Rethinking Bretton Woods | Sat, Mar 12, 2011
In preparation for the fourth United Nations Conference on the Least Developed Countries, to be held in Istanbul, Turkey on 9-13 May 2011, the Africa growth Initiative at Brookings, InterAction, and the Center of Concern co-hosted a discussion on US policy towards LDCs. Since 1981, Member States of the United Nations have been engaged in global cooperation to help the Least Developed Countries (LDCs). This category is defined by the United Nations as a group of low-income countries which face subverse structural constraint to economic growth and development.
There are currently 48 LDC defined countries, of which, 33 are from Africa, 1 from Latin America (Haiti), and 14 more from Asia and the Pacific. Mr. Arjun Karki, International Coordinator for LDC-Watch and chair and spokesperson of UN LDC IC Civil Society Forum, commented that the 48 poorest and most vulnerable countries, listed as LDCs, are in a “development emergency” in great need of foreign assistance. Many of the LDC-defined countries rank among the lowest in the world on the Human Development Index., Chronic poverty, troubling maternal and child mortality rates, and staggering unemployment have plagued LDCs for decades. Furthermore, Mr. Karki described the “development emergency” in terms of the growing financial crisis, rising food prices, lack of energy, the sometimes violent climate system, internal conflict, political instability, and human rights violations. Despite great efforts to aid those categorized as a LDC, only 2 countries have graduated from the “poverty trap” of Least Developed Countries.
Nonetheless, the past 10 years have had some encouraging improvement in part due to the concerted assistance from the development partners. According to Cheick Sidi Diarra, Secretary General of the 4th United Nations Conference on LDCs, the United States has played a ‘pivotal role’ in the progress of LDC’s and continues to commit itself to the cause of global cooperation. Current US President, Barack Obama, has reaffirmed and increased assistance to LDCs and articulated the importance of Least Developed Countries in the United Nations’ overall development agenda. In 2009, the United States represented 22% of the total USD 37 billion allocated funds for LDCs. In 2011, the US announced its expansion of the Feed the Future Program, and brought duty-free, quota-free preferential treatment to several LDCs through initiatives like the Africa Growth and Opportunity Act in sub-Saharan Africa.
Steve Radelet, Chief Economist for USAID also commended the United States for its productive agenda on aid to LDCs. From the first Presidential Policy Directive on Development, to the presence of President Obama at the MDG Review Summit, the United States has made a ‘loud statement’ on the importance of global cooperation in terms of aid to LDCs. USAID has implemented USAID Forward, aimed at better focusing resources across and within countries instead of spreading aid too thing across too many countries. Mr. Radelet stressed the importance of sustainable economic growth as one of the main paths to reducing poverty over time. Additionally, he stressed USAID’s new approach in partnership with LDC governments, which aims to work within and outside governments, including citizens in partner countries. With significant increases in monetary assistance to LDCs (USD 8 billion allocated in 2010 and an estimated USD 11 billion for 2011), USAID and the United States have remained committed to LDCs both financially and in a more transparent way in order to see the progress hoped for in the Least Developed Countries.
According to Mr. Diarra, “There have been gains but ultimately there remains much to be done for improvement”. Due to the global economic crisis, many donors have been reluctant to commit as much aid as previously promised, creating a problem for LDCs and the new program to be discussed in Istanbul this May. In agreement, Laurence Chandy, a Fellow at the Brookings Institution, added that “aid is very volatile, and the volatility of aid creates incredibly pernicious effects on recipients”. Fickle aid programs can be contrary to development in the long run if aid is only used for short periods as a carrot to induce policy reform in recipient countries. Mr. Diarra suggested that it is time for leading economies to find alternative sources of financing development, with Aid for Trade and financial transaction tax schemes at the forefront (although, Mr. Radelet refuted, saying that the issue is not necessarily finding a clever way to tax, but rather allocating financial resources in the most effective way possible).
Mr. Karki approached development reform in a similar fashion to Mr. Diarra. In his discussion on development, he added, “The world has changed, and so must the approaches that we use to address the challenges faced by LDC’s”. In a new light, Mr. Karki listed different means of aid that do not necessarily warrant a large dollar amount for donor countries. These means include debt cancellation, food sovereignty, fair trade, adequate and predictable development assistance, crisis mitigation and assistance, coordinated adaptation to climate change, and an immediate follow-up to the LDC-IV Conference to sustain the focus and attention toward development within the Least Developed Countries.
The UN Conference on the Least Developed Countries in May leaves the world in a state of anticipation. Will the US and the rest of the world engage in aid reform in order to pull the Least Developed Countries out of a “poverty trap”? As Mr. Karki asserted in his intervention, “We must aim to close the gaps, to achieve international convergence, and to give hope to more than 850 million people living in the LDCs.”
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