The new 2019-2022 Strategic Plan introduced by Enhanced Integrated Framework (EIF) is designed to better position LDCs in the global economy at a time of growing concerns about trade. The goals of the new plan are to improve the trade environment for LDCs so there is inclusive and sustainable growth, and to increase their exports and access to international markets. With an unstable global economy and high trade costs creating uncertainties across the world, the EIF will focus its work on fragile countries and providing the adaptability needed as well as increasing engagement and support for micro, small and medium sized enterprises (MSMEs) and women in trade.
In today’s complex trade environment, the support for LDCs are needed now more than ever. Improving the economic prospects for the LDCs remains a key global challenge. Through critical diagnostic analysis, institutional and policy support, capacity development and coordination mechanism-building, the EIF has helped governments develop tailored national trade programmes. These programmes support producers, train officials to develop and implement home-grown trade agendas and build capacity among small businesses – many of which are owned by women.
LDCs: Fragile global economy
Economic growth in the LDCs, which as a group averaged 5% in 2017, continues to leave behind the countries that are dependent on raw materials and commodities. Growth forecasts for 2019, at an average of 5.5%, remain well below the 7% target set out in sustainable development goals. It is estimated that an additional investment of US$24 billion per year is needed to spur a 7% average annual GDP growth between 2016 and 2020.
Amid escalating trade tensions and uncertain growth and trade trajectories in the world and, alongside, the declining consumption in many developed markets, continued positive momentum may be hampered. The LDCs need to further diversify their exports and increasingly look to expanding their presence in domestic and regional developing country markets for future growth and trade opportunities.
As technology continues to drive the transition from the Third to the Fourth Industrial Revolution, the premium on skills and innovation has never been more important, and this offers both opportunities and challenges for the LDCs. Analytical work to define the dynamic comparative advantages of the LDCs in the digital economy followed by policies that promote skills development and upgrading, adoption of technology and innovation must be at the heart of any trade-led development strategy. Closing the skills and technology gap in the LDCs is not only essential for boosting productivity, building productive capacity, engaging in higher value-added activities and promoting longer term structural change, it also lays the foundation, alongside digital infrastructure, for leveraging emerging opportunities in e-commerce and digital trade.
Opportunity Ahead
With increasing regional and continental trade integration in Asia and Africa, regional markets are emerging as important export destinations for LDC goods and services, and regional production networks are on the rise.
In addition, LDC trade in tourism as well as other commercial services, which include financial services and other highly dynamic technology-intensive activities, have been increasing. Alongside the expected demographic dividend in the LDCs, this opens up potential niche markets and opportunities to better engage in regional and GVCs.
Unfortunately, such shifts are hampered by high trade costs in the LDCs, including those coming from regulatory differences and inadequate physical and digital infrastructure. High trade costs and constrained institutional capacities, including quality national infrastructure, remain stumbling blocks for the LDCs to tap into regional markets and get involved in regional value chains. This calls for intensified efforts from the LDCs, development partners and the private sector at national and regional levels to invest in trade infrastructure, skills development, regulatory reforms, institutional support, access to finance and trade facilitation, to name but a few. These needs are even more important in light of shrinking investment resources for LDC trade.
Strengthening local expertise to deal with complex trade issues and a fast-changing trade environment through proactively providing training and capacity-building; and engaging research institutions, universities, sector associations, MSMEs, women’s groups and other key stakeholders are the imperative route to escalate the participation of LDCs in global trade. Also exposing producers and traders of the LDCs to international and regional trade opportunities and supporting them to take required training to acquire skills to build and harness the established international connections will corroborate the expected outcome.
