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HOW ARE THE LEAST DEVELOPED COUNTRIES (LDCs) DOING?

POVERTY AND GROWTH TRENDS 1990 VS 2007-8

Andy Sumner and Ricardo SantosInstitute of Development Studies, Sussex

KEY POINTS

1. This note outlines progress in the LDCs over the last twenty years based on the

current 49 countries set and data in World Development Indicators (data forgroupings is not population weighted and there is no data for Tuvalu).

2. LDCs account for a significant proportion of the worlds poor - around a quarter

of the worlds poor in terms of income poverty and malnutrition and around 40% ofthe worlds poor by infant deaths and out of primary school children. LDCs accountfor a significant proportion of the worlds population and there has been a large

increase in population in the LDCs group from 531m to 801m people over the last

twenty years. However, it should be noted most LDCs have small populations thuspopulation weighted data misleads by reflecting the data of a small number ofpopulous LDCs (10 of the 49 LDCs account for 68% of the 801m total population).

3. There has been a lot of growth - GNI per capita (US$ PPP) rose from about $900 to

almost $2000 or an average annual growth rate of 4.5%. However the proportion ofGNI to the poorest quintile barely changed.

4. There are still very high poverty rates - on the US$1.25 poverty measure the

incidence is 50% or 401m poor people and on the new UNDP multi-dimensionalpoverty measure the poverty incidence is 67% or 537m people. There issome good

news onsome

poverty dimensions - there have been improvements in literacy ratesfrom 51% to 62%; secondary enrolment 18% to 35% and under 5 year old mortalityfell from 166 to 119.

5. There is still a structural handicap - illiteracy is 51%; and although aid

dependency has fallen from 19% of GNI to 16% it remains high.

IS THE LDC PROBLEM A FRAGILE AND CONFLICT AFFECTED STATES

(FCAS) ISSUE?

6. 30 of the 49 LDCs countries are currently FCAS (using the broadest definition of

three combined FCAS lists) and all have been FCAS at some point. There is

surprisingly little differencebetween LDC FCAS versus LDC non-FCAS on GNIper capita and GNI per capita trends and income poverty. However, there arebig differencesbetween LDC FCAS and LDC non-FCAS if one considers nutritionand education poverty (which are much worse in FCAS LDCs) and there are alsobig differences on structural handicaps (e.g. secondary enrolment is much lower inthe FCAS LDCs and aid dependency much higher in FCAS LDCs group (19% vs11% in the non-FCAS LDCs).

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IS THE LDC PROBLEM A DOMESTIC RESOURCE PROBLEM?

7. One LDC is now a high-income country (Equatorial Guinea) and 13 more are

now middle-income countries (MIC). There are large differences between the MICLDCs versus LIC (low-income country) LDCs in US$1.25 incidence - 33% versus54%; in multi-dimensional poverty - 69% vs 55%; in literacy - 81% versus 56%; inunder 5 year old mortality - U5M 133 vs 77; and in GNI per capita - US$1000 versus$3000 per capita. There are large differences in structural handicap in secondaryenrolment 31% vs 49%; and in ODA as a percentage of GNI - 18% vs 12%.However, most of the new MICs are islands with very low population.

IS THE LDC PROBLEM AN INEQUALITY PROBLEM?

8. Gini data is very limited. Data for the income share of bottom quintile is better

and the proportion is around 5-6% and has not changed in twenty years. Thenew UNICEF equity report included data on the bottom quintiles which suggestedsignificantly weaker MDG data among the poorest (e.g. children under 5 years

underweight - LDC average of 28% vs 34% in the LDC bottom quintile).

HAS THE GLOBAL CRISIS HIT LDCS HARD?

9. There have been significant impacts of global crisis in terms of growth

decelerations - based on UNDESA data (data from WDI is not yet available for post-crisis) suggests pre-crisis the LDC average growth rate reached 9% in 2007 but fell toan estimated 3% in 2009 and are projected to bounce back to 5% in 2010. There arealso some worrying public expenditure projections for social spending in LICs

(although less so in Africa LICs) if one consider the Oxfam-commissionedindependent study and a significant emerging fiscal gap.

CONCLUSION - WHAT IS THE LDC QUESTION?

10. The core LDC group in 2010 could probably be smaller and focused on thosecountries that are FCAS; LIC and aid dependent. This would likely mean the 18African countries with these characteristics. The question then follows what can bedone for them by the international community?

References

Guillaumont, P. (2009) Caught in a Trap: Identifying the LDCs. Economica: Paris.Kyrili, K., and Martin, M. (2010) The Impact of the Global Economic Crisis on the Budgetsof Low-Income Countries. Oxfam: Oxford.UNCTAD (various years) The Least Developed Country Report. UNCTAD: Geneva.UNDESA (2010) World Economic Situation and Prospects. UNDESA: New York.UNICEF (2010) Progress for Children: Achieving the MDGs with Equity. UNICEF: NewYork.World Bank (2010) World Development Indicators. World Bank: Washington, DC.

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