Poorer nations will feel the full brunt of COVID‑19 as the crisis continues, suffering from rising hunger, poverty and heightened inequities, a United Nations official said today at a joint meeting of the Second Committee (Economic and Financial) and the Economic and Social Council on productive capacities and the post-pandemic world.
Most least developed, landlocked developing, small island developing and middle-income developing nations will take several years to return to 2019 levels of gross domestic product (GDP) per capita, added Collen Kelapile, President of the Economic and Social Council. With limited productive capacities, these nations are limited in stimulating economic growth, diversifying economies, boosting resilience and integrating into the global community.
Expanding productive capacities will enhance efforts to reach development goals, foster growth, create employment and develop infrastructure, he said. Well-directed attempts to spur production will heighten developing country capacity to produce vaccines, combat poverty and address climate change, but will require structural economic transformation and risk-informed investments, he said.
Similarly, Rebeca Grynspan, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), said many developing countries will need several years to recover the GDP per capita they had in 2019, and many face the risk of another lost decade. If the international community fails to close this gap, she warned, the post-pandemic world will be even more fragile and unilateral.
Courtenay Rattray, High Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, said the COVID‑19 pandemic has set back production capacity in his group, while nations that previously invested heavily have seen economic gains. Most countries with low productive capacities are relegated to supplying unprocessed commodities, he said, with landlocked and small island nations further hampered by remoteness, small economies or narrow resources bases.
Highlighting the need to open access to development financing, Abdulla Shahid (Maldives), President of the General Assembly, urged the Committee to develop strategies for assisting disadvantaged economies to recover sustainably. Also noting that COVID‑19 was the first major stress test for the reformed United Nations development system, he said the Committee should review and spotlight its effectiveness. “We have the capacities and knowledge, we have the blueprints,” he said, calling on the Committee to consider how to use these in delivering concrete outcomes.
During the ensuing discussion, speakers stressed the importance of resilient recovery from the pandemic, focusing on the role that building productive capacities can play, along with long-term resilience to shocks. Bangladesh’s delegate, highlighting challenges faced by least developed countries, emphasized the need to enhance productive capacity in agriculture and shift from low-value to higher-value added areas.
The representative of Guatemala, speaking for the Like-Minded Group of Countries Supporters of Middle-Income Countries, lamented that his bloc included 75 per cent of the world’s population, but represented only one third of global GDP. Middle-income countries face diverse challenges in achieving sustainable development, he said, including shortfalls in digital infrastructure, food and essential medicines.
Delegates also focused on the need to implement development accords aimed at assisting poorer nations, continuing efforts to develop productive capacities, infrastructure, diversification, growth of exports and access to innovations. Noting the equally important role of regionalization, the Russian Federation’s representative said regional integration contributes to investments, the modernization of production and technology infrastructure, and the creation of a sustainable infrastructure.
Developed countries underscored their contributions to post-pandemic development efforts, with the representative of the European Union noting that her bloc is investing heavily in digital infrastructure and continuing to work on liberalizing trade in environmental goods and services. The representative of the United States said his country is providing $11 billion to less developed nations annually, will support infrastructure for basic public services and will double its climate finance commitments.
An additional presentation was made by Liu Zhenmin, Under-Secretary-General for Economic and Social Affairs.
Also speaking today were the representatives of Paraguay, Trinidad and Tobago, Ethiopia, Malawi, Kazakhstan, Canada (also for Australia and New Zealand), Malta, Ghana (for the African Group), Fiji (for the Pacific Islands Forum), Morocco, United Kingdom, Pakistan, Gambia, Philippines, China, Mexico, Nigeria, Lao People’s Democratic Republic, Senegal, Dominican Republic, Indonesia, Kenya, Bolivia, Somalia and Cameroon. A representative of the International Telecommunication Union (ITU) also made a statement.
VANESSA FRAZIER (Malta), Chair of the Second Committee (Economic and Financial), said social and economic transformative measures are necessary to embark on a resilient and inclusive recovery from the COVID‑19 pandemic. Before the pandemic hit, least developed countries were seeking to boost productive capacities, but now are in danger of falling further behind in efforts to build solid economies. More than ever, the international community must support them in building productive capacities, including infrastructure and a green energy sector. These nations need access to technology, international support and strengthened private sector engagement.
Landlocked developing countries are also now facing new and unanticipated challenges, she said. Due to geography and dependency, they face bottlenecks that can have disproportionately damaging effects on their economies. This will endanger their economic and social recoveries in the short and medium term, she emphasized, while rising prices of fuel and other basic commodities will add inflationary pressure, and such countries will run the risk of falling further behind.
The economies of small island developing States have suffered dramatically from the impact of the pandemic, she noted. In 2020, their gross domestic product (GDP) dropped by 4.7 per cent, compared to just 3 per cent for the entire world. The collapse of tourism drained their resources at a time when they needed them the most and lacked access to concessional resources. While they combat the effects of climate change daily, it is disheartening to see that greenhouse gas emissions seem to have taken just a short pause from their devastating rise.
Meanwhile, the high debt burden in middle-income countries undermines the ability of many to step up investments in their people, economies and infrastructure as part of recovery packages, she continued. Resources to build back better from the crisis are lacking, and they are caught even deeper in a trap constraining their abilities to develop further. In some cases, policy interventions to address high-income inequality had been paused to address COVID‑19 measures.
COLLEN V. KELAPILE, President of the Economic and Social Council, said least developed countries as well as landlocked, small island and middle-income developing nations will feel the full brunt and devastating impact of COVID‑19 as the pandemic continues. They will suffer rising hunger, poverty and significant exacerbation of pre-existing inequalities, and it will likely take several years for most to return to 2019 levels of GDP per capita. These nations have limited productive capacities, he said, which constrain their ability to sustain economic growth, diversify their economies, boost resilience to shocks, achieve effective integration into the global economy and ensure the well-being of their people.
Expanding productive capacities in such countries will help boost achievement of the Sustainable Development Goals, growth, employment and infrastructure development, he said. Well-directed efforts will also maximize impacts on combating poverty, inequality and hunger as well as health at a time when developing countries need the capacity to produce vaccines. Actions to build productive capacities must thus consider all development goals and help address climate change, pollution and biodiversity crises. This will require an integrated approach at the national and international levels, structural economic transformation and adequate financial resources as well as directed and risk-informed investments.
REBECA GRYNSPAN, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), said the joint meeting is an important opportunity to share wisdom, coordinate action and learn and work with each other. Noting differences in recovery levels between developed and developing countries, she said asymmetries are evident in almost every area, including vaccinations, fiscal packages, spending patterns, long-term investment commitments, poverty rates, and debt vulnerabilities. Many developing countries will take several years to recover the GDP per capita they had in 2019, and many face the risk of another lost decade. In social indicators, it will take much longer to recover. If the international community does not close this gap, the post-pandemic world will be even more fragile and less multilateral, she warned.
While countries have repeated in various forums that gaps should be closed, she stressed that there is no consensus on how to close those divides. In that regard, she said UNCTAD has put strengthening productive capacities at the centre of development as productive capacities harbour some of the largest collections of development gaps between developed economies and the economies of least developed, landlocked developing, small island developing and middle-income countries. Noting that having a low productive capacity index is a strong predictor of least developed status, she stressed that strengthening productive capacities is critical to a global recovery that closes gaps instead of opening them.
COURTENAY RATTRAY, High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, said productive capacities constitute the sum of national resources and synergies determining the degree to which nations can produce goods and services. According to the International Monetary Fund (IMF), the pandemic has resulted in a setback in production capacity for developing countries, while those States that have previously invested heavily in this sector have seen economic gains. Most developing countries with low productive capacities are relegated to be suppliers of unprocessed commodities. Landlocked and small island developing countries are further incapacitated by their remoteness, with small islands additionally disadvantaged due to their small economies and narrow resources base.
Long-term development requires human capital achieved through education, training and lifelong development of skills, he said. Stressing that developing States must transition towards the digital world in the coming years, he added that this will reduce geographic disadvantages. It is crucial that these nations tap other forms of investment, including public‑private infrastructure and green projects as well as transition from low- to high-value added production, especially for landlocked and small island developing States. Noting that foreign direct investment (FDI) is largely concentrated on natural resource processing, he stressed the need to promote investment in structural change. The international community must provide increased resources and project-related financing, he said, which will be critical in the aftermath of the pandemic.
Panel I: Priorities for Action Post-COVID‑19
RAÚL CANO RICCIARDI, Vice Minister for Economic Relations and Integration of Paraguay, said that despite his country’s efforts to strengthen its productive capacity, it faces many challenges. In addition to the pandemic and its impacts, Paraguay’s condition as a landlocked country and the size of its internal market compel it to make additional and differentiated efforts to stimulate its development, including tax reductions to attract foreign investment and capital, with a view to generating jobs. That, in turn, he said, can affect the State’s income and limit the capacity to change public policies, which are necessary for inclusive development, creating a “bottleneck” in financing for development. Noting the worsening impacts of climate change, he suggested three areas that should be prioritized for productive capacity development in landlocked developing countries. First, specific technical support to enhance domestic manufacturing industries and increase the value added to domestic raw materials and inputs. Second, comprehensive assistance for development of both physical and digital infrastructure development. Third, making human capital development the top priority for building productive capacity in landlocked developing countries. Noting that human capital development regressed significantly in landlocked developing countries in 2020 and 2021, he said that only with a holistic and long-term strategy can those countries unleash their productive potential.
PAULA GOPEE-SCOON, Minister for Trade and Industry of Trinidad and Tobago, said building domestic productive capacities is pivotal to the development process of small island developing States. To this end, the Government of Trinidad and Tobago is implementing several capacity-building initiatives aimed at building the competitiveness of businesses with heightened focus on small and medium-sized enterprises. Additionally, work is being done to build the capacity of the national workforce through apprenticeship and vocational programmes. The Government is also developing a sound and robust national quality infrastructure that will bolster competitiveness and encourage a quality culture among businesses and citizens. The pandemic has reinforced the importance of digital technology as the widening digital divide and the uneven speed of digital transformation experienced by developing countries has limited effective participation in the global economy.
Address by General Assembly President
ABDULLA SHAHID (Maldives), President of the General Assembly, noting the overarching role of the Second Committee in the organ, commended the choice of the current theme: “Crisis, Resilience and Recovery ‑ Accelerating Progress Towards the 2030 Agenda”. Noting the dual threat posed by the pandemic and climate change, he called on the Committee to address in its discussions and resolutions the need for affordable and accessible vaccines. It must also galvanize commitment of the international community towards renewable and sustainable efforts, he said, stressing that the world cannot achieve the 1.5°C target without transitioning sustainably. Technological advancement remains an unattainable development frontier for low-income economies, he said, adding that the Committee must harness international support for closing the digital divide.
Also highlighting the need to address access to financing, he encouraged the Second Committee to develop strategies that will assist economies to recover sustainably. Drawing attention to the dialogues he is convening, including the upcoming high-level thematic discussion on “Delivering Climate Action for People, Planet and Prosperity” on 26 October, he added that a high-level thematic debate will be held in early 2022 to address vaccine inequity. Noting that the COVID‑19 crisis was the first major stress test for the reformed United Nations development system, he said the Committee’s review of the revamped system will enable an assessment of the effectiveness of these reforms. “We have the capacities and knowledge, we have the blueprints,” he said, calling on the Committee to consider how to use these to deliver concrete outcomes.
Panel II: Productive Capacities for Recovery and Rebuilding
TAFFERE TESFACHEW, Team Leader of the Least Developed Countries Sub-Group of the United Nations Committee for Development Policy, and Senior Adviser at the Tony Blair Institute for Global Change, said that developing productive capacities is critical as it enables countries to produce goods and services that will allow them to move up the value chain and catch up with more developed economies. However, while progress has been made in understanding the importance of productive capacities, there is still a need for clarity in how the term is understood by policymakers since it has implications for policy choices and sequencing.
Noting the tendency to perceive every investment in productive sectors as actions contributing towards productive capacity-building, he said that while this is true to some extent, it is erroneous to associate every investment in economic activities with the strengthening of the total of a country’s productive capacities. In that regard, UNCTAD has solved the measurement issue by introducing the productive capacities index. This practical policy tool determines the level of development of productive capacities and pinpoints the gaps in capacity-building that require policy attention and will enable the economies of least developed, landlocked developing, small island developing and middle-income countries to identify the specific areas where policy intervention is required and assist them in establishing benchmarks against countries with whom they aspire to catch up.
Stating that there are numerous and diverse policy instruments that vulnerable economies can utilize to develop their productive capacities, he highlighted three basic guidelines that Governments should consider in designing policies to expand productive capacities. First, he said, there is the need for an integrated approach to policy formulation and implementation to ensure a balanced development of productive capacities. Second, the need for coherence and complementarity between policies for the development of productive capacities and the international support provided by development partners. Finally, the need to maximize the potential role of regional trade and regional value chains as sources of development of national productive capacities.
The representative of Malawi, speaking on behalf of the Group of Least Developed Countries, stressed the need for resilient recovery from the pandemic and the important role that building and maintaining productive capacities can play. Adding that the pandemic has reversed hard-won progress towards achieving development goals, he underscored the need to build long-term resilience to shocks.
The representative of Kazakhstan, speaking on behalf of the Group of Landlocked Developing Countries, noted that the three groups of countries in special situations were the hardest hit by the pandemic. Building back better requires greater outreach strategies, he said, as well as improved coordination and streamlining in the United Nations development system to avoid duplication. There is also a vital need to enhance production capacity, resilience to external shocks and Internet affordability.
The representative of the European Union said his bloc has adapted new programmes to better respond to developing country needs in recovering from the pandemic. Adding that the Union is investing heavily in digital infrastructure and environmental sustainability, he said it will continue to work on liberalizing trade in environmental goods and services as well as sustainable products.
The representative of Canada, also speaking for Australia and New Zealand, said countries in special situations continue to be most affected by major global challenges, stressing the importance to support ongoing efforts to address their needs. In ensuring a resilient recovery, the international community must reform its response to the needs of the most vulnerable. Adding that it can and must do better, he stressed the need to work together on international agendas.
The representative of Guatemala, speaking on behalf of the Like-Minded Group of Countries Supporters of Middle-Income Countries, said his bloc included 75 per cent of the world’s population, but represented only one third of global GDP. Middle-income countries face diverse challenges in achieving sustainable development, he said, including shortfalls in digital infrastructure, food and essential medicines. He encouraged the United Nations to continue developing an inter-agency strategy for middle-income countries with concrete policies to reflect their needs.
The representative of Malta said that her country since January 2020 has been co-chairing, together with Antigua & Barbuda, the Steering Committee on Partnerships for Small Island Developing States. Through that platform, it has been tirelessly working to establish meaningful and effective capacity-building partnerships among and with small island developing States amid the challenges the pandemic has posed to the health sector, the tourism industry, the blue economy and the fields of renewable energy and water management ‑ all equally important sectors for those countries.
The representative of Bangladesh, associating herself with the Group of Least Developed Countries, said given the challenges faced by least developed States, there is a need to enhance productive capacity in agriculture and shift from low-value to higher-value added areas. As global efforts focus on a fast and sustainable recovery from the pandemic, the least developed countries should be taken along and supported in areas such as access to vaccines and export diversification.
The representative of the Russian Federation called for strengthened efforts to implement the Istanbul and Vienna Programmes of Action, adding that they should continue to focus on the development of productive capacities, infrastructure, diversification and growth of exports, and access to innovations. Noting the important role of regionalization, he said integration processes contribute to the modernization of production and technology infrastructure; intraregional investments, including in local currencies; and the creation of a sustainable infrastructure.
The representative of Ghana, associating himself with the African Group, highlighted that least developed countries, most of which are on his continent, are disproportionately affected by the pandemic. In that regard, the upcoming Fifth United Nations Conference on the Least Developed Countries, in Doha, is an opportunity to design an ambitious plan so that those States are not left behind in the global recovery.
The representative of Fiji, speaking on behalf of the Pacific Islands Forum, called on all countries to fulfil the goal of mobilizing $100 billion annually in climate finance and to make climate finance easier to access for countries like those in the Forum. He also urged further action, including through South‑South cooperation, to facilitate the sharing of best practices, scaling up of development capacity and promoting of cooperation in the region in the areas of vaccine equity, climate resilience and social protection, among others.
The representative of Morocco, aligning herself with the African Group, said her country has now vaccinated 55 per cent of its people, which has helped it get back on track to economic recovery. It has also launched policies to address long-standing inequalities, invested in social protection to boost human capital, restructured its network of public enterprises and accelerated sustainable agriculture.
The representative of the United Kingdom said the needs of vulnerable nations must be at the heart of international community efforts to recover from the pandemic. Emphasizing the need for a green, sustainable recovery, she said the international community must tackle climate change head-on, invest in adaptation and ensure that climate finance is available to poorer nations. Social protection and inclusion must be at the heart of recovery efforts, she said, emphasizing the need for equitable access to vaccines, investment in technology and access to financing.
The representative of Pakistan pointed to structural deficiencies within countries as well as the international economic system due to stagnant growth, debt burdens, declining exports, lost tourism revenues, impacts of climate change and vaccine inequity. The international community must take political decisions to quickly restructure debt burdens, repurpose unused special drawing rights, lower borrowing costs, provide adequate climate finance, and reform unequal structures of trade, finance and taxation.
The representative of Gambia, highlighting the devastating effects of COVID‑19 lockdowns, stressed the need to invest more in productive capacity, diversify economic sectors and advance agricultural industries, which employ 70 per cent of his country’s labour force. Regarding recovery from the pandemic, he underscored the need for a multilateral response and investments in technical assistance to boost key sectors in promoting economic growth.
The representative of the Philippines said middle-income countries are still at risk of reversing development trajectories, as the pandemic has taxed health-care systems and economic resilience. The international community must enable these nations to structurally reform their economies, enhance international trade and support the development of new innovative sectors. She also posed a question regarding UNCTAD’s production capacity index.12
The representative of Senegal stressed the importance of supporting economic growth by increasing production capacity and consolidating value chains. There is also a need to build up budgetary systems and diversify economies to develop solid tax bases. He posed a question on how the United Nations can assist countries in resolving the issue of statistical data.
The representative of the United States, stating that his country is committed to supporting lower- and middle-income countries, said it provides $11 billion to less developed nations annually and additional support for small island economies to strengthen collaboration with them. In countering pandemic challenges and boosting recovery, he said, his country would support infrastructure providing basic public services and efforts to tackle climate change, doubling its climate finance commitments.
The representative of the Dominican Republic said her country has adopted exceptional measures leading to increased financing as well as debt level in mitigating the pandemic. Emphasizing the need to focus efforts to achieve economic recovery on resilience and investments in health, she pointed to the importance of a reformed financing mechanism and new design for international aid that would be directed towards more vulnerable countries.
The representative of Indonesia focused on the need for enhanced resilience through production capacity, affordable access to vaccines, improved infrastructure, a reduced digital gap and support for small businesses, especially through enhanced access to markets.
The representative of Kenya said limited production capacity in countries in special situations, coupled with countless natural hazards, have hindered them in recovering from COVID‑19 and achieving development goals. She emphasized the need to focus on cushioning and increasing resilience to protect nations from present and future shocks. She also underscored the need for equitable vaccine access, structural changes in the international financial system, investment and technology transfer, enhanced capacity-building and a reduced digital divide.
The representative of Bolivia said joint work between the General Assembly and the Economic and Social Council is fundamental, but Member States must be cautious to not duplicate work between the two organs. Noting that his country is working towards economic reconstruction, he said that in five years it has transitioned from a low-income to a middle-income country. However, its status as a landlocked developing country represents a cost of over 2 per cent of GDP on an annual basis. It also faces various challenges that hinder economic recovery and achievement of the 2030 Agenda. In that regard, external debt relief, opening of vaccine and medicine patents, access to the Internet, technological and digital connectivity, and renewable energy, among others, are necessary elements to foster the productive capacities of landlocked developing countries.
The representative of Somalia said there is a need to look into ways and complementary policies to facilitate and increase countries’ ability for productive capacities and resilience. He asked what main investments are necessary to strengthen a country’s capacity for recovery and reconstruction and accelerate growth and sustainable development after the pandemic.
The representative of Cameroon, associating herself with the African Group, called on Member States and development partners to tackle the challenges facing landlocked developing countries. She also stressed the urgency for reform towards an inclusive and equitable trading system, as well as an open and fair international financial monitoring system and an increase of resources for developing countries.
The representative of the International Telecommunication Union (ITU), noting that half the world’s population has never connected to the Internet, said those offline are overwhelmingly located in least developed, landlocked developing and small island developing States, where presently less than 25 per cent are connected to the Internet. As the Sustainable Development Goals cannot be achieved without information and communications technology (ICT), she said ITU has ramped up efforts in those countries. For example, it has launched a multi-stakeholder alliance to foster meaningful connectivity in hardest to connect communities. Its four focus areas are connecting people everywhere, empowering communities, building digital ecosystems and incentivizing investments.
LIU ZHENMIN, Under-Secretary-General for Economic and Social Affairs, spotlighted the pandemic’s negative impact, especially on women and girls, while noting that it also contributed to a reversal of sustainable development progress in many areas. Least developed countries, small island developing States and other countries in special situations continue to bear the brunt of those negative impacts, facing down vaccine inequity and economic shocks. “Yet, your joint meeting today on productive capacities has provided relevant policy messages,” he said, describing the latter as a source of hope.
Outlining some of the session’s central takeaways, he said strengthening the link between a country’s production structure and its level of human development was identified as crucial to achieving the Sustainable Development Goals. Developing a modern and inclusive ICT infrastructure and promoting the digitalization of services are also critical. In addition, the meeting highlighted the need for least developed, landlocked developing, small island developing and middle-income countries to rapidly scale up investment for structural transformation, through productive capacity development, and called for stronger multilateral solutions through international solidarity and cooperation.