UNDP

Voices of the Least Developed Countries of Asia and the Pacific : Voices of the Least Developed Countries of Asia and the Pacific Achieving the Millennium Development Goals Through a Global Partnership LONDON, Asia 2015, March 6-7, 2006


Overview : Overview Asia-Pacific – the fastest-developing part of the world With the world’s two most populous and fastest-growing countries, China and India And the 'tiger' economies of East and South-East Asia No country is expected to ACHIEVE ALL the MDGs – concern No country expected to FAIL ON ALL MDGs - potential But Asia-Pacific is a region with extreme contrasts - highly heterogeneous With some of the most economically disadvantaged countries: 14 (of 50) Least Developed Countries inhabited by nearly 40% of worldwide LDC population The 'tyranny of averages' hides extreme poverty in Asia-Pacific LDCs Structural and geographic impediments result in persistence of poverty in its many dimensions; conflict aggravates problems A global partnership through ODA, debt relief and trade is necessary to accelerate development in these countries A three-pronged argument beyond the fundamental moral basis: strategic, commercial and efficiency Progress in Asia-Pacific LDCs benefits the world - a ‘win-win’ for all


Who are the LDCs? : Who are the LDCs? Criteria for identification Low income level Low stock of human assets (nutrition, health, education) Economic vulnerability (X concentration, unstable X earnings, unstable agri, low share of manuf andamp; services, small population) LDCs face severe handicaps Disadvantaged location Small domestic markets Limited infrastructure Low domestic resources – savings for investment Conflict in some Environmental hazards


Location & population of LDCs : Location andamp; population of LDCs In 2003, the UN listed 50 Least Developed Countries 28% (14 LDCs) in Asia-Pacific account for almost 40% of worldwide LDC population - disproportionately high population share 72% (36 LDCs) in other regions account for 60% of worldwide LDC population Number of LDCs Population (million)


Slide5 : Key indicators of LDCs in Asia-Pacific and other regions


Slide6 : Proportion of Population Below US$1 (PPP) Per Day Heterogeneity of Asia-Pacific The Asia-Pacific LDC population accounts for 7% of the total population in the Asia-Pacific region. However, as much as 12% the region’s extreme poor (or 90 million) live in these LDCs. Per-Capita GDP, 2003


Current trend Vs MDG target in Asia-Pacific LDCs : Current trend Vs MDG target in Asia-Pacific LDCs


Some successes, but MDGs are far from attained… : Some successes, but MDGs are far from attained… Despite handicaps, Asia-Pacific LDCs have made progress in achieving some MDG targets such as: Net enrolment ratio Under-five mortality rate Proportion of the population with sustainable access to improved water sources and sanitation But are far from achieving other MDG targets such as: Poverty reduction Minimum dietary needs - malnutrition Literacy rate Infant mortality rate


Resource gap in Asia-Pacific LDCs : Resource gap in Asia-Pacific LDCs A key structural impediment is the low savings rate in LDCs: Most of the income of the poor has to be spent on essential consumption (food, clothing and shelter) Low savings lead to low investments and slow capital formation, resulting in slower economic growth ('classic poverty trap') Resource gap (% of GDP) = Gross domestic savings - investment % of GDP (2003) Asian developing countries Asia-Pacific LDCs


Resource Gap Per-Capita : Resource Gap Per-Capita Resource gap (% of GDP) = Gross domestic savings - investment US$ Asia-Pacific LDCs Asian developing countries


Addressing MDG impediments : Addressing MDG impediments Asia-Pacific LDCs are trying to achieve the MDGs with very little resources Landlocked and small island LDCs face additional geographic challenges (distance from markets, proneness to natural disasters, etc.) Conflict in some LDCs is also an impediment – diverts scarce public resources andamp; inhibits private flows MDG 8 advocates global partnership through a combination of three strategies: 1. Increased and more effective aid in the short run, with a phase-out plan 2. Debt relief to severely indebted poor countries 3. Increased market access and aid-for-trade consistent with poverty reduction (will also help in tapering off aid) From the LDCs a clear recognition of governance issues – addressing corruption upfront Complementary support from partner countries within and outside the Asia-Pacific region could make an enormous difference


Slide12 : Increasing Aid to Achieve the MDGs Other LDCs Asia-Pacific LDCs 1990 2002 US$ Average Aid Per-Capita, 1990-2002 Average aid per-capita has consistently been lower in Asia-Pacific LDCs, compared to LDCs of other regions. In 2003, aid per-capita was US$19 for Asia-Pacific LDCs, compared to US$43 in other regions.


Slide13 : In 2003, import duties on apparel exported from Bangladesh, Cambodia and Nepal to the US amounted to US$520 million, more than 3 times the net disbursed bilateral aid of US$150 million received by those countries. Aid vs. Trade: making aid work for trading out of poverty


Slide14 : Estimated MDG financing gap in the 14 LDCs – 12 to 26 billion, 2006 to 2015


ODA: increase, coordination, and effectiveness : The additional ODA required to bridge the resource gap of Asia-Pacific LDCs is not an unreachable sum An estimate by the Millennium Project shows the cost of meeting the MDGs in all LDCs will correspond to 0.12% of the GNP of OECD-DAC countries in 2006 Roughly double the current share of ODA in donor GNP to these countries (0.06% in 2002) Still well below the 0.15% to 0.20% target as called for in the Brussels Programme of Action for the Least Developed Countries Effective utilisation of aid: Asia-Pacific LDCs recognise the importance of addressing the 'leaky bucket syndrome' through improved governance and institution-building ODA: increase, coordination, and effectiveness A small amount of support from more developed partners would make a huge difference to Asia-Pacific LDCs.


Recommendations on Aid for the MDGs(endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005) : Recommendations on Aid for the MDGs (endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005) Actions by LDCs at the national level Good governance at all levels is a prerequisite for effective use of aid Better aid harmonisation and coordination – and a country-based approach that channels aid to sectors where its impact is greatest Assessment of outcomes more important than assessment of available inputs – need to strengthen domestic capacities for planning and project implementation, improve monitoring and evaluation, ensure better institutional coordination, and greater decentralisation of project implementation Actions at the international level Aid should be front-loaded, primarily in the form of grants, not in the form of tied purchases - meeting the targets in the Brussels Programme of Action, the Almaty Programme of Action and the Mauritius Strategy Improving coherence among donors in areas such as policy conditionalities, trade regimes and technology transfer from donor countries – policy conditionalities should converge with recipient country priorities, thus promoting national ownership Programme budget support as the main long-term strategy to assist LDCs – to indicate long-term donor commitment and to finance recurring costs, not only initial investments Implement regional solutions to enable small economies to address costly issues by introducing economies of scale Responding to the changing priority needs and concerns of Asia-Pacific LDCs over the years


Slide17 : Debt Relief in Support of the MDGs The debt burden and debt-servicing liability of Asia-Pacific LDCs have received little attention, compared to other LDCs. However, debt-to-GDP ratios and per-capita outstanding debt stand at high levels in some LDCs.


Debt Relief for Additional Resources : Debt Relief for Additional Resources Since the introduction of the initiative for Heavily Indebted Poor Countries (HIPC) in 1995, 27 countries have benefited (US$ 70 billion) No Asia-Pacific LDC has benefited from the HIPC initiative HIPC eligibility thresholds remain very high Asia-Pacific LDCs have relatively good debt repayment records, relatively low debt-servicing ratios – reflecting their relatively prudent economic management In view of the pressing need to release additional resources to meet the MDGs in Asia-Pacific LDCs, it is imperative that this 'better performance' not be penalized by exclusion from the HIPC Initiative. All 'severely indebted' and 'moderately indebted' (as per World Bank classification, 2003) Asia-Pacific LDCs should be eligible for debt relief


Slide19 : Recent developments on debt relief Mid 2005: Gleneagles G8 finance ministers announced 100% cancellation of debt owed to multilateral agencies by 18 of the 38 HIPC countries -14 in Africa, 4 in Latin America -None of the beneficiaries are LDCs from Asia-Pacific Jan 2006: Multilateral debt relief initiative of IMF for 100% debt cancellation for 19 countries plus 20 more on eligibility under HIPC Bold and commendable - will enable poor countries to use resources saved for health, education and addressing income poverty But Asia-Pacific LDCs remain off the radar -Only 2 LDCs from the region (Lao PDR and Myanmar) are classified as 'eligible' on the HIPC list Urgent need to re-examine the issue of debt relief from the perspective of generating additional resources to attain the MDGs


Recommendations on Debt Relief for MDGs (endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005) : Recommendations on Debt Relief for MDGs (endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005) Any debt relief extended should be an add-on to ODA, not be at cost of ODA Criteria for the selection of HIPC-eligible countries need to be reviewed, with particular attention to the unique challenges faced by the 4 'severely indebted' and 2 'moderately indebted' LDCs of Asia-Pacific MDG-based needs assessments should prevail over arbitrary indicators such as debt-to-export ratios Debt sustainability should be redefined as 'the level of debt consistent with achieving the MDGs, reaching 2015 without a new debt overhang'


Slide21 : Potential for trading out of poverty Asia-Pacific LDCs have fairly open economies, most have embraced globalisation - potential for making trade work for development 6 are WTO members; 5 negotiating


Slide22 : STRUCTURE OF EARNINGS FROM GOODS EXPORTS AND REMITTANCE FLOWS IN ASIA-PACIFIC LDCs (% of foreign exchange earnings) Export structure reveals high contribution of labour-intensive exports, remittances and agriculture (for some) – trade-related support can lead to job creation and income generation for the poor Earnings from remittances could be threatened by entry barriers to services markets in partner countries


Trading Out of Poverty: Some Concerns : Trading Out of Poverty: Some Concerns Phasing-out of the Multi Fibre Arrangement (MFA) and rise of textile/apparel exports from China: adverse consequences for Bangladesh, Nepal, Cambodia and Lao PDR – particularly women Supply-side constraints: inadequate domestic capacities limit gains from new market access opportunities offered under Generalised Schemes of Preferences (GSP) Limited South-South trade: the structure of protection of developing countries often weighs more heavily on exporters from the LDCs than on those from developed countries Fall in world prices of major exports from Asia-Pacific LDCs, for example, apparel prices Non Agricultural Market Access (NAMA) negotiations: expected to bring down tariffs on manufactured goods, leading to considerable erosion of preferences currently enjoyed by Asia-Pacific LDCs WTO Hong Kong, Dec 2005: limited progress Duty andamp; quota free access for 97% of LDC products; new pledges on Aid for Trade End agri export subsidies by 2013; but no progress on ending domestic support New WTO deadline of April 30 2006 to agree ‘modalities’ (frameworks) for NAMA, agri and comprehensive draft schedules of commitments based on agreed modalities by 31 July 2006


Recommendations on trade and market access(as endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005) : Recommendations on trade and market access (as endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005) Actions at the national level Mainstreaming trade into overall development plans Social impact assessments of trade liberalisation options Actions at the international level Providing WTO-bound duty- and quota-free market access for all exports Enhancing market access under preferential schemes A scheme similar to the African Growth and Opportunity Act (AGOA) could be extended to the LDCs of Asia-Pacific More commercially meaningful commitments in terms of temporary movement of natural persons and cross-border supply of services such as outsourcing Simplifying and streamlining WTO accession process – investing resources in ‘real’ priorities for LDCs Increasing technical assistance for human resources development – negotiating capacity of trade negotiators, implementation capacity, etc. Increasing funds allocated to improve productive capacity and other supply-side responses Providing special and differential concessions to LDCs in regional and bilateral trade agreements Addressing volatilities in the financial and monetary systems


Case for a Regional Compact : Case for a Regional Compact Emerging positive trends in more south-south cooperation Examples – China, India, Korea, Japan, Malaysia,Thailand - more so in times of disasters (e.g., tsunami, earthquake) Address cross border issues – migration, trafficking, drugs, diseases, conflict, environmental hazards More could be done to help close the ‘development gap’ - no country benefits by having a poor neighbour Preferential market access Trunk infrastructure Ease legal labour movements


Key Messages : Key Messages Pro-poor growth in Asia-Pacific LDCs will raise standards of living of millions of people contributing to peace, progress, and economic security all over the world – a 'win-win The moral argument is clear; in addition there is the Strategic argument: regional and global security will be enhanced Commercial argument: dynamism of Asia-Pacific will permeate through the LDCs and markets for all partners will grow Efficiency argument: LDCs have already demonstrated commendable progress towards achieving MDGs; with increased support, aid dependence will progressively decline We appreciate the increased support to Africa; and call attention to the 120 million people from the poorest countries of Asia and the Pacific as well. This is not a Utopian wish: it is realistic and possible in our generation