located in centres where they can benefit from improved access to services,
economic infrastructure, markets and labour.


Some of the challenges faced
by agricultural development in


LDCs are the security of tenure,
conflict management, excessive


centralization of land administration
and lack of access to land.


LDCs with the potential for
developing cash crops for export


can exploit niche markets for
agricultural goods that enjoy a
growing international market.


Non-farm wage employment is
equally, if not more, significant than


RNF self-employment.




The Least Developed Countries Report 2013160


F. Summary and conclusions


Policies for employment-rich growth in LDCs should have two complementary
objectives: expanding the number of jobs so as to absorb the growing labour
force and the youth bulge, and raising the incomes generated by these jobs
(by means of productivity gains) so as to combat the generalized prevalence of
poverty and underemployment. Reaching these objectives involves implementing
a range of mutually supportive policies aimed at building productive capacity
and fostering structural transformation. Policy interventions should cover three
broad areas: macroeconomic policies, enterprise development, and public-
sector investment and actions for job creation.


Inclusive development calls for a macroeconomic policy approach that goes
beyond the narrower goal of macroeconomic stability. This broader approach
requires expanding the number of instruments and coordinating macroeconomic
policies with other policies to stimulate the development of productive
capacities. In this context, fiscal policy becomes more important than monetary
policy. It should target financing public investment in physical and human capital
by accelerating public investment in infrastructure and raising spending on
education and training. To do so requires strengthening government capacity
to mobilize and manage fiscal revenues, whether domestic or external. At the
national level, this can be done initially through domestic resource mobilization,
which entails changes in fiscal policy and tax administration.


Tax administration and collection can be made more efficient, by streamlining
information management, cross-checking statements and declarations and
setting up a special unit for high-income taxpayers. For resource-rich LDCs,
fiscal revenue can be increased by modifying the extremely favourable terms
currently offered to foreign investors in agriculture and mining. This may involve
imposing a tax on land leased for large-scale investment projects, raising existing
land taxes or revising the taxation of activities undertaken by those projects.
Governments with mining resources can raise their revenues by adopting higher
levies, royalties, income taxes or export taxes. LDC authorities should also boost
the mobilization of external resources from both traditional and non-traditional
aid donors and from multilateral and regional financial institutions.


Although fiscal policy may be more important than monetary policy in
developing productive capacities, monetary policy is still critical. It should,
however, be less fixated on attaining an inflation rate in the low single digits than
on targeting full employment of productive resources and providing reasonable
macroeconomic stability. Credit policy is also of crucial importance in the LDCs,
particularly for MSMEs, which are typically credit-constrained in these countries.


Private sector development is a sine qua non for large-scale employment
generation in LDCs, since it generates the bulk of jobs, both now and in the
future. The main policies for developing the LDCs’ private sectors are industrial
policy, enterprise policy, rural development policies, and education and training
policies. Industrial policy is designed to steer the economy towards structural
transformation, by moving to higher-productivity activities both among and
within sectors. There are two types of strategies that LDCs can pursue to
bolster the employment intensity of growth. The first is to build on activities of
existing comparative advantage, by fostering backward and forward linkages
and technological upgrading in these sectors. This typically means focusing on
natural resource-based activities. Agriculture can be the basis for developing
downstream industries, such as food processing, geared mainly to domestic
and regional markets, but also global markets.


Policies for employment-rich
growth in LDCs should have


two complementary objectives:
expanding the number of jobs and
raising the incomes generated by


these jobs.


For resource-rich LDCs, fiscal
revenue can be increased by


modifying the extremely favourable
terms currently offered to foreign


investors in agriculture and mining.


LDC authorities should also
boost the mobilization of external


resources from both traditional and
non-traditional aid donors.


Private sector development is a sine
qua non for large-scale employment


generation in LDCs.




161CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


A second type of industrial policy strategy aims at changing the capital-labour
ratio of the economy, by attracting investment in labour-intensive industries.
In this respect, some LDCs will be able to take advantage of the window of
opportunity opened by China’s likely delocalization of the lower end of its
manufacturing industry, through a combination of integrating domestic firms into
manufacturing GVCs and attracting FDI. Domestically, this strategy should be
complemented by policies on clustering, export promotion and labour costs.


Effective enterprise policy measures for stimulating the development of
urban-based MSEs include facilitating their access to capital and helping them
upgrade into formal status. Policymakers need to expand the financing made
available to these firms through national development banks or commercial
banks. These financial institutions should select those MSEs with high growth
potential, based on current profitability and entrepreneurs’ profiles.


Rural development policy is a special challenge, given the dismally low level
of productivity of rural areas, and requires action on infrastructure, technology
and financing. The State needs to invest heavily in rural infrastructure, especially
irrigation, electricity, transport, storage (warehousing) and communication (ICTs)
in order to boost rural productivity and foster backward and forward linkages of
farms. Rural extension services must be established or rehabilitated to provide
advice and training on cultivation techniques, water management, choice of
seeds and/or crops, warehousing, conditions of land quality and water access,
avoiding soil degradation, and techniques for meeting market requirements.


Providing rural producers with access to capital and finance involves offering
both seasonal and long-term finance to farmers and rural non-farm economic
agents. This should be undertaken by agricultural development banks, State
banks, post office financial services, community credit cooperatives (which have
better knowledge of borrowers’ creditworthiness) and commercial banks.


Most of the above-mentioned instruments of industrial, enterprise and rural
development policy are targeted policies. They need to be complemented by
horizontal policy measures aimed at increasing the knowledge intensity of the
LDC economies, so as to make them more adaptable and better prepared
to meet the requirements of a modern economy. This brings us to education
and training policy. In primary education, the priority is to improve quality. In
secondary and tertiary education and in technical and vocational training, the
priority is to expand the supply and improve the quality of services. This includes
revising curricula and teaching methods in order to make the labour force more
adaptable and innovative, and adjusting education policies to meet future
domestic labour market requirements.


Finally, in addition to involving the private sector, the State itself must play
a role in generating jobs, either directly and indirectly, especially in the earlier
phases of development. Since infrastructure work is a non-tradable type of
activity, and since it finances the bulk of projects, the State can influence the
choice of technique so as to ensure the adoption of labour-intensive production
processes. These have several advantages over capital-intensive technologies:
They generate more jobs, have lower costs, can contribute to local enterprise
development and capacity-building, provide more readily available maintenance
and repair services, and can generate foreign exchange savings.


Some LDCs will be able to take
advantage of the window of


opportunity opened by China’s likely
delocalization of the lower end of its


manufacturing industry.


Rural development policy requires
action on infrastructure, technology


and financing.


Education and training policy
should make the labour force more


adaptable and innovative.


Labour-intensive production
processes generate more jobs,
have lower costs, contribute to


local enterprise development and
capacity-building, and generate


foreign exchange savings.




The Least Developed Countries Report 2013162


G. International support measure:
Bolstering youth employment in LDCs
through private sector development


According to the current and future demographic trends in the LDCs —
analysed in chapter 2 of this Report — the working-age population in these
countries will increase by 15.7 million people every year, and 225 million new
jobs will have to be created by 2030 to productively employ newcomers to the
labour market. Even more worrying is that the LDCs youth population (aged 15–
24 years), which is becoming better educated and growing fast, is increasingly
seeking job in rapidly growing urban centres. The main responsibility for creating
these jobs rests largely with the LDCs themselves. Nevertheless, the international
community can also play a role in helping to ease the constraints faced by these
countries in creating sufficient jobs.


Indeed, the international community has pledged to help implement the IPoA,
which is a consensus programme aimed at transforming the LDC economies
during the decade 2011–2020. One of its pledges focuses on the employment
of youth and their participation in the economy. More specifically, the LDCs’
development partners have committed to “provide financial and technical
assistance to support least developed countries’ policies and programmes that
provide economic opportunities and productive employment to youth” (IPoA,
para. 81 (2a)).


In line with this undertaking, the Report is proposing a new international
support measure to create employment opportunities for youth in the LDCs. The
support measure would involve a catalytic use of ODA for employment creation
through private sector development.


The objective is to create a financing facility for private sector development
in LDCs, aimed specifically at providing seed capital and training for young
entrepreneurs. The ultimate goal is to create favourable conditions for the growth
of local enterprises so that more employment opportunities are generated for
the millions of young people who join the labour market each year. This proposal
is based on the recognition that the lack of financing and entrepreneurial
capabilities is one of the most critical constraints on private sector development
in these countries. Investment will provide seed capital for start-ups. Training will
equip young people with the requisite skills for successfully managing these new
enterprises.


The financing facility would be based on a cost-sharing partnership between
the international community and LDC Governments. Creating productive
employment for young people in the LDCs is in the interests of the international
community and of traditional donors in particular, as it would reduce the
incentives for emigration from these countries. International assistance of this
nature would enhance the development of productive capacities and generate
desperately needed employment for LDC youth. It would have the additional
benefits of improving the technical and skills base of the LDCs and of creating
new forms of innovation. As such, it could be a win-win proposal for both the
international community and the LDCs.


The facility would have two valuable impacts on LDC economies. First, it
would enable the creation of enterprise incubators to strengthen their private
sector. Unlike public works programmes, it would provide a long-term and
sustainable solution to the employment challenge by fostering the development
of productive capacities.


225 million new jobs will have to
be created by 2030 to productively
employ newcomers to the labour


market.


The international community has
made a pledge on the employment


of youth and their participation
in the economy.


The objective is to create a
financing facility for private sector


development in LDCs, aimed
specifically at providing seed
capital and training for young


entrepreneurs.


The financing facility would be
based on a cost-sharing partnership


between the international
community and LDC Governments.




163CHAPTER 5. Policies for Employment-Intensive Growth in the LDCs


Second, it would support the creation of enterprises in the formal sector of
the economy. Creating formal firms would not only provide better employment
opportunities for young people, but would also contribute to domestic resource
mobilization by broadening the tax base.


Ownership of the scheme by the LDCs themselves is critical. It should be
embedded in the national development strategy and have verifiable indicators of
success. These could be specified in terms of the number of jobs created, the
share of young people in the total number of employed in enterprises supported
by the facility, and the like.


Financing the facility may require innovative solutions, such as a “matching
fund” approach. Donors would agree to match (or exceed by a margin) the funds
mobilized by LDC Governments to finance the facility. Such matching funds
would provide an incentive to recipient Governments to raise more revenues for
employment creation for young people. Non-traditional donors might also find
the matching fund approach appealing, since the facility would be based on
risk-sharing and a balance of resources.


The facility would work as follows. In the first phase, organizational and
managerial training would be provided to those candidates that complied
with certain requirements (such as age and educational background). After
finishing the training, candidates would prepare project proposals for enterprise
development in the second phase. These proposals would be screened, and
the most promising would receive seed capital for concretizing their business
proposals. Alternatively, funding “windows” could be provided, in which
competitive bids would be offered with proposals submitted for funding under
more discretionary terms, involving joint ventures and riskier capital (venture)
fund approaches.


The screening would be based on the commercial benchmarks typically used
by private banks, to which an additional condition could be added – namely, that
a given percentage of the new firm’s employees should come from the targeted
age group (for example, those aged 15 to 24 years). The facility, which could
be managed by a national development bank or an authorized government
entity, would also fund technical and vocational education and training for new
employees, enabling an ongoing increase in their skills and knowledge and
increased productivity for the new enterprise.


Given the high failure rate of start-ups in most economies — a simple rule
of thumb is that half of all start-ups fail during their first operating year — some
form of support for new firms would have to be provided for the first three to five
years. The facility could be the main source of financial and managerial support
for the first two to three years (the second phase of the programme). Later on,
in the third phase, Governments could provide some additional form of support,
for example through financing by a State financial institution, under preferential
conditions. After the last phase of the programme, enterprises would have to
survive on their own.


Donors could provide not only financing for the facility, but also technical
cooperation to establish enterprise incubators, as well as different types of training
using their own expertise in these areas (e.g. SME support and entrepreneurship
policy). In principle, the facility could finance start-ups in activities that could
potentially result in the largest effect on employment creation, although
Governments could gear the projects towards activities and sectors based on
their national priorities and specificities (e.g. regional or sectoral development
targeted by industrial policy).


When possible, LDCs might want to tape the considerable knowledge, skills,
networks and other resources of their diasporas (UNCTA, 2012: 147—150).
Participating countries could network to share best practices, particularly in
monitoring the impact on the economy.


In the first phase, organizational
and managerial training would be
provided to those candidates that


complied with certain requirements.


The screening would be based
on the commercial benchmarks


typically used by private banks, plus
an additional condition that new


firm’s employees should come from
the targeted age group.


Some form of support for new firms
would have to be provided for the


first three to five years.


Donors could provide not only
financing for the facility, but also


technical cooperation to establish
enterprise incubators, as well as


different types of training.


LDCs might want to tape the
considerable knowledge, skills,


networks and other resources of
their diasporas.




The Least Developed Countries Report 2013164


Notes


1 The effectiveness of improving tax collection is shown by the example of Ecuador,
where better access to information and monitoring of company accounts and more
determined implementation of existing laws, led to a doubling of corporate income
tax receipts in just five years.


2 LDC Governments can consider negotiating with these development partners on the
use of local labour force in the execution of South-financed infrastructure and public
works projects.


3 LDCs endowed with natural gas have a comparative advantage in the production
and trading of fertilizers, and may consider adopting industrial policy measures to
establish the industry.


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STATISTICAL TABLES ON THE
LEAST DEVELOPED COUNTRIES




170 The Least Developed Countries Report 2013


Annex table 1. Indicators on LDCs development, 2012


country
GNI per
capita


(current $)a


Economic
Vulnerability


Indexb (EVI)


Human
Assets


Indexc


(HAI)
Income level


Human
Development
Index (HDI)


Multi-
dimensional


Poverty Index


(MPI)e


CDP 2012 review value rank value
Afghanistan 570a 38.8 22.5 Low income 0.37 175 ..
Angola 4’580 51.3 31.6 Upper middle income 0.51 148 ..
Bangladesh 840 32.4 54.7 Low income 0.52 146 0.292
Benin 750 36.2 41.1 Low income 0.44 166 0.412
Bhutan 2’420 44.2 59.0 Lower middle income 0.54 140 0.119
Burkina Faso 670 37.5 29.2 Low income 0.34 183 0.535
Burundi 240 57.2 20.8 Low income 0.36 178 0.53
Cambodia 880 50.5 57.9 Low income 0.54 138 0.212
Central African Republic 490 35.7 21.6 Low income 0.35 180 ..
Chad 740 52.8 18.1 Low income 0.34 184 0.344
Comoros 840 49.9 45.3 Low income 0.43 169 ..
Dem. Rep. of the Congo 220 35.4 21.7 Low income 0.30 186 0.392
Djibouti 1’513d 46.3 42.4 Lower middle income 0.45 164 0.139
Equatorial Guinea 13’560 43.7 43.0 High income: nonOECD 0.55 136 ..
Eritrea 450 59.0 35.6 Low income 0.35 181 ..
Ethiopia 410 33.5 28.2 Low income 0.40 173 0.564
Gambia 510.0 67.8 49.2 Low income 0.44 165 0.324
Guinea 460 28.6 36.8 Low income 0.36 178 0.506
Guinea-Bissau 550 60.5 34.2 Low income 0.36 176 ..
Haiti 760 47.3 35.6 Low income 0.46 161 0.299
Kiribati 2260 82.0 86.9 Lower middle income 0.63 121 ..
Lao People's Dem. Rep. 1’260 37.1 61.4 Lower middle income 0.54 138 0.267
Lesotho 1’380 45.9 62.1 Lower middle income 0.46 158 0.156
Liberia 370 61.0 38.5 Low income 0.39 174 0.485
Madagascar 430 38.0 52.5 Low income 0.48 151 0.357
Malawi 320 51.9 44.1 Low income 0.42 170 0.334
Mali 660 36.8 30.2 Low income 0.34 182 0.558
Mauritania 1’110 44.2 47.1 Lower middle income 0.47 155 0.352
Mozambique 510 44.4 30.7 Low income 0.33 185 0.512
Myanmar 1’144d 45.0 68.8 Lower middle income 0.50 149 ..
Nepal 700 27.8 59.8 Low income 0.46 157 0.217
Niger 370 38.6 24.3 Low income 0.30 186 0.642
Rwanda 560a 47.3 42.2 Low income 0.43 167 0.35
Samoa 3’220 51.1 92.8 Lower middle income 0.70 96 ..
Sao Tome and Principe 1’320 46.1 74.9 Lower middle income 0.53 144 0.154
Senegal 1’040 36.1 47.0 Lower middle income 0.47 154 0.439
Sierra Leone 580 48.5 24.8 Low income 0.36 177 0.439
Solomon Islands 1’130 55.2 65.1 Lower middle income 0.53 143 ..
Somalia 107d 50.1 1.4 Lower middle income .. .. 0.514
South Sudan 650 .. .. .. .. ..
Sudan 1’450 44.4 52.6 Lower middle income 0.41 171 ..
Timor-Leste 3’670 53.3 48.1 Lower middle income 0.58 134 0.36
Togo 500 35.4 45.5 Low income 0.46 159 0.284
Tuvalu 6’070 63.9 88.1 Upper middle income .. .. ..
Uganda 440 36.2 45.8 Low income 0.46 161 0.367
United Rep. of Tanzania 570 28.7 40.1 Low income 0.48 152 0.332
Vanuatu 3’080 46.8 77.7 Lower middle income 0.63 124 0.129
Yemen 1’110a 38.5 52.3 Lower middle income 0.46 160 0.283
Zambia 1’350 53.0 36.9 Lower middle income 0.45 163 0.328
Source: United Nations Committee for Development Policy (CDP) database, 2012 review ; World Bank, World Development Indicators data-


base September 2013; United Nations, UNdata database, Septtmber 2013; UNDP. Human development Report 2013, September
2013; World Bank Economies Income classification, July 2013.


Notes: a) GNI current $ Atlas method, World Bank, WDI database, September 2013; 2011 data for Afghanistan, Rwanda and Yemen.
b) EVI: higher values indicate higher vulnerablity.See explanotory notes at http://www.un.org/en/development/desa/policy/cdp/


cdp_publications/2008cdphandbook.pdf
c) HAI: lower values indicate weaker human asset development. See explanotory notes at http://www.un.org/en/development/


desa/policy/cdp/cdp_publications/2008cdphandbook.pdf
d) 2011 data for Djibouti, Myanmar and Somalia. Source: Undata, National accounts main aggregates database, September 2013.
e) MPI: higher values indicate population multidimentionally poor. See explanatory notes for HDR composite indices at http://


hdrstats.undp.org/images/explanations/PSE.pdf




171ANNEX. Statistical Tables on the Least Developed Countries


Annex table 2. Real GDP growth rates for individual LDCs, selected years
(Annual weighted averages, percentage)


2002–2008 2009 2010 2011 2012 2013
Food and Agriculture exporters 5.2 6.1 6.3 5.4 2.0 5.1


Guinea-Bissau 2.8 3.0 3.5 5.3 -1.5 4.2
Malawi 5.1 9.0 6.5 4.3 1.9 5.5
Solomon Islands 7.6 -4.7 7.8 10.7 5.5 4.0
Somalia


Fuel exporters 9.2 3.0 4.0 -1.1 2.2 3.9
Angola 16.6 2.4 3.4 3.9 8.4 6.2
Chad 8.9 -1.2 13.0 0.5 5.0 8.1
Equatorial Guinea 14.9 -3.6 -2.6 4.5 2.0 -2.1
Sudan 5.9 5.2 2.5 -1.9 -4.4 1.2
Yemen 4.0 3.9 7.7 -10.5 0.1 4.4


Manufactures exporters 6.2 5.3 5.9 6.5 6.0 6.1
Bangladesh 6.2 5.9 6.4 6.5 6.1 6.0
Bhutan 8.5 6.7 11.7 8.5 9.7 6.3
Cambodia 10.4 0.1 6.1 7.1 6.5 6.7
Haiti 0.9 2.9 -5.4 5.6 2.8 6.5
Lesotho 3.8 4.8 6.3 5.7 4.0 3.5


Mineral exporters 5.6 4.0 6.1 5.9 5.7 7.1
Democratic Republic of the Congo 6.4 2.8 7.2 6.9 7.1 8.3
Eritrea -0.5 3.9 2.2 8.7 7.0 3.4
Guinea 2.6 -0.3 1.9 3.9 3.9 4.5
Mali 4.9 4.5 5.8 2.7 -1.2 4.8
Mauritania 5.6 -1.2 5.1 3.9 6.4 5.9
Mozambique 7.8 6.3 7.1 7.3 7.5 8.4
Zambia 5.7 6.4 7.6 6.8 7.3 7.8


Service exporters 8.7 7.8 6.1 6.0 5.7 5.0
Afghanistan 7.7a 21.0 8.4 7.0 10.2 3.1


Burundi 4.4 3.5 3.8 4.2 4.0 4.5
Comoros 1.6 1.8 2.1 2.2 2.5 3.5
Djibouti 4.0 5.0 3.5 4.5 4.8 5.0
Ethiopia 10.3 10.0 8.0 7.5 7.0 6.5
Gambia 3.3 6.5 6.5 -4.3 3.9 8.9
Liberia 3.1 5.3 6.1 7.9 8.3 7.5
Madagascar 5.9 -4.1 0.4 1.8 1.9 2.6
Nepal 4.0 4.5 4.8 3.9 4.6 3.0
Rwanda 7.9 6.2 7.2 8.3 7.7 7.6
Samoa 3.9 -5.1 0.4 2.0 1.2 0.9
Sao Tome and Principe 5.8 4.0 4.5 4.9 4.0 4.5
Timor-Leste 5.0 12.8 9.5 10.6 10.0 10.0
Tuvalu 0.9 -1.7 -2.9 1.1 1.2 1.3
Vanuatu 5.7 3.3 1.6 1.4 2.7 4.3
Uganda 8.1 7.1 5.6 6.7 2.6 4.8


Mixed exporters 7.8 4.5 6.0 5.2 6.7 6.6
Benin 3.8 2.7 2.6 3.5 3.8 4.1
Burkina Faso 6.2 3.0 7.9 4.2 8.0 7.0
Central African Republic 2.3 1.7 3.0 3.3 4.1 4.3
Kiribati 0.6 -2.4 1.4 2.0 2.5 2.5
Lao People's Democratic Republic 7.5 7.5 8.1 8.0 8.3 8.0
Myanmar 12.1 5.1 5.3 5.5 6.3 6.5
Niger 4.7 -1.0 10.7 2.2 11.2 6.2
Senegal 4.8 2.2 4.3 2.6 3.5 4.0
Sierra Leone 6.0 3.2 5.3 6.0 19.8 17.1
Togo 2.7 3.5 4.0 4.9 5.0 5.1
United Republic of Tanzania 7.2 6.0 7.0 6.4 6.9 7.0


LDCs 7.5 5.0 5.6 4.5 5.3 5.7
African LDCs and Haiti 7.5 4.2 4.9 4.4 4.8 5.6
Asian LDCs 7.5 5.9 6.4 4.6 5.8 5.7
Island LDCs 4.9 2.7 5.5 6.8 5.7 5.8
Source: UNCTAD secretariat calculations, based on IMF, World Economic Outlook database, April 2013.
Notes: a 2003-2008; data for 2012 are preliminary and are forecasted for 2013.




172 The Least Developed Countries Report 2013


Annex table 3. Real GDP per capita growth rates for individual LDCs, selected years
(Annual weighted averages, percentage)


2002–2008 2009 2010 2011 2012 2013
Food and Agriculture exporters 2.7 3.2 3.4 2.5 -0.8 2.2
Guinea-Bissau 0.8 0.9 1.4 3.2 -3.4 2.0
Malawi 2.6 6.0 3.6 1.4 -1.0 2.5
Solomon Islands 5.2 -7.0 3.4 7.9 3.1 1.7
Somalia


Fuel exporters 6.2 0.2 1.2 5.5 -0.5 1.1
Angola 13.3 -0.2 0.4 0.9 5.3 3.1
Chad 5.5 -3.6 10.2 -1.9 2.5 5.4
Equatorial Guinea 11.5 -6.3 -5.2 1.6 -0.8 -4.6
Sudan 3.2 2.5 -0.1 20.6 -6.8 -1.4
Yemen 0.8 0.8 4.6 -13.1 -2.8 1.3


Manufactures exporters 4.8 4.1 4.8 5.4 4.7 5.1
Bangladesh 4.8 4.8 5.2 5.4 4.9 4.9
Bhutan 5.9 4.8 9.8 6.7 9.0 6.0


Cambodia 8.5 -1.6 5.0 6.0 5.4 5.6
Haiti -0.7 1.2 -4.8 3.9 -1.1 7.5
Lesotho 3.7 4.5 6.0 5.5 3.7 3.3


Mineral exporters 2.8 1.2 3.3 3.1 2.9 4.2
Democratic Republic of the Congo 3.3 -0.2 4.1 3.8 4.0 5.1
Eritrea -4.1 0.7 -0.9 5.4 3.8 0.3
Guinea 0.5 -2.7 -0.6 1.4 1.4 2.0
Mali 1.7 1.3 2.7 -0.4 -4.2 1.7
Mauritania 2.8 -3.6 2.6 1.4 3.9 3.4
Mozambique 5.7 4.2 5.0 5.2 5.4 6.3
Zambia 3.3 3.8 5.0 4.3 4.7 5.2


Service exporters 5.9 5.2 3.5 3.5 3.1 2.4
Afghanistan 4.0 a 17.3 5.2 3.8 7.0 0.1


Burundi 2.2 1.0 1.4 1.7 1.6 2.0
Comoros -0.5 -0.2 -0.1 0.1 0.4 1.4
Djibouti 1.2 2.2 0.7 1.6 2.0 2.1
Ethiopia 7.7 7.7 5.7 5.2 4.5 4.0
Gambia 0.3 3.5 3.7 -6.9 1.2 5.9
Liberia -0.2 1.0 1.8 5.2 5.6 4.7
Madagascar 3.0 -6.6 -2.2 -0.8 -0.6 0.1
Nepal 1.8 2.7 3.0 2.1 2.9 1.4
Rwanda 6.0 4.1 5.0 6.0 5.5 5.4
Samoa 3.5 -5.1 -0.2 1.5 1.2 0.3
Sao Tome and Principe 4.2 2.1 3.2 2.5 2.2 2.7
Timor-Leste 2.4 10.2 6.8 8.0 7.4 7.5
Tuvalu -1.2 -1.7 -2.9 1.1 1.2 1.3
Vanuatu 3.3 1.1 -0.5 -1.1 0.6 1.8
Uganda 4.7 3.7 2.2 3.3 -0.7 1.5


Mixed exporters 5.2 1.9 3.4 2.6 4.4 4.3
Benin 0.6 -0.3 -0.3 0.7 1.1 1.4
Burkina Faso 3.1 -0.1 4.7 1.1 5.6 4.6
Central African Republic 0.3 -1.9 0.5 0.8 1.6 1.8
Kiribati -1.2 -4.3 0.4 0.0 0.5 0.6
Lao People's Democratic Republic 5.8 5.9 6.6 6.5 6.8 6.5
Myanmar 9.9 3.1 3.3 3.4 4.2 4.4
Niger 1.3 -4.3 7.3 -0.9 7.9 3.0
Senegal 2.0 -0.5 1.5 -0.1 0.8 1.3
Sierra Leone 2.5 0.7 2.6 3.3 16.7 14.2
Togo 0.1 1.3 1.7 2.6 2.7 2.8
United Republic of Tanzania 4.6 3.0 3.9 3.3 4.8 4.9


LDCs 5.0 2.6 3.3 3.2 2.9 3.4
African LDCs and Haiti 4.8 1.5 2.2 3.4 2.1 3.0
Asian LDCs 5.5 4.1 4.7 2.9 4.1 4.0
Island LDCs 2.7 0.6 2.9 4.5 3.5 3.6
Source: UNCTAD secretariat calculations, based on IMF, World Economic Outlook database, April 2013.
Notes: a 2003-2008; data for 2012 are preliminary and are forecasted for 2013.




173ANNEX. Statistical Tables on the Least Developed Countries


Annex table 4. Gross capital formation, gross domestic savings and resource gap in LDCs ,
by country, and by LDC groups, selected years


(Percentage of GDP)
Gross capital formation Gross domestic savings External resource gap


2000-
2008


2009 2010 2011
2000-
2008


2009 2010 2011
2000-
2008


2009 2010 2011


Countries with real GDP growth >6% in 2011


Ethiopia 23.1 22.7 24.7 25.5 6.9 5.7 5.2 8.8 -16.2 -17.0 -19.5 -16.7


Solomon Islands 17.3 19.3 37.4 21.0 4.3 -0.7 0.2 13.7 -12.9 -20.0 -37.2 -7.3


Timor-Leste 5.4 14.9 14.1 11.2 63.9 56.0 61.9 62.6 58.5 41.1 47.8 51.4


Eritrea 19.9 9.3 9.3 10.0 -21.1 -9.7 -9.3 1.2 -41.0 -18.9 -18.6 -8.8


Rwanda 16.9 21.6 21.0 21.4 2.0 2.2 0.4 2.3 -14.9 -19.4 -20.5 -19.1


Liberia 13.9 19.6 19.5 19.3 -12.3 -28.7 -26.7 -25.4 -26.2 -48.3 -46.2 -44.7


Lao People's Dem. Republic 31.0 31.5 27.3 31.1 19.1 26.2 27.7 25.3 -11.9 -5.2 0.4 -5.8


Mozambique 20.5 14.9 13.4 14.7 5.7 6.6 4.2 0.4 -14.8 -8.4 -9.1 -14.3


Equatorial Guinea 31.2 70.5 70.6 50.8 88.9 87.3 88.1 88.2 57.7 16.8 17.5 37.3


Cambodia 19.1 21.4 17.4 17.1 11.8 17.7 12.4 11.1 -7.3 -3.7 -5.0 -6.0


Democratic Rep. of the Congo 13.6 19.1 26.4 27.5 8.1 2.8 18.8 22.8 -5.5 -16.3 -7.6 -4.6


Bangladesh 23.9 24.4 24.4 24.7 19.4 20.1 20.1 19.6 -4.5 -4.3 -4.3 -5.1


Zambia 23.8 21.0 22.6 24.9 18.7 23.9 34.5 34.0 -5.1 2.8 11.9 9.1


United Republic of Tanzania 23.8 28.7 31.7 32.9 14.5 17.0 21.3 22.6 -9.3 -11.6 -10.4 -10.3


Sierra Leone 10.2 9.9 24.5 40.8 -3.5 -4.7 6.5 2.9 -13.7 -14.6 -18.0 -37.9


Countries with real GDP growth between 3% and 6% in 2011


Bhutan 48.7 41.2 52.3 54.1 38.1 40.7 38.3 36.2 -10.5 -0.5 -13.9 -17.8


Afghanistan 17.6 17.4 17.5 15.1 -24.4 -9.9 -8.9 -8.5 -42.0 -27.3 -26.3 -23.6


Haiti 14.8 14.3 13.3 14.6 -15.7 -17.6 -44.9 -31.9 -30.4 -31.9 -58.1 -46.5


Gambia 31.8 31.1 30.2 30.7 16.0 19.1 19.1 9.1 -15.8 -12.0 -11.1 -21.6


Myanmar 13.4 18.9 22.7 19.3 13.9 15.8 21.7 19.5 0.6 -3.0 -1.0 0.2


Mauritania 34.4 20.6 18.3 25.9 12.2 0.1 4.4 15.8 -22.3 -20.5 -13.9 -10.1


Burkina Faso 22.0 24.7 28.2 26.0 7.2 9.5 22.0 12.5 -14.7 -15.2 -6.3 -13.4


Sao Tome and Principe 22.7 18.4 21.1 20.9 -19.4 -31.1 -29.6 -26.0 -42.1 -49.5 -50.7 -46.9


Togo 16.3 18.7 18.9 19.4 -2.7 3.1 2.1 3.4 -19.0 -15.6 -16.8 -16.0


Djibouti 17.9 18.8 19.1 18.9 -4.6 -4.3 -4.7 -4.6 -22.5 -23.1 -23.8 -23.5


Malawi 21.1 25.0 24.8 13.5 3.4 2.3 3.6 7.0 -17.7 -22.7 -21.2 -6.5


Guinea-Bissau 10.5 8.5 7.3 8.9 -4.5 -4.8 2.0 5.3 -15.1 -13.3 -5.2 -3.7


Vanuatu 23.3 34.1 34.1 34.1 17.4 22.3 22.3 22.3 -5.9 -11.9 -11.9 -11.9


Guinea 28.4 30.1 32.6 45.1 23.4 25.1 27.5 32.9 -5.0 -5.0 -5.1 -12.2


Burundi 16.0 24.0 22.4 22.4 -3.1 -20.1 -20.8 -19.2 -19.1 -44.2 -43.2 -41.6


Lesotho 27.5 28.0 28.0 34.3 -45.5 -43.8 -40.3 -27.8 -72.9 -71.9 -68.3 -62.1


Uganda 20.9 22.0 22.3 22.4 9.0 12.1 7.5 7.5 -11.9 -9.9 -14.8 -14.9


Nepal 25.7 31.7 38.3 32.5 10.4 9.4 11.5 8.6 -15.3 -22.2 -26.8 -23.9


Angola 13.2 16.1 16.1 16.1 39.5 15.6 35.3 40.4 26.3 -0.5 19.1 24.3


Chad 23.6 21.7 27.7 19.1 42.2 43.1 48.4 52.4 18.6 21.4 20.7 33.3


Central African Republic 9.6 11.3 14.1 14.9 3.3 -0.6 1.9 3.7 -6.4 -11.9 -12.2 -11.3


Benin 20.0 21.2 21.0 21.6 11.7 11.9 11.5 12.2 -8.2 -9.3 -9.5 -9.4


Kiribati 40.9 43.9 42.9 42.4 -30.4 -40.1 -37.1 -35.4 -71.2 -83.9 -80.0 -77.8


Countries with real GDP growth < 3% in 2011


Senegal 24.7 22.1 22.6 22.2 7.8 5.2 7.0 4.8 -17.0 -16.9 -15.7 -17.4


Mali 21.4 21.2 24.5 22.9 16.4 20.5 22.3 21.1 -5.0 -0.8 -2.2 -1.8


Somalia 19.9 20.0 19.9 20.0 18.5 18.7 18.6 18.7 -1.4 -1.4 -1.4 -1.4


Niger 22.0 33.2 35.9 32.1 10.0 9.9 14.6 10.1 -12.0 -23.3 -21.3 -22.0


Comoros 10.5 11.5 14.3 16.9 -11.9 -22.6 -21.4 -18.8 -22.3 -34.1 -35.6 -35.7


Madagascar 24.9 31.7 18.8 14.5 7.3 2.5 1.1 0.3 -17.6 -29.3 -17.7 -14.2


Samoa 10.8 9.2 9.0 9.0 -13.8 -13.7 -13.2 -13.1 -24.6 -22.9 -22.2 -22.0


Tuvalu 57.2 55.6 53.6 51.8 -4.0 4.1 4.8 6.1 -61.3 -51.5 -48.8 -45.7


Sudan 21.5 20.5 21.7 20.6 16.6 15.7 22.4 21.6 -4.9 -4.8 0.7 1.0


Yemen 24.6 20.7 15.8 7.4 23.6 10.5 9.9 8.3 -0.9 -10.2 -5.8 0.9


Memo items:


LDCs 21.2 22.5 23.3 22.0 17.4 14.7 19.6 20.8 -3.8 -7.8 -3.7 -1.2


African LDCs and Haiti 20.5 22.2 23.3 22.6 18.1 14.0 21.3 23.8 -2.4 -8.2 -2.0 1.2


Asian LDCs 22.7 23.1 23.4 21.3 16.0 15.5 16.3 15.1 -6.7 -7.6 -7.1 -6.1


Island LDCs 12.2 17.4 18.8 15.4 27.3 28.3 34.2 38.6 15.2 10.9 15.4 23.1


ODCs 27.8 31.2 32.0 32.8 31.9 33.4 35.0 35.9 4.1 2.2 2.9 3.1


Source: UNCTAD secretariat calculations, based on UNCTADstat database., July 2013.




174 The Least Developed Countries Report 2013


Annex table 5. Share of value added in main economic sectors in LDCs, by country and country groups,
1999–2001 and 2009–2011


(Percentage of GDP)
Agriculture, hunting,


forestry, fishing
Industry Services


Manufacturing Non-manufacturing


1999–2001 2009–2011 1999–2001 2009–2011 1999–2001 2009–2011 1999–2001 2009–2011
Afghanistan 56.3 30.9 16.9 13.8 6.5 9.0 20.3 46.3
Angola 6.9 10.0 3.4 6.2 67.2 55.9 22.5 28.0
Bangladesh 25.3 18.6 15.4 18.0 10.0 10.6 49.3 52.9
Benin 37.9 35.4 9.0 8.4 5.1 6.1 48.0 50.2
Bhutan 27.5 18.2 8.6 8.8 28.2 35.2 35.6 37.8
Burkina Faso 35.0 35.1 13.9 9.0 7.8 15.1 43.3 40.8
Burundi 41.4 36.1 12.9 13.5 5.6 8.7 40.1 41.8
Cambodia 38.9 36.2 16.2 15.7 5.7 7.6 39.1 40.6
Central African Republic 52.3 54.4 6.1 6.7 8.3 7.1 33.3 31.8
Chad 41.3 20.7 10.4 6.5 2.2 42.8 46.0 30.0
Comoros 45.4 49.0 4.3 4.1 7.2 6.5 43.1 40.5
Dem. Rep. of the Congo 53.9 45.1 4.9 5.4 14.8 17.7 26.4 31.9
Djibouti 3.5 3.8 2.6 2.4 12.6 17.9 81.3 75.9
Equatorial Guinea 8.6 2.8 0.2 0.2 87.3 93.6 4.0 3.4
Eritrea 19.0 17.0 10.5 6.0 11.9 17.4 58.7 59.7
Ethiopia 48.6 47.6 5.5 3.7 7.1 6.6 38.8 42.1
Gambia 23.9 31.2 6.7 5.2 8.0 7.1 61.5 56.4
Guinea 23.1 25.8 3.6 6.0 28.4 28.2 45.0 40.0
Guinea-Bissau 59.0 44.6 9.2 12.3 3.1 1.0 28.8 42.1
Haiti 23.5 20.4 10.1 9.3 22.7 24.8 43.7 45.6
Kiribati 23.2 25.7 4.9 5.2 6.6 3.3 65.3 65.8
Lao People’s Dem. Republic 43.5 29.7 8.0 10.0 10.9 17.7 37.6 42.6
Lesotho 12.5 8.0 14.4 15.2 15.7 17.4 57.3 59.5
Liberia 71.8 70.6 1.8 5.8 0.9 5.6 25.5 18.0
Madagascar 28.7 28.4 12.3 14.6 3.5 5.4 55.5 51.9
Malawi 34.7 30.0 11.3 10.5 6.9 6.0 47.1 53.5
Mali 37.2 39.4 7.6 5.9 14.1 15.3 41.0 39.4
Mauritania 35.5 23.6 11.6 6.5 16.6 31.1 36.3 38.8
Mozambique 24.7 29.4 12.4 13.6 11.5 9.1 51.4 48.0
Myanmar 58.0 37.6 7.2 18.6 2.6 6.4 32.2 37.4
Nepal 37.5 35.4 9.1 6.5 8.1 8.8 45.4 49.3
Niger 43.4 43.1 6.5 5.3 6.0 10.6 44.1 41.0
Rwanda 39.4 34.8 7.6 7.0 7.6 9.3 45.4 48.9
Samoa 16.1 10.3 15.5 8.7 11.2 18.0 57.2 63.0
Sao Tome and Principe 20.4 17.4 7.7 7.0 10.3 11.5 61.5 64.0
Senegal 18.9 17.1 15.8 14.0 7.9 9.5 57.4 59.4
Sierra Leone 48.6 57.0 3.6 2.3 5.4 5.5 42.4 35.2
Solomon Islands 31.6 28.9 8.2 5.9 5.0 4.3 55.2 60.9
Somalia 60.1 60.2 2.5 2.5 4.9 4.9 32.5 32.5
Sudan 37.3 34.0 6.7 8.3 11.0 16.2 44.9 41.5
Timor-Leste .. 4.8 .. 0.6 .. 80.3 .. 14.3
Togo 40.0 46.9 8.6 8.6 10.2 9.5 41.2 35.0
Tuvalu 18.3 22.1 1.4 0.9 12.0 8.4 68.2 68.6
Uganda 28.2 23.6 7.7 8.1 14.8 17.2 49.4 51.0
United Republic of Tanzania 33.0 28.5 9.2 9.3 9.8 14.4 48.0 47.8
Vanuatu 26.1 21.5 4.9 3.3 5.5 7.5 63.4 67.7
Yemen 12.9 11.7 5.3 7.4 33.5 28.0 48.3 52.9
Zambia 21.5 19.7 10.9 8.8 12.9 27.0 54.7 44.4
LDCs 31.4 25.6 10.1 10.2 14.5 22.0 44.0 42.2


African LDCs and Haiti 32.6 26.3 8.0 7.5 16.5 27.3 42.9 38.9
Asian LDCs 30.0 24.7 12.7 15.2 12.1 12.1 45.2 48.1
Island LDCs 28.7 13.5 8.0 2.6 7.2 51.6 56.1 32.4


Source: UNCTAD secretariat calculations, based on UNCTADstat database, July 2013.




175ANNEX. Statistical Tables on the Least Developed Countries


Annex table 6. Foreign direct investment inflows to LDCs, selected years
(Millions of current dollars)


2000–2008 2009 2010 2011 2012
Afghanistan 120.8 75.7 211.3 83.4 93.8
Angola 1'010.5 2'205.3 -3'227.2 -3'023.8 -6'897.8
Bangladesh 606.9 700.2 913.3 1'136.4 990.0
Benin 84.1 134.3 176.8 161.1 158.6
Bhutan 14.7 18.3 25.8 10.4 15.9
Burkina Faso 67.2 100.9 34.6 42.3 40.1
Burundi 2.1 0.3 0.8 3.4 0.6
Cambodia 356.1 539.1 782.6 901.7 1'557.1
Central African Republic 28.5 42.3 61.5 36.9 71.2
Chad 271.7 375.8 312.7 281.9 323.5
Comoros 1.9 13.8 8.3 23.1 17.0
Democratic Republic of the Congo 572.4 663.8 2'939.3 1'686.9 3'312.1
Djibouti 68.6 99.6 26.8 78.0 100.0
Equatorial Guinea 459.6 1'636.2 2'734.0 1'975.0 2'115.1
Eritrea 19.4 91.0 91.0 39.0 73.7
Ethiopia 321.1 221.5 288.3 626.5 970.4
Gambia 49.8 39.6 37.2 36.0 78.8
Guinea 135.6 140.9 101.4 956.1 743.8
Guinea-Bissau 6.7 17.5 33.2 25.0 16.2
Haiti 37.1 38.0 150.0 181.0 178.8
Kiribati 1.1 3.2 -6.6 -1.8 -1.7
Lao People's Democratic Republic 96.1 189.5 278.8 300.8 294.4
Lesotho 59.8 99.9 113.7 132.1 172.3
Liberia 120.6 217.8 450.0 508.0 1'354.1
Madagascar 305.7 1'066.1 808.2 809.8 894.7
Malawi 85.2 49.1 97.0 128.8 129.5
Mali 137.9 748.3 405.9 556.1 310.5
Mauritania 236.5 -3.1 130.5 588.6 1'204.4
Mozambique 289.4 892.5 1'017.9 2'662.8 5'218.1
Myanmar 357.5 972.5 1'284.6 2'200.0 2'243.0
Nepal 3.5 38.6 86.7 95.5 92.0
Niger 68.6 790.8 940.3 1'065.8 793.4
Rwanda 30.2 118.7 42.3 106.0 159.8
Samoa 9.4 9.6 1.1 12.3 21.5
Sao Tome and Principe 20.7 15.5 50.6 35.0 49.5
Senegal 140.3 320.0 266.1 338.2 337.7
Sierra Leone 47.5 110.4 238.4 715.0 740.1
Solomon Islands 24.0 119.8 237.9 146.4 69.3
Somalia 38.1 108.0 112.0 102.0 107.3
Sudan 1'711.6 1'816.2 2'063.7 2'691.7 2'466.4
Timor-Leste 12.5 49.9 28.5 47.1 42.0
Togo 53.3 48.5 85.8 171.0 166.3
Tuvalu .. .. .. .. ..
Uganda 395.5 841.6 543.9 894.3 1'721.2
United Republic of Tanzania 564.3 952.6 1'813.3 1'229.4 1'706.0
Vanuatu 33.2 31.7 41.1 58.2 37.7
Yemen 402.4 129.2 188.6 -518.4 348.8
Zambia 501.3 694.8 1'729.3 1'108.0 1'066.0
LDCs 9'972.0 17'585.8 18'751.3 21'442.9 25'703.0


African LDCs and Haiti 7'920.0 14'679.2 14'618.6 16'913.0 19'832.6
Asian LDCs 1'954.8 2'663.1 3'771.8 4'209.7 5'635.0
Island LDCs 97.1 243.5 361.0 320.3 235.4


ODCs 340'732.5 512'703.0 618'311.7 713'769.3 677'122.6
Source: UNCTAD secretariat calculations, based on UNCTADstat database, July 2013.




176 The Least Developed Countries Report 2013


Annex table 7. Total workers remittances to LDCs, by country and groups
(Millions of current dollars and share in GNI)


$ millions Percentage of GNI
2000–
2008


2009 2010 2011
2000-
2008


2009 2010 2011


Countries with remittances > 10% of GNI in 2011
Samoa 82.3 131.4 143.4 151.2 22.6 26.1 24.8 23.9
Lesotho 540.5 623.0 745.9 753.5 33.8 28.7 27.5 23.7
Haiti 917.8 1’375.5 1’473.8 1’597.8 23.8 23.2 24.2 23.7
Nepal 1073.0 2’985.6 3’468.9 3’951.4 13.5 23.2 21.1 21.2
Gambia 43.2 79.8 115.7 124.8 6.7 9.3 13.0 11.1
Bangladesh 4’327.8 10’520.6 10’850.2 11’989.4 7.2 10.8 10.0 10.4
Senegal 712.0 1’350.4 1’346.0 1’437.1 8.9 10.7 10.7 10.1
Countries with remittances between 5% and 10% of GNI in 2011
Togo 175.5 334.5 333.1 345.3 9.0 10.6 10.6 9.4
Guinea-Bissau 24.9 48.9 48.1 51.1 4.7 5.7 5.9 5.7
Kiribati 7.2 8.7 8.8 - 6.1 6.1 5.1 5.1
Countries with remittances < 5% of GNI in 2011
Uganda 391.8 778.3 914.5 937.4 4.2 4.8 5.2 4.9
Yemen 1’302.9 1’160.0 1’501.9 1’322.8 7.8 4.3 4.8 4.3
Mali 196.9 453.7 436.2 439.8 4.0 5.3 4.8 4.3
Benin 143.9 149.9 248.1 250.5 3.6 2.3 3.8 3.5
Cambodia 209.3 337.8 321.1 407.3 3.9 3.4 3.0 3.4
Liberia 57.8 25.1 31.4 27.9 12.0 2.9 3.6 3.1
Sudan 1’338.8 2’135.3 1’419.6 2’055.4 4.2 3.7 2.1 3.1
Djibouti 22.4 32.5 32.6 35.4 3.0 2.9 2.7 2.6
Sierra Leone 19.3 46.8 57.5 60.2 1.2 1.8 2.2 2.0
Comoros 12.0 12.0 12.0 12.0 3.4 2.2 2.2 2.0
Rwanda 22.5 92.6 103.1 96.5 0.9 1.8 1.8 1.5
Niger 50.9 101.7 88.0 88.0 1.6 1.9 1.6 1.4
Guinea 53.7 63.7 60.4 60.9 1.5 1.2 1.2 1.1
Mozambique 68.0 111.1 131.9 131.9 1.2 1.2 1.4 1.1
Burkina Faso 64.7 99.3 95.0 95.0 1.3 1.2 1.1 0.9
Vanuatu 13.5 5.5 6.4 6.6 3.8 1.0 1.0 0.9
Sao Tome and Principe 1.4 2.0 2.0 2.1 1.3 1.0 1.0 0.8
Ethiopia 152.8 261.6 345.2 241.6 1.2 0.9 1.3 0.8
Lao People's Dem. Rep. 3.6 37.6 40.9 44.2 0.1 0.7 0.6 0.6
Solomon Islands 4.2 2.5 1.7 2.4 1.1 0.5 0.3 0.3
Bhutan 2.9 4.9 5.7 4.9 0.4 0.4 0.4 0.3
Zambia 53.8 41.3 43.7 45.3 0.8 0.4 0.3 0.3
Myanmar 112.3 116.3 133.0 137.0 0.9 0.4 0.3 0.2
Burundi 0.8 3.6 3.6 3.6 0.1 0.2 0.2 0.2
Madagascar 14.0 6.0 10.0 13.0 0.3 0.1 0.1 0.1
United Rep. of Tanzania 14.0 23.3 24.8 24.8 0.1 0.1 0.1 0.1
Mauritania 2.0 1.9 1.9 1.9 0.1 0.1 0.1 0.0
Angola 6.9 6.0 9.0 10.0 0.0 0.0 0.0 0.0
Malawi 0.8 0.8 0.8 - 0.0 0.0 0.0 0.0
LDCs 12’196.5 23’571.7 24’616.1 26’969.5 4.6 4.8 4.5 4.4


African LDCs and Haiti 5’045.9 8’246.7 8’120.1 8’929.4 3.2 2.7 2.5 2.5
Asian LDCs 7’029.8 15’162.8 16’321.6 17’857.0 6.6 8.1 7.5 7.4
Island LDCs 120.7 162.1 174.4 183.1 7.1 6.7 6.5 5.7


ODCs 154’741.5 262’716.8 280’581.2 301’557.8 1.6 1.6 1.4 1.3
Source: UNCTADstat database, United Nations /DESA for GNI, July 2013.




177ANNEX. Statistical Tables on the Least Developed Countries


Annex table 8. Selected indicators on debt burden in LDCs
Total debt stock


as % GNI
Total debt stock


as % exports
Total debt service


as % exports
2000–
2008


2009 2010 2011
2000-
2008


2009 2010 2011
2000–
2008


2009 2010 2011


Countries with debt >100% of GNI in 2011
Somalia 156.5 157.8 296.2 297.8 .. .. .. .. .. .. .. ..
Countries with debt between 50% and 100% of GNI in 2011
Sao Tome and Principe 295.5 81.5 90.2 93.2 1’712.4 745.0 698.1 747.5 28.4 9.8 6.4 5.4
Lao People’s Dem. Rep. 127.5 101.2 84.2 79.6 447.2 384.6 245.0 .. 16.0 14.8 13.2 ..
Guinea 103.6 84.3 72.9 67.5 337.1 273.4 202.4 205.4 14.6 10.1 4.8 11.2
Mauritania 117.0 69.6 70.9 66.2 102.3 130.7 110.8 87.3 5.5 4.7 4.7 3.6
Samoa 48.9 53.4 58.7 60.6 117.7 139.5 161.6 180.8 4.4 4.7 5.3 5.8
Bhutan 70.5 62.4 60.6 59.9 137.6 128.7 145.2 136.1 6.5 12.8 13.5 11.1
Djibouti 64.2 79.8 63.1 56.0 164.9 211.5 173.3 .. 6.7 8.5 8.1 ..
Gambia 96.1 58.0 55.5 53.8 318.7 174.5 179.7 142.3 13.9 6.5 8.1 7.5
Countries with debt <50% of GNI in 2011
Comoros 83.9 53.9 51.9 45.7 419.8 361.8 .. .. 16.4 14.9 .. ..
United Rep. of Tanzania 53.5 36.1 39.8 42.5 276.7 143.5 137.6 131.4 4.8 3.1 3.0 2.0
Eritrea 67.1 57.1 49.7 40.8 308.5 .. .. .. 4.3 .. .. ..
Solomon Islands 41.3 36.5 41.6 37.9 144.4 69.7 65.8 33.7 7.9 4.0 5.9 2.0
Dem. Rep. of the Congo 189.8 233.7 50.9 37.9 274.7 259.5 69.6 52.5 8.1 12.4 3.1 2.4
Sudan 87.2 43.6 37.3 36.2 523.6 243.2 188.5 8.2 5.6 4.2
Sierra Leone 100.7 35.4 36.9 36.1 850.2 225.8 218.3 191.5 26.9 2.1 2.7 3.8
Cambodia 59.3 35.5 35.8 35.8 95.9 60.0 55.2 57.9 0.9 0.8 0.9 1.0
Mozambique 90.3 43.9 40.6 33.1 324.3 141.0 118.8 113.3 5.2 1.4 2.8 1.6
Liberia 879.9 183.1 37.6 31.3 842.4 391.9 97.3 .. 47.1 13.6 1.4 ..
Senegal 51.2 29.7 30.7 30.2 175.3 114.3 .. .. 11.1 6.1 .. ..
Guinea-Bissau 285.1 139.8 135.4 29.3 1’188.6 717.4 .. .. 8.5 6.4 .. ..
Mali 68.6 26.0 27.4 28.7 225.7 100.1 98.2 .. 6.9 3.1 2.5 ..
Madagascar 73.4 32.8 30.8 28.5 266.0 140.7 163.3 140.9 5.2 2.8 3.7 2.1
Lesotho 46.5 35.7 29.6 27.7 57.0 48.8 43.7 .. 5.5 2.5 1.9 ..
Ethiopia 51.8 16.3 24.8 27.2 365.5 152.3 157.9 147.6 8.0 3.0 3.9 6.1
Burundi 125.2 36.0 31.9 26.9 1’946.5 517.9 353.5 258.2 49.0 16.5 2.1 3.4
Central African Republic 84.0 28.8 29.2 26.5 .. .. .. .. .. .. .. ..
Vanuatu 33.9 26.5 25.5 26.3 60.7 46.9 47.8 51.4 1.7 1.7 1.6 1.6
Uganda 46.9 20.5 20.6 24.6 332.8 81.6 91.6 95.1 7.5 2.1 1.8 1.7
Zambia 114.0 30.5 29.8 24.2 343.6 82.7 57.0 48.1 16.1 3.7 1.9 2.1
Niger 59.9 22.5 23.6 23.7 342.1 98.9 .. .. 8.9 3.8 .. ..
Burkina Faso 37.5 23.0 23.7 23.3 359.8 168.4 109.0 10.1 3.8 2.5
Angola 66.3 24.8 25.6 22.9 72.2 40.9 36.8 31.2 15.2 8.5 4.5 4.2
Bangladesh 30.9 25.3 23.5 22.2 190.7 144.0 118.3 98.9 7.9 5.6 4.7 5.5
Malawi 98.0 23.1 19.7 21.9 405.9 84.9 85.0 74.5 8.5 2.9 1.7 1.3
Yemen 43.3 28.7 22.3 21.8 102.3 93.4 71.7 64.4 4.2 3.7 2.8 2.8
Nepal 42.7 29.0 23.6 20.7 240.1 215.6 212.9 184.0 8.9 10.1 10.5 9.5
Togo 92.9 62.0 45.0 20.1 237.2 137.3 .. .. 5.1 4.4 .. ..
Benin 37.4 17.5 19.8 19.6 173.0 77.1 75.4 .. 6.4 2.5 2.5 ..
Chad 50.5 27.4 23.1 19.0 .. .. .. .. .. .. .. ..
Rwanda 57.0 16.7 16.4 17.5 621.4 165.5 147.1 11.9 2.2 2.4
Afghanistan 17.4 22.2 17.1 14.5 .. .. .. .. .. .. .. ..
Myanmar 57.5 23.4 18.5 14.0 182.7 113.7 98.5 0.9 0.2 7.1
Haiti 38.3 24.4 16.2 11.6 250.4 151.2 118.4 72.9 9.9 4.7 15.8 0.5
LDCs 60.4 32.7 29.0 26.6 202.1 114.3 90.4 67.5 9.2 6.2 4.1 3.9


African LDCs and Haiti 76.2 36.0 32.4 29.9 230.3 106.1 83.6 .. 11.0 6.5 3.8 3.7
Asian LDCs 39.8 28.4 24.6 22.3 163.7 136.7 109.3 95.6 6.1 5.3 4.6 4.9
Island LDCs 67.1 45.4 47.1 46.0 201.2 121.9 103.3 104.1 6.0 4.5 3.9 2.9


ODCs 22.5 16.6 16.3 16.0 92.6 72.8 66.7 62.8 15.4 9.5 8.3 7.7
Source: UNCTAD secretariat based on World Bank, World Development Indicators database, July 2013.




178 The Least Developed Countries Report 2013


Annex table 9. Indicators on area and population, 2011


Country


Area Population


Land area


% of arable
land and


land under
permanent


crops


% of
land
area


covered
by forest


Density Urban Labor force


(000km2)
(pop/km2
land area)


% agricultural non-agricultural


Afghanistan 652.2 12.1 2.1 45 26.2 19’209 13’149
Angola 1,246.7 3.5 46.8 16 57.5 13’535 6’084
Bangladesh 130.2 65.5 11.1 1174 27.9 66’836 83’658
Benin 112.8 25.5 40.0 87 41.8 3’944 5’156
Bhutan 38.4 2.9 84.9 19 36.0 685 53
Burkina Faso 273.6 21.1 20.4 58 28.1 15’617 1’351
Burundi 25.7 51.4 6.6 372 9.8 7’638 937
Cambodia 176.5 23.5 56.5 83 19.6 9’363 4’943
Central African Republic 623.0 3.0 36.2 7 39.5 2’792 1’694
Chad 1,259.2 3.9 9.1 10 20.8 7’438 4’087
Comoros 1.9 75.2 1.4 376 30.2 519 234
Dem. Rep. of the Congo 2,267.1 3.3 67.9 28 36.3 38’434 29’324
Djibouti 23.2 0.1 0.2 37 82.4 666 239
Equatorial Guinea 28.1 7.1 57.5 26 39.7 459 261
Eritrea 101.0 6.9 15.1 59 19.5 3’976 1’440
Ethiopia 1,000.0 15.7 12.2 89 16.1 65’076 19’658
Gambia 10.1 45.0 47.6 171 58.6 1’344 432
Guinea 245.7 14.4 26.5 45 32.4 8’110 2’112
Guinea-Bissau 28.1 19.6 71.6 58 41.8 1’222 325
Haiti 27.6 46.4 3.6 364 53.9 5’895 4’229
Kiribati 0.8 42.0 15.0 123 44.7 23 78
Lao People's Dem. Rep. 230.8 6.5 67.9 28 33.0 4’700 1’588
Lesotho 30.4 10.3 1.5 67 29.8 846 1’348
Liberia 96.3 6.5 44.6 42 48.7 2’536 1’592
Madagascar 581.5 7.1 21.5 37 32.0 14’841 6’474
Malawi 94.3 39.6 34.0 164 15.6 11’123 4’258
Mali 1,220.2 5.7 10.2 12 38.4 11’764 4’076
Mauritania 1,030.7 0.4 0.2 4 39.7 1’774 1’767
Mozambique 786.4 6.9 49.4 31 30.4 18’121 5’809
Myanmar 653.3 18.8 48.2 80 30.1 32’258 16’078
Nepal 143.4 17.3 25.4 189 19.1 28’323 2’163
Niger 1,266.7 11.8 0.9 13 17.4 13’271 2’798
Rwanda 24.7 59.6 18.0 452 18.8 9’761 1’182
Samoa 2.8 10.6 60.4 66 19.5 49 135
Sao Tome and Principe 1.0 49.7 28.1 191 57.7 96 73
Senegal 192.5 20.3 43.8 69 40.7 8’925 3’843
Sierra Leone 71.6 17.2 37.8 82 40.1 3’567 2’430
Solomon Islands 28.0 3.0 78.9 19 .. 372 181
Somalia 627.3 1.8 10.6 16 36.4 6’223 3’334
Sudan (former) 2,376.0 8.0 29.4 20 28.3 22’563 22’069
Timor-Leste 14.9 14.1 49.1 74 29.8 916 238
Togo 54.4 50.0 4.9 119 36.1 3’249 2’906
Tuvalu 0.0 60.0 33.3 328 50.6 3 7
Uganda 199.8 44.8 14.5 176 15.3 25’139 9’370
United Republic of Tanzania 885.8 15.0 37.3 52 26.6 33’615 12’604
Vanuatu 12.2 11.9 36.1 20 25.3 73 172
Yemen 528.0 2.8 1.0 44 34.4 9’381 15’419
Zambia 743.4 4.6 66.3 18 38.7 8’439 5’036
LDCs 20,168.0 8.1 29.7 42.6 28.3 544’709 306’394
African LDCs and Haiti 17,553.7 7.1 30.0 31 28.7 371’903 168’225
Asian LDCs 2,552.7 15.0 26.4 120 27.6 170’755 137’051
Island LDCs 61.5 11.2 58.4 50 25.9 2’051 1’118
ODCs 56,301.8 13.8 28.4 85 49.5 2’007’495 2’777’343
All developing economies 76,469.8 12.3 28.8 74 46.3 2’552’204 3’083’737
Sources:FAO, FAOSTAT , september 2013; United Nations/DESA/Population Division; World Bank, World Development Indicators database,


September 2013.
Notes: Land area: country area excluding Inland water.




179ANNEX. Statistical Tables on the Least Developed Countries


Annex table 10. Selected indicators on education and labour, 2011*


Country


Primary completion rate
(% of primary school-age


population)


Youth literacy rate
(% of people aged 15-24)


Labor participation rate
(% of total population aged 15+)


female male total female male total female male total
Afghanistan 18.7 48.4 34.1 .. .. .. 15.7 80.3 49.2
Angola 40.0 53.2 46.6 66.1 80.1 73.0 62.9 77.1 69.8
Bangladesh .. .. .. 80.4 77.1 78.7 57.2 84.3 70.8
Benin 66.3 84.3 75.3 30.8 54.9 42.4 67.4 78.2 72.6
Bhutan 98.1 92.2 95.1 68.0 80.0 74.4 65.8 76.5 71.5
Burkina Faso 42.3 47.8 45.1 33.1 46.7 39.3 77.5 90.4 83.8
Burundi 62.2 62.1 62.1 88.1 89.6 88.9 83.7 82.1 82.9
Cambodia 89.7 90.1 89.9 85.9 88.4 87.1 79.2 86.7 82.8
Central African Republic 32.8 53.3 43.0 59.1 72.3 65.6 72.5 85.1 78.7
Chad 29.2 47.2 38.2 42.2 53.6 47.9 64.4 80.2 72.2
Comoros 65.5 83.9 74.8 85.9 86.1 86.0 35.1 80.4 57.7
Dem. Rep. of the Congo 51.0 70.8 60.9 53.3 78.9 65.8 70.2 72.5 71.3
Djibouti 44.9 46.6 45.8 .. .. .. 36.0 67.2 51.5
Equatorial Guinea 52.2 51.3 51.7 98.4 97.7 98.1 80.6 92.3 86.7
Eritrea 36.4 43.2 39.8 87.7 92.6 90.1 79.8 90.0 84.7
Ethiopia 54.8 60.7 57.8 47.0 63.0 55.0 78.4 89.8 84.0
Gambia 67.2 65.5 66.3 63.6 72.6 68.1 72.4 83.1 77.6
Guinea 53.0 74.9 64.1 21.8 37.6 31.4 65.4 78.3 71.9
Guinea-Bissau 60.0 75.3 67.6 67.1 79.3 73.2 68.0 78.2 73.0
Haiti .. .. .. 70.5 74.4 72.3 60.1 70.6 65.3
Kiribati 113.1 111.0 112.0 .. .. .. .. .. ..
Lao People's Dem. Rep. 89.9 95.3 92.6 78.7 89.2 83.9 76.5 79.5 77.9
Lesotho 76.8 60.4 68.5 92.1 74.2 83.2 58.9 73.4 65.9
Liberia 60.3 71.6 66.0 37.2 63.5 49.1 57.9 64.4 61.2
Madagascar 74.0 71.9 72.9 64.0 65.9 64.9 83.4 88.7 86.0
Malawi 72.4 69.9 71.2 70.0 74.3 72.1 84.8 81.3 83.1
Mali 49.5 61.0 55.4 38.8 56.0 46.9 36.8 70.0 53.1
Mauritania 71.9 68.3 70.1 66.2 71.6 69.0 28.7 79.2 53.8
Mozambique 51.6 60.9 56.2 56.5 79.8 67.1 86.0 82.9 84.6
Myanmar 106.2 101.1 103.6 95.8 96.3 96.1 75.0 82.1 78.5
Nepal 63.1 76.5 70.0 77.5 89.2 82.4 80.4 87.6 83.9
Niger 39.6 52.4 46.2 23.2 52.4 36.5 39.9 89.9 64.6
Rwanda 73.8 65.4 69.6 78.0 76.7 77.3 86.4 85.4 85.9
Samoa 102.7 94.6 98.4 99.6 99.4 99.5 42.8 77.8 60.7
Sao Tome and Principe 117.0 112.4 114.7 77.3 83.1 80.2 43.7 76.6 59.7
Senegal 64.6 61.1 62.8 56.2 74.2 65.0 66.1 88.4 77.0
Sierra Leone 71.3 77.6 74.4 52.1 70.5 61.0 66.3 69.1 67.7
Solomon Islands .. .. .. .. .. .. 53.2 79.9 67.0
Somalia .. .. .. .. .. .. 37.7 76.8 56.9
Sudan 54.9 60.8 57.9 84.5 89.9 87.3 30.9 76.5 53.7
Timor-Leste 73.6 71.4 72.5 78.6 80.5 79.5 38.4 74.1 56.5
Togo 66.8 86.5 76.6 72.7 86.9 79.9 80.4 81.4 80.8
Tuvalu 109.2 89.3 99.2 .. .. .. .. .. ..
Uganda 54.2 55.7 54.9 85.5 89.6 87.4 76.0 79.5 77.7
United Republic of Tanzania 92.1 87.7 89.9 72.8 76.5 74.6 88.2 90.3 89.2
Vanuatu 83.1 83.7 83.4 94.8 94.4 94.6 61.3 79.7 70.7
Yemen 53.3 72.2 62.9 76.0 96.4 86.4 25.2 72.0 48.5
Zambia 108.3 98.3 103.3 58.5 70.3 64.0 73.2 85.6 79.4
LDCs 59.9 67.4 63.7 68.1 77.0 72.4 65.4 82.5 73.9
African LDCs and Haiti 59.3 65.9 62.6 60.2 72.9 66.4 69.9 82.2 75.9
Asian LDCs 63.0 75.5 69.4 82.4 84.3 83.2 59.1 83.0 71.0
Island LDCs 78.6 81.5 80.1 83.7 85.1 84.4 43.0 77.5 60.5
ODCs 86.3 88.4 93.6 87.9 93.5 90.7 48.5 79.1 64.0
All developing economies 80.9 84.4 87.5 84.7 91.0 87.8 50.7 79.5 65.3
Sources:UNESCO, UIS database, september 2013; United Nations/DESA/Population Division; World Bank, World Development Indicators


database, September 2013.
*2011 or lastest year available.




180 The Least Developed Countries Report 2013


Annex table 11. Selected indicators on demography in LDCs


country
Population total


(thousands)


Life expectancy
Male


Life expectancy
Female


Life expectancy
Total


Fertility rate
(births per
women)(years)


2000 2011 2000 2011 2000 2011 2000 2011 2000 2011
Afghanistan 20’595 29’105 53.8 58.8 56.0 61.4 54.8 60.1 7.7 5.4
Angola 13’925 20’180 43.9 49.6 46.6 52.6 45.2 51.1 6.8 6.1
Bangladesh 132’383 152’862 65.1 69.2 65.6 70.7 65.3 69.9 3.1 2.2
Benin 6’949 9’780 53.3 57.6 57.2 60.4 55.2 58.9 6.0 5.0
Bhutan 564 729 60.2 67.2 60.4 67.8 60.3 67.5 3.6 2.3
Burkina Faso 11’608 15’995 49.2 54.9 51.8 56.0 50.5 55.4 6.6 5.8
Burundi 6’674 9’540 47.0 51.4 49.4 55.0 48.2 53.1 7.1 6.2
Cambodia 12’223 14’606 59.3 68.4 64.6 73.8 61.9 71.1 3.8 2.9
Central African Republic 3’638 4’436 42.1 47.0 45.4 50.7 43.7 48.8 5.4 4.5
Chad 8’301 12’080 45.8 49.4 47.6 51.1 46.7 50.2 7.4 6.5
Comoros 528 700 56.3 59.1 59.5 61.8 57.9 60.4 5.3 4.9
Dem. Rep. of the Congo 46’949 63’932 45.0 47.6 47.8 51.1 46.4 49.3 7.1 6.1
Djibouti 723 847 55.5 59.3 58.6 62.4 57.0 60.8 4.5 3.5
Equatorial Guinea 518 716 46.5 50.7 49.1 53.6 47.8 52.1 5.8 5.0
Eritrea 3’939 5’933 53.8 59.4 58.3 64.1 56.0 61.7 5.9 4.9
Ethiopia 66’024 89’393 51.3 60.8 53.2 63.8 52.2 62.3 6.5 4.8
Gambia 1’229 1’735 53.9 57.1 56.5 59.7 55.2 58.4 5.9 5.8
Guinea 8’746 11’162 51.2 54.8 51.3 56.4 51.2 55.6 5.9 5.1
Guinea-Bissau 1’273 1’624 50.4 52.3 52.5 55.4 51.4 53.8 5.8 5.1
Haiti 8’578 10’033 55.7 60.5 59.2 64.2 57.4 62.3 4.3 3.3
Kiribati 83 99 61.8 65.5 67.5 71.1 64.6 68.2 3.9 3.0
Lao People's Dem. Rep. 5’388 6’521 60.4 66.1 62.9 68.7 61.6 67.4 4.2 3.2
Lesotho 1’856 2’030 46.7 48.0 47.6 48.5 47.2 48.2 4.1 3.1
Liberia 2’892 4’080 51.8 59.0 53.1 60.8 52.4 59.9 5.9 4.9
Madagascar 15’745 21’679 57.3 62.4 59.7 65.3 58.5 63.8 5.5 4.6
Malawi 11’321 15’458 45.7 54.1 46.4 54.2 46.0 54.1 6.3 5.6
Mali 10’261 14’417 49.4 54.3 48.7 54.0 49.1 54.2 6.8 6.9
Mauritania 2’708 3’703 58.2 59.7 61.2 62.7 59.7 61.2 5.4 4.8
Mozambique 18’276 24’581 46.0 48.5 49.0 50.5 47.4 49.5 5.8 5.3
Myanmar 48’453 52’351 60.0 62.8 64.2 66.9 62.0 64.8 2.4 2.0
Nepal 23’184 27’156 61.2 66.5 63.0 68.7 62.0 67.5 4.1 2.5
Niger 10’990 16’511 50.7 57.3 50.7 57.6 50.7 57.5 7.7 7.6
Rwanda 8’396 11’144 46.8 61.4 48.5 64.5 47.6 62.9 5.9 4.7
Samoa 175 187 66.3 69.6 72.8 75.9 69.5 72.7 4.5 4.3
Sao Tome and Principe 139 183 61.5 64.1 65.1 68.0 63.3 66.0 4.7 4.2
Senegal 9’862 13’331 56.2 61.6 59.4 64.5 57.8 63.0 5.6 5.0
Sierra Leone 4’140 5’865 37.4 44.9 38.8 45.3 38.1 45.1 5.9 4.9
Solomon Islands 412 538 61.6 66.0 64.1 68.7 62.8 67.3 4.7 4.2
Somalia 7’385 9’908 49.3 52.8 52.5 56.0 50.9 54.4 7.6 6.8
South Sudan 6’653 10’381 48.0 53.0 50.5 55.1 49.2 54.0 6.1 5.1
Sudan 27’730 36’431 56.2 60.0 59.9 63.5 58.0 61.7 5.4 4.6
Timor-Leste 854 1’176 58.3 65.0 60.7 68.1 59.5 66.5 7.1 5.5
Togo 4’865 6’472 52.8 55.0 54.4 56.6 53.5 55.8 5.3 4.7
Tuvalu 9 10 .. .. .. .. .. .. .. ..
Uganda 24’276 35’148 47.8 57.0 48.5 59.0 48.1 58.0 6.9 6.1
Tanzania 34’021 46’355 49.3 58.9 50.6 61.3 50.0 60.1 5.7 5.4
Vanuatu 185 242 65.9 69.2 69.3 73.2 67.6 71.1 4.4 3.5
Yemen, Rep. 17’523 23’304 59.1 61.4 61.9 64.1 60.5 62.7 6.4 4.3
Zambia 10’101 13’634 41.5 54.4 42.1 57.3 41.8 55.8 6.1 5.8
LDCs 663’251 858’285 52.0 57.0 55.5 60.9 53.2 58.4 5.3 4.5
African LDCs and Haiti 400’552 548’513 49.6 55.0 51.7 57.4 50.7 56.2 6.3 5.4
Asian LDCs 260’314 306’636 60.0 65.6 62.4 68.3 61.2 66.9 3.7 2.7
Island LDCs 2’386 3’136 54.0 57.3 57.4 60.8 55.6 59.0 5.6 4.7
ODCs 4’144’079 4’749’170 62.2 64.1 66.6 68.5 64.3 66.2 2.6 2.4
All developing economies 4’807’330 5’607’455 58.8 61.8 63.0 66.0 60.6 63.6 3.0 2.7
Source: World Bank, World Development Indicators database, September 2013




181ANNEX. Statistical Tables on the Least Developed Countries


Annex table 12. LDC selected population indicators, 2012


Total Population
(‘000)


Population
growth


(annual %)


Population age
0-14


(% of total)


Rural
population
(% of total)


Urban
population


growth rate (%)
Afghanistan 29’825 2.5 47.4 73.3 4.5
Angola 20’821 3.2 47.6 41.9 4.1
Bangladesh 154’695 1.2 30.6 71.6 3.0
Benin 10’051 2.8 43.0 57.6 4.3
Bhutan 742 1.7 28.5 63.2 3.9
Burkina Faso 16’460 2.9 45.7 71.0 6.3
Burundi 9’850 3.2 44.2 90.1 4.6
Cambodia 14’865 1.8 31.2 80.4 2.1
Central African Republic 4’525 2.0 40.1 60.3 2.6
Chad 12’448 3.0 48.5 79.2 3.0
Comoros 718 2.5 42.2 69.7 2.9
Democratic Republic of the Congo 65’705 2.8 45.1 63.1 4.3
Djibouti 860 1.5 33.7 17.2 2.0
Equatorial Guinea 736 2.8 39.0 60.1 3.2
Eritrea 6’131 3.3 43.1 80.2 5.2
Ethiopia 91’729 2.6 43.3 83.7 3.6
Gambia 1’791 3.2 45.9 41.1 3.8
Guinea 11’451 2.6 42.5 67.1 3.9
Guinea-Bissau 1’664 2.4 41.6 57.6 3.7
Haiti 10’174 1.4 35.4 44.8 3.9
Kiribati 101 1.5 32.4 55.2 1.8
Lao People's Democratic Republic 6’646 1.9 35.6 66.1 4.7
Lesotho 2’052 1.1 36.8 69.4 3.7
Liberia 4’190 2.7 43.1 50.8 3.6
Madagascar 22’294 2.8 42.7 67.3 4.9
Malawi 15’906 2.9 45.4 84.2 4.2
Mali 14’854 3.0 47.1 60.9 4.9
Mauritania 3’796 2.5 40.2 60.2 2.9
Mozambique 25’203 2.5 45.4 69.5 3.1
Myanmar 52’797 0.9 25.3 69.4 2.5
Nepal 27’474 1.2 35.6 80.5 3.7
Niger 17’157 3.9 50.0 82.5 5.0
Rwanda 11’458 2.8 43.6 80.9 4.6
Samoa 189 0.8 37.9 80.8 -0.6
Sao Tome and Principe 188 2.7 41.6 42.1 3.1
Senegal 13’726 3.0 43.5 59.1 3.4
Sierra Leone 5’979 1.9 41.7 59.4 3.1
Solomon Islands 548 2.4 40.4 79.1 4.6
Somalia 10’195 2.9 47.3 63.3 3.8
South Sudan 10’838 .. 42.3 82.1 ..
Sudan 37’195 .. 41.5 68.6 ..
Timor-Leste 1’210 1.6 46.3 69.4 4.3
Togo 6’643 2.6 41.9 63.6 3.4
Tuvalu 10 0.2 - 49.0 1.0
Uganda 36’346 3.4 48.5 84.3 6.0
United Republic of Tanzania 47’783 3.1 44.9 72.9 4.9
Vanuatu 247 2.3 37.4 74.3 3.7
Yemen 23’852 2.4 40.7 64.7 4.9
Zambia 14’075 3.2 46.7 61.0 4.2
LDCs 878’194 2.3 40.3 71.3 3.8
African LDCs and Haiti 564’085 2.8 44.5 71.0 4.1
Asian LDCs 310’896 1.4 32.6 71.9 3.3
Island LDCs 3’212 2.0 42.5 73.8 3.3
ODCs 4’857’463 1.2 26.4 49.9 2.4
All developing economies 5’735’559 1.4 28.6 53.2 2.5
Source: UNCTAD secretariat calculations, based on UNCTADstat database, September 2013 and World Bank, World Development Indica-


tors database, September 2013.




182 The Least Developed Countries Report 2013


Annex table 13. New entrants to the labour market in LDCs
New entrants (15-24)


(thousands)
Share in working age population


15-64) (per cent)
2000 2005 2010 2020 2030 2050 2000 2005 2010 2020 2030 2050


Afghanistan 388.0 475.5 549.7 841.6 944.7 975.9 3.9 3.9 3.9 4.1 3.4 2.4
Angola 267.9 319.8 377.8 536.7 722.1 1,074.5 3.9 3.9 3.9 3.9 3.8 3.2
Bangladesh 2’764.6 2’981.5 3’070.3 3’162.7 2’943.4 2’531.5 3.5 3.4 3.2 2.7 2.3 1.9
Benin 133.5 159.8 188.0 249.6 309.9 407.9 3.7 3.7 3.7 3.6 3.4 2.9
Bhutan 11.9 15.0 15.5 14.2 13.8 11.9 3.8 3.7 3.3 2.5 2.2 1.8
Burkina Faso 236.3 271.8 311.2 419.7 544.1 785.7 4.0 4.0 3.9 3.8 3.6 3.1
Burundi 134.6 173.7 199.3 228.0 338.6 498.1 4.2 4.3 4.0 3.5 3.7 3.2
Cambodia 242.1 323.0 300.7 268.9 317.7 299.1 3.6 4.1 3.3 2.5 2.6 2.1
Central African Republic 73.3 81.5 89.5 107.4 122.2 148.8 3.8 3.8 3.7 3.5 3.2 2.7
Chad 158.2 193.9 231.8 323.9 434.3 665.9 4.0 4.0 4.1 4.0 3.8 3.3
Comoros 11.2 12.3 12.7 16.9 21.3 27.9 3.8 3.7 3.4 3.4 3.4 3.0
Dem. Rep. of the Congo 883.0 1’037.0 1’226.7 1’632.2 2’086.4 2’986.3 3.7 3.8 3.8 3.7 3.6 3.1
Djibouti 14.6 16.7 18.7 17.0 19.7 18.8 3.6 3.6 3.6 2.8 2.8 2.3
Equatorial Guinea 7.4 10.9 13.6 16.7 21.5 28.4 2.7 3.2 3.4 3.1 3.2 2.7
Eritrea 84.3 110.5 120.7 147.5 205.1 253.4 4.2 4.2 3.8 3.4 3.5 2.7
Ethiopia 1’276.8 1’490.1 1’756.9 2’433.6 2’737.5 3’204.6 3.8 3.9 3.9 3.8 3.2 2.5
Gambia 25.5 28.9 33.0 45.8 62.2 96.7 4.0 3.9 3.8 3.8 3.7 3.3
Guinea 165.3 186.4 215.5 278.9 346.3 450.7 3.6 3.7 3.7 3.6 3.4 2.9
Guinea-Bissau 24.9 28.3 31.5 39.3 48.4 64.8 3.7 3.7 3.6 3.5 3.3 2.9
Haiti 178.1 200.5 206.6 220.3 228.6 224.1 3.7 3.7 3.5 3.1 2.8 2.3
Kiribati 1.5 1.8 2.1 2.2 2.1 2.4 3.2 3.4 3.4 2.9 2.5 2.3
Lao People's Dem. Rep. 107.1 124.1 147.3 147.4 164.8 155.8 3.8 3.8 3.9 3.1 2.8 2.2
Lesotho 40.0 43.8 47.0 48.1 48.7 48.7 4.0 4.1 4.0 3.5 3.1 2.5
Liberia 58.1 64.5 75.3 102.7 128.0 173.3 3.7 3.7 3.5 3.6 3.4 2.9
Madagascar 298.9 345.7 420.6 566.3 694.6 1,022.5 3.7 3.6 3.7 3.6 3.3 3.0
Malawi 223.1 253.1 305.7 406.8 540.1 805.7 3.9 3.9 4.0 3.9 3.7 3.2
Mali 209.3 238.1 269.6 370.7 528.6 918.0 4.0 3.9 3.8 3.9 3.9 3.6
Mauritania 54.2 62.5 70.8 89.0 109.6 142.4 3.7 3.6 3.5 3.3 3.2 2.9
Mozambique 362.0 407.0 463.6 637.2 816.9 1,196.1 3.7 3.7 3.8 3.9 3.8 3.3
Myanmar 1’033.6 1’022.3 962.7 898.8 852.3 721.2 3.3 3.0 2.7 2.3 2.1 1.8
Nepal 452.2 465.7 524.9 633.0 554.4 488.4 3.5 3.3 3.4 3.2 2.5 2.0
Niger 189.6 224.5 274.8 436.5 664.3 1’411.5 3.5 3.5 3.6 3.9 4.0 3.8
Rwanda 181.2 212.6 212.9 297.8 356.8 449.9 4.3 4.2 3.7 3.7 3.3 2.8
Samoa 3.2 3.2 3.4 3.9 4.3 4.1 3.4 3.2 3.2 3.4 3.4 2.8
Sao Tome and Principe 3.2 3.6 3.7 4.3 5.8 6.9 4.4 4.3 3.7 3.3 3.4 2.8
Senegal 205.2 236.1 265.9 337.4 447.2 611.8 4.0 4.0 3.9 3.6 3.5 3.0
Sierra Leone 86.6 104.4 112.8 141.2 160.9 189.0 3.8 3.7 3.5 3.5 3.3 2.8
Solomon Islands 8.7 9.3 10.0 13.0 15.4 17.7 3.8 3.5 3.4 3.5 3.3 2.7
Somalia 134.4 156.0 182.4 260.2 343.0 540.9 3.6 3.7 3.8 4.0 3.8 3.4
South Sudan 124.8 155.0 200.3 281.9 342.2 454.5 3.6 3.7 3.7 3.6 3.4 2.9
Sudan 557.5 619.8 699.3 898.7 1’072.8 1’389.4 3.8 3.7 3.6 3.5 3.2 2.8
Timor-Leste 14.4 19.9 23.0 30.5 33.5 43.6 3.5 4.1 4.3 4.6 4.0 3.3
Togo 101.9 116.8 129.2 157.8 201.8 263.1 4.0 3.9 3.7 3.4 3.4 2.9
Tuvalu
Uganda 476.5 570.9 683.4 968.5 1’325.0 2’062.3 4.1 4.1 4.1 4.0 3.9 3.3
United Republic of Tanzania 690.9 787.7 888.2 1’176.1 1’626.9 2’485.7 3.9 3.9 3.8 3.7 3.7 3.2
Vanuatu 3.7 4.3 4.5 5.6 6.6 7.6 3.6 3.6 3.3 3.1 3.0 2.5
Yemen 355.6 444.6 526.3 608.0 662.1 707.8 4.2 4.3 4.2 3.6 3.0 2.4
Zambia 211.9 231.5 260.2 365.2 495.9 857.8 4.1 4.0 3.9 3.9 3.7 3.4
LDCs 13’270.7 15’046.1 16’739.6 20’889.7 24’672.6 31’933.1 3.7 3.7 3.6 3.4 3.2 2.8
African LDCs and Haiti 7’744.9 8’985.0 10’382.4 13’956.7 17’788.1 25’476.9 3.8 3.8 3.7 3.7 3.5 3.0
Asian LDCs 5’355.1 5’851.8 6’097.5 6’574.7 6’453.3 5’891.6 3.6 3.4 3.3 2.9 2.5 2.0
Island LDCs 45.9 54.4 59.4 76.4 89.1 110.1 3.7 3.8 3.7 3.7 3.5 3.0
ODCs 77’011.0 84’951.2 87’320.9 81’604.8 86’142.3 83’032.1 2.9 2.9 2.8 2.3 2.3 2.1
All developing economies 90’281.7 99’997.3 104’060.5 102’494.5 110’814.9 114’965.2 3.0 3.0 2.9 2.5 2.4 2.2
Source: United Nations, DESA, Population Division (2013). World Population Prospects: The 2012 Revision, DVD Edition.
Note: Data reflects the cohort of new workers (aged 15-24 years) entering to the labour market or reaching the age of findings an income


generating activity, which following NEPAD (2013) was 1/10 of the 15/24 year age group.




183ANNEX. Statistical Tables on the Least Developed Countries


Annex table 14. Total employment trends in LDCs
(Thousands)


2000 2005 2010 2015 2018


annual
average


growth rate
2000-2018


(%)
Afghanistan 5’532 6’416 7’565 9’453 10’633 3.6
Angola 4’810 5’606 6’577 7’905 8’881 3.5
Bangladesh 55’398 62’408 69’000 77’269 82’046 2.2
Benin 2’539 3’012 3’578 4’188 4’593 3.4
Bhutan 225 301 352 407 433 3.5
Burkina Faso 5’334 6’257 7’298 8’547 9’375 3.2
Burundi 2’689 3’244 3’988 4’496 4’777 3.4
Cambodia 5’629 6’772 7’839 8’648 9’099 2.7
Central African Republic 1’553 1’702 1’910 2’160 2’321 2.3
Chad 2’974 3’538 4’091 4’746 5’172 3.1
Comoros 166 195 226 260 284 3.0
Dem. Rep. of the Congo 17’192 19’961 23’447 27’752 30’603 3.3
Djibouti .. .. .. .. .. ..
Equatorial Guinea 242 290 341 387 412 3.1
Eritrea 1’521 2’005 2’395 2’801 3’057 3.8
Ethiopia 26’685 33’013 38’583 45’024 49’131 3.4
Gambia 501 590 694 816 898 3.3
Guinea 3’192 3’505 3’964 4’610 5’052 2.6
Guinea-Bissau 462 526 601 684 737 2.6
Haiti 3’001 3’418 3’813 4’336 4’625 2.5
Kiribati .. .. .. .. .. ..
Lao People's Dem. Rep. 2’413 2’728 3’125 3’518 3’738 2.5
Lesotho 531 541 680 703 729 2.0
Liberia 918 1’046 1’324 1’549 1’702 3.7
Madagascar 7’111 8’362 9’780 11’566 12’747 3.4
Malawi 4’453 5’268 6’202 7’267 7’992 3.3
Mali 2’805 3’302 3’950 4’680 5’183 3.5
Mauritania 517 634 768 899 981 3.6
Mozambique 8’059 9’140 10’250 11’582 12’523 2.4
Myanmar 23’057 24’862 26’750 28’599 29’512 1.4
Nepal 12’014 13’655 15’609 17’909 19’320 2.7
Niger 3’348 4’057 4’841 5’840 6’538 3.8
Rwanda 3’777 4’469 5’197 6’001 6’499 3.0
Samoa .. .. .. .. .. ..
Sao Tome and Principe .. .. .. .. .. ..
Senegal 3’551 4’153 4’847 5’657 6’202 3.1
Sierra Leone 1’509 1’909 2’186 2’493 2’689 3.2
Solomon Islands 149 177 206 241 263 3.2
Somalia 2’173 2’445 2’711 3’089 3’363 2.4
Sudan 9’631 11’121 13’045 15’157 16’599 3.1
Timor-Leste 221 286 310 379 422 3.4
Togo 1’985 2’344 2’717 3’127 3’385 3.0
Tuvalu .. .. .. .. .. ..
Uganda 9’813 11’218 12’857 15’260 16’881 3.0
United Republic of Tanzania 15’858 18’573 21’197 24’498 26’805 2.9
Vanuatu .. .. .. .. .. ..
Yemen 3’615 4’389 5’526 6’722 7’606 4.2
Zambia 3’898 4’163 4’844 5’515 5’988 2.6
LDCs 261’050 301’605 345’183 396’741 429’796 2.8
African LDCs and Haiti 152’632 179’416 208’674 243’335 266’441 3.1
Asian LDCs 107’882 121’531 135’766 152’526 162’386 2.3
Island LDCs 537 658 743 880 970 3.2
ODCs 1’777’409 1’959’142 2’090’454 2’236’656 2’310’419 1.4
All developing economies 2’038’460 2’260’747 2’435’637 2’633’397 2’740’215 1.6
Source: UNCTAD secretariat calculation based on data from ILO, Employment trends (EMP/TRENS) econometric models, April 2013.




184 The Least Developed Countries Report 2013


Annex table 15. Countries and data sources for LDC sub-sample RNF income analysis


Country Name of survey
Year of


collection
Number of observations


Total Rural Urban
Bangladesh household Income-Expenditure Survey 2000 7,440 5,040 2,400
Madagascar Enquête Permanente Auprès des Ménages 1993–1994 4,505 2,653 1,852
Malawi Integrated Household Survey-2 2004–2005 11,280 9,840 1,440
Nepal Living Standards Survey I 1995–1996 3,370 2,655 715
Source: Davis et al. (2010).








The LDCs face a stark demographic challenge as their population, about 60 per cent of which is
currently under 25 years of age, is projected to double to 1.7 billion by 2050. The LDC youth population
(aged 15 to 24 years) is expected to soar from 168 million in 2010 to 300 million by 2050, an increase
of 131.7 million. By 2050, one in four youths worldwide will live in an LDC.


As to the LDC working-age population, it will increase on average by 15.7 million people each year.
Given the clear demographic challenges, then, the LDCs will need to make significant efforts to generate
a sufficient quantity of jobs and offer decent employment opportunities to their young population. If this
is not achieved, the likelihood is that poverty and international emigration rates will rise.


Against this background, this Report examines the link between investment, growth and employment.
More specifically, it considers how LDCs can promote growth that generates an adequate number of
quality jobs and that enables them to reach what UNCTAD believes are their most urgent and pivotal
goals, both now and in the post-2015 development agenda: poverty reduction, inclusive growth and
sustainable development.


The main messages of the Report are:
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It has not generated enough “quality” jobs – that is, jobs offering higher wages and better working
conditions – especially for the young.
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of poverty.
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creation without the development of productive capacities is equally unsustainable.
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productive capacities.
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investment-growth-employment nexus. The critical entry point for creating such nexus is investment.
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to medium term the investment push required to kick-start the growth process will originate in the
public sector.
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infrastructure in most LDCs is a serious bottleneck to enterprise development and productive
capacity-building.
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sizes, in view of their potential role in contributing to growth, creating productive capacities and
generating jobs for both unskilled and skilled workers.
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framework recommends a three-pronged approach to employment creation that focuses on the
generation of foreign exchange through investment in both capital- and labour-intensive tradable
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productivity improvement in agriculture in general and subsistence agriculture in particular.


FRONT COVER
The front pictures show fishermen selling their produce and people in search of jobs. Self-
employment, underemployment and unemployment are pervasive in LDCs. Given the rapid
growth of these countries’ population, the number of people (especially young) looking for
jobs will rise rapidly. If LDCs fail to create decent jobs in sufficient quantities, the risk of
social unrest and the pressure for emigration will increase.


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13-51596
ISBN 978-92-1-112864-2




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