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First decade of the WTO: Performance of the LDCs

DEBAPRIYA BHATTACHARYA
THE WTO is currently a 148 member strong organisation. This number includes 32 Least Developed Countries (LDCs), six of them are founding members (Bangladesh being one of them), 24 more LDCs signed-in or joined later, and another eleven that are either Observers or in the accession process. As may be readily observed, more than a quarter of the WTO Members and Observers come from the LDC ranks.
In an organisation which is supposed to be membership driven, where every member theoretically enjoys veto power in the decision making process, one would expect that the interests and concerns of the LDCs would be acted upon on priority basis, particularly given their formidable numerical presence. However, as is said in England, justice is open to all -- like the Ritz Hotel. One wonders whether the WTO often behaves like the Ritz Hotel when it comes to its income-poor members.
As we mark the first decade of the WTO one may be also be curious to know what has happened to the LDCs during this period. The trends highlighted below, however, cannot be necessarily attributed to the nature of functioning of the multilateral trading system.
Exports and Trade Balance: According to UNCTAD, in 2004, LDCs share in world trade (export plus import) stood at 0.68 per cent (approximately $13 billion), compared to 3.06 per cent in 1954. However,
our estimate, based on WTO data set on 48 LDCs reveals that the share of the LDCs in global export has increased marginally from 0.46 per cent to 0.58 per cent between 1995 to 2003 (last year for which figures are available). The share of these LDCs in global imports also registered marginal increase from 0.65 per cent in 1995 to 0.71 per cent in 2003.
In this connection, one needs to be reminded of the fact that the top 5
LDC exporters in 2003 (Angola, Bangladesh, Yemen, Equatorial Guinea, and Myanmar) accounted for about 57 per cent of the total exports of the group. This process of export concentration within the LDCs is increasing. During 19952003, LDCs as a group continued to experience high negative trade balance. Indeed, average trade deficit increased by more than 30 per cent in the non-oil primary commodity dependent LDCs.
Foreign Direct Investment: Concurrently, the share of LDCs in global FDI inflows experienced an upward trend during the period of 1995-2004, increasing from 0.43 per cent to 1.65 per cent. However, these FDI inflows to the LDCs were highly concentrated
in oil exporting/producing countries, e.g. top 5 LDCs (i.e. Angola, Sudan, Equatorial Guinea, Myanmar, and Chad) accounted for about 61 per cent of the FDI inflows.
Foreign Aid and Technical Assistance: We do, however, observe some progress in case of Overseas Development Assistance (ODA) flow to the LDCs, increasing at an average rate of 8.7 per cent per annum between 1995-2003. This resulted in an
increase in the share of LDCs in total ODA flows to all developing countries from about 26.3 per cent (1995) to 38.8 per cent (2003) during the same period. As a matter of fact, perceptible increase in ODA flow to LDCs was observed particularly in the post-2001 period.
Some increase in the inflow was also observed in case of trade-related technical assistance and capacity building support, although the quality of such support still remains suspect.
Economic Growth: The positive changes which we observe for the LDCs as a group, in terms of trade and investment performance, coupled with foreign aid inflow, were paralleled by some improvement in the
real GDP growth rates. Indeed, the LDCs recorded an average growth rate of about 5.2 per cent per annum during 2001-2004, against about 4.8 per cent during 1995-2000.
Dynamism and Differentiation
Thus, one cannot deny the fact that we observe some dynamism in the economies of the LDCs. There is a positive interpretation of this, which gives us hope and which the global
community of nations should take into cognisance. When development-friendly domestic reforms are pursued and when the global environment is conducive, LDCs are indeed able to ensure growth and register progress. LDCs are not a black hole, as some would like to project them. What we need is support of the global institutions such as the WTO to help us actualise the potentials about which we are aware, potentials which we are capable of realising. The indicators of success give us hope and imbue us with confidence. We want the developed countries to keep this perspective in view when we negotiate concessions in the WTO place our demands at various international forums.
However, we should also not lose sight of the broader picture of marginalisation of the LDCs as a group. The dynamism I have just mentioned is also characterised by a continuing and persistent process of severe differentiation and acute polarisation. The flip-side of these apparent indicators of progress in the LDCs is that these marginal advances have been hardly adequate to precipitate any significant and tangible
improvement in the lives and livelihood of the overwhelming population in the LDCs. These average macro-economic aggregates can at best tinker only at the margin, and conceal the unabated trends of deprivation and desperation within and between countries.
Sustained Poverty, Growing Inequality
A number of examples may be cited to illustrate the sustained level of poverty in the LDCs and the growing inequality, in this group of countries. The proportion of undernourished population in the LDCs has remained stagnant at 38 per cent since the early 1970s. According to IFPRI, the food security index of the LDCs is much worse than it was before -- their per
capita food consumption index has declined by 6 per cent over the last 20 years. Today, nearly 650 million poor and hungry people live in the LDCs -a number which has hardly changed during the last decade. This process was largely underwritten by a steady deterioration of income distribution in the LDCs.
More than half of the LDC population continue to live on less than $1 a day, while about 81 per cent live on less than $2 a day. The number of people living in extreme poverty in LDCs is likely to increase from 334 million in 2000 to 471 million in 2015. There goes your Millennium Development Goals!
Indeed, the aggravation of incountry income inequality was paralleled by a growing income gap between the richest and the poorest countries in the world. Between 1960-1962 and 2000-2002, the gap of per capita GDP between the 20 richest and 20 poorest countries increased by three times. In the same vein, the share of the richest ten per cent of the world's population has increased from 51.6 per cent to 53.4 per cent of total world income.
Reviewing the progress indicators of the LDCs, the optimists proclaim that we live in the best of all worlds, and the pessimists fear that this might very well be true.
The author is Executive Director, Centre for Policy Dialogue (CPD). The article draws on a section of his Introductory Statement delivered at the Inaugural Session of the recently concluded International Civil Society Forum 2005: For Advancing LDC Interests in the Sixth WTO Ministerial, Dhaka, October 3-5.