launch of the unctad ldc report 2013

Growth with employment for inclusive and

sustainable development Presented by:

Sebastian C. KopulandeChief Executive Officer

•Lusaka, 26th November, 2013

The Least Developed Countries Report 2013

• LDCs’ fast growing and young population needs quality jobs to escape poverty and earn decent livelihood

• Despite fast economic growth since 2000, LDC economies’ employment generation has been disappointing

• Quality jobs can only be the consequence of developing productive capacities

• Macroeconomic, industrial, rural and infrastructure policies should be geared to employment generation and development of productive capacities

Put job creation front and centre!

Key messages of the Report


• Economic trends and outlook for LDCs

• Growth with employment for inclusive and sustainable development

Demographic trendsEmployment trendsPolicy agenda

This presentation


Economic trends

and outlook

GDP growth of LDCs in 2008–2013 was 5.2%, over 2 percentage points lower than during the boom period: 2002-2008: 7.5% annual growth: fastest growth in decades

Recent trends


Mid-term outlook: 6% annual growth

• Lower than target of Istanbul Programme of Action (IPoA) of May 2011 : 7%• This has been caused by (recession) factors such as:

Lower growth in developed and developing (“emerging”) economies Subdued international trade Falling commodity prices More expensive international finance

This has impacted LDCs’ capacity to generate jobs required by population growth

Outlook


Growth with employment for inclusive and sustainable

development

Demographic trends

By 2050, total LDC population is projected to double to 1.7 billion

Rapid demographic growth


LDCs are the group of countries with the fastest population growth rate @ 2.2%, ODCs @ 1.2%, DCs @0.4%

… and increasingly urban

Population: very young…


Youth to soar from 168 million in 2010 to 300 million in 2050


development

Employment trends

Especially young: 16 million youths will reach working age annually between 2010 and 2050

• Since 2000: more labour market entrants outside agriculture

• They will expect to find quality jobs to escape poverty and earn a reasonable livelihood

Fast growing labour force


Major challenge for LDC economies:

Generate quality jobs for all these people

… in quantity

Employment growth: 3%

well below

economic growth: 7%

(annual rates, 2000–2012)

Despite fast economic growth, job generation has lagged behind


… in quality

•Labour productivity gap falling slowly, but still very wide

•Most jobs are in informal sector: insecure, low wages, low skills

Despite economic growth, job generation has lagged behind


• Vulnerable employment (own account +

family workers): 80% total employment

• Working poor: ¾ total employment

Only slow overall poverty reduction

LDC LABOUR PRODUCTIVITY

LDC output per worker in 2012:

22% of the level in other developing countries;

10% of the level in the European Union

7% of the level in North America

BUT

High labour force participation rate – 75% compared to 68% in ODCs.

WORK IS THE ONLY MEANS TO SURVIVE- regardless of type and quality!


development

Policy agenda

THE AWAKENING

• Economic Liberalization Policies on the early 1990s have not produced inclusive development;

• Economic Growth by itself neither guarantees job creation nor promotes inclusive development;

• It could lead to Social inequalities, rising unemployment, and increased poverty;

• Growth must come from labour rather than capital intensive activities

• Economic growth without enough decent jobs is unsustainable

• Employment creation is best way out of poverty

• If employment performance does not improve, major risks arise: Growing poverty Social instability Mass international emigration

Reversing the negative picture is urgent


LDCs need to change policy focus and adopt employment-rich growth as major objective

• Sustainable economic growth can only result from development of productive capacities

Employment and productive capacities(productive resources, entrepreneurial capabilities and production linkages which together determine a country’s capacity to produce

goods and services and enable it to grow and develop).


This occurs through three (3) key economic processes: Investment-growth-employment nexus: virtuous circle

• Entry point: investment

• Critical role for• public investment,

especially in infrastructure

• social services

• Develop productive capacities AND generate employment

• Diversify economy (new sectors) AND upgrade traditional sectors instead of present type of structural change: Labour moving from

subsistence agriculture to informal survivalist urban activities• Policy interventions have to be designed to encourage investment in activities

with strongest employment effects;

• Target the non-tradables sector where international competition is limited.

• Increase labour productivity to make labour-intensive investments profitable

• Aim at productivity growth in all sectors by improving technology

Policy priorities


• Objective: Output and employment expansion

• Fiscal policy: Central role to finance public investment and social services Need to improve mobilization of domestic resources

• Credit policy: Improve access to financing of firms, esp. farmers, micro and small enterprises Multiple actors: development banks (national and regional), rural banks,

commercial banks, credit cooperatives, informal institutions…

• Monetary policy: Focus on price and volume of credit Go beyond exclusive focus on price stability

Macroeconomic policies


• This has a Crucial role in short to medium term by increasing demand and enlarging the capital base of the economy.

• It must be designed to encourage private investment, not to crow it out!It should focus on:1. Investment in infrastructure – Potential benefits:

Lifts major constraint on enterprise development Can crowd in private investment Can initiate virtuous circle Choice of labour-intensive techniques – Advantages:

o Greater employment creationo Local market creationo Enterprise developmento Lower costo Foreign exchange savings

2. Investment in Social services Mostly labour-intensive e.g. education, health, sanitation, transport, public administration

Public sector job creation Role


• Industrial policy Build / Upgrade activities around existing comparative advantage

o esp. natural resources Favour investment in labour-intensive manufaturing Support citizen/local investment

• Types of policies for firms (to fill ‘missing middle’): Financing Formalizing Strengthening organization and technology Networking / Clustering

• LDC Report 2013 proposes international support measure Donors and LDC governments match funds to provide finance and

training to young entrepreneurs, esp. firms creating jobs for youth

Enterprise development policies


• Invest heavily in rural infrastructure Esp. irrigation, energy, transport, storage, communications

• Rural extension services

• Raise funding of national / regional research centres

• Build regional value chains

• Seasonal and long-term finance to farmers and non-farm economic agents

Rural development policies


Thank you

launch of the unctad ldc report 2013

Technology