Question

Explain the major obstacles towards economic growth in the Least Developed Countries (LDCs).
Provide your own suggestions to accelerate the economic growth of the LDCs.

Answer 1

Strong emphasis was placed on building capacity for LDCs to mobilize local financial resources. Tax reform – including the State's ability to collect and manage tax revenues efficiently might help raise LDC finance. It is likely that the LDCs will continue to depend heavily on foreign assistance to exploit opportunities on the informal market and improve their technological and institutional capacity to effectively mobilize capital.

LDCs are highly dependent on primary commodities leaving them vulnerable to commodity price fluctuations. That results in balance of payments imbalances and economic instability. Some African countries like Angola and Mozambique were particularly badly hit.

Many LDCs expressed frustration at the lack of global implementation support, including the lack of reform to persistently unfavorable trade regimes, the divergence between pledged financial assistance and actual money supplied, and the transfer of token technology. The G8 community of countries , for instance, fell more than US$ 10 billion short on their Africa commitments alone for 2010. As important as focusing on local reforms is, it is crucial that sufficient attention is paid to implementing means. Without that, the LDCs graduation remains a mere aspiration.

LDC delegates shared concern about the mind-boggling number of priorities and objectives set by various global initiatives, including the Sustainable Development Goals, IPoA, the Paris Climate Change Agreement and the Biological Diversity Convention, to name just a few. Keeping track of both of these priorities is challenging, and not always the most efficient way to execute growth agendas. The best path forward is through a structured framework of simplified reporting mechanisms.

The government should provide limited opportunities to solve the first-mover issue; that is, to enable private companies to join the new industry. If companies succeed, then other copycat companies would share the gains quickly. Yet failure of the first movers provides latecomers with useful information. Policymakers might therefore consider compensating pioneer firms in the identified industries with time-limited tax incentives, investment co-financing or foreign exchange access. LDC international support mechanisms such as duty and quota-free entry to the market will help certain companies gain a competitive advantage in international markets.