Despite the sluggish global economic performance of recent years, the least developed countries (LDCs) in general have enjoyed moderate economic growth. Per capita income for the group as a whole has been expanding steadily, raising hopes that some of them may even be able to graduate from the category within the decade. However, there are worrying signs that this growth trend has not been inclusive and that its contribution to poverty reduction has been limited. The main explanation for the lack of inclusiveness is that growth in LDCs has not generated enough “quality” jobs — that is, jobs offering higher wages and better working conditions — especially for the young. Creating employment opportunities is critical because of the fundamental role that work plays in economic development and in people’s lives. Not only does it influence income, aggregate demand and investment decisions, it is also the best and most dignified pathway out of poverty.
Since the onset of the global financial and economic crisis in 2008, employment generation — and especially the phenomenon of jobless growth — has increasingly been recognized as a major policy concern worldwide. This is particularly true of the LDCs, where the challenges posed by demographic patterns, persistent poverty, accelerated urbanization and rising inequalities make the absence of remunerative employment a source of significant social and political tension. Not all LDCs are rich in mineral resources or other natural endowments. For most of these countries, their most valuable asset is their people, in particular the young. It is only by engaging their people in productive employment that LDCs can achieve lasting and constructive growth.
This Report examines the link between investment, growth and employment. More specifically, it considers how LDCs can promote growth that generates an adequate number of quality jobs and that enables them to reach what UNCTAD believes are their most urgent and pivotal goals, both now and in the post-2015 development agenda: poverty reduction, inclusive growth and sustainable development.

The uncertain global economic recovery and the worsening Eurozone crisis continue to undermine those factors that enabled the least developed countries (LDCs) as a group to attain higher growth rates between 2002 and 2008. Despite seeing real gross domestic product (GDP) grow slightly faster in 2010, the group as a whole performed less favourably in 2011, signalling challenges ahead. Indeed, with the world’s attention focused on Europe, there is a danger that the international community may lose sight of the fact that in recent years, LDCs have been most affected by financial crises caused by other countries. With less diversified economies, LDCs have neither the reserves nor the resources needed to cushion their economies and adjust easily to negative shocks. Furthermore, if another global downturn hurts the growth prospects of emerging economies, LDCs, as major commodity exporters, will be directly affected. Therefore, LDCs require increased external assistance to better protect their economies against external shocks and help them manage volatility.

This year has been a significant one for the least developed countries (LDCs). From 9 to 13 May, Heads of State and Government and Representatives of States gathered in Istanbul for the Fourth United Nations Conference on the Least Developed Countries (LDC–IV) to discuss the specific development challenges facing the LDCs and to deliberate on actions which could best enable their accelerated, inclusive and sustainable development. At the end of the Conference, member States declared their collective commitment to a renewed and strengthened global partnership for the development of the LDCs, and they adopted a new Programme of Action for the Least Developed Countries for the Decade 2011–2020.
The overarching goal of the Istanbul Programme of Action (IPoA) is “to overcome the structural challenges faced by least developed countries in order to eradicate poverty, achieve internationally agreed development goals and enable graduation from the least developed country category” (para. 27). This goal is expected to be achieved through national policy actions and international support, which focus on (a) achieving sustained, equitable and inclusive economic growth in LDCs of at least 7 per cent per annum; (b) building human capacities; (c) reducing the vulnerability of LDCs to economic shocks and disasters, as well as climate change, and strengthening their resilience; (d) ensuring enhanced financial resources and their effective use; and (e) ensuring good governance at all levels. The aim is to enable half the LDCs to reach the criteria for graduation by 2020 (para. 28).

Over the past three decades, the LDCs have been following a development strategy designed to release the creative potential of market forces by reducing the role of the State in the development process. For the first two of those decades, there was little indication that this strategy was working. But after the turn of the millennium, with the emergence of new Asian growth drivers and favourable movements in the terms of trade, economic growth began to accelerate. Some observers attributed this to the market-oriented policy reforms undertaken by a number of LDCs, though others raised doubts about their pattern of growth. Surging commodity prices, in some cases driven by speculative investment, debt forgiveness, increased aid flows, remittances and foreign direct investment (FDI) seemed vulnerable to a global economic downturn. There were also concerns that growth was not translating into substantial improvement in human well-being. When commodity prices suddenly fell at the end of 2008, heralding a bust in the global economic cycle, many LDCs experienced a sharp slowdown, with major adverse social consequences. It was clear from this that markets are not only creative but also can be destructive

The current economic crisis is the result of weaknesses in the neoliberal thinking that has shaped global economic policies in the last three decades; weaknesses that have been magnified by policy failures and lax regulation in the advanced countries. The cost in terms of the bailouts and recapitalization of banks has already reached unprecedented levels. However, the adverse impact on the real economy and the cost in terms of lost output and employment are now the great concerns. Most advanced economies are in recession and emerging markets have slowed. But the major victims of this contagion are likely to be the least developed countries (LDCs), many of which are still suffering the adverse impact of recent energy and food crises and have the least capacity to cope with yet another major external shock.

The Report argues that the achievement of a more sustainable and inclusive type of economic growth requires effective national development strategies, which are supported by effective development aid and development-friendly international regimes for trade, investment and technology. Enhanced country ownership of national development strategies is critical for development and aid effectiveness. In order to reach these aims, LDCs are advised to implement aid management policies. These policies will allow aid to be more effective, providing a more powerful contribution to development. The proposals are critical to enhancing aid effectiveness and making the scale-up of aid work. They link to the assessment of the Paris Declaration on Aid Effectiveness, adopted in March 2005, which will take place in Accra, Ghana, in September 2008.

The Report shows that the current pattern of technology flows to LDCs through international trade, foreign direct investment and intellectual property licensing does not contribute to narrowing the knowledge divide. Sustained economic growth and poverty reduction are not likely to take place in countries where viable economic re-specialization would remain impossible in the absence of significant progress in technological learning and innovation capacity-building.
The Report suggests that national governments and development partners could meet this challenge, notably through greater attention to the following four key policy issues:
-- How science, technology and innovation policies geared toward technological catch-up can be integrated into the development and poverty reduction strategies of LDCs.
-- How stringent intellectual property regimes internationally affect technological development processes in LDCs, and how appropriate policies could improve the learning environment in these countries.
-- How the massive loss of skilled human resources through emigration could be prevented.
-- How knowledge aid (as part of official development assistance) could be used to support learning and innovation in LDCs.
The Report is the first comprehensive insight into the development objective of technological learning and innovation capacity-building in LDCs. It is intended to increase awareness of this issue and enrich the policy dialogue toward the new "paradigm shift" on poverty reduction through productive capacity-building.

For the LDCs as a group, the decade 2000-2010 is going to be the first decade in which the growth of the economically active population outside agriculture is predicted to be greater than the growth of the economically active population within agriculture. This transition will affect more than half the LDCs during the decade and most of the others in the decade 2010-2020. Substantial poverty reduction in the LDCs will thus require not simply increased agricultural productivity, but also the development of competitive businesses in manufacturing and services, as well as increased dynamic inter-sectoral linkages.
The Report calls for a paradigm shift from a consumption- and exchange-oriented approach to poverty reduction towards a production- and employment-oriented approach. It analyzes three basic constraints on the development of productive capacities in the LDCs -- poor physical infrastructure; weaknesses of the domestic private sector and supporting financial systems and knowledge systems; and insufficient demand and thus underutilization of domestic resources and capabilities as well as weak incentives to invest and innovate -- and it identifies some key policy priorities to overcome these constraints, including the mobilization of underutilized domestic potentials and a re-balancing of the sectoral allocation of aid.

If past trends persist, LDCs are likely to become the main locus of extreme poverty in the world economy by 2015. A more effective link between international trade and poverty reduction could help to prevent this from happening. Action is required now on three fronts: mainstreaming of trade and development concerns within national poverty reduction strategies; increasing international financial and technical assistance to enhance domestic production and trade capacities; and promoting a more favourable international trade regime. The latter includes:
-- phasing out by OECD countries of agricultural support measures that adversely affect LDCs,
-- new international policies to reduce vulnerability to negative commodity price shocks and to address the special challenges facing mineral economies,
more effective market access preferences for LDCs, complemented by supply-side preferences, and
-- enhanced South-South cooperation in the field of trade and investment.

With improved national and international policies, LDCs can escape the poverty trap. Indeed a central message of the Report is that there is a major, but currently underestimated, opportunity for rapid reduction in extreme poverty in the LDCs through sustained economic growth. However, the new Poverty Reduction Strategy Papers (PRSPs), which are currently the focus of national and international efforts to reduce poverty in poor countries, are not grasping that opportunity. The Report proposes an alternative approach to improve the design of poverty reduction strategies. It also shows that effective poverty reduction in the LDCs needs a more supportive international environment. This should include increased and more effective aid and debt relief, a review and recasting of international commodity policy, and policies which recognize the interdependence between the socio-economic marginalization of the poorest countries and the increasing polarization of the global economy.

In order to facilitate discussions at UNLDC III, the Report discusses the scale of the development finance challenge in LDCs, the scope for meeting this challenge through domestic resource mobilization, and the constraints which are limiting the LDCs´ access to international capital markets and attractiveness for FDI. From the analysis, two key features of the development financing patterns of LDCs emerge. First, the central accumulation and budgetary processes of the LDCs are dominated by external rather than domestically generated resources. Second, almost all the external finance for most LDCs comes from official sources. The development prospects of most LDCs thus still depend critically on aid relationships and associated external debt dynamics. The Report examines how these have been working in the 1990s and whether the current rethinking of international development cooperation is likely to rectify the deficiencies of the past.

The main focus of The Least Developed Countries, 1998 Report, is an analysis of how different aspects of the multilateral trading system affect opportunities and constraints for least developed countries (LDCs) to enhance their participation in the world economy. The Report also examines the evolving interface between trade issues and the development objectives of LDCs. It analyses, in particular, several aspects of the multilateral trading system which traditionally have not been the main focus of concern for LDCs, but which are rapidly becoming important as these countries attempt to diversify their economies and enhance their involvement in the global economy. These issues include the extension of the multilateral framework to cover trade and the environment, and trade in services.
The Report focuses on two other issues: the implementation of WTO agreements by LDCs and how implementation by the developed countries is likely to affect LDCs, and how the process of accession could be expedited for the 19 LDCs which are not members of WTO while ensuring that they enjoy the same rights and concessions as current LDC members. The Report also identifies areas where specific concessions and provisions in multilateral agreements may be beneficial to LDCs and areas in which LDCs should develop a proactive agenda which systematically puts forward their concerns and interests in the global trading system.

The Least Developed Countries, 1996 Report, is the twelfth annual report of UNCTAD focusing the attention of the international community on the key developmental issues confronting the Least Developed Countries (LDCs), which are the poorest and economically weakest of the developing countries with the most formidable structural problems.
The Report reviews recent developments in the LDCs, their short-term outlook and prospects for growth. It analyses selected issues in the context of interdependence, examining the implications for LDCs of the processes of globalization and liberalization, processes that have profound implications for LDCs in terms of their position in the world economy, their development prospects and the nature of their economic policies. It presents a set of national policies and international support measures to enhance the capacity of LDCs to benefit from globalization and liberalization. It also deals with related issues in trade and economic cooperation between LDCs and other developing countries and financial sector reform in LDCs.