Strategies for effective way-out of LDC status

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Shahiduzzaman Khan
Bangladesh has otherwise enormous potentials to become a middle-income country sooner rather than later. But its efforts over the years to graduate to this category of countries from its present status as a least developed country (LDC) have not shown much real progress. It is now looking afresh for suitable strategies to find an effective way-out.
In this context, the participants in an international dialogue on exploring a new global partnership for the LDCs that was held in the city late last month were largely of the view that the LDCs should formulate a number of strategies in accordance with the new challenges they are currently facing -- a fragile economy, global warming and internal political conflicts. On their part, the developed nations have not been pro-active enough to provide supports to the LDCs to the expected level. The poor nations need massive doses of investment from the developed countries to break the poverty trap and catch up with the rest of the world. Generally, the developed countries offer official development assistance (ODA) to the LDCs. This is praiseworthy, but the future of most LDCs depends on foreign direct investment (FDI).
In a real sense, the rich nations are not also now as not as generous as before. Nor are they providing aid to the LDCs, matching their pledges, made time and again, about ODA to the LDCs. Inflows of massive FDI is now considered important for participating the upgradation of the status of the poor countries.
The LDCs, as many participants in the fore-mentioned dialogue noted, need investment not only in oil and energy sectors, but also in agriculture and services. Such investments are expected to give high dividends to the LDCs. However, the foreign investors need some sort of state guarantees from the LDCs. They also look for receiving due honour, tax rebate and assurance of safe repatriation of profits to their home countries. The LDCs should also ensure proper security of their lives and property.
The United Nations has otherwise been working on how it can facilitate increasing investment flows from the developed countries to the LDCs. The UN expects that the LDCs would achieve some significant progress in the process which is expected to be spelt out more elaborately at the next year's LDC summit in Turkey.
There is no denying the fact that the LDCs do need to make consistent efforts to raise their productivity and quality of their products to sustain themselves in the global market-place. Various development initiatives have been undertaken by the international development partners over the last decade towards promoting sustainable development of the LDCs. However, a large part of the commitments, made through such these initiatives, have remained either unfulfilled or are of low value. The developed nations did hardly give a closer look into the priority needs of the LDCs. Issues like trade enhancement, investment promotion, access to technology, ODA for productive capacity development and domestic institutional and policy reforms that are of critical importance for the LDCs, are, thus, left largely unaddressed, in practical terms.
The LDCs, as the reviews in the dialogue in Dhaka suggested, have not been able to make much of significant progress in poverty reduction during the last one decade. Poverty remains a key challenge for the LDCs as the teeming millions in these countries continue to live with hunger and malnutrition. On the other side, the LDCs achieved significant progress in many areas under Brussels Programme of Action until the global financial crisis surfaced in late 2007. Such progress was well visible in different macro-economic indicators, liberalisation of economies, governance, social indicators and trade. But there remain a lot more challenges. The LDCs need to tackle the effects of climate change, increase farm productivity and food security, contain population growth, raise trade and investment and diversify economies.
Prime Minister Sheikh Hasina, addressing a meeting of LDC leaders in New York sometime back, said food security is of prime concern for the poor nations. Unfortunately, climate change and the world recession created food shortages globally. She stressed the need for adoption of innovative strategies that would include employment of excess farmers in some countries to farm uncultivated lands in some other ones with the developed nations supplying tools, technology and quality inputs. This can be an ideal arrangement for producing food for domestic consumption as well as exports and for ensuring global food security, she added.
On its part, Bangladesh has to take effective actions in order to utilise its huge manpower through large investment in human asset development to help achieve the goal of graduating itself into a middle-income country. It is easier said than done.
Upgrading the economic status will involve a huge challenge. The country is now facing an acute shortage of power and gas supplies. To achieve the target of becoming a middle income country by 2020, per capita income of the country has to reach $1086 from the current $750. And for that, the country's growth rate has to reach 10 per cent in phases. The task is really formidable.
While giving a thorough look into the performances of the LDCs, the development practitioners have noted that most countries performed well group-wise in various sectors over the decade in question. But there are wide variations in the intra-group performance record. Most of the advances made so far have been highly skewed, fragile and unsustainable.
In order to get rid of such a situation, the LDCs need a preferential, secured and predictable system of market access to both the developed and developing economics. To promote investment, the governments in the LDCs will also have to provide fiscal and financial incentives to the entrepreneurs to promote in-country backward and forward linkages. Indeed, a set of bold initiatives is required to help broaden and strengthen the support base of the LDCs, taking into account the specific and diverse nature of their economies.
— szkhan@dhaka.net