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Report: Manufacturing Could Free Poorest Nations From Poverty

FILE - A price ticker displays latest market information outisde the Ethiopian Commodities Exchange in Addis Ababa, May 29, 2013.
FILE - A price ticker displays latest market information outisde the Ethiopian Commodities Exchange in Addis Ababa, May 29, 2013.

A new United Nations report urges the poorest countries in the world to shift from low- to high-productivity activities to improve their economies.

In its annual Least Developed Countries Report, UNCTAD — the U.N. Conference on Trade and Development — says these countries must structurally transform their economies to free themselves from the "poverty trap," which is stunting economic growth and development.

Of the 48 nations the U.N. considers "Least Developed Countries" (LDCs), only one, Laos, is on track to achieve all seven of the Millennium Development Goals (MDG's) by 2015.

Only four African countries — Ethiopia, Malawi, Rwanda and Uganda — are likely to meet a majority of these targets.

This assessment is particularly grim in light of the even greater challenges awaiting these countries in the coming years. The MDGs set a goal for nations to halve their poverty levels by 2015. The so-called Sustainable Development Goals, which carry on from where the MDGs leave off, call for eradication of poverty by 2030.

According to Taffere Tesfachew, an UNCTAD official who works with African nations, it would be nothing short of a miracle for the LDCs to pull this off.

In order for the least developed countries to achieve this miraculous performance, he says they will need to structurally change their economies.

He tells VOA this means shifting labor from activities with low productivity, such as small-scale agriculture and services to more dynamic activities with higher productivity, such as manufacturing and high-value services.

“Countries that have moved up are the ones that are creating opportunities for those that are leaving agriculture to engage in things where they add value, where they get training and as it happens, manufacturing tends to have that sort of feature, that is why this call for manufacturing," he said. "Countries that are using policies to shift and influence capital and labor to move into this activity sector tend to do better.”

Tesfachew says these high-productivity sectors tend to pay higher wages and create a demand for goods. This, he says, encourages investment.

On the surface, it appears that the LDCs are not doing badly. UNCTAD economic data show growth in these poor countries between 2002 and 2008 exceeded the seven percent target set by the international community. And, even after the 2008 financial crisis, UNCTAD notes the LDCs grew faster than other developing countries, at an average of 5.7 percent per year.

But U.N. economists say the outlook for the least developed countries in the short and medium term remains uncertain. They say increasing people’s productivity is the best way to break the patter of human and economic underdevelopment that continues to entrap them in poverty.