Economic and environmental crises cause a 'significant deterioration' in LDC economies.

Economic and environmental crises cause a "significant deterioration' in LDC economies

Mid-term review group concludes that "negligible progress' made on ODA targets

Economic crises and environmental catastrophes have produced a "significant deterioration' in the socio-economic situations of the world's least developed countries (LDCs). That was a major conclusion of the mid-term review of the Substantial New Programme for Action for the 1980s for the Least Developed Countries.

A high-level Intergovernmental Group on the Least Developed Countries of the United Nations Conference on Trade and Development (UNCTAD), meeting in Geneva from 30 September to 12 October to review the Programme, stated there had been "negligible progress' in reaching a main goal of the programme--an increase in official development assistance (ODA) to the LDCs. The Group also adopted conclusions and recommendations on the Programme's progress at the country level, international support for it, and measures to ensure its progress over the next decade.

The 36 least developed countries and their 300 million people face "serious and stark repercussions' unless urgent measures are taken to implement the Programme, the Group warned. Extremely low levels of income, literacy and industrialization continue to characterize those nations--26 of which are in Africa, 9 in Asia, and 1 in Latin America. In the only resolution adopted in Geneva, the Group recommended that a global review and appraisal of the Programme be undertaken in 1990.

Adopted unanimously in Paris at the 1981 United Nations Conference on the Least Developed Countries, the Substantial New Programme of Action (SNPA) provides a comprehensive set of national and international measures for the development of the least developed countries during the 1980s. While emphasizing the primary responsibility of the least developed countries for their own development, the Programme recognizes the special need of those countries for external support. Accordingly, the policy measures outlined by the Programme are divided into two groups: one covering measures which the LDCs themselves should take at the national level; the other consisting of international support measures with which donor countries should assist the LDCs in their efforts.

UNCTAD was chosen as the SNPA's global focal point and to conduct its mid-term progress report. Jean Ripert, Director-General for Development and International Economic Cooperation is charged with co-ordinating its implementation within the United Nations system.

"Make every effort' to raise ODA

The Group, in its conclusions, appealed to donor countries to "make every effort' to either double their ODA or raise it to a level corresponding to 0.15 per cent of their gross national product (GNP). It also called upon donor countries to channel "a substantial part' of such aid through multilateral development institutions and agencies and urged that aid to the LDCs be "untied to the maximum extent possible'.

The Group recommended immediate debt relief measures including the cancellation of the ODA debt of LDCs by all bilateral donors who had not yet done so. Scope for further debt relief mainly concerned a limited number of developed donor countries which had not yet granted extensive debt relief or which had provided ODA flows to LDCs on relatively hard terms. It was estimated that if the debt relief were to cover the entire amount of debt-service payments currently due to developed donor countries, annual relief for LDCs in the second half of the decade would average some $510 million. The cancelling of debt service payments by all donor countries in that period would raise the total annual debt relief to LDCs to $1 billion. Waiving interest payments could already provide significant relief, the report pointed out.

In connection with export earnings stabilization, the European Economic Community (EEC) was urged to broaden its STABEX facility for compensating shortfalls in earnings from commodity exports and to extend the benefits of the scheme to LDCs not parties to the Lome Convention. Facilities similar to the STABEX would also need to be provided by non-EEC countries.

Other commercial policy measures mentioned in the report were the extension of the product coverage of Generalized System of Preferences (GSP) schemes to include products of special export interest to LDCs (in particular in the field of agriculture, textiles and footwear), the extension of the duration of the GSP to allow LDCs to embark on long-term investment programmes, the simplification of preferential schemes, and the removal of non-tariff barriers affecting items of high priority for LDCs.

Highest priority to agriculture

In one recommendation for action by the LDCs themselves, highest priority was laid on agriculture, with a target of 4 per cent per year agricultural growth rate, self-sufficiency in food by 1990, and affordable food prices.

From 1980 to 1984, agricultural production had not only failed to achieve the 4 per cent growth target, but had actually fallen below levels in the 1960s and 1970s--a serious per capita deterioration and far below population growths in the LDCs.

Causes of unsatisfactory agricultural production varied from country to country. From 1980 to 1984, nearly all LDCs suffered from natural disasters that not only exacerbated existing agricultural problems, but also caused severe ecological damage. Drought and famine had overwhelmed Africa; floods and earthquakes had ravaged parts of western Asia; and cyclones and flooding had devastated Bangladesh. Depressed demand for LDC agricultural imports, poor infrastructure and failure to implement agrarian reforms were also serious constraints to improved agricultural production.

Export-oriented agricultural production in the LDCs had used relatively modern cultivation techniques. But subsistence farming had not provided for the people's food needs. Due to the rapid decline in per capita food production, the cost of imported food increased; by 1980, LDCs were spending 44 per cent of their export earnings just to import food.

Emergency food aid--useful in the short term--had sometimes discouraged self-sufficiency by depressing food prices, the Group's report noted. But food aid had provided a basis for resumed food production, and would continue to be necessary for LDCs, particularly those in Africa, the report stated. Food aid should be linked to improvements in domestic and export-oriented food production.

Greater food security wanted

The report emphasized the need to accelerate agricultural development and achieve greater food security. For rural households unable to produce enough food to meet even their own needs, action towards achieving food security should centre on strengthening their ability to produce their own food. More attention should be given to research and extension work geared to domestic food crops and especially to those grown by sub-subsistence food producing households headed by women and located in sub-marginal, high risk areas. Such activities should concentrate on traditionsl staples such as root crops and drought resistant grains, and should include testing for viability and practicability to local conditions. Small farmers should be provided with better access to more productive resources, remunerative prices for agricultural products and more efficient and fairer patterns of land distribution and use.

Industry and energy: The share of manufacturing in LDC gross domestic product (GDP)--one criterion used to define an LDC--in most cases had not reached 10 per cent. In 1981, that share was only a ninth of the average for the developing countries as a whole, according to an UNCTAD-sponsored study by Eric Sottas on the LDCs.

Despite the decline in oil prices, the cost of importing energy had remained a heavy burden for the LDCs. Their energy deficit had led to a heavy mortgage on balance of payments and to destructive consequences on the environment. Intensive use of firewood and charcoal had continued to deplete those energy sources while its use degraded the ecosystem and weakened agricultural potential.

The LDCs were called upon to include in their energy development plans measures for energy conservation. They should assess the pattern of consumption of energy sources, including fuelwood and its impact on the environment. Developed countries were asked to assist the LDCs in planning and implementing such measures and in developing renewable sources of energy and reforestation techniques.

With regard to industrial development, the Group recommended that LDCs should continue to give priority to agro-industry, industries producing agricultural inputs and industries based on local raw materials, as well as to maintaining and fully using existing industrial capacity. They were also urged to improve the economic, legal and financial framework for industrial development and improve incentives for entrepreneurship and support for local initiatives. Donor countries were called on to combine technical and management training with financial assistance, to base contributions on local initiatives, and to provide assistance where possible on a multi-year basis.

Human resources and social development: Within the space of a generation, LDC populations had doubled--creating "adverse consequences that in certain cases border on catastrophe', according to the Sottas study. The number of dependent persons had increased faster than the number of productive persons, causing larger proportional increases in social spending.

Three quarters of the adult population of LDCs were illiterate. In some LDCs where the female population did not have the same educational opportunities as males, illiteracy among women was as high as 99 per cent. For the remainder of the decade, the report stated, hunger, unemployment and emigration would continue to be major problems for LDCs.

Health care systems were available to 20 per cent of the population in LDCs. Inadequate attention to primary health care had allowed curable diseases such as leprosy and tuberculosis to continue to take their toll. Infant mortality was 10 times higher in LDCs than it was in developed countries. Although some progress had been made in improving life expectancy, the rates were far below even those of developing countries. The report said that of 1,000 children born into poverty in the LDCs, 200 would die before one year, another 100 would die before the age of 5, while only 500 would live until 40. In some LDCs, 60 per cent of the children were undernourished, and that situation could worsen, in view of the deteriorating economic situation of those countries.

The Group urged LDCs to devise and implement concrete plans in education and training, health and nutrition and population. In education and training the following elements were emphasized: universal primary education and universal adult literacy, and the need to narrow the gap between men and women and improve the quality of education; vocational training; educational programmes for the rural population; and stressing the importance of productive activities and manual work, particularly in farming, at primary and higher levels of education.

Regarding health and nutrition, recommendations related to: improved access to health services; strengthening health infrastructure; development of national health manpower; improvement of drug supply and storage; and integration of nutritional considerations into agricultural and health plans. The integration of population policies into national development planning was also stressed.

Although the Programme's 1981 goals were reaffirmed by UNCTAD's Intergovernmental Group, the outlook for the second half of the decade remained serious. The mid-term review noted that the Organization for Economic Co-operation and Development had forecast slower growth in the industrial countries for 1985; increases in LDC debt service payments; interest rates that would remain higher than rates of return on LDC development projects; and continued restraints on multilateral aid.

The target to either double or raise ODA levels to 0.15 per cent of donor GNP, in 1981 termed "the minimum required' to double LDC income over the next 10 years, was now "out of reach', the report noted.

For nearly two thirds of LDCs, per capita ODA was lower in 1983 than it had been in 1980. ODA from developed market countries--which accounted for nearly 80 per cent of all aid to the LDCs--had remained at a level of 0.08 per cent through 1984. Denmark, the Netherlands, Norway, Sweden, Belgium and France had attained the proposed aid levels. Other market country aid to the LDCs was lower than Programme proposals.

OPEC countries had provided aid exceeding the target level. The USSR reported its LDC aid had reached 0.17 per cent of its GNP. Bilateral commitments to the LDCs should be made in grant form, the Intergovernmental Group recommended, calling for additional emergency food aid and balance-of-payments support for the LDCs.

The Group also urged more flexible International Monetary Fund (IMF) conditions for LDCs. The IMF Compensatory Financing Facility would be more useful, it suggested, if it covered not only shortfalls in export earnings, but also deteriorations in terms of trade and sharp increases in interest rates.

Recent failures to agree on IDA and International Fund for Agricultural Development replenishment levels, and the refusal of some countries to join the Special Facility for sub-Saharan Africa, endangered those institutions' ability to provide assistance to the LDCs, the Group warned.

United Nations Development Programme round-tables and World Bank consultative group meetings had been increased at the request of LDCs, which pointed out that expanding development activities had created administrative burdens for the LDCs.

Country studies

Botswana

Botswana was "remarkably successful' in using its mineral resources-- diamonds, copper and nickel--to finance stable and balanced development. Its mining sector broadened the country's economic base, had earned substantial resources and provided the basis for improvements in living standards. Recovery in the diamond market had particularly helped Botswana's balance of payments.

High investment and savings rates allowed the country to finance many development programmes from its own resources. Although Botswana had no oil, natural gas or hydroelectric potential, its large coal deposits could reduce its dependence on imported oil.

Parts of eastern and southern Botswana had suffered their worst drought in 40 years. Crop production had decreased to less than 10,000 tons--a sixth of the normal output. The drought had increased food import and food aid requirements. Malnutrition had risen and livestock conditions had deteriorated. Over-grazing, deterioration of land, desertification, depletion of forest and fuel reserves and water shortages continued to plague Botswana.

Botswana's population growth rate was 3.3 per cent per year, higher than the average for the LDCs. Nearly half its population was under 15 years of age. Between 1960 and 1980, Botswana's per capita income had more than quadrupled. Its literacy rate was constantly rising, making it a "bright spot' in the generally dark picture of LDC literacy rates. Providing essential social services to its people would place heavy demands on its resources over the next decade.

Bangladesh

Nearly 80 per cent of the population of Bangladesh does not have income adequate to meet minimum needs for nutrition, housing, clothing, education and health. The country's landless rural population, low literacy rate, inadequate health care and vulnerability to natural disasters constituted enormous obstacles to sustained economic and social development. Its economy depended on outside assistance to meet essential requirements.

Agriculture, the dominant sector of the country's economy, accounted for 52 per cent of its GDP, and food grain production was Bangladesh's most acute problem. In spite of enormous water resources, Bangladesh did not have adequate irrigation systems to increase agricultural production.

Its manufacturing sector recorded a 5.7 per cent growth rate in 1983/84--due mainly to the doubling of export revenue from the manufacture of ready-made garments, an important new growth industry in the country. But its low rate of domestic savings, characteristic of all Asian LDCs, was a major constraint to rapid economic growth. Bangladesh's debt service ratio nearly doubled between 1979 and 1983. Both the World Bank and the IMF have stressed the country's need to diversify exports.

As the most densely populated LDC, Bangladesh accelerated population control methods in a two-year programme that resulted in acceptance of sterilization and the intra-uterine device (IUD) as methods of contraception. As a result, Bangladesh's population growth rate had been expected to decline to 1.5 per cent by the end of 1985.

Although the adult literacy rate in the country stood at 26 per cent, the Government's budget for education increased by 83 per cent from 1980-81 to 1984-85. Life expectancy also rose to 48 years and infant mortality fell to 135 per 1,000 in 1984.

Haiti

Uncontrolled tree cutting in Haiti--the only LDC in the Americas--had stripped the hillsides bare throughout the country, causing soil erosion and decreasing the land's productivity.

An almost complete lack of infrastructure plagued rural Haiti. Many areas have been cut off from the outside world. No agricultural storage facilities existed in the countryside; nor was there telecommunications or electricity. Ninety per cent of the population did not have access to drinking water. Health services were inadequate, and overcrowding in the cities was a problem. More than 70 per cent of the population was illiterate, and only 40 per cent of primary school pupils completed their education.

Rural income per capita was lower in 1984 than it had been in 1979. Export volume in 1983 for coffee--Haiti's major export--reached the same levels it had in 1980, but due to a fall in prices, 1983 income from coffee exports was only 62 per cent of the 1980 level.

Export-oriented industries, particularly clothing, electronics and baseball equipment, were the "most dynamic' of the economic sectors, employing more than 35,000 people and providing 26 per cent of the country's exports.

Although Haiti's external debt remained manageable, aid to that country fell from $130.5 million in 1982 to $119.9 million in 1983, largely due to the virtual disappearance of non-concessional aid.

Samoa

The recession of the early 1980s brought a sudden halt to the growth the Pacific island nation of Samoa had enjoyed throughout the 1970s. A fall in the unit price of copra, coconutbased products and cocoa between 1979 and 1982 had resulted in severe balance-of-payments problems and a significant increase in Samoa's foreign debt.

Samoa had few natural resources, and its waters were poor fishing grounds. Nearly two thirds of its total area was cultivable, but only 30 per cent of that area was now being farmed. Industry, though modest, had risen from 5 per cent of the GDP in 1978 to 6 per cent of the GDP in 1983, and its manufactures accounted for 58 per cent of the country's merchandise exports.

Ten per cent of Samoa's population emigrated each year, reducing the size of the small skilled labour force. Although life expectancy in Samoa was high for an LDC--68 years-- nearly 15 per cent of pre-school children and 11 per cent of school children suffered from malnutrition. Immunization of children less than one year old increased from 29 per cent in 1979 to 84 per cent in 1984, and nearly all the population had access to piped water. School in Samoa was neither free nor compulsory, but the island country's literacy rate was nearly 100 per cent.

Both Samoa's private and public sectors have performed poorly, and have burdened the country's exchequer. As a result of its borrowing in the 1970s, the country's debt service rose to nearly 46 per cent of its exports for 1985. The Government, in conjunction with the IMF, introduced a stabilization programme in 1983; since then its balance of payments had been in surplus. However, the stabilization programme reduced resources for its development programme. But Samoa's traditional donors were expected to continue 1983 aid levels through 1987, and no new major commercial loans had been planned.

Photo: Greater food security is a goal of developing countries. Here Otovalo Indians in Ecuador work on a co-operative farm.