Brussels — An air of anxiety pervaded debate at the UN's Conference on Least Developed Countries in Brussels last week. Was this going to end up as irrelevant as the UN's previous two LDC meetings had been?
The 1990 conference in Paris set out brave and optimistic projections for growth in Africa and a lessening of poverty. But instead, the number of countries qualifying for 'least developed' status increased by two (the Republic of Congo and Ghana) - while overall poverty grew and the LDCs were further marginalised.
So this time the conference set out to avoid failure - it set few concrete goals and made no absolute promises.
The 34 African LDCs came away without the debt cancellation agreements they had aimed for; their bid for better trade access was manoeuvred into the orbit of the World Trade Organisation; their call for more official development aid was met with assertions of a changed donor mood and with a repeat of the earlier OECD decision to reduce 'tied aid', the practice of linking aid donations to the receiving country's commitment to buy goods from the donor country.
"Sensible and realistic" mood>
European Union development commissioner Poul Nielson noted the importance of "mood" at the conference; unlike its predecessors it was "sensible and realistic", a turning point from confrontation to "constructive dialogue". But at times the realism sounded more like fatalism.
Rwanda's Finance Minister Donald Kaberuka noted that for poverty to be overcome, the LDCs needed to hit an "extraordinarily high" rate of growth - around 7% of GDP. This could not be achieved by aid alone - domestic resources had to be garnered, and foreign direct investment found. For that civil conflict had to be ended and governance improved.
LDCs had to make their environment safe for investors, and had to reduce internal costs, delegates said. For the financing gap to be closed there had to be an increase in Overseas Development Assistance (ODA); it had to be effectively used, so there had to be debt relief; and there had to be better market access.
Nearly a third of Africa's 34 LDCs are, or were, recently affected by war, but on this the conference did not have much new to say.
The LDC side accepts that there has been some "very serious soul-searching" in the donor countries, who intend to organise peer reviews of their aid performance, as Kaberuka, Rwanda's minister of finance, noted.
The African LDCs, for their part, are themselves prepared to meet to discuss how they can strengthen their own performance. This, said Kaberuka, was partly necessary because of the impact domestic events had on neighbours.
Structural reform
Even if the conference has not delivered hard gains for the LDCs, it may have given them more flexibility in carrying out the precepts of the IMF and World Bank.
Since the Paris LDC conference, views on economic development among the donor states have shifted away from brutalist neo-liberalism. Now they - and the World Bank - agree that the market is not always right and that the process of globalisation has, rather than eliminated barriers to trade and investment, marginalised the LDCs even further.
Attention should now be paid to "market weaknesses as well as government weaknesses" and to "public-private participation". There has to be preparation of the private sector before privatisations go ahead, World Bank vice president, Mats Karlsson, said.
Trade - how free?
Much of the focus of the conference was on trade - on the elimination of barriers to exports from the LDCs. In 1999, 37% of LDC exports were to the EU, 27% to the US, 4% to Japan, and 1% to Canada.
Recently the EU agreed on an 'Everything but Arms' package - saying it was cutting barriers to all exports from the LDCs. Nearly a half of ODA would not be necessary if there were no protectionism in the rich countries.
But the representative from Malawi commented, "How can we talk about free trade areas when most LDCs have very little, or nothing, to trade". Instead, he thought, the accent should be on capacity building.
Many of the sessions came down to a debate between members of the EU and the LDCs. The United States was a participant and worked on the drafts, but in the final accounting the US and Japanese presence was little felt.
Usaid administrator Andrew S. Natsios promoted the value of Agoa (the Africa Growth and Opportunity Act) as a means to improve trade with Africa. The US also promoted its incentives for private investment, through Opic (the Overseas Private Investment Corporation).
While the donors were stressing free trade policies, a different slant came from Unido, the UN's Industrial Development Organisation. In a position paper, Unido said the way ahead consisted in building an industrial base from where a "modernisation spiral" could be launched. To start the LDCs on this path, it would be necessary to launch a crash trade facilitation programme, "to do what it takes to set up a first line of industrial plants capable of churning out exportables".
However, the existing LDC action plan puts emphasis on mining, and hedges and seeks to limit protection for infant industry protection. The Unido perspective is much closer to the US' Agoa plan, which its architects see as a means to jump-start industry in many of the LDCs.
Aid - how much
The Netherlands Co-operation Minister, Eveline Herfkens, stressed the advances made by this conference - without it there would not have been movement in Europe to boost aid as a proportion of GDP, and on reducing tied aid. As a proportion of GDP, the ODA figures remain tiny - between 0.15Next and 0.2% of GDP, with only Denmark and Norway moving up to 1%. This time donors will all "increase their efforts".
The decision on cutting tied aid had been taken earlier by the OECD, and it was reaffirmed by the conference. However, when the figures are unpicked this decision also looks less far-reaching. Of the US$8bn in ODA going to the LDCs $5bn can now be untied. Previously this was $2-3bn. So the gain is that around $2-3bn more, excluding other let-outs such as food aid, can be donated without ties.
But on this front, as elsewhere, the stress by donors has been on the politics of the shift. Changes will put pressure on other rich countries to follow suit, through the process of peer review, said Jean-Claude Faure, chairman of the OECD's Development Assistance Committee.
EU officials are, at least publicly, expressing optimism that the US will come more fully into the UN system, paying their debts and taking on commitments. But Herfkens commented that she simply didn't know what the new US administration's policy would be on aid, and that all would have to "wait and see."
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However, she believed that there was a will among the US public to contribute to aid if - as in Europe - its effectiveness could be demonstrated.
Debt relief
On the issue of debt relief, which has arguably received the most public support, the delegates decided to make "expeditious progress" towards the full cancellation of official outstanding bilateral debt to the HIPC (Highly Indebted Poor Countries) group - nothing near the immediate cancellation the LDCs wanted.
There was an additional commitment to provide debt relief to post-conflict countries under the same HIPC framework. This would be an inducement to Angola, which is actively seeking debt relief, or to the DR Congo. In both of those countries, however, the causes of war lie far beyond the reach of these incentives.
Conflict-afflicted LDCs saw a GDP decline of around 1% in the past decade compared to their neighbours.
It was on this front that the conference seemed most limited - it had too little to say about the causes and cures for war - or about the patrimonial system which it conveniently lumped under the rubric "corruption" - to be cured by "good governance".
A round of applause greeted a Belgian Green Party delegate who called on the 'undemocratic' WTO and the World Bank to improve their own 'good governance' record.
The conference papers weighed 30 tonnes, the media were told. Afterwards a group of journalists, seasoned observers of the constant round of international meetings in Brussels, marked the final statement on a scale of one to ten. They gave it a three.
