A new report says the economies of the world's 50 poorest countries grew by nearly six percent in 2004, the highest rate in two decades. But the report by the UN Conference on Trade and Development says this positive result is having little effect on reducing poverty.
The report says record levels of exports, foreign direct investments and overseas development aid account for the record levels of economic growth in the world's least developed countries.
It says aid from rich countries to poor countries doubled to $25 billion between 1999 and 2004. It says some of the poorest countries profited from high demand for oil and other natural resources as well as record merchandise exports of nearly $58 billion. In addition, the report notes private foreign investment amounted to a record $10.7 billion.
But the secretary-general of UNCTAD, Supachai Panitchpakdi, says these riches were not spread evenly among all the less-developed countries. And this is cause for concern.
"Real GDP per capita stagnated or declined in one-third of LDCs is 2004," he said. "Second issue for concern is that the sustainability for growth is rather fragile as it is highly dependent on trends in commodity prices, particularly oil prices, which seems to be quite volatile. Also, trends in external finance, preferences for export of manufactured goods and climatic and weather conditions."
Supachai says these trends are not always stable. He says an overall increase in gross domestic product is not as important as providing people with jobs that provide a decent living.
"The population of working age is growing much faster than the number of productive jobs," he continued. "The farming sector is getting to be saturated so we need to really have a growth strategy, economic development strategy that can produce productive jobs."
The report finds the key to reducing poverty in the world's poorest countries is for them to develop the ability to efficiently produce goods and services that can be sold at home and abroad.
It says low labor productivity leads to widespread underemployment. And, this is the basic cause of persistent mass poverty. The report says it takes 94 workers in a poor country to match the productivity of one worker in a developed country.
In an effort to increase productivity, the report recommends that the poorest countries should do all they can to improve their roads, transport, telecommunications, energy and other infrastructure. It says it is particularly important to provide more widespread and reliable electricity. Closing what it calls the electricity divide, the report says, is at least as significant for economic growth and poverty reduction as closing the digital divide.