Inequality. Hunger. Poverty. Weak infrastructure. Competition for dwindling resources. Insecurity and conflict. The vulnerabilities of Least Developed Countries (LDCs) may be different today than they were 50 years ago – when the UN created the category – but left unaddressed, the results are the same.
Even their strong economic growth since the mid-1990s has generally been insufficient to redress their long-term income divergence with the rest of the world. The COVID-19 crisis and the emerging two-speed global recovery threaten to reverse many hard-won development gains, which is further aggravated by the creeping adverse effects of climate change.
Mainstreaming productive capacities development in these countries is a necessary condition for boosting their capacity to respond to and recover from crises. While LDCs prioritize economic transformation and diversification in their policies, they have critically lacked the means necessary to progress towards the objectives of the 2030 Agenda for Sustainable Development. The average annual investment requirements to end extreme poverty (SDG 1.1) in LDCs is estimated at $485 billion, whereas doubling the share of manufacturing in GDP (SDG 9.2) is estimated at $1,051 billion. The latter amounts to more than triple the current investment by LDCs, and therefore vastly exceeds LDCs’ available resources.
The international community has therefore an essential role to play in supporting LDCs in their efforts to mobilize adequate resources for their sustainable development needs, including in financing and technology. A new generation of international support measures that are more closely aligned to the expressed needs of LDCs and 21st century realities will have to be rolled out to support their domestic efforts. Bolstering multilateralism and dealing decisively with external sources of instability affecting LDCs is necessary to create a conducive climate for the achievement of the next programme of action for the least developed countries for the Decade 2022-2031.
The COVID-19 pandemic has exposed and amplified the vulnerability of least developed countries to external shocks. Once again, those with the least are suffering the most. At a time fraught with fragilities, UNCTAD’s Least Developed Countries Report shines a light on how governments and the international community can pool efforts to build productive capacities as a pathway to sustainable development for all.
United Nations Public and Private Finance for the Poor (UNCDF) is playing an increasingly active role in mobilizing investments in local economies through the application of catalytic loans and guarantees that mitigate risks for public and private investors. The enabling mechanism for these activities is the LDC Investment Platform (the “Platform”), which is creating new opportunities for UNCDF to expand its support for local infrastructure and businesses in the last mile. In addition, if the funding and demand are there, the platform could eventually be expanded to consider last-mile finance pipelines from UNDP and the wider United Nations Development System.
Through the LDC Investment Platform, in 2017 UNCDF provided a new generation, concessional subordinated loan of $250,000 to an agribusiness company in the United Republic of Tanzania. The loan, together with UNCDF technical assistance and a guarantee scheme from the Private Agricultural Sector Support Trust, mitigated risks of the project and unlocked $765,000 in loans from a local private bank. This will enable the project developer to enhance productivity and build a regional value chain that will benefit some 7,500 smallholder farmers working with the company. This demonstrates how UNCDF can unlock local private sector capital for sustainable development in markets perceived as too risky by some investors.
The LDC Investment Platform is helping UNCDF programmes to structure, produce credit ratings and mitigate risks in investment opportunities they have sourced, both from the private and public sectors. UNCDF has put in place new loan and guarantee policies, strengthened its due diligence requirements and transaction documentation, launched a credit scoring model and enhanced the process to support the selection and approval of relevant loan and guarantee transactions.
INVEST IN LEAST DEVELOPED COUNTRIES
To ensure development and financial additionality, the LDC Investment Platform looks to invest in niche market opportunities, where finance is not yet flowing predictably because of real and perceived risks; where the recipient can make productive use of the capital and ensure repayment
The international community has therefore an essential role to play in supporting LDCs in their efforts to mobilize adequate resources for their sustainable development needs, including in financing and technology.
Investments in infrastructure are crucial to achieving sustainable development.
United Nations Public and Private Finance for the Poor (UNCDF) is playing an increasingly active role in mobilizing investments in local economies through the application of catalytic loans and guarantees that mitigate risks for public and private investors.
To reduce inequalities, policies should be universal in principle, paying attention to the needs of disadvantaged and marginalized populations.
The Platform also strengthened its legal framework based on support from the UNDP Office of Legal Affairs as well as pro bono support received from two top international law firms in New York. The Platform introduced support tools to field investment staff and has increased human capacities to manage and oversee the loan and guarantee operations, while ensuring robust due diligence, credit scoring and risk assessment.
To ensure development and financial additionality, the LDC Investment Platform looks to invest in niche market opportunities, where finance is not yet flowing predictably because of real and perceived risks; where the recipient can make productive use of the capital and ensure repayment; where UNCDF has the potential to mobilize additional capital flows; and where there is scope to achieve significant development results.
The Least Developed Countries Fund is enabling Least Developed Countries to prepare for a more resilient future. LDCF funding helps recipient countries address their short-, medium- and long-term resilience needs and reduce climate change vulnerability in priority sectors and ecosystems.
LDCF backing helps countries implement National Adaptation Programs of Action (NAPAs) – country-driven strategies for addressing their most urgent adaptation needs. It also supports the implementation of the National Adaptation Plan (NAP) process, and the Least Developed Country work program under the UNFCCC.
The LDCF works with partner agencies to bolster technical and institutional capacity at the national and local level, to create a policy environment that encourages investment in adaptation solutions, to reduce systemic barriers to progress, and to promote innovation and private sector engagement.
Priority funding areas include agriculture and food security; natural resource management; water resources; disaster risk management and prevention; coastal zone management; climate information services; infrastructure; and, climate change induced health risks. Nature-based adaptation solutions – such as restoring mangrove forests to help protect exposed coastal areas – are another focus of the fund.
LDCF projects cut across a range of themes and geographies. For instance:
An initiative in Nepal saw the creation of farm field schools with trained facilitators to teach farmers about climate adaptation. Meanwhile, areas highly at risk from climate change benefited from the introduction of green agriculture technologies for low-till crop planting, and stress-tolerant plant and animal varieties.
A $6 million LDCF grant helped Sao Tome and Principe join the West Africa Coastal Area (WACA) Resilience Investment Program. The program’s activities included the “Safety at Sea” initiative for fishermen who must contend with increasingly strong and unpredictable storm surges, as well as intense squalls and dry fog. The program will also support training of marine meteorologists on storm surge modelling, and the establishment of a marine meteorological station – or system of buoys – to improve monitoring and forecasting. This work complements a $20 million GEF Trust Fund contribution to the West Africa Coastal Areas management program, which was recognized at the 2017 One Planet Summit as an innovative initiative to support resilience.
Work in Senegal aims to restore and conserve degraded landscapes in two target areas – one urban and one rural – and to strengthen institutional understanding and governance of ecosystem-based adaptation initiatives. Meanwhile, local entrepreneurs and small enterprises will be trained, equipped, and encouraged to create sustainable and climate-resilient businesses.
In the small island state of Comoros, resilience-building efforts have centered around reforestation and the revitalization of watershed areas. Teams have also aimed to underline the value of healthy forests with local communities by providing saplings to safeguard farmland against soil erosion as well as by planting income-generating fruit trees and species sought by the pharmaceutical industry for medicines and cosmetics.
In Gambia, the LDCF has supported the strengthening of climate change early warning systems to allow for rapid responses to extreme weather events – an effort that included improvements to the structure and capacity of the national hydro meteorology agency. The project also worked to integrate climate change awareness into national policies and to raise community awareness of climate-linked risks, potential impacts to their livelihoods, and the value of adaptive steps such as using weather and climate information to make informed agricultural decisions.
LDCF-backed work in Togo has aimed at protecting bio diverse and populous coastal areas from the twin threats of destructive human activities (e.g. marine sand and gravel mining) and increasingly severe floods and storms. On-the-ground teams have helped coastal communities find green and climate-resilient alternative income sources – from ecotourism to the production of medicinal plants – and will offer training and support to ensure adaptation and conservation are embedded in local and national policies and programs.