Asian LDCs seek more donor funds for graduation
The least-developed countries in the Asia Pacific region are parched for external financing to move out of the ignominious list of most disadvantaged nations but the prospect for adequate donor fund is unpredictable.
Officials from 12 LDCs of the region began a three-day meeting in Dhaka yesterday to discuss ways to mobilise official development assistance (ODA) so at least half of them can graduate to the middle-income status by the 2020 deadline.
"ODA has been unpredictable, with bilateral support priorities of donor countries often based on their historical relationships and other political considerations,” said Shamshad Akhtar, under-secretary-general of the United Nations.
“Resources are also often deployed in sectors which do not enhance the productive capacities of economies."
The executive secretary of the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) spoke in a video message at the inaugural of the meeting on "Financing graduation gaps of Asia Pacific LDCs" at Sonargaon Hotel in Dhaka.
The UN official said LDCs would need significant level of financial resources to support their graduation, and this calls for exploiting all sources of financing and capital flows.
Three Bangladeshi ministers and a number of international speakers echoed the views of the UN official.
The continuous slow flow of ODA to the LDCs is sad, and developed countries have failed to honour their commitments on development assistance, said AMA Muhith, finance minister.
International financing institutions should come up with adequate support to help the LDCs meet their needs for funds, said MA Mannan, state minister for finance and planning.
“We must break the cycle of poor inflow of FDI and ODA because of low absorptive capacities in the LDCs,” said Shahriar Alam, state minister for foreign affairs.
“This is crucial to fully realise the Istanbul Programme of Action as well as the upcoming Sustainable Development Goals.”
ESCAP's Akhtar said the LDCs must the broaden tax base and woo foreign investors to graduate from the list of the most disadvantaged nations.
"The LDCs face a range of structural impediments, and lifting these economies from the trap of low incomes and social deficit calls for holistic approaches to support their economic and social transformation," she said.
A number of speakers lamented the low level of official development assistance flowing to the LDCs as one of the key setbacks, as many countries rely on donors' money.
The 12 Asia Pacific LDCs received about $12 billion in ODA in 2012, which was 9 percent of the total donors' money. And half of the money went to Afghanistan.
Akhtar said even if ODA commitments to LDCs rise, most of the growth impetus would need to come from the private sector.
"This calls for LDCs to create an enabling policy environment for private sector investment and implement broad-based structural reforms to address their wide-ranging structural impediments."
Although the Asia Pacific LDCs are home to 56 percent of the world's total poor population, they receive about 20 percent of the global ODA, said Syed Nuruzzaman, chief of Countries with Special Needs Section at the ESCAP's macroeconomic policy and development division.
The Economic Relations Division in association with ESCAP and the United Nations Department of Economic and Social Affairs (UNDESA) are organising the event.
The conference aims at giving LDCs a valuable opportunity to offer some practical guidance on how the countries can facilitate and accelerate the process of their graduation.
Fifty-five policymakers from Afghanistan, Bangladesh, Bhutan, Cambodia, Kiribati, Laos, Myanmar, Nepal, Solomon Islands, East Timor, Tuvalu and Vanuatu are taking part in the event.
At present, there are 12 LDCs in Asia and the Pacific region with half of them supposed to graduate by 2020. Samoa and the Maldives have successfully already moved out of the category.
Kiribati, Vanuatu and Tuvalu are moving forward on the path towards graduation, while several countries, including Bangladesh, Cambodia, Lao PDR and Nepal, have formally expressed their commitment to graduate in the next six years.
These LDCs face a number of challenges when it comes to their graduation. They have low levels of human capital and investment and some are landlocked while others having exposures to natural disasters and economic shocks.
The investment-GDP ratio stands at 26.7 percent in the Asia Pacific LDCs. Issues surrounding allocation and efficiency of investments have held back economic diversification and kept productivity low in these countries, Akhtar said. "Graduation from LDC status means overcoming these limitations."
"It means growing the economy above and beyond the status of a low income country, creating conditions for people to have access to health, education, and better nutrition, and reducing vulnerability for the natural and economic shocks which make growth within LDCs so volatile and threaten hard-earned development gains."
ERD Secretary Mohammad Mejbahuddin, who chaired two sessions on the day, said ODA should go to areas that will bring in transformational change in an economy.
He said the LDCs have given more attention to appropriate policies, strategies and programmes for bringing about desired development and economic changes in the countries.
“There has not been much thinking, and measures have not been taken on how the funding for the programmes will be mobilised.”
The secretary said the LDCs have been heavily dependent upon ODA flows, and hoped the assistance pledge of 0.15 percent to 0.20 percent by OECD countries would make all the difference.
“Unfortunately, resource flow to LDCs has remained much lower than promised, and is unlikely to be realised in the near future given the worldwide economic downturn.”
Given the enormity of the development challenge these countries face, sources of financing for development has to be much varied comprising domestic as well as international and both through public and private channels, she said.
A delegate from the Lao PDR said his country would not be able to move out of the list without international development support. Another delegate from Kiribati said support should be provided in developing infrastructure which will give the economy a major boost.
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