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Poverty trap leaves least developed countries ever further behind


Poverty trap leaves least developed countries ever further behind

Poverty trap leaves least developed countries ever further behind
Photo credit: UNCTAD

Global poverty is increasingly concentrated among a group of 48 countries, which are falling further behind the rest of the world in terms of economic development, according to a United Nations report released on Tuesday by UNCTAD.

The Least Developed Countries Report 2016: The Path to Graduation and Beyond – Making the Most of the Process states that a global goal to halve the size of this group will be missed unless the international community takes more action.

“These are the countries where the global battle for poverty eradication will be won or lost,” said UNCTAD Secretary-General Mukhisa Kituyi, launching the Report. “A year ago, the global community pledged to ‘leave no one behind’, but that is exactly what is happening to the least developed countries [LDCs].”

The proportion of the global poor in the 48 LDCs has more than doubled since 1990, to well over 40 per cent. Their share of those without access to water has also doubled to 43.5 per cent in the same period. And these countries now account for the majority (53.4 per cent) of the 1.1 billion people worldwide who do not have access to electricity, an increase of two thirds.

In six LDCs, the rate of extreme poverty is between 70 per cent and 80 per cent, and in 10 more the rate is between 50 per cent and 70 per cent.

There are only four other countries in the world where the rate is above 30 per cent, and nowhere else is it above 50 per cent.

This leaves many LDCs stuck in a poverty trap, a vicious circle in which poverty leads to poor nutrition and health, and lack of education, undermining productivity and investment. This in turn blocks the sustainable development needed to reduce poverty.

Countries can only break out of such vicious circles with international support in finance, trade and technology. The LDC category was created largely to target such support for those countries that most need it.

Countries graduate from the LDC category by satisfying a complex set of economic and social criteria. But only four countries have graduated in the 45 years since this classification was established.

In 2011, prompted by this glacial rate of progress, the international community set a goal that half of all LDCs should satisfy the criteria for graduation by 2020. But halfway to the target date, this goal already appears out of reach.

Only one country (Samoa) has graduated since 2011; only three more (Equatorial Guinea, Vanuatu and Angola) are scheduled to do so in the coming years. Looking ahead, the Report projects that only 13 more will qualify for graduation by 2021, far short of the 21 needed to meet the goal in 2020.

Graduation itself is only a first step towards long-term development. To weather the loss of the international support they received as LDCs and confront the challenges that lie further ahead requires what the Report calls “graduation with momentum” – a process of structural change to increase the productivity of their economies. But many of the countries projected to graduate will not achieve this.

“Graduation is not the winning post of a race to escape from the LDC category. It is the first milestone in the marathon of sustainable long-term development,” said Mr. Kituyi. “So how a country graduates is just as important as when it graduates.”

Likely failure to meet the graduation target, or to achieve graduation with momentum, highlights the inadequacy of international support measures to the developmental needs of LDCs. The Report therefore calls for improvements to such measures, for example:

  • Fulfilment by donors of their long-standing commitments to provide 0.15-0.20 per cent of their national income for assistance to LDCs, to make aid more stable and predictable, and to align it more closely with national development strategies.

  • Faster progress towards 100 per cent duty-free and quota-free access for LDCs’ exports to developed country markets.

  • Renewed efforts to break the stalemate on special and differential treatment for LDCs in World Trade Organization negotiations.

  • Full and timely operationalization of a technology bank for LDCs in 2017, with adequate financing and due regard for each country’s level of development.

  • Improved monitoring of technology transfer to LDCs.

  • A more systematic, smooth transition process for graduating countries, to limit the impact of losing access to international support measures when they graduate.

For LDC Governments, moving from graduation strategies to graduation-plus strategies aimed at achieving graduation with momentum is also essential. Key priorities include the following:

  • Transforming rural economies by developing rural non-farm activities in parallel with upgrading agriculture.

  • Combining economy-wide industrial policies directed towards market failures with policies aimed at promoting productive activities that contribute to development.

  • Building capacities in science, technology and innovation.

  • Strengthening tax systems, improving financial systems and addressing financial inclusion.

  • Pursuing macroeconomic policies that combine stability with investment dynamism and employment generation.

  • Strengthening efforts to address gender inequality across all policy areas.


Graduation is the process through which a country ceases to be an LDC, having in principle overcome the structural handicaps that warrant special support from the international community, beyond that generally granted to other developing countries. However, the Report argues that it should be regarded, not as a winning post, but rather as a milestone in a country’s long-term economic and social development. Thus, the focus should not be on graduation itself, but rather on “graduation with momentum”, which will lay the foundations for long-term development and allow potential pitfalls to be avoided far beyond the country’s exit from the LDC category.

Structural transformation, the importance of which is explicitly recognized in the 2030 Agenda for Sustainable Development, plays a fundamental role in this process.

Projections conducted for the Report suggest that only 16 of the 48 current LDCs are likely to fulfil the graduation criteria by 2021, well short of the IPoA target. Unless effective national and international action is taken, the ensuing graduations are also likely to widen the development gap between the remaining LDCs and other developing countries still further.

While there are numerous international support measures (ISMs) for LDCs, their contribution towards graduation is undermined to varying degrees by vague formulation, non-enforceability of commitments, insufficient funding, slow operationalization and exogenous developments in international trade and finance. Their effectiveness also depends critically on the institutional capacities of each LDC to leverage them in support of its own development agenda. Nonetheless, loss of access to LDC-specific trade preferences after graduation may entail substantial costs, estimated by the Report to be in the order of $4.2 billion per year across LDCs as a whole. Such losses underscore the importance of effective smooth transition procedures, and of strong leadership and sound preparation on the part of LDC governments.

The Report highlights the need for LDCs to move from graduation strategies focused on qualification for graduation to “graduation-plus” strategies that take a long-term perspective and foster structural transformation.

Facts and Figures 2016

The UNCTAD Least Developed Countries Report 2016 projects that the following 16 LDCs will graduate from the LDC status in the 2017-2024 period: Afghanistan, Angola, Bangladesh, Bhutan, Djibouti, Equatorial Guinea, Kiribati, Lao People’s Democratic Republic, Myanmar, Nepal, Sao Tome and Principe, Solomon Islands, Timor-Leste, Tuvalu, Vanuatu, and Yemen.

The report projects that the target set in Istanbul in 2011 – that half of the-then 49 LDCs satisfy the graduation criteria by 2020 – will not be met. Projections indicate that only ten LDCs will meet the graduation criteria by that date.

  • The number of LDCs doubled from the original list of 25 in 1971 to a peak of 50 between 2003 and 2007, declining to 48 since 2014.

  • Four LDCs have graduated since the principle of graduation was established in 1991: Botswana in 1994, Cabo Verde in 2007, Maldives in 2011 and Samoa in 2014.

  • While Botswana graduated three years after first meeting the criteria in 1994, this took 17 years for Samoa, 11 years for Maldives, and 10 years for Cabo Verde.

  • None of the graduated LDCs has satisfied the vulnerability criterion even after graduation.

  • 33 LDCs and two of the four past graduates have remained in the same per-capita-income category since 1987

  • In the 1950-2010 period, LDCs on average experienced more than 20 years of declining real GDP per capita, compared with around 15 years for other developing countries and fewer than 10 years for developed countries.

Graduates’ profile and post-2025 LDC profiles

UNCTAD graduation projections imply a reduction in the total number of LDCs from 48 in 2016 to 32 in 2025. These would be: Benin, Burkina Faso, Burundi, Cambodia, Central African Republic, Chad, the Comoros, Democratic Republic of the Congo, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Kiribati, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, Tanzania, Togo, Tuvalu, Uganda, Yemen and Zambia.

  • By the mid-2020s, the projections imply that the LDC group would include only two countries outside Africa (Cambodia and Haiti) and only one small island country (Comoros).

  • The average GNI per capita of the projected graduates of 2017-2024 was nearly double that of the LDCs projected to form the group in 2025 ($1,377 as against $731).

  • The projected graduations would increase the agricultural share of employment from 59.7 per cent in the current LDC group to 68.1 per cent in the 2025 group.

  • None of the current exporters of minerals, ores and metals is projected to graduate by 2024; and two of the five current fuel exporters are projected to be unable to graduate in this period (Chad and South Sudan).

Commodity dependence

  • In 38 of the 47 LDCs for which data are available, commodities accounted for more than two-thirds of merchandise exports in 2013-2015.

  • Only five LDCs (Afghanistan, Burundi, Comoros, Solomon Islands and Uganda) have reduced their dependence on primary commodities significantly since 2000, while a quarter have seen significant increases.

Divergence between LDCs and other developing countries (ODCs)

The GDP per capita of LDCs as a whole has fallen almost continuously relative to that of other developing countries and economies in transition since 1981, from more than a quarter to barely one sixth. This ratio fell in all but 5 of the 33 years from 1981 to 2014.

  • Since 1990 the proportion of all people worldwide without access to electricity who live in LDCs has increased by two thirds, from 31.8 per cent to 53.4 per cent of the world total; and their share of people without access to water has more than doubled, from 20.0 per cent to 43.5 per cent.

  • The tertiary education enrolment ratio in LDCs rose slightly from 1.6 per cent in 1970 to 9.0 per cent in 2013. At the same time it soared from 4.0 per cent across all developing countries to 26.4 per cent over the same period.

  • Other developing countries registered 907 times as many patents relative to population and LDCs in 2014, compared with 35 times as many in 1980, as registrations have stagnated in LDCs but boomed in other developing countries.

  • The proportion of medium and high skills- and technology-intensive manufactured goods in total merchandise exports has consistently been around 10 times higher in ODCs than in LDCs since 1995, and the gap has widened still further in recent years.

  • The median level of mobile telephone subscriptions per 100 people is 65 in LDCs, compared with 110 in other developing countries.

Economic growth

Economic growth in LDCs reached a low of 3.6 per cent in 2015, by far the slowest pace of expansion this century, the slowest since 1994, and barely half the Istanbul Programme of Action target of 7 per cent.

  • Their average per-capita GDP growth rate fell by more than half, from 3.3 per cent in 2014 to 1.5 per cent in 2015.

  • GDP per capita fell in 13 LDCs, in three cases (Equatorial Guinea, Sierra Leone and Yemen) by more 10 per cent

  • The fastest growth in 2015 was recorded by exporters of manufactured goods, at 6.2 per cent, faster than the average for developing countries as a whole.

  • Ethiopia enjoyed the fastest growth rate among LDCs in 2015 (10.2 per cent), followed by the Democratic Republic of the Congo, Bhutan, Myanmar, the Lao People’s Democratic Republic and the United Republic of Tanzania, all of which grew by at least 7 per cent.

  • Yemen experienced a dramatic reduction in GDP (-28.1 per cent), due to armed conflict taking place there.

International trade

  • Despite targeting a doubling LDCs’ share of global exports by 2020 (under the Istanbul Programme of Action), their share in global exports of goods and services fell from 1.05 per cent in 2011 to 0.96 per cent in 2015.

  • In 2015, LDCs’ total current account deficit was a record $68.6 billion, one-third greater than in 2014, while both developing countries as a whole, and developed countries, had surpluses.

  • The current account deficit of LDCs in Asia nearly doubled to $13.8 billion.

  • Relative to GDP, Mozambique had the largest current account deficit in 2015 at 41.3 per cent.

  • The total merchandise trade deficit of LDCs almost doubled from $36 billion in 2014 to $65 billion in 2015.

  • In nominal terms, the merchandise trade deficit of African LDCs and Haiti group grew by a factor of more than eight, from $2.6 billion in 2014 to $22.5 billion in 2015.

  • Fuels, ores, metals, precious stones and gold accounted for 77.7 per cent of merchandise exports of African LDCs and Haiti in 2015, compared with 20.5 per cent for Asian LDCs, and 7.8 per cent for island LDCs.


  • Total net official development assistance (ODA) to LDCs in 2014 amounted to $26 billion. The share in total ODA to developing countries received by LDCs went down from 31.2 per cent in 2013 to 27.1 per cent in 2014.

  • The largest LDC recipients of ODA in 2014 were Afghanistan ($3.9 billion), Ethiopia ($1.9 billion), South Sudan ($1.6 billion), the United Republic of Tanzania ($1.5 billion), Mozambique ($1.4 billion), Bangladesh ($1.4 million), the Democratic Republic of the Congo ($1.2 billion) and Myanmar ($1.2 billion)

  • Inflows of foreign direct investment (FDI) to LDCs as a group increased by one third to $35 billion in 2015, compared with an increase of 9.5 per cent (to $765 billion) to developing countries as a whole.

  • The Africa and Haiti group received 79.9 per cent FDI flows to LDCs, Asian LDCs 19.7 per cent, and island LDCs 0.4 per cent.

  • Personal remittances to LDCs rose from $38.5 billion in 2014 to $41.3 billion in 2015, despite a fall from a global historic high of $592 billion in 2014 to $582 billion in 2015.

  • Seven countries accounted for 82.5 per cent of all personal remittances to LDCs in 2015: Bangladesh ($15.4 billion), Nepal ($7 billion), Myanmar ($3.5 billion), Yemen ($3.5 billion), Haiti ($2.2 billion), Senegal ($1.6 billion) and Uganda ($1.1 billion).

  • Relative to GDP, remittances were greatest in Liberia (33.8 per cent), Nepal (33.4 per cent), Haiti (24.7 per cent), Senegal (11.7 per cent) and Kiribati (11.0 per cent).


  • In 2015, the United Nations Development Programme’s gender inequality index was 0.57 for LDCs, compared with 0.45 for developing countries as a whole.

  • Of the 36 LDCs for which data are available, 26 are in the lowest of five categories based on this index.

Landlocked LDCs

  • Landlocked LDCs have an average GNI per capita more than one-quarter less than the LDC average and 37 per cent less than that of coastal and island LDCs.

  • Growth in landlocked countries has on average been at least 3.5 percentage points less than in coastal and island developing countries (controlling for other determinants), an effect that cannot be wholly offset by domestic policies.

Small island LDCs

  • Three of the four countries that have graduated to date are small island developing states (SIDS), as are six of the ten countries projected to graduate by 2021. Only one small island LDC (Comoros) is not projected to graduate in the 2017-2024 period.

  • The particular economic vulnerability of small island LDCs is reflected in a higher Economic Vulnerability Index (EVI) than other LDCs (52.0, compared with 39.6).

  • Kiribati is the most vulnerable of the 145 countries for which the EVI has been calculated. Its score on this index is 71.5.

  • Small island LDCs on average have a substantially higher Human Asset Index than other LDCs (73.9, compared with 47.7), and their average GNI per capita is more than twice as high ($2,088.6 as against $942 in 2013-2015), reflecting the so-called “island paradox”.

Ongoing efforts

Most of the countries whose graduation is expected by 2024 have included graduation as an explicit goal in their development plans and programmes, and at least five of these countries (Bangladesh, Bhutan, the Lao People’s Democratic Republic, Myanmar and Nepal) have set explicit timetables.

Most LDCs that are not expected to graduate until after 2024, by contrast, emphasize goals related to reaching middle-income status, rather than graduation from the LDC group.

International support measures (ISMs) to LDCs

  • The potential impact of losing LDC-specific trade preferences is estimated at $4.2 billion annually across LDCs as a whole.

  • There are 136 LDC-specific ISMs, in the fields of finance, trade, technology and technical assistance.

  • ODA to LDCs from Development Assistance Committee (DAC) donors was only half the 1981 agreed target of 0.15 to 0.20 per cent of GNI in 2012–2014, a shortfall of $26-$50 billion.

  • The climate finance architecture is immensely complex, encompassing 29 implementing agencies, 21 multilateral funds and initiatives, and 7 bilateral funds and initiatives.

  • In 2013, Quad countries (the United States, the European Union, Japan and Canada) accounted for 40 per cent of LDCs’ total merchandise exports.

  • More than half of LDC exports to major developed country markets would have faced zero tariffs even without preferential market access.

  • LDCs accounted for an average of 29 per cent of total Aid-for-Trade commitments and 27 per cent of disbursements in 2012-2014.

  • In 2014 the share of LDCs in total Aid-for-Trade disbursements fell to 25 per cent, the lowest level for at least a decade.

  • Only 0.49 per cent of total ODA disbursements to LDCs in 2012-2014 went to science, technology and innovation, barely one-third of the small proportion (1.44 per cent) in other developing countries.

  • The number of LDCs benefiting from technical assistance under Article 67 of the World Trade Organization’s Trade Related Intellectual Property Agreement (TRIPs) fell by more than two thirds from 25 to 8 between 2008 and 2012, while the number of cooperation partners providing such assistance fell from 13 to 5.

  • 85 per cent of respondents to an UNCTAD survey with LDC policymakers deemed their respective countries’ access to development finance insufficient to achieve the Istanbul Programme of Action targets by 2020.

  • Only about half of the respondents considered that there had been improvements in their respective countries’ ability to retain and manage resource rents.


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