Global Policymakers Should Rethink Economic Classification of Countries to Reflect Their Actual Challenges, Keynote Speaker Tells Second Committee

15 October 2010

Global Policymakers Should Rethink Economic Classification of Countries to Reflect Their Actual Challenges, Keynote Speaker Tells Second Committee

15 October 2010
General Assembly
Department of Public Information • News and Media Division • New York

Sixty-fifth General Assembly

Second Committee

Panel Discussion (AM)

Global Policymakers Should Rethink Economic Classification of Countries to Reflect

Their Actual Challenges, Keynote Speaker Tells Second Committee


Panellists Discuss Need to Ensure Smooth Transition

From Least-Developed Status, Eliminate Some Economic Categories

After the 2015 target year for realizing the Millennium Development Goals, global policymakers should consider replacing the current economic categories of countries by classifying them in a manner more appropriately reflecting their socio-economic situations and challenges, the Minister for Foreign Affairs of Bangladesh told the Second Committee (Economic and Financial) today.

In a keynote address during the Committee’s panel discussion on the subject “Fourth United Nations Conference on the Least Developed Countries:  Enhanced international support and smooth transition of LDCs towards graduation,” Minister Abul Maal Abdul Muhith suggested eliminating the “least-developed-countries” category established by the Bretton Woods Institutions and creating a “vulnerable and fragile countries” classification that would apply to all struggling nations.  A “climatically disadvantaged” category would represent all States grappling with the environmental, economic or social pitfalls of climate change.

He said doing so would expand the focus from countries traditionally considered vulnerable to climate change, such as small island developing States, to include other developing countries like Bangladesh, which could lose 20 per cent of its land surface by 2014 due to the effects of climate change.  New classifications would enable policymakers to plan differently for vital aspects of national economic well-being, such as health care, housing and education.

Moreover, it was “high time” the international community made good on its numerous trade, development and aid commitments to improve the lot of the 49 United Nations-identified low-income countries, Mr. Muhith continued, pointing out that too few least developed countries had graduated from that category since its creation in 1971.  “Once the agreed programmes will be delivered, graduation will be a self-promoted process,” he said.  “No one wants to be branded as poor, and no one is poor or rich by his or her own act.  Together we have to share the burden and opportunity, for we are responsible for weal and woe of our world.”

Least developed countries accounted for 12 per cent of the world population, but only 1 per cent of global wealth and trade, he said, adding that alarmingly high proportions of their populations lived in extreme poverty.  The recent multiple global crises had undermined their development, leaving them in no position to sustain further drops in exports, investment and access to capital.  To make them independent of growth-inducing measures - such as International Monetary Fund (IMF) special drawing rights, official development assistance (ODA) and grants - they must be able to participate successfully in global trade and development, he stressed.

It was also crucial to conclude the long-stalled Doha Round of World Trade Organization negotiations, remove all agricultural subsidies and give duty- and quota—free market access to exports from all least developed countries, he said.  During the Fourth Conference on the Least Developed Countries, to take place in Istanbul next May, the international community must take stock of progress in implementing the Brussels Programme of Action for the Decade 2001-2010, and adopt a comprehensive, results-oriented action programme for the next one, he said.

Echoing the Minister’s concerns, the panel’s moderator, Cheick Sidi Diarra, Special Adviser on Africa and High Representative for the Least Developed Countries, Landlocked Developed Countries and Small Island Developing States, said nearly half the population of least developed countries — about 800 million people — lived in extreme poverty.  They were at the “epicentre of today’s development emergency” and deserved additional support and action, he said, adding that the Istanbul Conference would be a major opportunity to deepen the global partnership in support of least developed countries, and to expedite their graduation.

Similarly, Pierre Encontre, Chief of Special Programmes in the Division for Africa, Least Developed Countries and Special Programmes of the United Nations Conference on Trade and Development (UNCTAD), warned of the pitfalls of pushing those nations through the graduation process too fast.  Their trade preferences, technical aid, development-financing, such as concessionary loans and grants, as well as United Nations budget support should be phased out gradually to give them time to adjust, he said, adding that graduating countries also merited a smooth transition into the World Trade Organization (WTO).

Mr. Encontre hailed the July 2008 European Union’s decision to extend duty- and quota-free market access for all products made in least developed countries, except weapons, for at least three years after their graduation, as well as the decision by the Enhanced Integrated Framework Trust Fund (EIF) to continue providing technical assistance for three years after their graduation.  The focus now was on how such measures would assist Cape Verde and Maldives – the two countries set to emerge from the least-developed category by the end of the Brussels Programme next year, he said.

Patrick Guillaumont, President of the Fondation pour les Etudes et Recherches sur le Développement International (FERDI) and Professor Emeritus at the Université d’Auvergne in France, noted that the least developed category had originally been intended to enable those countries to move out of the “trap” caused by low per-capita income, low human capital and high structural vulnerability to exogenous shocks.  Ironically, their number had nearly doubled between 1971 and 49.

Under the current graduation rules, 23 countries were “caught in the middle” and unable to meet the criteria for either inclusion or graduation, he said.  Moreover, some small island developing States were hesitant to graduate for fear of losing the category’s advantages and being subjected to future high levels of economic and climate-related vulnerability.  In the last decade, the Committee for Development Policy(CDP) had begun to address the vulnerability issue by refining the Economic Vulnerability Index and considering vulnerability profiles prepared by UNCTAD.  However, more needed to be done, he said, proposing the use of identification criteria for allocating aid in order to smooth the transition and distribute financial resources more fairly.  The criteria would also take into account the vulnerabilities of small island developing States, including after graduation.

Ahmed Naseem, Minister of State for Foreign Affairs of the Maldives, shared key aspects of his country’s experience as a graduating small island developing State and least developed country, saying the current graduation criteria and institutional architecture were inadequate in dealing with the vulnerabilities of small islands.  On the basis of the Maldives’ experience, the Governments of countries in the earlier stages of transition from subsistence to market economy had a chance to start from a “cleaner slate” and nurture a culture of good governance, if the political will existed.

He described his country as a vivid example of the “island paradox”, whereby islands enjoyed relative prosperity owing to domestically-generated income, but remained vulnerable to external shocks and high structural costs due to their geography.  They were among the least prepared to graduate from least-developed status in the absence of smooth transition measures, he said, recalling that in 2002, the CDP – a subsidiary advisory body of the Economic and Social Council - had noted the need for a more sophisticated notion of “net national product”, whereby the amortization of natural or productive capital would be considered.

The impact of environmental degradation on assessments of national income was particularly relevant to small island developing States, he said, because their key productive capacities were inextricably linked to the natural environment and the durability of fragile ecosystems.  The fact that the Maldives had not once met the economic vulnerability criteria was proof that a country could be deemed eligible for graduation without being considered economically sound.  High per-capita income in such countries often masked their high economic vulnerability and structural handicaps, he noted, emphasizing that the international community must consider the current limitations of differential treatment and give them the full support they needed to cope with special challenges.

The review by the CDP of the United Nations system’s support for those States had shown that the Organization’s involvement was too fragmented, incomplete and insufficiently results-oriented, he said.  It was therefore crucial to review the shortcomings in institutional support, as well as other constraints in order fully to implement the Mauritius Strategy for the Further Implementation of the Programme of Action for the Sustainable Development of Small Island Developing States and the Bali Plan of Action.

Peter Thompson, Director for Development and Economic Partnership Agreements at the European Commission’s Directorate-General for Trade, said the European Union had fulfilled its promise to grant full, duty- and quota-free market access to all imports from all least developed countries.  New rules of origin, which could be officially applied as of 1 January 2011, would give beneficiary countries of the Generalized System of Preferences (GSP) better access to preferential treatment within the European Union.

He stressed that ODA must be linked with other sources of financing, in line with the Monterrey Consensus and the Doha Declaration.  “Only this holistic approach provides a realistic basis for assessing resources needed for development,” he said.  The European Union had raised substantially its aid to least developed countries from €7.5 billion in 2000 to €13.5 billion in 2009, he said, cautioning, however, that the increase was not sufficient on its own to help those in need achieve the Millennium Development Goals.  He urged other donors, as well as emerging Powers, to contribute their fair share of aid.

Mr. Thompson highlighted other European Union aid programmes, such as Air for Trade and the EIF, a global partnership involving least developed countries, donors and international organizations, which helped those nations become more active in the global trading system by tackling the obstacles they faced and promoting economic growth, sustainable development and poverty reduction.  He hailed the role of the G-20 in implementing the global development agenda and underscored the importance of its Framework for Growth Initiative for developing countries.

During the ensuing discussion, several representatives said least developed countries really did need duty- and quota-free market access as well as ODA to shore up their economies.  One delegate pointed out that investment in least developed countries had fallen by 12 per cent in 2009 while trade had declined by 14 per cent.  The gross economic marginalization of least developed countries, their extreme level of vulnerability and structural weakness must be factored into discussions about helping them.

Delegates said the upcoming Istanbul Conference should consider special measures to reduce the debilitating effects of the global crises on least developed countries, as well as strong monitoring and follow-up.  One representative said the next action programme should focus on agricultural development, particularly for small farmers.  Another asked the panellists to elaborate on their goals for the conference.

Responding to those interventions, Mr. Thompson said the European Union had already provided market access and rules-of-origin benefits to least developed countries, adding that, in Istanbul, it would push others, like the United States, to follow suit.  The Conference should also discuss alternative financing since even a doubling of ODA would not adequately fuel productive capacity and fix the supply-side constraints afflicting least developed countries.

Mr. Nassem said small island developing States and least developed countries could not afford to be “cry babies” or to depend excessively on expert advice, which often worked to their disadvantage.  He pledged to share his country’s experience with others trying to graduate from least-developed status.

Mr. Guillaumont said preferential measures for small island developing States graduating from least-developed status must be maintained, adding that the Istanbul Conference should consider that in addition to defining and bolstering other measures to ensure a smooth transition for graduating countries and prevent least them from remaining in the trap.  The CDP could examine the list of least developed countries every three years and review the criteria for inclusion and graduation, he suggested, emphasizing the importance of protecting the credibility of those criteria.

Mr. Encontre said last month’s five-year review of the Mauritius Strategy would have been the best place to discuss smooth transition upon graduation, pointing out the continuing absence of an integrated framework for technical aid-for-trade initiatives targeting small island developing States.  It was important not to lose sight of the island paradox, he stressed, adding that the Istanbul Conference should focus on devising appropriate targeted responses.

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For information media • not an official record
For information media. Not an official record.