UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD

UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT (UNCTAD)
Trade and Development Board
Fifty-sixth session
18 September 2009

Mr. Chairman,

1. The more than one-year-old global economic and financial crisis continues to severely affect both advanced and developing countries. Its impact on employment levels has been especially painful and is expected to worsen during the coming months. While weak signs of a recovery can be spotted in advanced economies, several developing countries still find themselves in the midst of strong recession. Due to the limited size of their financial and credit systems, poor countries did not initially suffer the direct impact of the financial crisis that principally hit the more advanced economies. However, the developing countries now are suffering indirectly from the global economic consequences caused by the financial crisis.

2. Developing countries are indeed more heavily dependent on the external sector than are industrialised countries, where the internal market forces generally play the major role in determining total demand. It is the composition of their exports that makes developing countries particularly vulnerable to the current global crisis. In fact, the exports of poor countries are heavily specialised either in commodities or in low-skill manufacturing goods. The contraction of global demand thereby has exerted a strong impact on the economies of such countries and has placed them in an extremely difficult situation.

3. Moreover, developing countries are severely constrained in attempts to develop a policy response to the crisis. Advanced countries generally have responded to the crisis with a strong intervention by the State, either through automatic stabilizers or through exceptional spending, mostly financed with public debt. In developing countries, this type of policy action is challenged, on the one hand, by the low impact of government spending on the overall economy, and, on the other hand, by the difficulty in gaining access to international financial markets.


4. External aid has a crucial importance during the current critical phase. For a number of developing countries, aid is the only source of foreign financing. Advanced economies, therefore, should be aware that reduction of official aid can exacerbate poverty in developing countries. Unfortunately, past experiences show that aid flows from donor countries tend to suffer a significant contraction during crisis periods. UNCTAD and multilateral institutions should make every effort to ensure that donors fulfil their promises by maintaining the levels of aid to which they previously committed themselves, even during this phase of adverse economic conditions.

5. The limited amount of resources presently available could constitute an incentive for both donors and recipients to enhance the efficiency of internal and external income distribution policies that often are criticised for their ineffectiveness. As his Holiness Pope Benedict XVI says in the encyclical Caritas in Veritate: “A more devolved and organic system of social solidarity, less bureaucratic but no less coordinated, would make it possible to harness much dormant energy, for the benefit of solidarity between peoples.” (60)

6. Mr Chairman, UNCTAD’s Least Developed Countries (LDC) Report calls for a “rethinking of the development paradigm”. One of the key policy action suggested is to re-think the role of the State in promoting development in LDCs. While it is not possible to neglect the crucial role played by the State in economic development, we should be aware of the fact that institutions alone, even if they are well designed, cannot ensure the achievement of the desired goals. In the words of Pope Benedict XVI: “In reality, institutions by themselves are not enough, because integral human development is primarily a vocation, and therefore it involves a free assumption of responsibility in solidarity on the part of everyone.” (Caritas in Veritate, 11)

7. Focusing on the vocational nature of economic development, we should keep in mind that it presupposes the exercise of responsible freedom by both individuals and groups of peoples. Policies and institutions, therefore, should be designed to ensure human freedom, but such freedom also should be exercised within the limits of individual responsibility in the context of the human family. This premise has several direct and practical consequences. For example, while agriculture represents a critical issue that is slowing down the Doha Development Round negotiations, the experience of the poorest countries has demonstrated that, during the current economic crisis, food shortages and hunger continue to claim a significant number of victims each year.

8. Freedom and solidarity, then, should guide advanced economies to take decisive steps toward the elimination of trade barriers on agricultural products. Nevertheless, since the majority of poor countries have already duty free access to European and American agricultural markets through the Everything But Arms initiative and the African Growth and Opportunity Act, agricultural liberalisation is not the most decisive economic policy that can be implemented. During recent years, UNCTAD repeatedly has stressed that the major problem confronting poor countries is the poor productivity of their agricultural sectors, which, in fact, has developed into a chronic deficiency in LDCs. As stressed by the latest Least Developed Countries Report: “Without a significant agricultural surplus, food security will remain precarious and diversification of the national economy into manufacturing and other sectors will be undermined by rising food prices and wage costs.”

9. In this context, national governments should give priority to the increase of agricultural productivity within their development policies, while advanced economies should take up the responsibility of providing knowledge and technology to implement them. As stated in Caritas in Veritate: “This can be done by investing in rural infrastructures, irrigation systems, transport, organization of markets, and in the development and dissemination of agricultural technology that can make the best use of the human, natural and socio-economic resources that are more readily available at the local level, while guaranteeing their sustainability over the long term as well. All this needs to be accomplished with the involvement of local communities in choices and decisions that affect the use of agricultural land.” (27)

10. In conclusion, Mr. Chairman, freedom, solidarity and responsibility are the pillars by which, we believe, it would be possible to build a new paradigm of economic development, one that is centred on the unconditional value of the human person. In the context of the unprecedented challenges posed by the current economic crisis, we support the UNCTAD proposal of re-thinking the development paradigm and believe that it would be important not only to re-define the role played by the State in the economic domain, but also to give a human component to development policies irrespective of the financial and other constraints affecting least developing countries.