WORLD TRADE WT/LDC/HL/13
13October 1997
ORGANIZATION(97-4445)
Original: English High-Level Meeting onIntegrated Initiatives for
Least-Developed Countries 'Trade Development
TRADE LIBERALIZATION AND SUSTAINABLE HUMAN DEVELOPMENT
THE CHALLENGE OFPROMOTING SUSTAINABLE BUSINESS PRACTICES
Contribution bytheUnited Nations Development ProgrammeWT/LDC/HL/13
Page2
TABLE OFCONTENTS
PageNo.
1. INTRODUCTION 3
2. THE BENEFITS OFLIBERALIZATION 5
3. THE ROLE OFTHE INTERNATIONAL COMMUNITY 8
4. TRADE AND SUSTAINABLE HUMAN DEVELOPMENT 9
5. SECTORAL POLICIES FOR TRADE LIBERALIZATION INSUPPORT 12
OFSUSTAINABLE HUMAN DEVELOPMENT
(i) Commodities 12
(ii) Agriculture 15
(iii) Forests 16
(iv) Energy 18
6. Conclusions andRecommendations 19WT/LDC/HL/13
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TRADE LIBERALIZATION AND SUSTAINABLE HUMAN DEVELOPMENT
I. INTRODUCTION
1. Theleastdeveloped countries seemtohavebeenthelosers fromthenegotiation oftheUruguay
Round. Developing countries asawhole gainfrom theround, although thegains tothedeveloped
world areproportionately much greater. Ontheother hand, theleastdeveloped countries stand to
loseupto$600 millions peryearinGSPadvantages. Preferential access toEuropean markets under
theLomé convention willbeeroded (orlost). AndtheUruguay Round lefttheleastdeveloped with
tariffs ontheirexports, some 30percentabove theglobal average since many oftheirbasic exports
suchasleather andtextiles arestillsubject tocomparatively hightariffs. Escalation willremain a
problem forthose countries seeking tomove upthevalue added chain, withtariffs 8-26percenthigher
onthefinished exports oftheLDCs thanontheunderlying rawmaterials.1
2. Evensome ofthegains mayyetprove tobeillusory. Many observers feelthatlittlewillhappen
intextiles andagricultural subsidies, twoofthemajor accomplishments oftheUruguay Round. As
arecent OECD study putit,:“Thecontrast between trade liberalization theory andpractice inthe
industrializedcountriesisstriking.WhereasOECDMembercountriesunanimouslyendorseliberalization
asaneconomic ideology, theirtrade practices point intheopposite direction.2Early evidence on
thesubsidy front isnotencouraging. Even aftersubsidy reduction, theUruguay Round agreement
stillpermits income support payments tofarmers. “Theendresult isthatthe$182billion inproducer
subsidies provided bytheOECD countries in1995 -asumrepresenting 40percentofthevalue of
output -isunlikely todecline (OECD 1996). Itisworth mentioning thatthe1995subsidy figure was
some 15percenthigher thanthatatthestartoftheUruguay Round. ”3Thetextile commitments are
equally dubious. Forpolitical reasons, theyareheavily “backloaded ”inthesense thatmostofthe
changes arescheduled tohappen inthelateryears ofthephase outperiod.
3. Inanycase,someleastdeveloped countries maywellbeharmed ifthesubsidy andMFA changes
areactually implemented. Some, suchasBangladesh andNepal, willloseMFA quota access andface
increasing competition from other developing countries. Andifagricultural subsidies arereduced,
theincreased priceofimported foodwillhitsome countries hard. Food imports account formore than
15percentoftotalimports in13ofthe16leastdeveloped countries, forwhich statistics areavailable.4
4. Finally, although theRound diddevelop some provisions designed tohelptheleastdeveloped,
itdidnotaddress thetwoissues which concern them most -relief from theirhighlevels ofdebtand
thedramatic deterioration intheterms oftrade fortheircommodity exports.
5. Despite these inauspicious beginnings, UNDP believes thatLDCs canbenefit from trade
liberalization andthattrade liberalization cancontribute tosustainable human development inthe
48poorest countries. Theconventional policy package ofWTO membership, structural adjustment,
1Human Development Report, UNDP; Oxford: Oxford University Press, 1977, p.85
2Cited inDavid Reed (Ed), Structural Adjustment, theEnvironment andSustainable Development, London:
Earthscan, 1996
3same as1,p.27
4AnnWeston, “TheUruguay Round: Unravelling theImplications fortheLeast Developed andLowIncome
Countries ”,inInternational Monetary andFinancial Issues forthe1990’s,Vol6,UNCTAD 1995WT/LDC/HL/13
Page4
thedevelopment ofexport capacity, access toNorthern markets andsources ofexport finance anda
focus ontheprivate sector maybeanecessary, butfarfrom sufficient, condition forsustainability.
6. Forliberalization tofulfilitspotential, theinternational community andtheLDCs themselves
mustimplement accompanying pro-poor, pro-environment policies simultaneously. Otherwise, export
expansionandinvestmentliberalizationmaycontributetothewideningofalreadygreatincomedisparities
andtotheacceleration ofenvironmental decline.
7. ThemixedblessingsfromtheUruguayRoundcomeagainstabackgroundofthealreadydramatic
deterioration inthetradepositions ofthe48leastdeveloped. Between 1970and1991, thedeveloping
countries ’share ofworld trade barely changed. Butthedistribution among regions haschanged
substantially. Forexample, Asian countries sawtheirshare ofworld trade increase from4.6percent
to12.5percent. TheLDCs, withabout 10percentoftheworld ’speople, have0.3percentofglobal
trade. Twenty years ago,theirshare wastwice ashigh.
8. Much ofthisdropinmarket share canbeattributed totheprecipitous fallincommodity prices.
UNCTAD estimates thatcommodity prices in1990 were45percentlower thanin1980 and10per
centlower thanthelowest prices during theDepression.5Thistrend hascontinued intothe1990’s
(although thelasttwoyears havebeenmore promising). Andmostofthese countries arestillheavily
commodity dependent. Theterms oftrade formanufactured goods from developing countries have
alsoworsened. Oneestimate putsthedropat35percent.
9. WithfallingcommoditypricesandasmallershareofGDPdevotedtoexportsthanthedeveloping
countries asawhole, thefinancial situation ofmostLDCs isprecarious. Thishasbeenexacerbated
bythedropinlevels offoreign assistance, stillanimportant element ofthebudgets ofmostLDCs.
Their financial position isworsened stillfurther byhighlevels ofdebt. Debtpayments typically absorb
20percentormore ofexport revenues.
10. AndFDIwillnotmake upthese shortfalls intheshort term. Despite substantial efforts to
implement major structural reforms, including privatization ofstateassets, market liberalization and
removal oflimitations onforeign ownership, verylittleoftheremaining direct foreign investment has
come totheleastdeveloped. TheLDCs asawhole receive only1.1percentofallFDIflows tothe
developing world. “Theinvestment shares ofGDP ofbothsub-Saharan Africa andLatin America
andtheCaribbean inthe1990’sremained lower thanthelevels reached in1971-80. Halfofthe
developing countries receive littleornoFDI,andinathirdofthemtheratioofFDItoGDP fellover
thelastdecade. ”6...“In1994, forexample, allofsub-Saharan Africa received FDIflows worth $1.8
bn,ortheequivalent offlows toNewZealand.7
11. Since thestructural reforms havenothadthedesired effect ontheagricultural sector, imported
cereals imports nowabsorb 1/4th ofsub-Saharan Africa ’sexport earnings. Between 1990 and1994,
percapita foodproduction fellin33oftheLDCs andgained verylittleinmostoftheremaining 15.
“..InAfrica, theILO(1995) estimates thatduring 1987-91 themedian growth rateoffoodproduction
5AlbertBerry,SusanHortonandDipakMazumdarGlobalization,Adjustment,InequalityandPoverty,prepared
fortheHuman Development Report, 1996, page 15.
6Globalisation andliberalisation: theimplications forpoverty, distribution andinedquality, paper prepared
forUNDP Human Development Report Advisory Panel. Kevin Watkins, Oxfam UKandIreland, 22January
1997. p4.
7Same as6,page 15WT/LDC/HL/13
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pereconomically active person was-8.0percentwhile thatofagricultural exports was-20percent.”8
Asaresult, dwindling supplies offoreign exchange arebeing usedforfoodimports.. With debt
repayments absorbing similar amounts andexport receipts under threat because ofdeteriorating terms
ofcommodity trade, littleremains tocreate afavourable balance ofpayments andfinance thecosts
ofdevelopment.
12. Falling incomes, greatly reduced public services, andtheincreased incidence ofpoverty in
theleast developed have been accompanied byaccelerated environmental degradation. Andthis
degradation hasmade itevenharder toearnaliving. Virtually allLDCs aredependent upon their
natural resource bases forthemajority oftheirexports, andmost oftheirpopulations arerural. It
isherethattheimpacts ofdesertification, lossofbiodiversity, soildegradation anddeforestation are
most keenly felt.
13. Finally, uptoathirdoftheleastdeveloped countries haveseenprolonged periods ofcivilstrife
andpolitical instability which haveseriously hindered anyefforts toward economic development and
havehaddevastating social andeconomic consequences.
II. THE BENEFITS OFLIBERALIZATION
14. Trade liberalization andthepolicies thatgoalong withitcanoffertheLDCs some important
chances overthelonger termtoreverse thedeclines suffered overthelasttwoorthree decades.
15. However itisclear thatmore sustainable forms ofdevelopment willnotemerge simply if
governments havemore money from more trade tospend onenvironmental protection andpoverty
alleviation. Itislikely, however, thatmore sustainable forms ofdevelopment willnotemerge without
thenewresources which increased trade canprovide.
16. Liberalization andopenness toforeign trade andinvestment canhaveanumber ofpositive
effects:
(i) liberalization canreduce inefficiencies from resource misallocation;
(ii) liberalization enhances learning, technological change andgrowth;
(iii) increased export earnings provide increased revenues which could beusedtoinvest
inenvironmental protection andsocial services;
(iv) FDI canbring withitmore efficient, cleaner production technologies;
(v) environmental standards canberaised through import requirements ofpurchasers in
other countries andthrough “bestpractice ”TNCs;
(vi) outward looking economies seem better abletocopewithexternal shocks.
17. TheUruguay Round agreement canhelptoopenmarkets intheNorth toproducers fromLDCs.
Anumber ofthese maywellbe“niche”markets inareas suchashorticulture, tourism andorganic
produce. They canalsooffergovernments theopportunity to“lockin”needed butunpopular domestic
policy reforms. Theagreement mayalsohaveindirect benefits. Byexpanding theexports ofmiddle
income developing countries, itmaycreate newopportunities forLDC exports tothese countries.
18. Itshould alsobeadded thatthenewobligations which LDCs assume asaresult oftheUruguay
Round arenotasarduous asmany critics would believe. “Theagreements offermuch flexibility in
8Globalization, Adjustment, Inequality andPoverty, Albert Berry, Susan Horton andDipak Mazumdar, paper
prepared fortheHuman Development Report, 1977, p.12WT/LDC/HL/13
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theadoption oftheobligations fordeveloping countries. Theadoption ofmany newrules issubject
tolongtransition periods, which inmany casescanbefurther extended. Many ofthegeneral exemptions
orthose forbalance ofpayments support remain available. Apart from theincrease intransparency
fromthenotification requirements, fewchanges topolicies arerequired bySub-Saharan Africa inthe
short run..”9
How tocapitalize onthese benefits
(a) Macroeconomic stability, outward oriented trade policies, more favourable treatment
offoreign investments, andremoving excessive distortions inmarkets areimportant
prerequisites. Many oftheleastdeveloped countries havealready undertaken anumber
ofthenecessary reforms toopentheireconomies. These policy reforms haveproduced
some economic stabilization, helped along byrecent increases incommodity prices;
buttheyhaveyettoshow thekindofsignificant stimulation togrowth which these
economies desperately need.
(b) Governments mustplace fargreater emphasis ontradeexpansion. Despite thegeneral
endorsement ofexport-led development asoneofthefewremaining options formost
LDCs, fewgovernments haveelaborated acomprehensive andcoherent strategy to
promote trade. Thisisnotjustaweakness ingovernments, itisalsotrueoftheprivate
sector, civilsociety anddonors inmany countries. “Tosupport anewgeneration of
export-oriented firms willdepend ongovernments 'capacity todevelop incollaboration
withtheprivate sector andother civilsociety leaders anoverall development strategy
thatplaces trade atitsverycenter. ”
(c) LDC'sneedtodevelop thecapacity toimplement these kinds ofmajor policy and
institutional changes. Thatisthereason forthisconference. Theintegrated program
oftechnical assistance setoutelsewhere willbecritical tothesuccess oftheleast
developed countries inworld markets. Andtheassessments already received bythe
Secretariat make itclear howgreat theneeds are.
19. Arecently developed UNDP programme forAfrica outlines thebreadth ofthechallenge. It
ranges fromimproving theability ofgovernments tonegotiate intheWTO, todeveloping acapacity
toanalyze international trade trends, toenhancing information flows about trade andinvestment, to
strengthening thecapacity ofngo’sandprivate sector organizations, toincreasing theawareness of
LDCs wishing tonegotiate theiraccession totheWTO.
20. TheProgramme addresses three main capacity building goals fortrade development, withan
agenda ofaction foreach. Under eachagenda, theprogramme contains anumber ofmodules, which
includes aseries ofactivities, suchthateachmodule furthers itsrespective agenda. However, the
modules aresomewhat discrete andcanwork asseparate projects independent ofeachother, though
ideally when combined, theyprovide thedesired multifaceted approach.
TheThree Agendas
1. Under theareaofhuman development resources, theprogramme contributes tothe
establishment ofnetworks ofnational andregional trainers andtraining institutions
9Piritta Sorsa, “Sub-Saharan Africa andtheUruguay Round ”,TheWorld Economy, Vol.19#3, May1996,
page 304WT/LDC/HL/13
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thatareequipped totrainnational andregional policy-makers, private sector operators
andcivilsociety representatives intheareas oftrade thatarepertinent tothem
2. Intheareaofcapacity forpolicy andstrategy making, theprogramme attempts to
strengthentheabilityofgovernmentsandeconomicintegrationorganizationsthroughout
theregion toidentify policies thatcanmove forward bothsub-regional integration and
theintegration ofsub-regional groupings within theglobal community.
3. Intheareaofenabling institutions fortrade, theprogramme attempts tostrengthen
selectively thebroad range ofinstitutions uponwhich firms needtorelyontostrengthen
theircompetitiveness inexport markets.
21. UNDP believes thatthecritical missing linkbetween avision ofanexport-led fastgrowing
African economy anditsrealization liesintheabsence ofastrong supply side, which includes: (i)
thesupply ofpolicy-makers andbusiness operators skilled inunderstanding howintegrated economies
work; (ii)thesupply ofstrong trade policies; and(iii)thesupply ofexport-oriented entrepreneurs
andofmeso-level institutions tosupport these newentrepreneurs toassist intheimplementation of
thenewstrong trade policies. Insum, whatislacking isthecapacity among African actors totake
fulladvantage ofthehostoftrading opportunities. Consequently UNDP 'sinitiative isdesigned to
develop thesupply sidebybuilding capacity among thevarious actors.
Basic Principles forDurable Capacity Building
22. UNDP alsobelieves thatforacapacity building initiative tobeeffective anddurable, ithas
tobeconsistent withthreebroad principles, which hasnecessitated thecreation ofaboldandinnovative
programme structure.
1. Thecapacity-building initiative hastaken theform ofanintegrated, multifaceted
exercise, asopposed tothetraditional piecemeal approach.
(i) Under thisProgramme, UNDP brings together theexpertise ofvarious
specialized agencies bydrawing onthebesteachhastooffer.
(ii) Thisstructure alsoensures thattheagencies collaborate among themselves and
among theirlocalandregional institutional counterparts.
(iii) Eventhough theprogramme covers numerous sectors, regions andparticipants,
itisstilldesigned formanageability andaccountability inmind. Themodules
eachhave adesignated leadagency, andtheyapply toalimited group of
institutions andcountries atanyonetime. Onlyifsuccessful, would themodule
migrate toabroader range ofparticipants.
2. Theapproach targets regional andnational institutions; bytargeting onewithout the
other, countries areunable toeffectively utilize theresources thatarebeing builton
theirbehalf elsewhere.
3. Theapproach alsoemphasizes strong country ownership; thisrequires working tothe
greatest degree possible withlocalcounterpart institutions, andtheinitiative includes
abroad array ofparticipants, suchasNGOs, civilsociety andgrass-roots groups, and
notleastofalltheprivate sector entrepreneurs.WT/LDC/HL/13
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23. Although specific toAfrica, itwould berelatively easytoadapt thiskindofapproach tothe
needs ofother LDCs. Aninternational program toexpand theexport capacity ofLDCs mustbeamajor
priority ofthisConference.
III. THE ROLE OFTHE INTERNATIONAL COMMUNITY
(a) ARenewed Commitment toDevelopment Assistance
24. Since theEarth Summit anditsrenewed commitment toODA, foreign assistance hasfallen
dramatically toitslowest levelin25years (at0.28percentofthedeveloped countries ’collective GDP).
AndIDAassistance hasbarely beenmaintained inrealterms, while theIMFisanetrecipient offunds
from developing countries, including some ofthepoorest.
25. Inorder foranyplantohaverealexpectations ofsuccess, ODA totheLDC’smustbeincreased
andmore carefully targeted. Insome countries, foreign investment andincreased export earnings are
filling thegap. Butforallthereasons outlined above, theLDC’swillremain dependent upon ODA
fortheshort andmedium term. Andwithparsimonious Northern parliaments unlikely toloosen the
purse strings, greater targeting ofaidonthepoorest willbeessential iftheyaretoescape thepoverty
trap.Thiswillrequire thekindofsustained political willdemonstrated alltoobriefly attheCopenhagen
Summit.
26. Theneedforassistance wasputverypowerfully bytheoneofthekeyfigures intheUruguay
Round. Peter Sutherland stated inarecent article “...itisobvious tomethatthemarket willnever
provide alloftheanswers totheproblems ofpoverty andinequality. Thefactisthatthere arethose
whowillnotbeabletodevelop theireconomies simply because market access hasbeenprovided. ”
Hewentontoaddthat,“Thegreatest economic challenge facing theworld istheneedtocreate an
international system thatnotonlymeasures global growth butalsoachieves agreater measure ofequity,
asystem thatbothintegrates emerging economic powers andassists currently marginalised countries
intheirefforts toparticipate inworldwide economic expansion...Some evenseethereduction insupport
forthepoor asapositive encouragement foreconomic growth. There arethose whooppose
redistribution policies inprinciple, whether inthedomestic ortheinternational context. Thisiswrong.
Itismorally wrong, itispragmatically wrong andweought nottobeashamed tosayso.”10
(b) Commitment toanAccelerated Program ofDebt Relief
27. Success willalsodepend upon debtreduction. Thiswould notonlyfreeupresources for
investment inexport growth, butitwould alsohelptheleastdeveloped toimprove theircredit ratings -
akeyingredient where export financing isconcerned. Although therecent initiatives inthisareato
dealwithmultilateral debt(typically uptohalfoftherepayments) areencouraging, eligibility criteria
arestillaproblem foranumber ofheavily indebted countries suchasTanzania andEthiopia whowill
notqualify untilatleasttheyear2000. Iftheliberalization andadjustment efforts aretobesuccessful,
theGroup ofSeven andtheBretton Woods institutions should aimtoendthedebtcrisis forthepoor
countries bythatyear. Debt relief tothe20countries deemed potentially eligible would notbe
particularly expensive. Estimates range between $5.5and$7.7billions.11
10International Herald Tribune, Feb. 20,1997
11Human Development Report, 1996WT/LDC/HL/13
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(c) Greater Market Access forLDC Exports
28. TheUruguay Round mustliveuptoitsminimum promises intheareasofagricultural subsidies
andtextiles. Developed countries must beserious intheimplementation oftheir Uruguay Round
commitments. There isalsoaneedtotreatproducts from theleastdeveloped countries onanequal
footing withthose ofdeveloped countries byaccelerating theliberalization ofmarkets ofconcern to
these countries suchastextiles andleather, andtoinstitute abanondumping agricultural exports.
Inaddition, many oftherecommendations intheComprehensive andIntegrated WTO planofAction
fortheLeast Developed Countries should beimplemented including:
(i) Eliminatingtariffescalationforsemi-processedtropicalagriculturalproductsandnatural
resources;
(ii) Deeper tariff cutsandeliminating duties which arestillsubject tohightariff peaks
under preferential schemes;
(iii) Exemptingtextileimportsfromsmallproducersfromrestrictions,evenifthesecountries
arenotWTO members.
(d) R&D forSustainable Development
29. Finally, thereisarealneedforinternational R&Dprograms forthepoor. Therecent Global
Knowledge ‘97Conference pointed outhowthepoorest neednotbeleftonadirtroadbeside the
information highway. Andthetimehascome foranemphasis oninternational agricultural research
onthecrops andgrowing conditions produced bythe2billion people wholiveonmarginal lands,
depending onrainfed crops suchassorghum andmillet whohavesofarnotbenefited fromthegreen
revolution.
IV. TRADE AND SUSTAINABLE HUMAN DEVELOPMENT
30. Theactions recommended above should helptheleastdeveloped countries expand theirexport
sectors andmobilize desperately needed resources forinfrastructure improvements, capacity building,
export finance andthelike. Butwilltheyhelptobeing about sustainable development?
31. Theanswer is,notnecessarily. Enough hasbeenwritten intheHuman Development Report,
byUNICEF, andinother places about theimpact ofstructural adjustment policies onthepoorand
especially onwomen, todictate thattheymustinclude economic andsocial policies which empower
thepoorandincrease theirincome earning opportunities. Andthese kinds ofstructural adjustments
aretheprecursors forexport expansion.
32. Ifincreased exports starttheengines ofgrowth inmany LDCs, willthisgrowth leadtomore
sustainable forms ofdevelopment? Again, notnecessarily. Research conducted fortheHuman
Development Report indicates thatgrowth isthekeytopoverty reduction -without it,littlecantake
place. Butgrowth appears toberesponsible foronlyabout 50percentofpoverty reduction. The
restresults from deliberate policies directed toward thepoor. Theexperience ofSoutheast Asiais
instructive. Indonesia, South Korea andMalaysia havehadgreat success indramatically expanding
theirexports andinreducing poverty since the1970’s.Their growth strategies expanded economic
opportunities forpoorpeople, withrelatively equitable distribution offinancial andphysical capital,WT/LDC/HL/13
Page10
including land. Andtheresources generated byeconomic growth wereheavily channeled intohuman
development, especially intoimproving health, education andskills. ”12
33. These strategies canberemarkably successful incombining rapid export growth withpoverty
reduction. In1970, about 60percentofthepopulation ofMalaysia lived below thepoverty line.
Thepercentage fellto21by1985 andto14percentby1993. Thetarget is7percentby2000.
34. Other countries, incontrast, haveexperienced rapid export growth andawidening ofincome
disparities, withlittleimpact oncoreincome poverty.
35. Willliberalization andadjustment helptobring about environmentally sustainable development?
Again, notnecessarily. Inthewords oftheWorld Bank, “Economic growth cangenerate resources
toaddress environmental problems butitisnotbynecessity environmentally sustainable. Markets
forenvironmental goods andservices areoften incomplete ornonexistent. Consequently, some
environmental values arenottaken intoaccount inmarket transactions. Thisisparticularly soina
context inwhich much oftheenvironmental resources arecommon property. Freemarkets cannot
beexpected toproduce efficient andsustainable results when property rights arenotclearly defined,
complete, enforced andtransferable. Complete privatization ofallenvironmental costs andbenefits,
however, isneither feasible nordesirable, which makes public policies thatreflect ecological values
necessary. ”13
TheEnvironmental Situation intheLeast Developed Countries
36. Virtually allLDCs areheavily dependent upon theirnatural resource bases from bothan
economic andsocial perspective. Inarecent publication,14theWorld Bank described thesituation in
SubSaharan Africa ingraphic terms. Although specifically directed toAfrica, many oftheseproblems
arepresent inequal measure inother LDCs.
37. Heavy Reliance onNatural Capital: About twothirds ofthepopulation ofsubSaharan Africa
livesinruralareasandderives itsmainincome fromagriculture. Alargepercentage ofexport earnings
from allAfrican LDCs isderived from agriculture andforestry. Thisnatural capital israpidly
deteriorating under thepressures ofdesertification andpopulation growth.
38. Andtherearesome major constraints onusing natural capital inafragile environment. African
soilsarecomparatively poorandsuffer fromachronic lackofphosphorus. Overgrazing anderosion
hasreduced thisproductivity evenfurther. Oneestimate isthatthesoilshavelostupto20percent
oftheirproductivity. Africa depends almost exclusively upon rainfed agriculture, andhasthelowest
percentage ofirrigated landofanycontinent inthedeveloping world.
39. Extreme Poverty along withrapid population growth: Poverty isbothacause andaresult
ofenvironmental degradation.
12Ibidpage 74
13Toward Environmentally Sustainable Development inSub-Saharan Africa, TheWorld Bank, Washington
D.C. 1996, page 20
14Toward Environmentally Sustainable Development inSub-Saharan Africa, TheWorld Bank, Washington,
1996 p.2WT/LDC/HL/13
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40. Urbanization andMigration: SubSaharan Africa isthemostrapidly urbanizing region inthe
world. Italsocontains some 35million transnational migrants, including some 4million refugees.
These massive migrations notonlyplace enormous pressures onpolitical andsocial structures, but
theyalsoconcentrate environmental pressures oncertain “hotspots”.
41. Because African economies haveaccumulated lowlevels ofhuman made capital, theyareforced
toincrease theirreliance onnatural capital. Thiscananddoesleadtolanddegradation, deforestation
andthelossofbiological diversity. Thisleads tofoodinsecurity which canoften leadinturnto
migration intomore marginal lands inaneffort toexpand acreage andintocities totally unequipped
fortheflood ofmigrants.
42. Ithasalsoledtolonger termdependence onfoodaidfromthetemperate countries which in
turndepresses agricultural prices andleadstoasubstitution forwheat andriceforthemore traditional
foodcrops ofthearea.
43. Hasthekindofstructural adjustment necessary forliberalization helped toreduce orexacerbate
these trends? Studies bytheWorld Wide Fund forNature15,theWorld Resources Institute16and
UNRISD17havebegun toshedlightontherelationship between these programs andtheenvironment.
44. Theenvironmental impacts ofthestructural adjustment process appear tohavebeenmixed.
Some oftheprice reforms have been good forthenatural environment, encouraging intensified
commercial agriculture, promoting crops which arelesserosive andgreatly reducing subsidies for
agricultural inputs.
45. Onbalance, however, environmental degradation seems tohaveaccelerated. Unemployment
resulting fromthestructural adjustment programs hasledinsome cases tourban ruralmigration which
inturnresults inincreased cultivation ofmarginal soilsandincreased reliance onwildlife, forest and
plant resources which inturnescalates pressures onsoils, forests andbiological diversity.
46. Theremoval offuelsubsidies results inareturn totheuseoffuelwood andcharcoal with
resulting increases indeforestation anddesertification. There areindications insome countries ofrapid
increases inunsustainable timber exports ascountries seektoincrease theirearnings offoreign exchange.
47. Poaching hasincreased, including endangered species, asruralpeople seektosupplement their
incomes.
48. Theagriculture sector hasreacted intwowaystotheadjustment process. Commercial farmers
haveresponded tothenewprice signals byexpanding andoften diversifying production. Andthere
havebeensome positive environmental improvements associated withthese increases inintensified
production. Smaller farmers havereacted inexactly theopposite way. Removals ofsubsidies on
agricultural inputs, reductions inextension programs andtheuncertainty resulting fromtheprivatization
offarmtomarket distribution systems hasledtoanextensification ofagriculture asfarmers reduce
theircashoutlays andtrytomaintain production bybringing more andmore marginal landunder
15DavidReed(Ed),StructuralAdjustment,theEnvironmentandSustainableDevelopment,London:Earthscan,
1996
16Need refforPhilippines casestudy byWilly Cruz andRobert Repetto
17UNRISD, States ofDisarray: Thesocial effects ofglobalization, Geneva: United Nations, 1995WT/LDC/HL/13
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cultivation. “Themutually reinforcing character ofdeepening poverty andenvironmental degradation
inbroad areasofsome countries indicates thatenvironmental problems willworsen incoming years. ”18
49. Theextractive industries inthecountries studied reacted quickly tothenewincentives provided
byliberalization andexploration andexploitation activities expanded quickly. However, substantial
cutsinthealready modest environmental agencies which existed before adjustment haveconstrained
theroleofgovernment toregulate thiskindofactivity.19
50. Boththeadjustment andliberalisation processes seem toassume thatnegative environmental
externalities willbeaddressed bygovernment action tocorrect market failures andtoestablish market
based incentives toprotect theenvironment. However, environmental agencies inmostLDCs were
never particularly strong orpolitically influential. They therefore suffered severe cutbacks suchthat,
“Thenorm among thesecountries iscutbacks sosevere thatbasicresource management functions have
beengutted orparalyzed. ”20
51. Insummary, although structural adjustment hasresulted insome positive environmental
changes... ”Without exception... thestudies affirm thefactthatthecurrent environmental impact trends
areserious, havelongtermimplications, andinmany cases, show signs ofirreversible damage. Of
equal concern isthefactthattheadjustment process ’neweconomic incentives haveprompted the
conversion andintensified useoftheseresources without providing newsources ofthose environmental
goods andservices tomatch rising consumption rates.”21
V. SECTORALPOLICIESFORTRADELIBERALIZATIONINSUPPORTOFSUSTAINABLE
HUMAN DEVELOPMENT
52. There areanumber ofkeysectors forLDCs which willrequire deliberate policy decisions
tohelpensure thatliberalization andadjustment contribute todevelopment thatisbothsocially and
environmentally sustainable.
(a) Commodities
53. Perhaps themostdifficult issuefrombothasocial andenvironmental point ofviewintheshort
runisthatofcommodities. Although efforts atdiversification areabsolutely essential andmust be
akeypartofbothnational andinternational efforts toassist theLDCs, most ofthese countries will
remain dependent upon theexport ofprimary commodities forthenextfewyears. Yetcommodity
prices arenotoriously volatile. Thelongtermdecline inprices isduetoanumber offactors, partly
afallinthecommodity intensity ofproduction, partly fromincreases insupply because oftechnological
innovation andaresort to“desperation production ”bycountries seeking togenerate foreign exchange,
andpartly bythedevelopment ofsubstitutes forsuchcommodities assugar andcopper. Partofthe
problem stems from thefocus ofcommodity producers ononesingle product withlittleattention to
potentially useful byproducts. Finally, many commodity based industries aredemoralized bythese
18Reed etal,page 329
19UNRISD
20Ibid, page 325
21Reed, page 349WT/LDC/HL/13
Page13
long term declines. Asaresult, levels ofR&D arelow, facilities areoften outmoded and
undercapitalized andinvestment levels arelow.
54. Thecumulative losses fromdeclining terms oftradesuffered bydeveloping countries amounted
to$290billions between 1980 and1991. ForSub-Saharan Africa, thelosswastheequivalent of5%
ofGDP.22
55. Attempts tostabilize, orevenincrease, commodity prices through international action have
failed. Andthere seems littlesupport forfurther international stabilization schemes. Bydefault, the
initiative seems tohavefallen totheproducers todevelop theirownsupply management schemes. This
isclearly unsatisfactory asproducers arealready bearing adisproportionate share oftherisksassociated
withcommodity production andarereceiving adisproportionately small share oftherevenues.
56. Export diversification isobviously crucial formost commodity producers andliberalization
could beoneofthekeystodiversification. Andhereiswhere thedonor community muststepinto
help. Support fortheSecretary-General ’sappeal for$75millions tosupport commodity diversification
would beagood firststep.
57. Commodities canpresent environmental andsocial problems. Thegrowth ofcertain crops
requires substantial application ofpesticides, exposing workers tonotorious health problems aswell
asdamaging theenvironment. Working conditions inthese industries areoften primitive, even
oppressive. Processing ofsome commodities, suchaspalmoil,canbeenvironmentally verydamaging
andthere isanecdotal evidence thatthepressure toearnforeign exchange hasdriven some countries
tocultivate highpesticide intensive orerosive cashcrops forexports onlandpreviously given over
tofoodcrops. This, inturn, hasforced foodfarmers ontomore marginal lands.
58. Becausevirtuallyallcommodityproducersarepricetakersandbecausevirtuallyallcommodities
areinabundant supply, itisextremely difficult tointernalize theenvironmental costsofcommodities.
Thestructure ofthecommodities business, inwhich theproducers receive onlyasmall partofthe
returns, exacerbates these problems.
59. Theunlikelihoodofsecuringtheagreementofalargenumberofproducerstosupplymanagement
schemes, andtheunwillingness ofdonors tofinance stabilization funds andthechronic problems of
oversupply make costinternalization extremely difficult. Thishasledtosome innovative suggestions
forreform.
60. Forexample there have been proposals forInternational Commodity Related Agreements
(ICREAs)23.Twotypesofsuchagreementshavebeensuggested.Onewouldcommitexportingcountries
toagree tocertain technology related environmental standards foraspecific commodity overanagreed
period. Thiswould require ahighdegree ofproducer andconsumer cooperation, otherwise those who
usedthetechnology would beundercut bythose whodidnot.
61. Thesecond, andperhaps more viable variant, would seektocapitalize onthegrowing interest
ingreen ororganic foods intheNorth. Under thisscheme, acompensation fundwould becreated
fromfinancial contributions fromtheimporting countries. Their annual contribution would bebased
upon theirimport volume ofthecommodity andtheirpercapita income levels. Exporting countries
22Maizels, quoted inWatkins.
23Henk L.Kox, TheInternational Commodity Related Environmental Agreement: Background andDesign,
Henk L.Kox, Free University ofAmsterdam, ICREA Research Project, June 1994WT/LDC/HL/13
Page14
would beabletodrawonthefundtofinance newtechnologies, andbetter environmental management
ofthecommodities involved.
62. Theincentives for“freeriders ”would beundercut iftheimporting countries agreed tocharge
thelevyoncommodities onageneric basis, thusensuring thatnoprice advantage wasgiven forpoor
environmental performance.
63. Some innovative producers mayalsobeabletoincrease their market shares through the
development of“niche”markets fortheirproducts. Producers mayhavesome options forproduct
differentiation through “fairtrading ”schemes suchasMaxHavelaar andother schemes which take
intoaccount suchissues asthesocial andenvironmental conditions under which theproduct was
produced.
64. Some Northern consumers, especially inWestern Europe, havebeenwilling topayadditional
costs forthese kinds ofproducts. Thepremium ranges from 20%fororganically produced coffee
totriple theprice forsome fruits. Astudy produced fortheDPCSD suggests thatthepotential for
theseproducts maybesubstantial. Itcitesexamples oftextiles inIndia; CFCfreerefrigerators inEgypt
andSwaziland; tourism inSenegal andJamaica; coffee inCosta Rica, organic fruitinChile andorganic
cotton inUganda.
65. Thiscould wellprovide income forpoorer farmers provided therightfinancing anddistribution
facilities canbeputinplace. Because theyareunable toafford modern inputs, suchaspesticides and
fertilizers, many poorfarmers areforced topractice thekindofagriculture which producers products
withlowlevels ofpesticides andother residues which command apremium insome markets.
66. Research intonewwaysofproducing agricultural commodities canalsoresult inproducts which
canappeal tothese niche markets. TheMona LisaandGoldfinger bananas, developed inCentral
America withtheassistance oftheInternational Development Research Centre, areresistant toallof
thecommon banana funghi, thereby bothreducing thecosts oftheirproduction, aswellasenabling
theproducers tomeetorganic criteria inthemarketplace.
67. Admittedly, these “niche’markets aresmall, buttheyaregrowing. AndmostoftheLDC’s
aresmall producers ofmany ofthesecommodities. Amodest portion ofthemarket inNorth America,
Europe orJapan could make amajor difference intheirexport prospects.
68. Another interesting approach hasbeenpioneered bytheZERI project attheUnited Nations
University. Inapplying bothmodern technology andabusiness approach tothepalm oilindustry,
forexample, theyseektomaximize theutilization ofthebiomass (90% isnowwasted andthatwaste
isinitself amajor environmental problem), greatly reduce pollution levels andtoincrease thevalue
added byoperating palm oilprocessing plants onthesame basis asmodern oilrefineries.
69. TheUNU Research teamhasdiscovered thatthere isamajor potential market forecological
cleaning products, based uponpalmoilsurfactants. Inaddition, theirresearch indicates that“...some
90percentofwhatisnowconsideredwastecouldberecoveredandtransformedintomarketableproducts
soldatcompetitive prices, i.e.byextracting vitamins, anti-oxidants andbetacarotene. These would
reduce prices, thusstimulating demand, supporting newtrade flows andmotivating more vegetable
oilprocessors toadapt theirextraction systems tomaximize thevalue oftheirrawmaterial. Waste
lignin, some 30percentofthewaste biomass, canberecovered asaclean fuel. ItcanalsobeusedWT/LDC/HL/13
Page15
asasubstitute forepoxies which would boost theproduction offormaldehyde freemedium density
fibreboard. Finally, waste fibres could alsobeusedintheproduction offibreboard. ”24
70. Thekeytothisprocess istochange theentire outlook ofthepalmoilindustry fromonewhich
issetupsimply toproduce anedible oiltoonewhich ismore akintothatofthepetroleum industry
where virtually every molecule isusedtoproduce asalable product. While thisapproach willnotwork
forevery commodity theZERI program islooking atitspotential forother edible oils,andsugar,
forexample. itisaresearch approach worthy ofincreased international support.
(b) Agriculture
71. While tradeliberalization maywellbenefit thelarge commercial farming sector, itisunlikely
tohelpsmallholders wholackaccess tomodern inputs, financing, farmtomarket distribution facilities,
andoften, secure tenure totheirland. Yetthere isplenty ofevidence thatthese farmers arethekey
tofoodsecurity. The88lowincome fooddeficit countries identified bytheFAO spend halfoftheir
foreign exchange onfoodimports. Andthisfigure maywellriseshould thesubsidies inthetemperate
countries bereduced under theUruguay Round agreements. Many ofthese countries could become
foodselfsufficient iftheyadopt policies aimed atstimulating smallholder agriculture.
72. Without positive action bygovernments andthedonor community, theliberalization process
could therefore produce theludicrous situation where theforeign exchange earnings arising from
increased exports ofcashcrops could beeclipsed bytheincreased costoffoodimports. Andthese
assumptions arenotfarfetched. Asexplained above, adjustment policies already seemtohaveresulted
inreduced output from small farmers inanumber ofAfrican countries.
73. Ifthetemperate subsidies arenotreduced, theworld willcontinue tobefaced withtheequally
ludicrous situation where Northern taxpayers continue tosubsidize theirfarmers tothetuneof40%
ofthevalue ofthecrops. Itwillcontinue tobefaced withthespecter oftheEuropean Union, which
wasamodest netimporter ofsugar 20years ago,being theworld ’slargest single exporter ofsugar,
acropperfectly suited tothetropics. These subsidies havehelped toreduce thedeveloping countries ’
share ofworld agricultural trade from 50%inthepostwarperiod toabout onequarter today.
74. Furthermore, continuing foodaidmade possible bythese subsidies (notemergency foodaid)
hashelped todepress localfoodprices inmany LDCs, thusrobbing farmers oftheincentives togrow
food. Inmany parts ofAfrica ithasledtothesubstitution ofwheat andriceforthemore traditional
cassava, sorghum andmillet, thusaggravating balance ofpayments problems.
75. Thishasbeenunderstood foryears. Butitneeds tobetackled nowiftheleastdeveloped
countries aretobenefit fromtheopportunities toearnadditional foreign exchange fromexpanded exports
ofmanufactures andcommodities.
76. Iftheexpansion offoodproduction inthepoorest countries istocontribute tosustainable human
development, itwillrequire policies directed specifically tothesmallholder. Andinmostoftheleast
developed countries, theywillneedtobetargeted atthelowexternal inputsystems. “Farming systems
inthese areas arecomplex anddiverse, agricultural yields arelow,andrural livelihoods areoften
dependent upon wildresources aswellasagricultural produce. They areremote from markets and
infrastructure; theyarelocated onfragile orproblem soils; andarelesslikely tobevisited byagricultural
scientists andextension workers orstudied inresearch institutions...Most ofthefoodproduction in
Africa comes from these lowexternal input systems ofagriculture. Theextraordinary thing isthat
24Need reference from theYale/UNDP book.WT/LDC/HL/13
Page16
inthemid1990’ssome 30-35% oftheworld ’spopulation, about 2billion people, aredirectly supported
bythisforgotten agriculture. ”25
77. There havebeenanumber ofsuccesses atstimulating thisform ofagriculture inAfrica and
inthepoorer partsofAsia. Buttheyhavebeenverylocalized. Researchers havedrawn thefollowing
lessonsfromthesuccesses:“Theyhavemadeuseofresourceconservingtechnologies,suchasintegrated
pestmanagement, soilandwater conservation, nutrient recycling, multiple cropping, water harvesting,
waste recycling andsoon.Inall,there hasbeenaction bygroups andcommunities atlocallevel;
andtherehavebeensupportive andenabling external government and/or nongovernmental institutions.
Most though arestilllocalized...That isbecause afourth element, afavourable policy environment,
ismissing. ”26
78. Twoinitiatives havebeensuggested tocomplement thisfavourable policy environment, both
ofwhich involve some external elements which could behelpful tosmall farmers. Thefirst, isthe
suggestion thatthenextround ofinternational agricultural research should bedirected atsmall farmers
practicing rainfed agriculture onmarginal lands, rather thantheemphasis onirrigated agriculture which
hassofarpredominated. Thesecond istheWorld Bank’sambitious proposal tohelpcorrect thepoverty
ofAfrican soilsbyamajor campaign toincrease thelevelofphosphorus.
79. Biodiversity andagriculture should gohandinhand. Yetmany oftheLDCs arelosing their
biodiversity atrapid rates. Thisisnotonlytrueforanimals, butincreasingly soforplants. Oneof
thealarming aspects ofthisbiodiversity lossisthedisappearance oflandraces. Landraces aregenetically
diverse forms ofcultivated plants attheinterface between wildanddomesticated plant species. As
repositories oftraitssuchasresistance todisease, pests, drought, andother stress conditions, landraces
areindispensable formodern cropimprovements. AndEthiopian landraces areamong themost
genetically diverse intheworld.
80. AUNDP Global Environment Facility project demonstrates howbiodiversity conservation
andsmallholder agriculture cangohandinhand. Theconstruction ofcommunity genebanks focuses
onincreased extension contact andlocal participation inlandrace conservation. Incentives for
conservation willbeidentified byanexamination ofmarket andnonmarket forces thataffect thechoice
ofwhatseedtoplant. Onegoaloftheproject istoidentify products based uponlandraces fornational
andinternational markets.
81. Landrace conservation throughout theAfrica region willbefacilitated through thebiodiversity
network oftheAfrican Ministerial Conference ontheEnvironment.
82. Other more traditional biodiversity conservation projects focus ontheestablishment ofparks
andprotected areas. Buttheemphasis isnowontheinvolvement ofthelocalpeople inthesuccess
oftheparksuchasaGEFproject inNepal, which seeks toprovide economic benefits toagricultural
communities which surround theparkarea.
(c) Forests
83. Ifbiodiversity goeshandinhandwithagriculture, thenmore sustainable forestry policies must
accompany bothofthem.
25Jules N.Pretty, Regenerating Agriculture, Earthscan: London, 1995, page 31.
26Pretty, page 19.WT/LDC/HL/13
Page17
84. Inmuch ofSub-Saharan Africa, many oftheproblems stemfromlandclearance foragriculture
andovercutting oftheforest resource forfuelwood. Here policies toencourage andmodernize low
inputagriculture, antidesertification strategies andthekinds ofdecentralized energy supply technologies
described below should help.
85. Inother parts ofAfrica, Cambodia andLaos, andsome ofthePacific islands, commercial
exploitation oftheforest resource isamajor problem. Chaotic concessions policies withverylow
rents, accompanied byillegal logging andlaxsupervision, areleading torapid depletion oftropical
forests, along withinadequate government revenue.
86. Inareview ofWest African forest policy, theconclusion wasthat“InmostWest andCentral
African countries, andindeed inmost tropical countries, concession feesareminor, almost
inconsequential revenue sources. Asaresult, there islittleornocosttotheindustry acquiring and
holding largeconcession areas. Sawmillers orloggers acquire concessions overvastforest areas, more
forinsurance purposes orspeculation thanforregular timber supplies. Notonlydoesthismean that
public resources arelying idle,butthese unused forests are,paradoxically, alsotheonesthatare
especially prone todeforestation byshifting cultivators. Theforest industry haslittleincentive tocontrol
encroachment iftheyhaveexcess area.”27
87. Arecent World Bank, FAOandUNDP forest study inCambodia revealed massive overcutting
andgovernment revenues of$15million peryearversus potential revenues of$100 million from a
lower cutwithproper forest charges.
88. Asafirststepincontrolling thiskindofforest exploitation, anewkindofconcession
arrangement isnecessary. Theywould bedesigned to“achieve protection andsustainable management
offorest lands forbothtimber andnontimber forest landuses. They involve contracts withprivate
sector forest industry companies toundertake management duties andresponsibilities forbothtimber
andnontimber forest landusesinexchange forsecurity ofsupply. ”28
89. These contracts would beinitiated bygovernments, otherwise thebetter concessions willbe
taken upfirst,leaving public authorities withapatchwork offorests tomanage. Theyshould bepublicly
advertised andbidders pre-qualified before theyareallowed tobid.Andthewhole process should be
transparent.
90. Needless tosay,thiskindofconcession forestry poses amajor governance challenge tomost
countries andnoneofthiswillwork without assistance toestablish andmaintain professional, effective
forest services.
91. Asinagriculture andcommodities, there maywellbeimportant “niche”markets forforest
producers inNorthern markets. Inrecent years there hasbeenaflurry ofattempts toproduce labels
forsustainably produced timber. TheCanadian Standards Association hasdeveloped ascheme in
partnership withtheforest products industry andtheEuropean Union hasbeenactively involved in
labeling discussions. Butthemostsuccessful appears tobetheForest Stewardship Council, anngo
initiative. TheFSC, working withsome forest products companies andthetimber trade, isassembling
anumber of“buyers groups ”.These groups haveagreed topreferential orexclusive purchases of
timber bearing theFSClabel. TheFSCisnowintheprocess ofcertifying upto10million hectares
27JohnAGray, Forest Concession Policies andSustainable Forest management ofTropical Forests. Prepared
forworkshop onForest Policies andSustainable Development intheAmazon, UNDP, July1997, p13
28Gray, page 19WT/LDC/HL/13
Page18
ofsustainably harvested forest toprovide thesupply tothese groups. Ifsuccessful, theFSCandother
sustainable harvesting labels could provide aninteresting market niche fortimber producers insome
oftheLDCs.
(d) Energy
92. TheLDC’sarethelowest percapita energy users intheworld. Anyserious attempts tobuild
export capacity ortoincrease domestic foodproduction willrequire verysubstantial investments in
energy production, especially inruralareas. Andheretheremayberealopportunities fortechnological
leapfrogging.
93. Traditional programs ofrural electrification, through power lineextensions andstand alone
diesel power generation, haveproven tobeverycostly andoften financially unsustainable. These
projectsoftenhavepoorratesofreturnanddieselgeneratorsarenotoriouslydifficulttomaintain.Imports
ofcrude oilandrefined products cancutdeeply intoforeign exchange earnings.
94. Decentralized electric installations must bedeveloped inconcert withactivities thataddress
specific social andeconomic development needs. These include thedevelopment ofvillage water
supplies, support ofdispensaries andpharmacies, support forhealth services, refrigeration offoodstuffs
anddevelopment ofdairy industries suchasthatwithmilkfrom camels andindigenous cattle in
Mauritania.
95. Theuseofsolarelectric, windmechanical/electric, biomass based andother renewable energy
systems willavoid orminimize growth incarbon dioxide emissions. Widespread useofsuchsystems,
coupled withindigenous assembly andeventual production oftheequipment, caneasethepressure
onforeign exchange reserves, reduce therequirements forfuelimports andtherefore contribute to
thenational economy.
96. AUNDP sponsored windgeneration project inMauritania hasalsoproven tobecheaper than
anyoftheavailable alternatives, suchassmall scale generators, which aretheonlyother practical
options.
97. Another project inKiribati helped tocreate andstrengthen asolar energy company toserve
remote areas. Thecompany should become commercially viable in1998andhasbrought thebenefits
oflighting andradio service toanumber ofisolated communities atareasonable cost.
98. Anewactivity inEritrea willcombine several aspects ofsustainable energy development. It
seeks toaccelerate theuseofphotovoltaic village pumps fordrinking water. Itwillaidinthe
dissemination ofimproved cooking stoves andtheestablishment ofvillage andfarmwoodlots toprovide
their fuel. Itwillhelpintheinstallation ofsolar water heaters forreduction ofthefossil fuel
consumption ofelectricity generation stations.
99. Although these remain small projects, theyhelptodemonstrate thatreliance onthetraditional
systemofrelativelylargecentralgeneratingstationswiththeirexpensiveanddifficulttomaintainnetwork
offixed wires isnolonger theonlyoption forsupplying essential energy supplies totheruralpoor.
100. “Undersustainabledevelopmentstrategies,decentralisedenergydemandandsupplytechnologies
contribute significantly toimproving theliving conditions ofrural populations inthenearterm by
increasing thelevels ofenergy services provided, ie.viatheintroduction anddiffusion ofenergy efficient
lightingtechnologies,energyefficientcookstoves,PVsystemsthatcanprovideelectricityforhouseholds
andmedical andeducational facilities ”WT/LDC/HL/13
Page19
101. “Inthemedium tolongterm, renewable energy isalsousedunder sustainable development
strategiestopromoteruralemploymentgenerationandruralindustrialization.Forexample,modernised,
energy efficient biomass electric generation technologies based upon theuseofgasturbines andfuel
cellscoupled tobiomass gasifiers offerthepotential forproviding electricity atsmall scales atcosts
competitive withconventional large-scale, fossil fuelpower generating technologies. ”Thiskindof
strategy provides opportunities notonlytouseresidues, butalsofuelfrom energy plantations.
102. Where larger scale energy supplies arerequired, suchasinurban areas andindustrialization
zones, there areagain more sustainable options thanmany ofthetraditional ones. Forexample, the
ZERI styleapproach tomany commodity processing plants (treating thebiomass asawhole) canyield
substantial dividends inco-generation. Many sugar refineries, forexample, areable,though advanced
technologies, togenerate enough electricity through theuseofbagasse, abyproduct, notonlytorun
theirownoperations, butalsotogenerate asurplus forsale.Thissame technology mayalsomake
itpossible toproduce electricity economically from biomass plantations.
103. Finally, depending upontheoutcome oftheKyoto Conference oftheparties totheConvention
onClimate Change, theleastdeveloped countries maywellbenefit ontheenergy front. Planting biomass
crops onmarginal lands to“lockup”carbon could prove tobeanattractive option forcompanies or
countries intheNorth seeking tomeetanytargets which might besetatKyoto. Retrofitting ofexisting
electricity generation stations toreduce theiremissions ofcarbon dioxide andotherconservation projects
could wellbemore costeffective inthedeveloping world andcontribute more toenergy efficiency,
thansimilar improvements intheNorth.
VI. CONCLUSIONS AND RECOMMENDATONS
104. Globalization andtheinvestment andtrade liberalization policies which facilitate it,isthe
dominant force intheworld economy today. Andtheleastdeveloped countries must participate in
these processes iftheyaretobeabletomobilize thekindofresources necessary toreverse their
increasing marginalization ofthelasttwoorthree decades.
(i) TheRoleoftheInternational Community
(a) AReformed Development Assistance
105. Butliberalisation isnopanacea. Inorder tobeabletobenefit fromtheseprocesses, theLDCs
willrequire substantial assistance from theinternational community. AstheUNDP Administrator
putitinhispresentation toUNCTAD IX:“It’samyththatthemarket inaglobalised economy isenough
toreplace aid,thatthedeveloping countries canhitch theirwagon toglobalisation andbeonaride
toprosperity. ”...We needareformed development assistance thatrecognises thateconomies existfor
people (andnotpeople foreconomies), thatbenefit thepoorandthatthepolity isasimportant asthe
economy, growth withemployment andenvironment. ”
(b) Accelerated Debt Relief
106. Further debtrelief initiatives arealsoneeded urgently, especially onthemultilateral frontwhere
theyear2000 needs tobetheendoftheprocess forallofthemost seriously indebted, rather than
thebeginning forsome.WT/LDC/HL/13
Page20
(c) Greater Market Access forLDC Exports
107. WTOmembersshouldtakeactiontofurtherincreaseexportopportunitiesfortheleastdeveloped
byfullyimplementing theComprehensive andIntegrated WTO planofAction fortheLeast Developed
Countries. Northern members mustdemonstrate thattheyareprepared tohonour theircommitments
onagricultural subsidies andtextiles inboththeletter andthespirit.
(d) R&D forSustainable Human Development
108. Newinternational initiatives mustbetaken onR&D forthepoorest. Herethepriorities should
bedirected toward reducing foodimports through efforts toincrease theyields ofthetraditional crops
ofpoorfarmers onmarginal lands. Anditmustnotsimply berestricted toagricultural research stations.
Newtechniques inparticipatory research andruralappraisals promise toreach farmers more directly.
“Thesecond green revolution should notbeacopy ofthefirst. Itshould aimatenvironmental
sustainability, lowcostinputs andhigher returns forsmall scale holdings-and atminimizing therisk
forpoorfarmers. Itshould focus lessoncrops andmore onsystems, onfinding ways todiversify
production andusetherange ofnatural resources available. Itshould focus ontreecrops, agroforestry
andmixed livestock, pasture andcrops. Therevolution mustlearnfromindigenous systems developed
overcenturies thathaveenabled people tosurvive inthemost hostile andfragile environments. It
must alsoconsolidate thecommunity ’scapacity forcollective action andbolster social capital. ”29
109. Research designed tomake thecommodity business more viable mustbepushed further. There
isaneedforinitiatives todemonstrate thereal,practical possibilities fortechnological leapfrogging,
especially intheareas ofdecentralised energy technologies, andthekinds ofinitiatives ininformation
andcommunications technologies illustrated attherecent Global Knowledge 97Conference inToronto.
(e) Capacity Building
110. Even withgreater market access andstructural adjustment, many LDCs lackthecapacity to
expand theirexports. Theintegrated program fortechnical assistance mustaddress needs ranging from
assistance tosome LDCs inapplying forWTO membership, through thedevelopment ofanalytical
skills andinstitutional strengthening totakeadvantage ofemerging trade opportunities, tothe
strengthening ofthebroad range ofinstitutions which firms relyupontostrengthen theircompetitiveness
inexport markets. These efforts should alsobeextended tostrengthen thecapacity ofdeveloping
countries andinparticular theirprivate sector toprovide connectivity totheInternet andtomake use
ofthepotential ofinformation technologies.
111. UNDPhasalreadybeguntoassistLDCsinthatrespectinawiderangeofprogramsandprojects.
Forone,TheUNDP Regional Bureau forAfrica, incooperation withUNCTAD, WIPO andITC,
haslaunched acomprehensive program ontradeanddevelopment tostrengthen thecapacity ofAfrican
countries tofullyparticipate intheglobal trading system. Furthermore, special efforts arebeing made
withUNCTAD todevelop ajointGlobal Program toassist lowincome countries toaccess thebenefits
ofglobalization andliberalization oftheworld economy.
112. Asregards theinformation technologies, UNDP hasnotonlylaunched twoglobal projects30,
butallitsregional bureaux arealready engaged orpreparing specific regional programmes tostrengthen
29Ibid, p70
30Namely,theInformationandCommunicationTechnologiesforSustainableHumanDevelopment(ICT/SHD)
andtheSustainable Development Networking Programme (SDNP)WT/LDC/HL/13
Page21
connectivity, build capacities anddemonstrate thesustainability ofthese technologies through pilot
projects.Morespecifically,theRegionalBureauforAsiahasjustlaunchedtheAsia-PacificDevelopment
Information Program tohelpequip developing countries inthese regions, withthebasic infrastructure
andknow-how needed tomake equitable useofnewcommunication technologies inacosteffective
manner.
113. Above all,thereisanurgent needtotackle theinfrastructure problems ofthepoorest countries,
includingtelecommunicationinfrastructure.Andthiswillbecriticalforthepoorestwithinthesecountries
fortheyarealways thefurthest from farmtomarket roads andstorage facilities, andareleftaside
incommunication andnetworking. They receive fewer visits from extension officers andhavethe
worst access tomodern inputs. Thisisaparticularly urgent problem forthelandlocked countries.
AstheEthiopian needs assessment graphically points out,some oftheirexport problems canonlybe
solved through portandrailimprovements inother countries. International action isessential tohelp
break these kindofbottlenecks.
114. Butthere isanother infrastructure problem which maybeevenmore urgent. Themajority
ofthepopulation oftheLDCs livesinruralareas, often onmarginal lands. They depend upon the
quality andquantity ofnatural resources fortheirsurvival. Yetallindications arethatthese natural
infrastructures ofsoils, water, forests andfisheries ofvirtually allLDCs aredeteriorating rapidly,
oftenirreversibly. There isanurgent needforinternational support foraprogram torestore thisnatural
infrastructure through efforts tocombat desertification, deforestation, soildegradation andtheloss
ofbiodiversity. Absent thesekinds ofefforts, thepotential gains fromexport expansion maybelimited.
Worse, theymayevenbeneutralized bytheneedforexpensive foodimports.
(i) Actions byNational Governments
(a) Putting Trade attheCenter ofNational Agendas
115. Fortheirpart,theLeast Developed Countries mustgivefargreater priority totheexpansion
ofexports andtothedevelopment ofthekindofdialogue withtheprivate sector andcivilsociety
organizations necessary toreorient priorities. Trade experts often saythat80%oftheproblems with
trade stemfrom inappropriate policies.
116. Policies must bebased upon co-operation withtheprivate sector andthedevelopment of
appropriate incentives forprivate investors. Inmany countries thereislittledialogue withtheprivate
sector andexcessive regulation andintervention donotstimulate expansion andinnovation. Both
“voluntary ”and“involuntary ”structural adjustment programs havegonesome waytobreaking down
these barriers, butmore remains tobedone.
117. Special attention needs tobedevoted tosmall andmedium enterprises. They aremore labour
intensive andwillprovide thebulkofthejobsforthepoor. They arealsocritical creators ofjobsand
incubators ofinnovation inthemosttechnologically advanced economies. Thebulkofthejobscreated
during thecurrent U.S.economic expansion havebeencreated bythese sectors andtheroleofsmall
companies assuppliers tothemost sophisticated industries inJapan iswellknown.
118. SME’sareoften neglected bygovernments andoften suffer themost from alackofvital
information about potential export markets. Forexample, ajointUNDP/UNCTAD study oftheeffects
ofenvironmentalregulationsinNorthernmarketsonSouthernproducersfoundthatlargescaleproducers
faced norealproblems inthisarea, butthatsmaller producers suffered agood deal. Similar studies
inChina haveshown thesame problem.WT/LDC/HL/13
Page22
119. Priority should begiven toinvestment inhuman resources. Experience hasshown thatan
educated labour force isoneofthekeyfactors inacountry ’sability toclimb thevalue added chain.
Andthatclimbing thevalue added chain from primary exports tolabour intensive manufactures or
assembly operations toamodern technology based export sector isthekeytosuccess intheglobal
marketplace. Wage inequality seems tohaveincreased incountries which liberalized trade(Chile, Costa
Rica, Colombia, Philippines andArgentina aswellasMexico) except inthose countries withastrong
increase inthesupply ofrelatively welltrained workers suchasKorea orSingapore. Thisseems also
tobetrueforthefourAfrican countries which achieved above average success inadjustment-Ethiopia,
Ghana, Nigeria andTanzania.31
120. Itisimportant torealize thattheUruguay Round agreements donotrequire theLDCs toopen
uptheireconomies immediately orcompletely. TheLDCs haveagooddealoffreedom tochoose both
thespeed anddegree ofliberalization which theyrequire. HeretheAsian experience provides auseful
lesson. Aselective approach totheglobal market could follow theexample ofmost EastAsian
economies-with timebound performance related protection forpotentially viable industries.
(b) Policies forTrade andSustainable Human Development
121. TheroleofthestateinmostLDCs ischanging dramatically. Asprivatization andcutbacks
inpublic expenditures reduce boththesizeandthereach ofgovernment, rethinking theroleof
governance becomes critical. Time andtimeagain, experience hasshown thattheweakening ofalready
fragile environmental agencies hasledtoanacceleration inenvironmental degradation. Experience
hasshown thatalmost nogovernments derive atrueeconomic rentfrom forest exploitation because
ofpoormanagement practices, rentseeking fromconcessionaires, anduncontrolled illegal exploitation.
122. Governments must develop pro-poor, pro-environment policies iftrade expansion isnotto
further widen income gaps andregional disparities andnottofurther degrade fragile natural
environments. Some examples ofthese types ofpolicies havebeenmentioned inprevious sections.
These policies arenottheoretical. They haveworked ontheground inanumber ofcountries. They
should aimtopromote small scaleagriculture, andruraldevelopment, small andmedium enterprises
andeducation.
123. These programmes should bebased onamore dynamic ruralsector. From theearly daysof
SirArthur Lewis, ithasbeenclearthatcountries which ignore theiragricultural sectors areinperil.
“...Such ahealthy rural sector hasbeenahallmark ofthemost successful development experiences
around theworld, including those ofJapan, Taiwan, Indonesia, Costa Ricaandothers; ithasbeen
thenormal precursor tohealthy overall development. Achieving itinvolves continued attention to
raising productivity insmall-scale agriculture, especially incountries where thisremains thedominant
sector oftheeconomy andinlow-income regions where agriculture isthemainsource ofincome. ”32.
Policies should alsoinclude incentives formicro-enterprises andmicro-credit.
124. Export policies willoften betargeted atlarger commercial farms fortheirexport potential.
Butresearch bybothFAO andIFAD point outthatreturns areevenhigher frominvestment insmall
andmarginal farmers. Andreductions infoodimports willdepend upontheperformance ofthissector.
31Ibid, page 22
32Watkins, p.34WT/LDC/HL/13
Page23
125. Asmentioned above, there isalsoaneedforamore imaginative approach tocommodities.
Thepotential ofICREAs andtheZERI approach ofbyproduct utilization should befurther explored.
Niche market andfairtrading opportunities should alsobepursued.
126. Forest policy raises adifficult governance issueformany countries. These canonlyberesolved
withthestrengthening ofprofessional forest services andwithmuch more transparent processes of
awarding forest concessions. Concessions which deliver economic rents togovernments canbean
important source ofrevenue togovernments, aswellashelptoensure thatforests aremanaged on
amore sustainable basis.