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UNCTAD is unique among international organizations in that,
unlike the IMF, World Bank or WTO, it advocates careful integration and
liberalization of developing countries from the perspective of their development
needs. Its Least Developed Countries Report 2002 (LDC Report) argues that (i)
countries with generalized poverty need overall growth, not poverty targeting;
(ii) development-led strategy is required instead of adjustment-led; (iii) the
cause of stagnation must be sought in external conditions as well as domestic
policies; (iv) the quality, not the extent, of international integration is key.
UNCTAD's distinctive position may cause isolation among international
organizations but it also helps to establish its own identity.
Kenichi Ohno (GRIPS) was invited by Charles Gore, the principal
author of the LDC Report, to speak at the above meeting (he was the only
participant from Asia). The purpose of this small group meeting was to provide
inputs to the LDC Report 2004 (published every other year). The two-day meeting
was heated and interesting. Apart from the meeting, Ohno met Gore informally to
further exchange views. Below are some of the arguments which may be of interest
to Japanese aid officials and experts. (It was a closed session but the
publication of this summary has been authorized by Mr. Gore.) These are my
personal and selective views and do not represent the views of UNCTAD or the
meeting host.
Speakers (in order of presentation): Gustav
Ranis, Guy Mhone, Jean-Claude Berthelemy, Ignacy Sachs, Mulat Demeke, Marc
Wuyts, Kenichi Ohno, Mario Cimoli, Jonathan Kydd
Other participants: Elsa
Assidon, Ajit Ghose, Massoud Karshenas, Amelia Santos-Paulino, Shigehisa
Kasahara (UNCTAD), and other UNCTAD staff. Rubens Ricupero (UNCTAD
Secretary-General) took part in the closing session.
Note: The UN classifies 49
countries as least developed using the criteria of income, human development
and economic vulnerability. However, our discussion proceeded without specific
reference to this definition. The UN-defined LDCs do not include, for example,
Mongolia, Vietnam, and Bolivia.
<
Purpose >
At the outset, Charles Gore, the meeting host, hoped that the
experts would discuss the following issues:
(i) LDCs adopted liberalization (structural adjustment) and
poverty reduction (PRSP) but have not attained sustainable development. Do they
now need developmental policies? If so, what alternative strategies can we
offer?
(ii) What is the proper relationship between external opening
and development? Is it too simple to say the former leads to the latter? Should
development be the main goal and trade a supplementary measure?
(iii) LDCs may be regarded as open subsistence economies which
were forced open. What is needed to trigger their take-off?
<
Session One: Balanced Growth, Dualism and Structural Change >
The first speaker
argued that Africa was moving from natural resource rich to labor surplus
economies (although not as much as East Asia), so the model of resource
mobility between agriculture and industry would apply. For this, many sectors
such as rural-urban, informal-formal, must be considered. LDCs' development
required domestic linkage between agriculture and industry, whereas growth
based solely on the export of primary commodities was unsustainable. Technical
and higher education as well as currency depreciation were recommended for
this. Analytically, typologies were useful. To this presentation, questions
were raised as to the complexity of typology when each country and issues must
be analyzed differently. The wisdom of currency depreciation was also
questioned.
The next speaker
stated that, in grafted capitalism of LDCs, modern development (enclavity) and
marginalization of the mass were simultaneously observed. Examples from
Southern Africa were presented. To overcome this duality, it was necessary to
directly analyze the informal sector and introduce pro-active measures
including land reform, labor-intensive industrialization and trade policy. It
was pointed out from the floor that international factors also played a part
in sustaining mass marginalization. Others noted the importance of
"supplementing policies" to correct growth biases, and the quality
of the leadership (and the way to ensure such leadership).
<
Session Two: Inclusive Development, Tradables/Non-tradables, and Supply of Wage
Goods >
The speaker
pointed to (i) subsistence-oriented economies; (ii) low saving due to waste;
and (iii) import vulnerability, as the common features of LDCs. The income
elasticity of employment and the supply elasticity of wage goods were
highlighted. Governments were urged to do everything to generate employment,
especially through non-investment sources of growth such as eliminating wastes
and better maintenance of existing capital. The second speaker, from Ethiopia,
reported the status of poverty trap in his country with concrete facts and
numbers.
To these
presentations, it was pointed out, from the methodological viewpoint, that the
search for a common policy list would not work since each country was
different, and what was required was a new program to ask the right
development question in the context of each country. Discussion on surplus
extraction from the agriculture and natural resource sectors followed.
The next speaker
reported on the PRSP and HIPC situations in Tanzania. The "macro-micro
linkage problem," namely, the coexistence of overall macro growth and the
lack of progress in poverty reduction, was a big concern. To explain this, the
author proposed the hypothesis of cheaper wage goods due to trade
liberalization. As the prices of (second-hand) manufactured imports fell, the
domestic production cost also fell even without productivity gain, sustaining
the competitiveness of Tanzanian agriculture. However, commentators questioned
the data quality as well as the significance of such manufactured goods in the
consumer basket of workers.
<
Session Three: Policies and Institutions for Poverty Reduction through
Productive Development >
Ohno reported on
the transferability of East Asian experience with the following main points:
--There are
three levels of transferability: (i) blind copying; (ii) selective copying;
and (iii) general strategic thinking. The most important is (ii) and (iii),
especially the last.
--East Asia is actually growing and we know what works but cannot articulate
it well. The World Bank has the opposite problem.
--The East Asian experience consists of: (i) industrialization through trade
and investment; (ii) clear order and organic structure of the region; and
(iii) authoritarian developmentalism as a political regime for initiating
growth. They cannot be directly transferred to Africa, however.
--Vietnam was presented as an example. It has the potential to join Asian
dynamism but has not attracted a critical mass of FDI due to bad policies.
We are trying to persuade the Vietnamese government through concrete
industrial studies and policy proposals.
--Japan has less experience with Africa and also faces a tight ODA budget.
We are encouraging the Japanese government to (i) adjust the aid system to
participate in the new aid modality; and (ii) propose a new growth strategy
suitable for each country.
There was an
emotional repulsion of authoritarianism, quoting Stalin. There was also a
criticism [based on misunderstanding] that Vietnam's FDI strategy could hardly
be copied to other LDCs. Knowing the risk of being misinterpreted, the author
made as clear a presentation as possible. However, misunderstanding still
seems inevitable in discussing the East Asian experience with people from
different backgrounds.
On a more fruitful level, the
following questions were raised: (i) Can East Asian experience be replicated
in South Asia? (ii) Is income convergence visible in East Asia? (iii)
Northeast and southeast Asia had different growth patterns; (iv) Is there a
leap frogging? (v) Other regions had authoritarian developmentalism but it was
not sustained; (vi) Can authoritarian developmentalism be adopted without
abandoning democracy?
Regarding (ii) and (iii), there was a
discussion on the limits faced by Malaysia and Thailand, which relied on trade
liberalization and FDI for growth but could not reach the level of domestic
capability of Taiwan and Korea. Some argued that there should not be any
difference in learning ability between ASEAN and NIEs, but the author rejected
this as a wishful thinking not based on reality. Additionally, the inclusion of
large-scale infrastructure in Vietnam's CPRGS, as well as Japan's agricultural
protection, were discussed.
The speaker from ECLAC asserted that
Latin America was witnessing a simultaneous occurrence of modernization
(liberalization, IT, etc) and declining domestic capability (productivity,
design, etc). Trade was freer but competitiveness and value were lost. Computer
users increased but productivity stagnated. To overcome this dilemma, deliberate
policy intervention to strengthen knowledge and networks was necessary. [This is
the same problem as ASEAN's, albeit at a higher level of development. However,
apart from ECLAC, it was not clear how much interest in industrial
competitiveness existed in Latin America generally.]
The last speaker argued for balanced
policy intervention to solve various coordination problems in the agriculture of
LDCs, which was experiential and not dominated by either plan mentality or
complete liberalization. For this, more institutional analysis, trade and
domestic policies to support institution, and the "stage" view of
agricultural development were required. Ohno noted that these ideas were
extremely interesting, however, it was doubtful whether the state alone could
provide coordination services. Historically, the merchant class provided such
services (long-distance trade, Yokohama merchants in 19c. Japan, overseas
Chinese in Southeast Asia, Japanese trading companies, etc). Ohno argued that
the state should link up with these private "professionals" for
agricultural coordination.
<
Closing Session >
Rubens Ricupero, secretary-general
of UNCTAD, commented on the previous session. According to him, the pressure
to open up agriculture was very strong at present. While it was mainly
directed to high- and middle-income countries, LDCs could no longer avoid
opening either. To this, a number of experts (including Ohno) replied that the
political economy of agricultural liberalization in higher income countries
and the agricultural development problem of LDCs were separate matters, and
hasty liberalization on the latter was undesirable. It was hoped that UNCTAD
would strive to modify the reality rather than take it as given. Ohno however
added: (i) while trade policy mattered greatly, the quality of domestic
development strategy was most important; (ii) food security argument should be
used with much care since it could be easily misrepresented; (iii) fundamental
discussion should not be hurried, and should be continued even past the
agricultural negotiation deadline of January 2005.
The points that each participant
felt as most important were also presented. Ohno's key points were as follows:
(i) shift the level of debate from the search for common policies to
individual, concrete policies; (ii) organize a new program to ask the right
questions and provide answers for each country; (iii) each LDC should be able
to choose from alternative development policy options.
Kenichi Ohno (GRIPS)
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