21 July 2014 – Half of all ODA should go to the least developed countries

Today’s post is from Gyan Chandra Acharya, United Nations Under-Secretary-General and High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States. This is one in a series of ‘In my view’ pieces written by prominent authors on issues covered in the Development Co-operation Report 2014: Mobilising resources for sustainable development.

The UN classifies as “least developed countries” those nations that are the bottom of the development ladder from all perspectives. The category was created in recognition of the deep-seated structural constraints these countries face, resulting in low per-capita income, weak human capital and high economic vulnerability. Without help, they are unable to adequately address their development challenges, irrespective of the efforts they may make. Moreover, they are the most exposed to economic shocks and degradation of natural capital, including through climate change. Their need for enhanced and targeted support from the international community is obvious.

Of the 48 least-developed countries, 34 are in Africa, 13 in the Asia-Pacific region, and one, Haiti, in Latin America and the Caribbean. Together they are home to about 900 million people, with a relatively high share of young people among their populations. Over the past decade, the least developed countries have made progress in many of the areas targeted by the Millennium Development Goals (MDGs): they have reduced child and maternal mortality, increased enrolment in primary education, and improved gender equality and women’s empowerment. Yet they still have a very long way to go, and around 50% of their population remain poor.

These countries hold great potential and are rich in human and natural resources – two inseparable characteristics for their people, who live close to nature. A holistic focus on improving health and education, building productive capacity and protecting natural capital would greatly contribute to transforming their economies, enabling them to leapfrog to green economies with relatively few trade-offs.

The least developed countries are and will continue to be — at least in the short and medium term — among the countries most dependant on ODA. This source of development finance constitutes more than 50% of their inflows and public finances and except in the mineral-rich countries, foreign direct investment in these countries is minimal. While they have been gradually widening their domestic resource base through tax reforms, on average across the least developed countries the ratio of government revenues to GDP stands at about 13% and gross domestic savings reach only 15% of GDP. Yet the investment required for poverty eradication and sustainable development is at least 25-30% of GDP over a long period of time.

In my view — which is also shared by the least developed countries — much of this shortfall must be filled by ODA. From both a moral standpoint, and in the interest of the long-term wellbeing of the global community, those that are in danger of slipping should be given foremost priority. It is urgent that the level, quality and focus of ODA to the least developed countries be scaled up and consolidated. Channelling 50% of total ODA to the least developed countries will be an important step in that direction. At the same time, ODA can have a strong leveraging impact on other sources of development finance (Chapter 11).

In this day and age it is unacceptable that so many remain below the poverty line in the least developed countries. We have the means to help them. We need to summon the necessary collective will to do so. The alternative is continued deprivation for a large number of people, which also represents a threat to global peace, security and environmental sustainability.

Source: OECD