New report urges developing national productive capacities to stem poverty

Addis Ababa, 20 July - Despite higher rates of economic growth in recent years, the world's poorest countries will remain in a dire situation until that growth becomes sustainable.

That's the conclusion put forward by `The Least Developed Countries Report 2006', launched by the UN's Conference on Trade and Development (UNCTAD) on Thursday. The report says developing productive capacities is the key to sustained economic growth in the world's least developed countries (LDCs).

In Addis Ababa, the report was presented by Hakim Ben Hammouda, director of the trade and regional integration division of the UN's Economic Commission for Africa, which contributed to the document.

He noted that economic growth in Africa was not sustainable because it relied on external factors. The continent had failed to build growth internally, he said. It had to improve supply, productivity and competitiveness. But he also acknowledged that other factors - many of them political - had an impact on the economic situation.

In Ethiopia, as in many other developing countries, the problem was that the agricultural sector accounted for about 80 percent of the workforce. The economy needed investment, access to equipment and financing. To sustain economic growth, the country had to find ways of producing more food with less people, he pointed out.

There are 50 LDCs worldwide - 34 of them in Africa - and they are classified as having low GDP per capita, weak human assets and a high degree of economic vulnerability.

According to the LDC report, in almost all of them there is an imbalance between the rate of growth of the labour force and the rate of capital accumulation and technological progress. Labour productivity is low and there is widespread unemployment.

"If productive employment opportunities do not expand sufficiently for the growing labour force in the LDCs - in non-agricultural activities as well as within agriculture - there will be increasing pressures for international migration from the LDCs and high levels of extreme poverty will persist," the report warns.

Poverty alleviation requires wealth creation. And the development of productive capacities - defined as resources, entrepreneurial capability and production linkages - can bring about sustained poverty reduction in these poor countries, the report says.

This means they will be able to rely more and more on domestic resource mobilization to finance their economic growth, reduce aid dependency and attract private capital inflows that can support their development process.

"It is also through developing their productive capacities that the LDCs will be able to compete in international markets in goods and services which go beyond primary commodities and which are not dependent on special market access preferences," the report adds.

"Without the development of their productive capacities, more and more LDCs will face recurrent, complex humanitarian emergencies."