SPEEDING UP transformation of rural economies by upgrading agriculture and promoting non-farm activities is key to ensuring a nation drops its least developed country (LDC) tag, a development economist has said.

Andrew Mold, thee acting director of United Nations Economic Commission for Africa (UNECA) Sub-Regional Office for Eastern Africa, was speaking at the launch of the 2016 LDCs report in Kigali yesterday.

"You need to have a dynamic agricultural sector and increase productivity to allow workers to move from the countryside into urban areas,” Mold said, summing up what is required for countries to graduate.

Graduation is explained as the point at which an LDC moves from dependency on international support measures to being able to benefit on an equal footing from global markets. It is seen as the first milestone in a marathon of development, but "not the winning post of a race to escape the LDC category.”

National policy agenda

Besides accelerated transformation of rural economies, he said, national policy agendas also need to put emphasis on: scaling up public investment, including projects that strategically address bottlenecks in the productive sector; and improved access to credit and financial services, notably for farmers and SMEs.

"In East Africa, we have a serious problem in terms of the financial sector not providing enough financial services to the private sector; and the very high rates of interest,” Mold said.

Also important is effective industrial policies, in addition to ending the neglect of science, technology and innovation policy.

"One of the big challenges is to increase investments in knowledge production, or knowledge acquisition, in the LDCs,” he added.

According to the Least Developed Countries Report 2016: The Path to Graduation and Beyond – Making the Most of the Process, a global goal to halve the size of this group will be missed unless the international community takes more action.

It says global poverty is increasingly concentrated among a group of 48 countries, which are falling further behind the rest of the world in terms of economic development.

Countries can break out of such vicious circles with international support in finance, trade and technology.

Toward better support

The report states that better and more effective international support is required, in addition to donors meeting long-standing commitments on official development assistance (ODA) to LDCs level and on aid effectiveness.

There is a proposal that an LDC Technology Bank could help, but this is not a complete solution.

Up to 12 of the 14 countries in Eastern Africa – Burundi, Comoros, DR Congo, Djibouti, Eritrea, Ethiopia, Madagascar, Rwanda, Somalia, South Sudan, Uganda and Tanzania – are designated by the UN as LDCs.

Their number doubled from 25 in 1971 to 50 between 2003-07, and to 48 in 2014.

Explaining the rationale of the report, Mold pointed to the 2011 Istanbul Programme of Action (IPoA) target for at least half of the then 49 LDCs being able to satisfy the graduation criteria by 2020.

The programme, adopted by the Fourth UN Conference on LDCs, in Istanbul, Turkey, on May 9-13, 2011, charts out the international community’s vision and strategy for the sustainable development of LDCs for the next decade with a focus on developing their productive capacities.

In 2011, the international community set a goal that half of all LDCs should satisfy the criteria for graduation by 2020 but now, halfway to the target date, this goal already appears out of reach.

The LDCs, it is noted, need "graduation with momentum,” thereby laying foundations for subsequent development. This requires developing productive capacities, and achieving structural transformation of the economy, among others.

Countries graduate from the LDC category by satisfying a complex set of economic and social criteria.

Only four countries – Botswana in December 1994, Cape Verde in 2007, Maldives in 2011, and Samoa in 2014 – graduated in the 45 years since this classification was established.

Key drivers of graduation in the four LDC graduates include: peace and social stability; quality of institutions; effective economic and social planning; emphasis on infrastructure and education; as well as prudent forward-looking macroeconomic policies.

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