Ladies and gentlemen,
The new wave of globalization driven by technological progress and innovation has offered opportunities for few and posed challenges to many. Instead of integration it has sharpened the inherent conflict underpinning global trade and development and deepened the disparities between and within the countries.
Conventional economic wisdom teaches that economic growth can reduce poverty and increase incomes. Between 2000 and 2005, least developed countries (LDCs), as a whole, grew at an impressive average annual rate of 6 per cent. Buoyant growth of LDCs has been largely underpinned by high commodity prices, improved government policies and better international environment for development: increased net flows of Official Development Assistance (ODA), increased Foreign Direct Investments (FDI) and significant debt relief under the Heavily Indebted Poor Country (HIPC) Initiative and the Multilateral Debt Relief Initiative (MDRI). Notwithstanding these positive trends, per capita income grew slowly and poverty has been even increasing in some LDCs.
Similarly, trade liberalization should lead to the expansion of exports and stimulate growth. However, in case of LDCs, trade liberalization without structural transformation and technological progress led to their further marginalization and loss of their market share. The LDCs merchandise exports in world trade fell from 2.5 per cent in 1960 to about 0.5 per cent in 1995, bouncing back to 0.9 per cent in 2006.
Furthermore, export structure of LDCs has been dominated by oil, minerals and fuels which account for 50 per cent of their total exports. Commodities make up to 86 per cent of total exports of African LDCs, while 45 per cent of exports of Asian LDCs are in textile and clothing. Services account for a significant share of exports of small island LDCs but only for 12 per cent of total exports of goods and services of all LDCs. Dependence ratio on three main products, which vary for each individual country, remains high (80 per cent) and only four LDCs had dependence ratio below 50 per cent which suggests some diversification of their export structure.
Percentage of products from LDCs admitted duty free to the developed countries markets has not almost changed since 1996. Excluding arms and oil, it was 79 per cent in 2006. Significant efforts need to be made to achieve the 97 per cent duty free market access agreed at the WTO Ministerial Meeting in Hong Kong, considering it took 10 years to improve market access by 1 per cent,.
The average rate of utilization of different trade preferential schemes is 70 per cent reflecting both difficulties faced by LDCs in meeting the stringent rules of origin of the developed countries and the supply-side constraints of LDCs which reduce their competitiveness and limit their trade potential. Competitiveness of LDCs has been further weakened by preference erosion under the Most Favored Nation (MFN) trade liberalization.
Foreign direct investments (FDI) to LDCs have tripled since 2000 and reached US$ 22.4 billion in 2006. However, inward flows of FDI are highly concentrated in extractive industries in a few natural resource-rich LDCs and represent only a fraction (0.7 per cent) of global FDI.
Workers remittances to LDCs have more than doubled since 2000 and reached US$ 13.2 billion in 2006. However, these financial gains have been leveled off by loss of human capital. ”Brain drain” or emigration rate of skilled persons with tertiary education has been particularly high in Haiti (82 per cent), Cape Verde (69 per cent), Samoa (67 per cent), the Gambia ( 64 per cent), Somalia, Eritrea (46 per cent), Mozambique (42 per cent), Sierra Leone (41 per cent), Liberia (37 per cent) and Madagascar (36 per cent). Worse, many skilled emigrants from LDCs have ended up in less skilled jobs in countries of destination which led to “brain waste”.
Noteworthy, half of trade and FDI, as well as 65 % of remittances to LDCs were “South-South”, reflecting a new geography of current globalization caused by the emergence of developing countries as the attractive destinations for foreign investments and trade.
Official Development Assistance (ODA) remains the largest source of external financial flows to LDCs due to their limited ability to mobilize sufficient domestic resources and attract meaningful FDI due to high investment risks and high operational costs associated with LDCs. However, as per cent of donors’ GNI, ODA to LDCs was only 0.09 per cent in 2006, the same level as in 1990.
Increased integration of LDCs in the world economy requires active domestic industrial policies which support capital accumulation, structural transformation, technological progress, building productive capacities, employment creation, development of entrepreneurial capabilities and upgrade of physical infrastructure. It also requires creating an enabling global environment as well as coherence of policies at all levels.
UNCTAD is uniquely placed to assist the LDCs in many of these areas through its research and analysis, support to inter-governmental process and technical assistance. However, the emergence of new challenges associated with globalization requires significant enhancement of UNCTAD, as a UN focal point for integrated treatment of trade and development and related issues. Furthermore, it needs greater involvement of UNCTAD in the system-wide coherence process and its enhanced support to the MDGs. I am confident that this Conference will be able to take the rights decisions, to enable UNCTAD to rise to new challenges.