Poverty Reduction in the Least Developed Countries


Research Paper (postgraduate), 2018
18 Pages

Excerpt

TABLE OF CONTENTS

INTRODUCTION

1. BACKGROUND ON THE LEAST DEVELOPED COUNTRIES

2. ASSISTANCE TO THE LEAST DEVELOPED COUNTRIES
2.1 Family Planning
2.2 Poverty Reduction Strategy (PRS) Initiative

3. GRADUATION
3.1 Requirements for Graduation
3.2. Causes for Non-Graduation

CONCLUSION

REFERENCES

INTRODUCTION

The United Nations has classified several countries as Least Developed Countries (LDCs). Of these countries 21 of them have been on the list since the inception of the LDC category in 1971, and it has been very difficult for them to exit this group. According to the United Nations Conference on Trade and Development (UNCTAD 2016), global poverty is increasingly concentrated among this group of countries, which are falling further behind the rest of the world in terms of economic development. As of 2018, 47 countries are classified as LDCs. As the global community has pledged to reduce inequality and promote shared prosperity, this paper envisions to

1) find out what has been done to help reduce the level of poverty in LDCs;
2) identify and examine the effectiveness or ineffectiveness of the strategies implemented, and
3) determine why it has been so difficult to graduate from the LDC category.

Before investigating these issues, however, this paper will provide a brief background on the least developed countries.

1. BACKGROUND ON THE LEAST DEVELOPED COUNTRIES

The Least Developed Countries are a sub-group of the Developing Countries (formerly referred to as less developed countries) and are defined by the United Nations as countries with low levels of income and human capital, and high economic vulnerability. Most of them are characterized by limited economic growth and export diversification, and a lack of competitive industries and exploitable natural resources. They also confront severe structural impediments to development and are vulnerable to natural disasters, such as droughts, floods, and hurricanes. World Bank (2016) has further sub-classified 23 of the 47 LDCs as “fragile”, and argues that these fragile countries experienced below-average GDP growth, under 4 percent a year compared with almost 6 percent in LDCs as a whole between 2000 and 2014. This is problematic because a growth rate of 7 percent has been targeted by international institutions to drive development in these countries.

What are the criteria used to classify a country as LDC?

UNCTAD (2017) posits that a country is classified as least developed country based on three criteria:

- Per- capita income (which is gross national income – GNI – per capita with a three-year average threshold of $1,025).
- Human assets index (HAI), based on indicators of nutrition, health, school enrolment, and literacy.
- Economic vulnerability index (EVI), based on indicators of natural shocks, trade-related shocks, physical exposure to shocks, smallness (population), and remoteness.

To be included in the group of LDCs, the threshold for all three criteria must be met, and the government of the country must give its consent. Without this consent, the country will not be added to the list even if it is qualified and meets all the three criteria. In this regard, UNCTAD (2017) states that qualification for addition to the list will effectively lead to LDC status only if the Government of the relevant country accepts this status.

Although a vast majority of LDCs are low-income countries (LICs), some of them are not because the LDC category is also based on human development and economic vulnerability criteria. As a result, argues Crawfurd (2016), the LDC classification includes some (but not all) lower-middle income countries. These countries are Bangladesh, Bhutan, Myanmar, Sao Tome and Principe, Timor-Leste, and Vanuatu. Tuvalu is also classified as LDC even though it is an upper middle-income country. According to Crawfurd, the rationale for the inclusion of those countries is partly to help out small and vulnerable island states.

Table 1 provides a list of the current LDCs (as of 2018) together with the inclusion year for each.

Table 1. Least Developed Countries

Abbildung in dieser Leseprobe nicht enthalten

Source: United Nations Committee for Development Policy.

2. ASSISTANCE TO THE LEAST DEVELOPED COUNTRIES

In order to help LDCs break the vicious cycle of poverty, the international community has agreed to some “special concessions” in support of this group of countries. For instance, international donors and financial institutions have provided grants and loans with low interest rates; in terms of trade, special treatments, including preferential access for their products to the markets of the developed countries; international support in finance, trade and technology; duty-free and quota-free market access.

However, despite the privileges, benefits, and special treatments, the economic situations of the LDCs have worsen instead of improving. According to UNCTAD (2016), the proportion of the global poverty in those countries has more than doubled since 1990, to 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.

The least developed countries therefore are left behind even though the global community had pledged to “leave no one behind”. Facing this fact, the UNCTAD Secretary-General affirms that the LDCs are the countries where the battle for poverty eradication will be won or lost (UNCTAD, 2016). The goal “poverty eradication”, which is different from “extreme poverty eradication”, is indeed very ambitious. The author of this paper prefers the concept “poverty reduction” because it seems more realistic and feasible.

Reflecting on the plight of the LDCs, Milanovic (2006) indicates that economic theory predicts that globalized markets for capital and technology will help poor countries ‘catch up,’ as poor countries take advantage of cheaper access to technologies already developed in rich countries, and capital flows to the developing countries where it is more scarce. However, continues Milanovic, since the late 1970s, per capita incomes have actually diverged between countries, and overall the Least Developed Countries (LDCs) have not grown.

The picture painted so far for the LDCs is indeed very somber, but it is important to acknowledge that poverty reduction is a complex and multifaceted issue, and the causes are numerous. Natural disasters (aggravated by climate change), inability to compete in global markets and attract foreign investment, low savings and slow economic growth, and ineffective policies/strategies (both national and international) are some of the reasons given to explain why the LDCs are left behind.

In their attempt to explain the lack of LDCs’ progress, Reiter and Adhikari (2016, 27 May) assert that many LDCs are dependent on commodity export and, due to insufficient export diversification, are struggling significantly with the latest slump in commodity prices. They further argue that LDCs remain heavily exposed to severe economic and natural shocks, including threats related to climate change, and are less equipped to deal with such challenges. Regarding the argument of commodity prices, it is worth mentioning that even when prices were relatively high, that had not contributed to the removal of the overwhelming majority of LDCs from the list because of the weight of the other factors involved.

Almost all strategies used have been unsuccessful in reducing poverty and promoting economic development in the majority of LDCs. Among those strategies, this paper will focus on Family Planning and Poverty Reduction Strategy (PRS) Initiative.

2.1 Family Planning

The United Nations Population Fund (UNFPA) defines family planning as the information, means and methods that allow individuals to decide if and when to have children, and this includes a wide range of contraceptives. UNFPA and many other international institutions support family planning as a strategy to control the number of births in LDCs, which would eventually lower the level of poverty in these countries.

This strategy, however, has not been very successful because most women in developing countries do not use contraceptives. Cognizant of this fact, UNFPA asserts that common reasons why women do not use contraceptives include logistical problems, such as travelling to health facilities or supplies running out at health clinics. Other reasons cited by UNFPA are social barriers, such as opposition by partners, families or communities, lack of knowledge about the availability of contraceptives, and incorrect perception about the health risks of modern methods.

However, the reasons given by UNFPA fail to include a fundamental one, which is the absence of an economic safety net for individuals in their old age. To help understand the significance of this last crucial reason, the author of this paper reproduces as Box 1 some personal observation and conversations that he had many years ago with some women in a developing country.

Box 1. Observation on the Use of Contraceptives

When I was living in a developing country many years ago, I personally witnessed conversations among men and women on the idea of taking contraceptive measures to limit the number of children they would have. The women opposed the use of contraceptives for very pragmatic reasons, and they were more vocal than the men. The rationale for their refusal was as follows:

Children represent a guarantee that someone will be there to take care of them personally and financially in their old age (their safety net). As the vast majority of governments in the developing world do not provide any safety net, the elders have to rely on their children. When asked why they gave birth to many children, their response was “one eye is no eye”, meaning that they had to have many children. Their rationale was that some of the children might die or might not be good providers. They argued that some of them might have limited means or do not care. They believe that if they have several children, at least one of them will be a good provider. Some women had even expressed a preference for girls by saying, “girls will always take care of mommy.” According to them, boys will be more attached to their wives after they get married.

The issues raised during the conversation in Box 1 are very real and critical in least developed countries. They must not be dismissed because they reflect the participants’ life experience. For instance, although the global maternal mortality has declined, in low-income countries more than half the population dies from communicable diseases or maternal, prenatal, or nutrition conditions, according to World Bank (2016). With regard to the issue of lack of social safety net, World Bank (2016) indicates that average social assistance cash benefits account for only 10 percent of poor’s consumption in low-income countries. In most LDCs, people have not received any social assistance at all.

Based on the reality described in Box 1, the rationale for the refusal to use contraceptives is obvious, and that the decision to have many children is fundamentally an economic one. It is therefore not practical nor advisable to take away something from someone without first replacing it with something else. This strategy of family planning will most likely continue to fail until some safety net is provided to individuals, or good-paying jobs are created, which would enable people to save and have some financial security in their old age.

The above observation on family planning can be viewed as an example to - in part- explain the importance of using policies/strategies that are applicable and appropriate to cases in specific countries if we want to foster economic growth and development that would reduce the level of poverty in LDCs.

2.2 Poverty Reduction Strategy (PRS) Initiative

When a substantial proportion of a country’s population is poor, it makes little sense to detach poverty from the dynamics of development, states the United Nations Institute for Research and Development (UNIRSD, 2010). Aware of the importance of poverty reduction in the development process and the fact that “Stakeholder groups were disappointed by the poverty reduction impact of past development assistance, particularly the poor results in low-income countries”, the World Bank, in conjunction with other international institutions, launched the Poverty Reduction Strategy (PRS) Initiative in 1999.

The key objective of the Initiative, states the World Bank, is to assist low-income countries in developing and implementing more effective strategies to fight poverty by supporting and sustaining a country-driven Poverty Reduction Strategy (PRS) process in low-income countries. According to the World Bank, this new PRS process should follow five underlying principles:

- Country-driven, involving broad-based participation
- Comprehensive in recognizing the multi-dimensional nature of poverty
- Results-oriented and focused on outcomes that benefit the poor
- Partnership-oriented, involving coordinated participation of development partners
- Based on a long-term perspective for poverty reduction

The process also requires preparation of Poverty Reduction Strategy Papers (PRSPs) and their endorsements by the Board of the Bretton Woods Institutions (BWIs), meaning the World Bank and IMF, to gain access to resources. To obtain irrevocable debt relief, the Heavily Indebted Poor Countries (HIPCs) are required to produce an initial PRSP and implement it successfully for a year. Regarding this last requirement, some concessions had been made. The process also includes additional requirements.

How successful has been this new approach?

Case studies, such as “Poverty reduction strategy processes in Malawi and Zambia” by Bwalya et al (2004), reveal some difficulties encountered by countries in implementing the PRS process. Depending on the country, some are less successful than others for several reasons, including structural, socio-cultural, economic and political, and especially the weaknesses of domestic institutions. Some of these countries have difficulties in following through with “intended policies” - designed by or with the assistance of international institutions - which prevented them from achieving the desired outcomes.

[...]

Excerpt out of 18 pages

Details

Title
Poverty Reduction in the Least Developed Countries
College
Harvard University
Author
Year
2018
Pages
18
Catalog Number
V513569
ISBN (eBook)
9783346115690
ISBN (Book)
9783346115706
Language
English
Notes
This paper -partially revised - was originally submitted by the author as a participant in a series of lectures on Development Economics at Harvard University in the summer of 2018.
Tags
poverty, reduction, least, developed, countries
Quote paper
JClaude Germain, Ph.D. (Author), 2018, Poverty Reduction in the Least Developed Countries, Munich, GRIN Verlag, https://www.grin.com/document/513569

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