HOW ARE THE LEAST DEVELOPED COUNTRIES (LDCs) DOING?

POVERTY AND GROWTH TRENDS 1990 VS 2007-8

Andy Sumner and Ricardo Santos

Institute 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 for
groupings is not population weighted and there is no data for Tuvalu).

2. LDCs account for a significant proportion of the world’s poor - around a quarter
of the world’s poor in terms of income poverty and malnutrition and around 40% of
the world’s poor by infant deaths and out of primary school children. LDCs account
for a significant proportion of the world’s 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 thus
population weighted data misleads by reflecting the data of a small number of
populous 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 of
GNI 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-dimensional
poverty measure the poverty incidence is 67% or 537m people. There is some good
news on some poverty dimensions - there have been improvements in literacy rates
from 51% to 62%; secondary enrolment 18% to 35% and under 5 year old mortality
fell 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 difference between LDC FCAS versus LDC non-FCAS on GNI
per capita and GNI per capita trends and income poverty. However, there are
big differences between LDC FCAS and LDC non-FCAS if one considers nutrition
and education poverty (which are much worse in FCAS LDCs) and there are also
big differences on ‘structural handicaps’ (e.g. secondary enrolment is much lower in
the FCAS LDCs and aid dependency much higher in FCAS LDCs group (19% vs
11% 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 MIC
LDCs versus LIC (low-income country) LDCs in US$1.25 incidence - 33% versus
54%; in multi-dimensional poverty - 69% vs 55%; in literacy - 81% versus 56%; in
under 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 secondary
enrolment 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. The
new UNICEF equity report included data on the bottom quintiles which suggested
significantly 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 to
an estimated 3% in 2009 and are projected to bounce back to 5% in 2010. There are
also some worrying public expenditure projections for social spending in LICs
(although less so in Africa LICs) if one consider the Oxfam-commissioned
independent 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 those
countries that are FCAS; LIC and aid dependent. This would likely mean the 18
African countries with these characteristics. The question then follows what can be
done 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 Budgets
of 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: New
York.
World Bank (2010) World Development Indicators. World Bank: Washington, DC.

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