An open garbage dump along a street in central Monrovia. Liberia is one of the 48 least developed countries. | EPA/Ahmed Jallanz
The United Nations Conference on Trade and Development (UNCTAD) released a report Thursday calling for co-operation between developing countries and the least developed countries in the Southern hemisphere.
UNCTAD’s report suggests that developing economies, such as China, India and Brazil, invest 1% of their sovereign wealth funds in least-developed countries to provide a source of financing for local projects. The report estimates that developing economies hold $3.5 trillion of the $4.3tr in available foreign reserves.
The least developed countries (LCDs) account for 12% of the world’s population, but produce less than 1 % of its GDP. Only two countries (Cape Verde and the Maldives) graduated from LCD status in the last decade. This leaves 48 nations with LCD status as determined by low-income, human assets weakness and economic vulnerability criteria. Nearly all are located in or around the southern hemisphere.
The so-called South-South Partnership, according to UNCTAD, would allow LCDs to access financing for their economies, increase their exports and fund development aid. The partnership would allow developing economies to engage in state building and form strategic relationships with these fledgling economies.
“Guided by the spirit of solidarity with least developed countries, developing countries will provide support for the effective implantation of the programme of action in mutually agreed areas of cooperation,” the report states.
UNCTAD’s report stresses an already increasing cooperation between Southern developing economies and LCDs. China and India have become the first and fourth, respectively, largest export markets for LDCs.
While the report stresses South-South co-operation, it still calls for a North-South relationship where developed economies, such as the United States and the EU, provide aid and financing to LCDs. UNCTAD, however, stresses the current economic and financial conditions of the more developed economies as a hindrance to more aid and investment.
“South-South financial co-operation should be viewed as a complement, rather than as a substitute for, traditional, North-South co-operation,” writes UNCTAD Secretary-General Dr. Supachai Panitchpakdi.
LCDs currently only receive 2.5% of the world’s foreign direct investment (FDI) funds. Their projected growth rate is 5.8% over the next decade, representing a decrease of 1.5% during the boom period of 2002-2008. LCD exports are also at a lower level than they were in 2008. UNCTAD says that these declining growth numbers mean the time is right for an enhanced South-South partnership, beyond the one developed during the last decade.
The report also warns how this model could lead the LDC economies to a dependence on commodities, which would lead to a locked international division labour. Already, 60% of the exports from LCDs to developing countries consist of fuels. This situation could make the LCD economies one-dimensional and totally dependent upon the sale of non-renewable commodities.
UNCTAD acknowledges this danger, but still maintains that if LCDs have greater access to funding through developing countries and potentially sovereign wealth funds, then they will see beneficial economic growth.
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