Presentation by Dr. Frannie A. LEAUTIER Executive Secretary, ACBF

1. Emerging Challenges for LDCsUN-OHRLLS Brainstorming meeting in preparation for UNLDC IVNew York, 14 – 16 July 2010 Presentation by Dr. Frannie A. LEAUTIER Executive Secretary, ACBF

2. Distribution of LDCs: Mainly an African Problem Today • Majority of LDCs are on the African continent, particularly Sub-Saharan Africa: • Income levels remain low, despite impressive economic growth • Progress in meeting the MDGs, but remaining weaknesses in nutrition, health, education and adult literacy • Economic vulnerabilities still present: • agricultural production, pattern of exports, size of economies • share of population impacted by shocks (natural disasters, food prices, fuel shocks, financial crises) • New vulnerabilities emerging: • Global: climate change; contagion in economic and financial systems; technological transformation; communicable diseases • Regional: demographic; arable land; water and energy shortages; challenges of economic integration; logistics and infrastructure issues • Country: implementation for service delivery; governance challenges; ethnic, religious, political violence

3. Impressive Economic Transformation Before Crisis:Real GDP Growth (%) Capacities to project short-term economic growth, manage indebtedness in the face of financial crises, obtain market access under changing consumer behavior, secure external financing in times of sharp retrenchment Source: UNECA (2010). Economic Report on Africa. Addis Ababa: UNECA.

4. Emerging Challenges for LDCs • Post-financial crisis economic models • Demographic shifts and their implications • Balancing effects of more open borders (trade, remittances) • New challenges of urbanization and global connectivity • Emerging and re-emerging disease patterns in humans and animals • Scarcity of water, energy, and land • Climate change and pressure on natural resources • Geographical and temporal patterns of economic growth • Transforming agriculture and food security issues • Technological and business model shocks • Challenges of integration (labour and capital markets, logistics and infrastructure)

5. Pre and Post Crisis Economic Growth Recovery in Africa 2008-2010 Capacities: to decide on R&D, industrial and competition policies in light of the financial crisis and growing competition from BRICs; maintain good fiscal governance and accountability for and get consensus on policy adopted; protect consumers in light of growing complexity of financial and business decisions; tap into the potential of nascent SMEs; regulate financial and commercial markets; effectively choose among integration options and their governance implications; shape investment policy to ensure allocative efficiency; strengthen macroeconomic management and redefine the role of the central banks Source: Calculated using data from UNECA, 2010.

6. Demographics: What do the patterns of growth imply? Capacities: to manage demographic transitions (employment creation, pension management); tap into creative potential of agglomerations and manage twin challenges of access to services and food security Source: United Nations

7. Can LDCs in Africa balance the effects of trade and migration to their advantage (2005-2008)? Angola Morocco Benin Niger Burundi Nigeria Congo, R Rwanda Djibouti Nigeria Ethiopia Sao Tome & Princi Gambia Sierra Leone Ghana South Africa Guinea Bissau Swaziland Kenya Tanzania Lesotho Togo Liberia Uganda Mali Zambia Growing remittances (current US$) Cameroon Cape Verde Cote d’Ivoire Gabon Guinea Mozambique Senegal Sudan Declining exports Growing exports (%growth) Burkina Faso Central African Republic Comoros Congo, DRC Madagascar Malawi Namibia Zimbabwe Chad Equatorial Guinea Eritrea Mauritania Mauritius Somalia Source: Ranked using data for 2000 and 2005 from the World Development Indicators Declining remittances

8. Global connectivity of the leading 123 world cities measured in terms of networks of accountancy, advertising, banking/finance, insurance, law, and management consultancy firms. Only six of the global cities are African. Capacities: to manage global integration during economic slowdown; to deal with urbanization stresses on land use, access to services, food prices and riots, youth unemployment, urban-rural linkages; for effective connectivity of leading and lagging areas through labor migration policies and infrastructure investments; for containing contagion in crime, violence, security issues; to manage effects of increased frequency/severity of disasters Source: Taylor (2003)

9. Successfully tackling current communicable diseases can build readiness for handling emerging diseases in the future Capacities: set up “smart surveillance” measures in the hotspots indentified; generate dynamic responses to communicable diseases that are based on effective collection and monitoring of outcomes with replication of solutions worked out from in-country trials

10. Dynamics of change impacting LDCs: Water is at the nexus of many risks Build secondary networks Identify & remove critical path Hedge against shocks Control for natural or induced risks Balance between local & global actions Capacities: to develop regional strategy and policies for water basin management and managing the suite of risks related to water shortages Source: Adapted from World Economic Forum 2009

11. Africa: Electrification Rate in 2005 (%) • Energy trade: Limited at present, no regional markets, no interconnectivity • Inefficiency: In operations and maintenance of existing systems • Innovation: Little innovation on alternatives with negative pressure on forest and desertification Capacities: to develop and support regional energy markets, put in place and maintain interconnected transmission grids, and improve the level of efficiency of current network operations; investment in innovative alternatives for energy generation and sales; enhancing capabilities for cross-country conflict prevention, resolution and management to ensure existing resources reach the demand centres across the continent Source: Calculated using data from UNDP 2007/2008 and OECD classification

12. Dynamics of change impacting LDCs: Agricultural dependency and arable land. Top 10 Countries over 5 Years Availability: Arable land makes up 11% of total global land area (1.4 billion hectares globally) Europe and Central Asia has the highest arable land per capita (0.57 ha per person) Arable land per capita has declined by 19% in low income countries over the past two decades Technology: Fertilizer use per hectare is highest in East Asia and Pacific and lowest Sub-Saharan Africa (by a factor of 17) During the past 30 years, Africa has experienced at least one major drought each decade Capacities: agricultural productivity, innovation in drought resistant technologies, managing food security, regional food markets and agricultural supply chains Source: World Development Indicators, World Atlas

13. Dynamics of change impacting LDCs dependent on Agriculture: The Case of Ethiopia and rainfall patterns Ethiopia – a relatively water rich country, but with GDP still tied to yearly rainfall variations 25 20 15 10 5 0 0 % -5 -20 1992 1987 1988 1989 1990 1991 1993 1994 1995 1996 1997 1998 1999 2000 1983 1984 1985 1986 1982 -10 year -15 -40 rainfall variability -20 -60 GDP growth -25 Ag GDP growth -80 -30 Capacities: for multi-Sectoral policies that recognize the complex interconnection between climate change, environment and development Source: A Country Water Resources Assistance Strategy for Ethiopia (Sadoff)

14. LDCs can leverage a Portfolio of Assets: natural, produced, human and social capital Per Capita Wealth (US$1000) Share of Wealth by Category (%) Capacities to balance development of human, social and produced assets while consuming and preserving natural assets Source: World Bank (2006) Where is the Wealth of Nations

15. Dynamics of change impacting LDCs: Geographical pattern of projected real GDP growth rates for the year 2010 • 5 Fastest growth: • Mongolia 12.8% • China 9.5% • India 8.1% • Mozambique 7.8% • Ethiopia 7.7% • Slowest growth: • Germany 1.2% • Italy 1.3% • Spain 1.7% • Japan 1.7% • Congo, R 1.9% Capacities to sustain significant growth patterns over time and speed growth in other sub-regions, while ensuring the polity owns the growth agenda

16. Transforming Agriculture: Top 20 Producing Countries of Cotton Lint in 2007 by Value in $ 1000 Source: FAOSTAT, 2010.

17. Technological and Business Model Shocks: Global Brands-- Top 20 Wool Exporters 1994 to 2004 by Value in 2004 (US$ 000) Source: FAO, Key Statistics of Food and Agricultural Trade, 2007 Capacities to transform primary products, manage complex supply chains, and negotiate appropriate trade agreements

18. Challenges of Economic Integration • Improve trade within borders (rural-urban) and outside borders by: • Mitigating for geographic characteristics: country size; proximity to other countries; common borders and land-lockedness • Rethinking trade policies in place: domestic (connectivity through transport and communication investments; competition and reliance on markets) and international (trading agreements, barriers and tariffs) • Adjusting for income levels: richer countries to interact more with other countries (regional trade) • Other factors for consideration: • Import and export policy reforms • Functioning of the labour markets

19. Key elements of the logistics revolution: access, inventory, supply chain logistics, risk management INVENTORY ACCESS • Opportunity for LDC economies: • Many LDCs are still tackling first generation infrastructure, transport and trade facilitation constraints • Few firms in LDCs have internalized the issue of supply chain management • There is room for LDCs to learn from countries in Asia (Malaysia) and Africa (South Africa) SUPPLY CHAIN LOGISTICS RISK MANAGEMENT Source: Images from Google Images

20. Conflict and Security Challenges Poverty & access to services: Speed and scope of addressing chronic poverty and broadening access to basic needs Horizontal inequalities (ethnic, religious, group, clan, race, geographical, gender distinctions) Threat from climate change: Droughts, desertification, land degradation, depletion of forests and fisheries Threat to coastal populations, increase in forced migration Challenge from weak states: Growing insurgency Networks of crime, drugs, illicit trade, human trafficking Economic/Political Competition: Low ability to generate jobs, poor distribution of natural resources Weak inclusion and poor representation

21. Three Potential Scenarios for Africa and LDCs in other Regions Continental Ownership and Leadership Externally Driven Nation States Sub-Regional Mosaic

22. Scenario 1: Continental Leadership and Ownership (Optimistic: high on inspiration, aspiration, and coordinated action ) Domestic Results LDCs Leadership & Ideas International Parity • Polity owns the growth agenda • LDC countries lead innovation • Homegrown democracies flourish • Leadership & representation in international institutions and debates • LDC standards of governance internationally accepted • LDC countries contribute to international architecture (trade, finance, environment, migration, debt) • LDCs resolve conflicts and prevent violence and crime • Service solutions (health, gender, water, education) are effective

23. Scenario 2: Sub-Regional Mosaic (Realistic: focused on performance and results, managing interdependency, mastering strategic planning) Visible but uneven Outcomes Sub-Regional Prominence Differentiated Performance • Models of success in some RECs but limited continental learning • Variable quality of democratic and economic governance • Some RECs with respectable performance, but others not • Ad hoc cooperation driven by bilateral strategies • Few prominent countries driving the external agenda • Isolated success in service provision (heath, education, gender, water) • External aid driven by external security needs and donor-based evaluations of capacity and need

24. Scenario 3: Externally Driven Nation States (Gloomy, with attention to adaptability and resilience, managing uncertainty from conflict, climate, global events) Reacting to external threats Country Conditionality Weak capacity to manage • New technologies and business models threaten domestic production • Governance standards externally set • Under-representation in international fora and debates • Weak capacity to handle ethnic, religious, and political violence • Weak country institutions lack capacity to react to international imperatives • Access to globalization determined by bilateral and multi-lateral organizations • Service provision variable with heavy dependence on international civil society • Selective aid provision with specific conditions

25. Scenarios for Africa and LDCs in other Regions and Capacity Implications Continental Ownership and Leadership Externally Driven Nation States Sub-Regional Mosaic • Capacity to manage across sectors, geographies & generations • Capacity to engage civil society, private sector, and international community • Capacity to negotiate and manage conflict • Capacity to transform agriculture • Capacity to decide on investment priorities • Capacity to observe, collect and analyze facts and data

26. Three key aspects of critical capacities regardless of scenario • Abilities to formulate, implement, analyze, evaluate and revise the appropriate policies • Skills to observe, collect, analyze and evaluate outcomes, trends, and patterns in a variety of macroeconomic, sectoral and cross-sectoral issues, including the requisite leadership skills to move perspectives, transform societies, unite diverse perspectives, or oversee implementation • Tools to know where you are, track where you are going, tap into opportunities, and handle the challenges at hand

27. Financing Capacity Development and the Patterns of ODA Source: MDG Report 2010 - UN

28. Implications for ACBF • Philosophy: develop a philosophy and approach that is suitable to the contexts and realities of different countries on the continent, drawing on local knowledge and practical skills, and embedding work programs in country priorities • Entry Points: select areas for strategic long-term support to particular countries, sub-regions, or group of institutions in partnership with critical institutions to build sustainable capacity—for example supreme audit institutions, procurement agencies, policy units, data collection and analysis agencies, leadership development, and entrepreneurship skills building • Partnerships: give priority to finding partnerships in tackling policy issues that can help evolve from one scenario to the next—policies on agriculture, climate change, investment and trade---and give priority to partnerships with institutions that can stretch geographies—(WB, IMF, IMF) (AfDB, AU, ECA, NEPAD) (bilateral donors) (private sector) • Piloting: put in place a more experimental “test and learn” approach to capacity building, drawing out lessons from experience horizontally across sectors and themes and vertically across levels of engagement • Scaling-up: speed up success by supporting regional learning institutions, policy institutes, regional NGOs, private sector associations