Achieving The Millennium Development Goals
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  • 1. Voices of the Least Developed Countries of Asia and the Pacific Achieving the Millennium Development Goals Through a Global Partnership LONDON, Asia 2015, March 6-7, 2006
  • 2. Overview
    • Asia-Pacific – the fastest-developing part of the world
      • With the world’s two most populous and fastest-growing countries, China and India
      • And the “tiger” economies of East and South-East Asia
      • No country is expected to ACHIEVE ALL the MDGs – concern
      • No country expected to FAIL ON ALL MDGs - potential
    • But Asia-Pacific is a region with extreme contrasts - highly heterogeneous
      • With some of the most economically disadvantaged countries: 14 (of 50) Least Developed Countries inhabited by nearly 40% of worldwide LDC population
      • The “tyranny of averages” hides extreme poverty in Asia-Pacific LDCs
    • Structural and geographic impediments result in persistence of poverty in its many dimensions; conflict aggravates problems
    • A global partnership through ODA, debt relief and trade is necessary to accelerate development in these countries
      • A three-pronged argument beyond the fundamental moral basis: strategic, commercial and efficiency
    Progress in Asia-Pacific LDCs benefits the world - a ‘win-win’ for all
  • 3. Who are the LDCs?
    • Criteria for identification
      • Low income level
      • Low stock of human assets (nutrition, health, education)
      • Economic vulnerability (X concentration, unstable X earnings, unstable agri, low share of manuf & services, small population)
    • LDCs face severe handicaps
      • Disadvantaged location
      • Small domestic markets
      • Limited infrastructure
      • Low domestic resources – savings for investment
      • Conflict in some
      • Environmental hazards
  • 4. Location & population of LDCs
    • In 2003, the UN listed 50 Least Developed Countries
      • 28% (14 LDCs) in Asia-Pacific account for almost 40% of worldwide LDC population - disproportionately high population share
      • 72% (36 LDCs) in other regions account for 60% of worldwide LDC population
    Number of LDCs Population (million)
  • 5. Key indicators of LDCs in Asia-Pacific and other regions 0.39 26% 43 310 Other LDCs 0.52 21% 19 513 (2130) Asia-Pacific LDCs (Asian developing countries) HDI value Exports of goods and services as % of GDP Aid per-capita GDP per- capita US$ Weighted averages (2003) Bangladesh, Cambodia, Myanmar 3 Coastal LDCs Afghanistan, Bhutan, Lao PDR, Nepal 4 Landlocked Developing Countries (LLDCs) Kiribati, Maldives, Samoa, Solomon Islands, Timor-Leste, Tuvalu, Vanuatu 7 Small Island Developing States (SIDS) Asia-Pacific LDCs Geographic status
  • 6. Proportion of Population Below US$1 (PPP) Per Day Heterogeneity of Asia-Pacific The Asia-Pacific LDC population accounts for 7% of the total population in the Asia-Pacific region. However, as much as 12% the region’s extreme poor (or 90 million) live in these LDCs. Per-Capita GDP, 2003
  • 7. Current trend Vs MDG target in Asia-Pacific LDCs
  • 8. Some successes, but MDGs are far from attained…
    • Despite handicaps, Asia-Pacific LDCs have made progress in achieving some MDG targets such as:
      • Net enrolment ratio
      • Under-five mortality rate
      • Proportion of the population with sustainable access to improved water sources and sanitation
    • But are far from achieving other MDG targets such as:
      • Poverty reduction
      • Minimum dietary needs - malnutrition
      • Literacy rate
      • Infant mortality rate
  • 9. Resource gap in Asia-Pacific LDCs
      • A key structural impediment is the low savings rate in LDCs: Most of the income of the poor has to be spent on essential consumption (food, clothing and shelter)
      • Low savings lead to low investments and slow capital formation, resulting in slower economic growth (“classic poverty trap”)
    Resource gap (% of GDP) = Gross domestic savings - investment % of GDP (2003) Asian developing countries Asia-Pacific LDCs
  • 10. Resource Gap Per-Capita Resource gap (% of GDP) = Gross domestic savings - investment US$ Asia-Pacific LDCs Asian developing countries
  • 11. Addressing MDG impediments
    • Asia-Pacific LDCs are trying to achieve the MDGs with very little resources
    • Landlocked and small island LDCs face additional geographic challenges (distance from markets, proneness to natural disasters, etc.)
    • Conflict in some LDCs is also an impediment – diverts scarce public resources & inhibits private flows
    • MDG 8 advocates global partnership through a combination of three strategies:
      • 1. Increased and more effective aid in the short run, with a phase-out plan
      • 2. Debt relief to severely indebted poor countries
      • 3. Increased market access and aid-for-trade consistent with poverty reduction (will also help in tapering off aid)
    • From the LDCs a clear recognition of governance issues – addressing corruption upfront
    • Complementary support from partner countries within and outside the Asia-Pacific region could make an enormous difference
  • 12. Increasing Aid to Achieve the MDGs Other LDCs Asia-Pacific LDCs 1990 2002 US$ Average Aid Per-Capita, 1990-2002 Average aid per-capita has consistently been lower in Asia-Pacific LDCs, compared to LDCs of other regions. In 2003, aid per-capita was US$19 for Asia-Pacific LDCs, compared to US$43 in other regions. 0 5 10 15 20 25 30 35
  • 13. In 2003, import duties on apparel exported from Bangladesh, Cambodia and Nepal to the US amounted to US$520 million, more than 3 times the net disbursed bilateral aid of US$150 million received by those countries. Aid vs. Trade: making aid work for trading out of poverty
  • 14. Estimated MDG financing gap in the 14 LDCs – 12 to 26 billion, 2006 to 2015 7 2.2 7 2.0 7 1.9 ODA for direct MDG support (2002) 80 26.2 59 17.7 44 12.0 MDG financing gap 15 50 65 4.8 16.3 21.1 11 34 45 3.2 10.1 13.3 8 24 32 2.3 6.4 8.7 Sources of financing Household contributions Government expenditures Total 52 104 Per-capita (US$) 24.0 47.3 Total (US$ billion) Projected for 2015 73 15.7 37 10.1 Shortfall in ODA for direct MDG support over 2002 level 145 31.0 76 20.7 Total MDG investment needs Per-capita (US$) Total (US$ billion) Per-capita (US$) Total (US$ billion) Projected for 2010 Projected for 2006 (based on UN Millennium Project estimates for Bangladesh and Cambodia)
  • 15.
    • The additional ODA required to bridge the resource gap of Asia-Pacific LDCs is not an unreachable sum
    • An estimate by the Millennium Project shows the cost of meeting the MDGs in all LDCs will correspond to 0.12% of the GNP of OECD-DAC countries in 2006
      • Roughly double the current share of ODA in donor GNP to these countries (0.06% in 2002)
      • Still well below the 0.15% to 0.20% target as called for in the Brussels Programme of Action for the Least Developed Countries
    • Effective utilisation of aid: Asia-Pacific LDCs recognise the importance of addressing the “leaky bucket syndrome” through improved governance and institution-building
    ODA: increase, coordination, and effectiveness A small amount of support from more developed partners would make a huge difference to Asia-Pacific LDCs.
  • 16. Recommendations on Aid for the MDGs (endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005)
    • Actions by LDCs at the national level
      • Good governance at all levels is a prerequisite for effective use of aid
      • Better aid harmonisation and coordination – and a country-based approach that channels aid to sectors where its impact is greatest
      • Assessment of outcomes more important than assessment of available inputs – need to strengthen domestic capacities for planning and project implementation, improve monitoring and evaluation, ensure better institutional coordination, and greater decentralisation of project implementation
    • Actions at the international level
      • Aid should be front-loaded, primarily in the form of grants, not in the form of tied purchases - meeting the targets in the Brussels Programme of Action, the Almaty Programme of Action and the Mauritius Strategy
      • Improving coherence among donors in areas such as policy conditionalities, trade regimes and technology transfer from donor countries – policy conditionalities should converge with recipient country priorities, thus promoting national ownership
      • Programme budget support as the main long-term strategy to assist LDCs – to indicate long-term donor commitment and to finance recurring costs, not only initial investments
      • Implement regional solutions to enable small economies to address costly issues by introducing economies of scale
      • Responding to the changing priority needs and concerns of Asia-Pacific LDCs over the years
  • 17. Debt Relief in Support of the MDGs The debt burden and debt-servicing liability of Asia-Pacific LDCs have received little attention, compared to other LDCs. However, debt-to-GDP ratios and per-capita outstanding debt stand at high levels in some LDCs. 10.3 1.64 1.7 255 Other LDCs 1.0 0.16 1.0 150 Asia-Pacific LDCs Ratio US$ Ratio US$ Weighted averages, 2002 Debt relief per-capita Outstanding debt per-capita US$830 41% Maldives US$785 71% Vanuatu US$471 146% Lao PDR Per-capita outstanding debt Debt-to-GDP ratio Selected Asia-Pacific LDCs, 2002
  • 18. Debt Relief for Additional Resources
    • Since the introduction of the initiative for Heavily Indebted Poor Countries (HIPC) in 1995, 27 countries have benefited (US$ 70 billion)
    • No Asia-Pacific LDC has benefited from the HIPC initiative
      • HIPC eligibility thresholds remain very high
      • Asia-Pacific LDCs have relatively good debt repayment records, relatively low debt-servicing ratios – reflecting their relatively prudent economic management
    • In view of the pressing need to release additional resources to meet the MDGs in Asia-Pacific LDCs, it is imperative that this “better performance” not be penalized by exclusion from the HIPC Initiative.
      • All “severely indebted” and “moderately indebted” (as per World Bank classification, 2003) Asia-Pacific LDCs should be eligible for debt relief
    Bangladesh, Maldives, Nepal, Vanuatu Less indebted (4) Afghanistan, Kiribati, Timor-Leste, Tuvalu Not classified (4) Cambodia, Solomon Islands Moderately indebted (2) Bhutan, Lao PDR, Myanmar, Samoa Severely indebted (4)
  • 19. Recent developments on debt relief
    • Mid 2005: Gleneagles G8 finance ministers announced 100% cancellation of debt owed to multilateral agencies by 18 of the 38 HIPC countries
    • -14 in Africa, 4 in Latin America
    • -None of the beneficiaries are LDCs from Asia-Pacific
    • Jan 2006: Multilateral debt relief initiative of IMF for 100% debt cancellation for 19 countries plus 20 more on eligibility under HIPC
    • Bold and commendable - will enable poor countries to use resources saved for health, education and addressing income poverty
    • But Asia-Pacific LDCs remain off the radar
    • -Only 2 LDCs from the region (Lao PDR and Myanmar) are classified as “eligible” on the HIPC list
    Urgent need to re-examine the issue of debt relief from the perspective of generating additional resources to attain the MDGs
  • 20. Recommendations on Debt Relief for MDGs (endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005)
    • Any debt relief extended should be an add-on to ODA, not be at cost of ODA
    • Criteria for the selection of HIPC-eligible countries need to be reviewed, with particular attention to the unique challenges faced by the 4 “severely indebted” and 2 “moderately indebted” LDCs of Asia-Pacific
    • MDG-based needs assessments should prevail over arbitrary indicators such as debt-to-export ratios
    • Debt sustainability should be redefined as “the level of debt consistent with achieving the MDGs, reaching 2015 without a new debt overhang”
  • 21. Potential for trading out of poverty
    • Asia-Pacific LDCs have fairly open economies, most have embraced globalisation - potential for making trade work for development
    • 6 are WTO members; 5 negotiating
  • 22. STRUCTURE OF EARNINGS FROM GOODS EXPORTS AND REMITTANCE FLOWS IN ASIA-PACIFIC LDCs (% of foreign exchange earnings)
    • Export structure reveals high contribution of labour-intensive exports, remittances and agriculture (for some) – trade-related support can lead to job creation and income generation for the poor
    • Earnings from remittances could be threatened by entry barriers to services markets in partner countries
    (100%) 16427.2 18.1 81.9 10.0 59.4 7.7 APLDCs (12) (100%) 37 29.7 70.3 10.8 5.4 54.1 Vanuatu (100%) 75 na 100 na na na Solomon Islands (100%) 59.7 74.9 25.1 na na na Samoa (100%) 945.5 12.2 87.8 28.1 51.7 8.1 Nepal (100%) 2652.1 2 98 na na na Myanmar (100%) 113 na 100 0.9 31.9 67.3 Maldives (100%) 378 na 100 na na na Lao PDR (100%) 9 0 100 11.1 0 88.9 Kiribati (100%) 1815 6.9 93.1 5 88.2 0 Cambodia (100%) 116 0 100 45.7 39.7 14.7 Bhutan (100%) 10121.9 31.4 68.6 8.5 55.4 4.6 Bangladesh (100%) 135 0 100 na na na Afghanistan Total Merchandise Exports + Remittances (Million US$) Remittances (%) Total Merchandise Exports (%) Other Merchandise goods (%) Manufactured Items (%) Agricultural Products (%) Country
  • 23. Trading Out of Poverty: Some Concerns
    • Phasing-out of the Multi Fibre Arrangement (MFA) and rise of textile/apparel exports from China: adverse consequences for Bangladesh, Nepal, Cambodia and Lao PDR – particularly women
    • Supply-side constraints: inadequate domestic capacities limit gains from new market access opportunities offered under Generalised Schemes of Preferences (GSP)
    • Limited South-South trade: the structure of protection of developing countries often weighs more heavily on exporters from the LDCs than on those from developed countries
    • Fall in world prices of major exports from Asia-Pacific LDCs, for example, apparel prices
    • Non Agricultural Market Access (NAMA) negotiations: expected to bring down tariffs on manufactured goods, leading to considerable erosion of preferences currently enjoyed by Asia-Pacific LDCs
    • WTO Hong Kong, Dec 2005 : limited progress
      • Duty & quota free access for 97% of LDC products; new pledges on Aid for Trade
      • End agri export subsidies by 2013; but no progress on ending domestic support
      • New WTO deadline of April 30 2006 to agree ‘modalities’ (frameworks) for NAMA, agri and comprehensive draft schedules of commitments based on agreed modalities by 31 July 2006
  • 24. Recommendations on trade and market access (as endorsed by the UN Special Body on LDCs and LLDCs in Bangkok, May 2005)
    • Actions at the national level
      • Mainstreaming trade into overall development plans
      • Social impact assessments of trade liberalisation options
    • Actions at the international level
      • Providing WTO-bound duty- and quota-free market access for all exports
      • Enhancing market access under preferential schemes
      • A scheme similar to the African Growth and Opportunity Act (AGOA) could be extended to the LDCs of Asia-Pacific
      • More commercially meaningful commitments in terms of temporary movement of natural persons and cross-border supply of services such as outsourcing
      • Simplifying and streamlining WTO accession process – investing resources in ‘real’ priorities for LDCs
      • Increasing technical assistance for human resources development – negotiating capacity of trade negotiators, implementation capacity, etc.
      • Increasing funds allocated to improve productive capacity and other supply-side responses
      • Providing special and differential concessions to LDCs in regional and bilateral trade agreements
      • Addressing volatilities in the financial and monetary systems
  • 25. Case for a Regional Compact
    • Emerging positive trends in more south-south cooperation
      • Examples – China, India, Korea, Japan, Malaysia,Thailand - more so in times of disasters (e.g., tsunami, earthquake)
      • Address cross border issues – migration, trafficking, drugs, diseases, conflict, environmental hazards
    • More could be done to help close the ‘development gap’ - no country benefits by having a poor neighbour
      • Preferential market access
      • Trunk infrastructure
      • Ease legal labour movements
  • 26. Key Messages
    • Pro-poor growth in Asia-Pacific LDCs will raise standards of living of millions of people contributing to peace, progress, and economic security all over the world – a “win-win
    • The moral argument is clear; in addition there is the
      • Strategic argument: regional and global security will be enhanced
      • Commercial argument: dynamism of Asia-Pacific will permeate through the LDCs and markets for all partners will grow
      • Efficiency argument: LDCs have already demonstrated commendable progress towards achieving MDGs; with increased support, aid dependence will progressively decline
    • We appreciate the increased support to Africa; and call attention to the 120 million people from the poorest countries of Asia and the Pacific as well.
    This is not a Utopian wish: it is realistic and possible in our generation