Free Business Essays - UNCTAD Trade Development
UNCTAD Trade Development
UNCTAD was created in 1968 with the aim of maximizing trade, investment and development opportunities of developing countries. Its objectives were promoting FDI in developing countries, help developing countries to have a cheap and efficient means of transport, development of commodity, the importance of money, finance and debt in international trade, the transfer of technology to developing countries and helped the LDCs.
UNCTAD faced a lot of problems to achieve its problems because firstly the problems had to be identified and solutions had to be implemented. These however took a lot of time. The objectives will be analysed in more details in this dissertation and recommendations will thus be suggested.
Background
UNCTAD was created because of the failure to create an International Trade Organization (ITO) in the 1950s by the United Nations. A notice was made in the United Nations Economic and Social Council (ECOSOS). A resolution was then passed in the 20th session of the ECOSOS which put forward the setting up of an international organization which would enable trading between developing countries and which would raise the living standards of people in these countries.
The number of developing countries was increasing rapidly in the 1960s as many African countries obtained their independence. The developing countries together with Economic and Social Council of the United Nations successfully promoted the creation UNCTAD in the General Assembly in 1962. The Cairo Declaration was also taken into consideration when accepting the conference to be held in 1964. The Cairo Conference was attended by 36 African, Asian and Latin American countries in July 1962.
Before the first UNCTAD conference in Geneva, there was a world economic forum, the United Nations Conference on Trade and Employment (UNCTE) which was held in Havana, Cuba in 1946 for the purpose of promoting the expansion of the production, exchange of goods and consumption which would contribute to an expansion in the world economy.
UNCTE also had the objective of reducing tariffs and barriers to trade, thus increasing opportunities for countries to trade and achieve their economic development. Moreover, UNCTE would try to find solutions to matters concerning employment, economic development, commercial policy, business practices and commodity policy.
Moreover there was also the General Agreement on Trade and Tariffs (GATT) whose objectives were to reduce barriers to facilitate international trade and it consisted of 34 contracting parties among which 14 were developing countries. It was eatablished by the Bretton Woods Conference also known as the United Nations Monetary and Financial Conference at Geneva in 1947 for economic recovery of most countries after the Second World War. GATT was an agreement and not an organization.
In the 1st UNCTAD Conference in 1964, Dr Raul Presbish stated that GATT was not beneficial to the developing nations because its concept was based on the fact that free play of international economic forces by itself leads to the optimum expansion of trade and the most efficient use of world’s resources. As a result, GATT could not enable international trade for the developing countries.
Introduction
The establishment of the United Nation Conference on Trade and Development (UNCTAD) in 1964 with the goal of promoting sustainable development while integrating developing countries into the world economy was a landmark in the history of the evolution of the United Nations. To achieve this goal, UNCTAD works by firstly, providing a platform for intergovernmental deliberations aiming at consensus building ; Secondly, it undertakes research, policy analysis and data collection ; and thirdly, it provides tailor-made technical assistance according to the specific needs and requirements of developing countries.
The goals of the organization are to “maximize trade, investment and development opportunities of developing countries and assist them in their efforts to integrate into the world economy on an equitable basis”. It is therefore clear that the foundation of UNCTAD was based on “concerns of developing countries over the international market, multi-national corporations and great disparity between developed and developing nations.
UNCTAD always felt that developing countries would benefit from an organization with clear rules. But if the organization does not have clear rules and rules based on equity, then people would lose faith in the system and this would be in no one’s favour.
During the first UNCTAD Conference, 4000 official delegates from 119 countries were present. Currently, UNCTAD has 191 member states and 400 staff members and has an annual budget of approximately $ 67 million which includes around $ 45 million from the United Nations regular budget and around $ 22 million from extra-budgetary resources.
The first UNCTAD Conference was held in Geneva in 1964. As a result of the magnitude of the problems at stake and the need to address them, the conference was institutional to meet every 4 years. However, in between the conference, UNCTAD is guided by the Trade and Development Board which meets up once in Geneva and up to 3 times a year in executive sessions for the proper management of UNCTAD.
UNCTAD also have 3 commissions (Commission on Trade in goods and services and commodities, Commission on investment, technology and related financial issues; and Commission on enterprise, business facilitation and development) for the consultation of policy, programmes and budgetary matters. The organisation also has an expert meeting which is held up to 10 times a year for the discussions among specialised technical experts in technical fields.
The first conference in 1964 was the largest international event that was ever held at that time. 4000 official delegates from 119 countries and representatives from different international organizations were present at the conference.
The Final Act was adopted. It contained 15 General and 13 Special Sections and was designed to regulate the international trade agreements and trade policies that would lead to development in the developing countries. The 11th UNCTAD Conference was held in Sao Paulo, Brazil, from the 13th June – 18th June 2004 and at present, UNCTAD has 191 member states and 400 staff members. The next UNCTAD Conference will be held in Acca, Ghana in 2008.
UNCTAD Virtual Institute on Trade and Development
The UNCTAD Virtual Institute on Trade and Development was launched on the 16th June 2004 at the 11th UNCTAD Conference in Sao Paulo, Brazil. It was designed to strengthen knowledge and capacities on trade and development issues in developing countries through training, networking, e-services, research and academic support.
That is, it would increase the knowledge, skills and human resource capacity in the developing countries to formulate economic policies and to negociate internationally. Its initiatives and programmes were to be accomplished in 3 ways namely:
- The virtual institute which was a capacity building initiative which seeks to cooperate with academic situations so as to support teaching and research on trade, investment and development issues
- The course on “key issues on the international economic agenda which highlights the links between trade, investment and development issues and
- The train for trade which is a training and capacity building programme targeting international trade operators in the public and private sector.
UNCTAD intended to formulate these through a systematic programme of technical cooperation with selected universities. However, the founding members of the Virtual Institute Network were the University of Campinas, Sao Paulo, the University of Mauritius and the Jawarharlal Nehru University, New Delhi. These Universities have a particular interest in building and improving teaching and research in trade, investment and development matters.
As such the courses offered by these universities on international economic and development issues were globalization challenges and development strategies, international trade and trade policies, transfer of technology and related investment and intellectual property issues and trade and transport facilitation and the use of ICT for development.
The people trained were government officials involved in the design and implementation of trade, investment, finance and development issues and academics involved in the dissemination of knowledge on trade, investment, finance and development studies.
Objectives
Trading in commodities and preferential tariffs were UNCTAD’s major activities in its early stage. Its other objectives were as follows:
- Promoting foreign direct investment (FDI) in the developing countries. Member countries were recommended in the first UNCTAD Conference to increase the flow of private direct investment for the economic development of the developing country.
- Helping the developing nations to have access to cheap and efficient transport and also ensure that their goods are being transported through ships. UNCTAD decided to put shipping as one of its main objectives because shipping could help to improve the international trade in development and enable the developing countries to enhance their economic structure.
- Diversification and development of commodity will enhance the diversification of production and trade structures, hence generating more employment, income and foreign exchange for the developing countries. These would enable the developing countries to integrate the global economy and hence be more productive and efficient in terms of production.
- Money, Finance and debt were also one of UNCTAD’s objectives because it would be impossible to carry out trade without these 3 elements. Money is related to International Monetary System and it can be exchanged, stored or created. Finance means the transfers of savings and investment between countries and for debt, UNCTAD’s aim is to focus on matters relating to external debt of developing countries. This would help developing countries to participate more effectively in the trade negotiations agreements.
- Transfer of technology to the developing nations which would increase productivity and promote economic growth. Transfer of technology was seen to be the most important objective of UNCTAD by the Member States.
- The Least Developed Countries (LDCs) had to be identified, reviewed their problems and take appropriate measures. As such they should be helped by being given special treatment financially and in trading matters. These would expand their trade and improve their economic and social development.
These objectives will be analysed in more details in the chapters that follows. Chapter 1 will deal with Foreign Direct Investment (FDI) and Transnational Corporations (TNCs). Chapter 2 with shipping, chapter 3 with commodities, chapter 4 with money, finance and debt, chapter 5 with technology and chapter 6 with Least Developed Countries (LDCs).
Chapter 1: Promoting FDI In Developing Countries
When UNCTAD was formed, its main objective was on trade and FDI was not seen as a tool for development. Only the importance of private investment capital was to be seen in UNCTAD’s documents. Therefore, member countries were recommended in the first UNCTAD Conference to increase the flow of private direct investment for the economic development of the developing country.
UNCTAD also recommended that governments of capital exporting developed countries should avoid measures which would prevent the flows of capital of these countries to the developing countries and take appropriate measures to encourage the flow of private investment like tax reductions, training facilities to staff, investment guarantees to investors.
Moreover, developing countries were recommended to establish information centres that would enable investors to obtain information concerning the investment conditions, regulations and opportunities that are made available to them.
During the 1970s, the activities of Transnational Corporations were given more importance than private direct investment. In the 1972 UNCTAD Conference, it was emphasized that developing countries should have the right to regulate Transnational Corporations (TNCs). This will be very beneficial to their domestic economy as it will generate inflows, avoid outflows of foreign exchange reserves, transfer of technology and promote more investment in the country.
In the 1970s, the United Nations Centre on Transnational Corporations (UNCTC) was assigned the task of regulating the activities on TNCs. Along with these, UNCTC also gave advice to developing countries about how to deal with TNCs. The UNCTC main office was located in New York.
In 1976, however, UNCTAD IV in accordance with the New International Economic Order adopted an analysis on Transnational Corporations (TNCs) which was entitled “Transnational corporations and expansion of trade in manufactures and semi-manufactures”. Its aim was to achieve a readjustment in the work of TNCs and thus work in the interest of the developing countries.
Measures were designed to help the participation of developing countries in the activities of the TNCs. Furthermore the impacts of RBPs on TNCs were also taken into account by UNCTAD and this had led to the “Set of Multilaterally Agreed Equitable Principles and Rules on Restrictive Business Practices.”
The fact that there were stagflation and recession in most markets in the 1980s, many countries were having severe debt crisis. FDI was thus seen as a source of non debt creating sources of external private finance by many developing countries and many countries tended to regard FDI as a means of development. But this has, in turn, increased the debt of many countries because of the high risks, lower profits and poor growth prospects. The share of net FDI inflows to developing countries in total FDI fell from more than one-quarter in the early 1980s to less than one-fifth in the late 1980s.
During UNCTAD VI in 1983, there was the emergence of new strategy from the industrialized country to promote world trade in such a way to provide more facilities to the operations of Multinationals Corporations (MNCs) and also trade in a more liberalized way. This however led to the Uruguay Round of Multilateral Trade Negotiations (MTNs).
UNCTAD’s role in the early 1990s became more important within the UN system for matters regarding FDI and TNCs. This was because of the fact that UNCTC ceased to function as a separate entity and its work programme was transferred to UNCTAD in 1993. Thus UNCTAD had the responsibility of further understanding the nature of TNCs and their contribution to development. UNCTAD secretariat also undertook the responsibility of producing World Investment Reports (WIR) which is commonly used as a source of data and analysis concerning FDI and development.
“Successive WIRs have helped governments, in a way no other publication has done, to know about TNCs – their nature, strategies and likely impact; and to guide them in their information gathering, policy formulation, institution building, and implementation devices.” (John H. Dunning)
By the mid 1990s, most countries started to attract inward FDI. Also, emphasis was given on FDI liberalization and improvements of standards of treatment and protection of investors in developed, developing and transition economies. For instance, 1551 changes out of 1641 introduced by 165 countries in their FDI laws were for liberalization.
Member States continued to prove the importance and benefits of attracting investment in 2004 during the 11th Conference. They adopted an integrated policy for issues of investment, technology and enterprise development.
1.1 Criticisms of FDI
As per the statement of Mr Ankie M.M Hoogvelt, more goods are now transfered internationally through multinational corporations and their affiliates than are exported and imported among nations. Moreover, over half of the manufactured goods exported by developing nations are a result of multinational activity. He also stated that over of the manufactured exported are as a result of multinational activity. This outstanding MNC record is not recognized by UNCTAD because the activities of the MNC do not fit into the development schemes of UNCTAD.
In a world more and more interdependent, the role of UNCTAD remains valid and necessary if we want to maximize the advantages of globalization and minimize, if not eliminate, some perverse consequences. This is so because without UNCTAD, dialogue and consensus building between developed and developing countries would have been less rich, effective and meaningful. (H. E. Archbisho Silvano M. Tomassi)
- Analysis
Since the creation of UNCTAD in 1964, it has recognized that FDI is both beneficial to the home and host country. The responsibility by UNCTAD‘s secretariats to publish World Investment Reports each year was a really good attempt. This proved to be very beneficial to policy makers who can analyse the data, try to develop strategies and apply it to the benefits of the developing countries. It is in this way that the relationship between FDI and development was established.
The following table shows the FDI flows in developing countries for the period 1982 – 2006.
FDI Flows in developing countries:
1982 |
1990 |
2004 |
2005 |
2006 |
|
FDI Inflows (billion US$) |
59 |
202 |
711 |
916 |
1306 |
FDI Outflows (billion US$) |
28 |
230 |
813 |
779 |
1216 |
Source: WIR2007
Table 1(a)
Global FDI inflows in developing countries in 1982 were only $59 million and FDI outflows were $28 million. However in 2006, FDI inflows have increased to $1306 million and FDI outflows to $1216 million. Developing countries are getting a bigger piece of the pie as FDI inflows increased to $233 billion in 2004, which shows an increase of 40% and by a further 28% increase in 2005. It should be noted that FDI flows have increased by approximately 6 times since 1990, that is, by the time UNCTC ceased operation and UNCTAD was given the responsibility of handling the FDI issues.
The following table shows the % of FDI Inflows and FDI Outflows in both developed and developing countries.
FDI Inflows:
Region |
1978 - 1980 |
1988 - 1990 |
1998 - 2000 |
2003 - 2005 |
Developed economies |
79.7 |
82.5 |
77.3 |
59.4 |
European Union |
39.1 |
40.3 |
46 |
40.7 |
Japan |
0.4 |
0.04 |
0.8 |
0.8 |
United States |
23.8 |
31.5 |
24 |
12.6 |
Developing Economies |
20.3 |
17.5 |
21.7 |
40.6 |
Africa |
2 |
1.9 |
1 |
3 |
Latin America & the Carribean |
13 |
5 |
9.7 |
11.5 |
Asia and the Oceanie |
5.3 |
10.5 |
11 |
21.4 |
South East Europe |
0.02 |
0.02 |
0.9 |
4.7 |
FDI outflows:
Region |
1978 - 1980 |
1988 - 1990 |
1998 - 2000 |
2003 - 2005 |
Developed economies |
97 |
93.1 |
90.4 |
85.8 |
European Union |
44.8 |
50.6 |
64.4 |
54.6 |
Japan |
4.9 |
19.7 |
2.6 |
4.9 |
United States |
39.7 |
13.6 |
15.9 |
15.7 |
Developing Economies |
3 |
6.9 |
9.4 |
12.3 |
Africa |
1 |
0.4 |
0.2 |
0.2 |
Latin America & the Carribean |
1.1 |
1 |
4.1 |
3.5 |
Asia and the Oceanie |
0.9 |
5.6 |
5.1 |
8.6 |
South East Europe |
0 |
0.01 |
0.2 |
1.8 |
Source: WIR2006
Table 1(b)
It can be seen that FDI inflows has improved more fairly than FDI outflows as compared to the world FDI in developing countries. In 1978 – 1980, FDI Inflows in developing countries accounted for 20.3 of world FDI flows whereas in 2003 – 2005, this has increase to 40.6%. FDI outflows have increased from 3% in 1978 – 1980 to 12.3% in 2003 – 2005.
The increase in the number of large TNCs shows a rising FDI. For example in the year 1990, only 19 countries found in developing economies were among the 500 list of the world largest companies. This number has risen to 47 in 2005 and has reached 58 in 2006.
Total FDI in African LDCs rose from an average of 1.7 billion US$ in the 1990s to 6.8 billion US$ in 2000 to 2005. FDI inflows in Africa rose from US$ 2.4 billion in 1985 to US$ 36 billion in 2006. However, even if FDI flows have increased in Africa, it accounted for only 3% of global FDI. Only ‘Asia and the Oceanie’ can be said to have gained from FDI as both their inflows and outflows have increased.
Moreover, the increase in FDI for the past years has led to an increase in employment in the TNCs. An estimated 73 million workers were employed in TNCs in 2006, which was nearly three times larger than in 1990.
It can be said that developing countries as a whole has gained from FDI, but not all countries have benefited from this. For instance, African flows are still lower as compared to other developing countries. So, UNCTAD has to find solutions to help developing countries who are not able to attract FDI.
Chapter 2:Importance of Shipping In International Trade
UNCTAD work in the field of ports and shipping started soon after its establishment in 1964 after analyzing the importance of shipping for international trade. The 3rd Committee of UNCTAD I decided to form a party which would analyse ways in which shipping could help to improve the international trade in development and enable the developing countries to enhance their economic structure.
Exports and imports of goods were taking place through shipping. The access and efficient transport cost was vital for traders, especially for those in developing countries as their goods become less competitive due to high transaction costs. For example, land locked developing countries spent approximately 2 times more of their export earnings for the payment of transport and insurance services than the average developing countries and 3 times more than the average developed countries.Q As such, ports and the level of management had to be improved in order to attain that objective.
A Committee on Shipping was established on the 29th April 1965 to carry out researches and studies on how shipping could enable international trade and then present these findings to the governments for them to react accordingly. The Committee on shipping had an agenda which take into account the freight rates, expansion of merchant marines on developing countries, development of ports and international law for shipping.
Studies carried out by the secretariat of UNCTAD with the help of governments, shippers, shipowners, shipper’s council and liner conference produced results which suggests that necessary actions should taken as early as possible.
As such in 1969, there was the establishment of a Working Group on International Shipping Legislation (WGISL). The role of this group was to review the economic and social aspect of international shipping law and practices in the field of shipping. A study carried out by UNCTAD in 1970 entitled “The Liner Conference System”, produces results which showed that works are needed in the shipping sector and it should be brought under an international control. Moreover, in 1971, the bills of lading which were studied by the secretariat suggest that the international shipping legislations were biased as shipowners were given preference to shippers.
Lots of reforms took place in the shipping industry in the early 1970s. The Committee on Shipping decided to establish an international regulatory system which would facilitate the transportation of goods. There was the introduction of cargos and larger ships to carry goods. In 1974, however, the secretariats were studying the social and economic implications of these changes in the shipping industry.
Moreover, the “United Nation Convention on a code of conduct for Liner conferences” was adopted in 1974. Its aim was to give the right to ships to carry a proportion of their own trade and reduce operations which were making losses.
The UN Convention on a Code of Conduct for Liner Conferences started taking effect in the year 1983. It controlled the economic and social aspects of shipping companies. In 1991, the Conference reviewed this convention and they adopted measures for a more effective implementation of the system.
The Code of Conduct for Liner Conference was a successful one as it has been accepted by 78 countries by December 1995. Also there was the adoption of the Convention on Conditions for Registration of Ships in 1986 in order to promote world shipping.
UNCTAD adopted the “UN Convention on the Carriage of Goods by Sea” on 30 March 1978 at the request of developing countries. This convention is also called the Hamburg Rules and its role was to form a standard rules concerning the rights and duties of shippers, carriers and deliveries under a contract of carriage of goods by sea. This Convention was accepted by only 21 countries by July 1993 and it entered into force on 1 November 1993.
Moreover there was also the adoption of “UN Convention on International Multimodal Transport of Goods” in 1980. Its objective was to allow the carriage of goods by at least two modes of transport on the basis of a multimodal transport contract from a place in one country at which the goods are taken in charge by the multimodal transport operator to a place designated for delivery situated in a different country. However this convention did not yet entered into force as it was accepted by only 7 contracting parties while the minimum requirements is its acceptance by 30 contracting parties.
In 1986, UNCTAD adopted the Convention on Ship Registration. This Convention would thus ensure that the owner, operators or any other persons should be responsible for the proper management and control of the ships and it should be recognized by its flags. However, by July 1993, only 9 acceptances were obtained and even now it is not yet into force as it requires 40 contracting parties.
The lack for finance for the acquisition of ships had always been a barrier for developing countries to increase their trade through shipping. As such, in May 1993, the International Convention on Maritime Liens and Mortgages was adopted. The objectives of this Convention were to improve the conditions for the financing of ships and to promote international standards concerning maritime liens and mortgages. It became into force in September 2004.
Laws concerning the arrest of ships were adopted in the 1952 Convention and some had become out dated and others were considered obscure, thus leading to conflicts between countries. As such, in December 1996, UNCTAD and the International Maritime Organisation decided to form a new convention on the arrest of ships. It was however in March 1999 that the Convention on Arrest of Ships was adopted. Regulations regarding circumstances under which ships may be arrested or released from arrest were made clear.
UNCTAD also formed the Strategic Planning Workshop for Senior Shipping Management (STRATSHIP) whose aim was to improve the management of shipping. It is organized at least once a year to discuss about these.
- Criticism
The UNCTAD Code of Conduct for Liner Conferences occupies a very limited part in the regulatory framework of liner shipping. (JOSEPH Francois, Ian Wooton)
The UNCTAD Code of Liner stands as monuments to multilateral and regional efforts to regulate shipper arrangements. The United States never ratified the code, while European countries demanded exemptions from crucial parts of the code.
- Analysis
UNCTAD first started by understanding the problems of shipping by establishing a Committee on Shipping. Then based on the findings of the committee, it started to solve these problems by adopting conventions which include the United Nation Convention on a code of conduct for Liner conferences in 1974, the UN Convention on International Multimodal Transport of Goods in 1980, the UN Convention on a Code of Conduct for Liner Conferences in 1983, the Convention on Conditions for Registration of Ships in 1986 and the Convention on Arrest of Ships in 1996.
UNCTAD’s secretariats also published a Review of Maritime Transport which provide information about the maritime industry and also help the delegations in their work. This report is published annually and is considered very important to governments and academic institutions.
Total of goods loaded and unloaded (million tons):
Year |
Developing country |
Developed country |
1970 |
2075 |
2812 |
1980 |
2926 |
3965 |
1990 |
3065 |
4529 |
2000 |
4834 |
6391 |
2004 |
5426 |
6731 |
2005 |
5577 |
6890 |
Table 2(a)
In the year 1970, , total of goods loaded and unloaded in developing country was 2075 million tons as compared to 2812 million tons in developed country, that is total of goods loaded and unloaded in developing countries were 40.4% of world trade. In 2005, developing country had 5577 million tons of goods loaded and unloaded whereas developed country had 6890 million tons, that is, total of goods loaded and unloaded in developing countries were 39.4% of world trade.
So the loading and unloading of goods has increased in both developing and developed countries and the increase in developing country was compensated with that of the increase in developed countries.
Moreover, in 2000, 65.43% of world trade was being carried out by sea transport. Also, total maritime activities were 21.48 billion tons in 1999. This increased to 27.635 billion tons in 2004 and further to 29.045 billion tons in 2006. This shows that the shipping industry became very important for the trading of goods between countries and UNCTAD was right when it decided to develop a good port system in the developing countries to enable the transportation of goods.
One difficulty faced by developing countries was the high freight costs that they had to pay as compared to developed country. The table below shows the freight costs of developing countries as a % of their total imports.
Total Freight Costs for imports in world trade:
Year |
Country Group |
Imports total freight costs |
Freight cost as a % of total imports |
1990 |
Developed market |
65.2 |
2.7 |
Developing market: |
38.1 |
6.7 |
|
Africa |
7.6 |
9.4 |
|
America |
6.1 |
5.1 |
|
Asia |
22.7 |
6.9 |
|
Europe |
1.4 |
6.9 |
|
Oceanie |
0.3 |
12.3 |
|
2004 |
Developed market |
157.7 |
3 |
Developing market: |
75.9 |
5.9 |
|
Africa |
9.9 |
9.9 |
|
America |
18.1 |
4.3 |
|
Asia |
46.6 |
6.5 |
|
Europe |
1 |
2.8 |
|
Oceanie |
0.2 |
15.4 |
Source: review of maritime transport 2006
Table 2(b)
The increase in the total freight costs from 1990 to 2004 could be mainly due to the increase in the marine activities. It can be observed that freight cost as a % of total imports in developed market was 2.7% whereas in developing country, it was 3.7%. In 2004, developed country’s rate was 3.0% as compared to 5.9% of developing countries.
Among the developing countries, Asia, America and Europe rate were reduced whereas developing countries in Africa and Oceanie experienced an increase in their freight cost as a % of total imports rate.
Therefore it can be concluded that although UNCTAD has achieved its objectives concerning shipping in developing countries, due to the increase in marine activities, it should continue to help those countries, more particularly those in Africa to increase their marine activities and also try to find solutions to reduce their freight costs which might be a barrier to their trading activities.
Chapter 3: Role Of Commodities In Developing Countries
UNCTAD attempted to examine the commodity problems faced by the developing countries. The role of commodities in developing countries was one of the main factors that led to the decision of the UN General Assembly to create UNCTAD in 1964.
Commodities is an issue that should be revisited to try to find a way, (Rubens Ricupero). Developing countries who engage themselves in trade negotiations are not really competitive as they are dependant on only 1 or 2 commodities. At that time only coffee was produced by the developing countries, but UNCTAD intended to facilitate exports of other commodities by these countries.
It all started in 1927 where there was the International Commodity Agreements (ICAs) for undertaking commodity problems.
The objectives of the ICAs were limited to rationalization of production, reducing costs and more efficient use of existing equipments (Gordon-Ashton, 1984).
Moreover in 1947, the UN Economic and Social (ECOSOC) established an Interim Coordination Committee for International Commodity Agreements (ICCICA) to establish commodity control schemes with participation of both producers and consumers. There were four commodity stabilization agreements on coffee, sugar, tin and wheat that were concluded under the ICCICA.
The Havana Charter established in 1948 recognized that ICAs could be used to stabilize prices, thus ensuring a reasonable income to producers and consumers. However by the early 1960s, these agreements under ICCICA and ICAs failed and UNCTAD took over the task within the UN system to formulate policies on international trade.
However, many countries derive livelihood from commodities, which have suffered a continuous fall in prices.
In April 1965, UNCTAD’s Trade and Development Board (TDB) established the Committee on Commodities. The role of the committee was to promote policies regarding commodity and find solutions to these problems.
Furthermore, it was seen at UNCTAD II in 1968 that 19 commodities of export interest to the developing countries needed special attention due to some problems that they were facing. These commodities were cocoa, sugar, vegetable oils, natural rubber, hard fibres, jute and allied fibres, bananas, citrus fruits, tea, wine, iron ore, tobacco, tungsten, cotton, manganese ore, mica, pepper, shellac and phosphates.
The World Bank was given the right to stabilize prices of the following commodities. However, very little was done by the World Bank in this matter. A Committee on Commodities which shows the problems and the possible remedies was also presented.
The most important agreement that took place in the 1976 UNCTAD Conference was the adoption of Integrated Program for Commodities (IPC).
The IPC analyses the importance of dealing with the problems of commodities on a case to case basis and focuses more on the difficulties faced by developing countries in exporting the different commodities. (Chadha, 1977)
Its objectives were also to negotiate 18 specific commodity agreements that would give producers a fair return and consumers a guaranteed price. It would take into account world inflation, monetary changes and the cost of manufactured imports. It also aimed at promoting the processing, marketing and distribution system of the product in developing countries.
UNCTAD work on commodity started after the creation of the IPC. The ICAs were renegotiated under UNCTAD. But progresses in making the agreements were quite slow and limited.
After UNCTAD VII, the secretariats started to put more emphasis on factors like commodity exchanges and commodity financing mechanisms which were previously being neglected. In the early 1990s, the relationship between commodities and environment was shown by UNCTAD. As such the public and government representatives were more interested in trade related environmental issues.
It was in the 1990s that UNCTAD recognizes the need to find an effective international commodity policy. This was because most of the agreements formulated for commodity by the UNCTAD earlier did not produce any results.
Therefore in 1993 UNCTAD developed a micro computer based commodity analysis and information system (MICAS) to provide up to date information on commodities, production, trade and consumption. This system would also provide assistance to developing countries in managing their economies and competing more effectively in world trade.
UNCTAD IX and UNCTAD X stated that it was important to improve the competitiveness of developing countries concerning commodities as well as improving their supply capacities and encourage better participation of the dependent commodity developing countries.
UNCTAD played a vital part in the establishment of the Sustainable Commodity Initiative (SCI) in association with the International Institute for Sustainable Development (IISD) of Canada. The objectives of the SCI were to improve the social, environmental and economic support in the commodity production and trade. The first product that was analysed was coffee in 2003.
- Criticisms
49 LDCs have suffered much more from loss of market shares than from adverse movements in their commodity terms of trade. Competitiveness on open world commodity markets is more important than stable or improved commodity prices while taking account of the importance of traditional commodities like coffee, cocoa, sugar and cotton in international trade continues on a downward trend.
This comment was made by Mr Abdelaziz Megzari, who is the Chief of the commodities at UNCTAD
Moreover it was also stated by Sophia Murphy, institute for agriculture and trade policy that UNCTAD has been the pre-eminent forum for debate, analysis and policy formulation regarding commodity issues.
The world economy has changed enormously since UNCTAD’s first session. Despite the changes, however, some things are painfully familiar Too many developing countries remain at a significant disadvantage compared to their developed counterparts Dependence on commodity trade is one of the familiar elements of developing countries’ relative poverty.
3.2 Analysis
All measures taken by UNCTAD before the 1990s did not produce any results. It was only after the 1990s that UNCTAD recognizes the need for an effective international commodity policy.
It was noted that the US dollar price of coffee fell by 71% between 1980 and 1993. Cocoa prices fell by 41% and that of cotton by 28%. Between 1997 and 2001, copper prices fell by again 27 %, cotton prices by 39 % and coffee prices by 66 %, striking a hard blow at the poorly diversified economies of the African LDCs. This decline in commodity prices has been influenced by the persistent surplus in production leading to an oversupply of that commodity in the international market.
Commodity |
1970 |
1985 |
1995 |
2000 |
Bananas:Production |
31.8 |
40.1 |
56.5 |
64.6 |
Consumption |
31.6 |
40.4 |
56.1 |
64.8 |
Surplus/Deficits |
0.2 |
-0.3 |
0.4 |
-0.2 |
Coffee: Production |
3.8 |
5.8 |
5.5 |
7.3 |
Consumption |
4 |
5.2 |
5.7 |
6.2 |
Surplus/Deficits |
-0.2 |
0.6 |
-0.2 |
0.9 |
Cotton: Production |
12.1 |
17.3 |
19.6 |
18.8 |
Consumption |
12.2 |
15.8 |
18.5 |
19.6 |
Surplus/Deficits |
-0.1 |
1.5 |
1.1 |
-0.8 |
Sugar: Production |
72.6 |
98.4 |
118.3 |
127.2 |
Consumption |
71.8 |
97.8 |
114.3 |
126.1 |
Surplus/Deficits |
0.8 |
0.6 |
4 |
1.1 |
Copper: Production |
7.6 |
9.7 |
11.8 |
14.8 |
Consumption |
7.3 |
9.9 |
12.1 |
15.1 |
Surplus/Deficits |
0.3 |
-0.2 |
-0.3 |
-0.3 |
Cocoa: Production |
1.5 |
2 |
3 |
3.2 |
Consumption |
1.4 |
1.8 |
2.5 |
3 |
Surplus/Deficits |
0.1 |
0.2 |
0.5 |
0.2 |
Table 3
As depicted in the table above, there has been persistent surplus in the production of cocoa and sugar from 1970 to 2000. These might thus be one of the reasons explaining falling prices. The role of UNCTAD should have been to limit the production of these commodities in order to maintain the price, but nothing as such was done.
Moreover, UNCTAD has not been able to solve the existing problems of commodities but new problems have emerged. The commodity sector continued to be the most important sector for the developing countries. It has also been observed that the resources allocated for work on commodities have declined considerably in UNCTAD’s agenda. Thus it can be concluded that UNCTAD has been ineffective in solving the commodity problems.
Chapter 4: The Importance of Money, Finance and Debt In Trading
Monetary, financial and debt issues did not appear to be UNCTAD’s main objectives but nevertheless these issues were identified in the first UNCTAD conference. UNCTAD has insisted that the nature of the International Monetary System should support trade and development issues. This can reduce the need for financing payments problems within trading countries.
In 1963, the International Monetary Fund (IMF) established the Compensatory Financing Facility (CFF) and it was designed to help member countries who were experiencing external deficits due to exports deficits.
UNCTAD tried to improve the work of the CFF by finding ways to measure the loss incurred through exports, the procedures of drawing and repaying back and the limitations of the CFF.
There were a lot of debates on how to measure the deficit made by the developing countries and the amount to be given to them.
Work was requested from the International Bank for Reconstruction and Development on the methods of relating the terms and conditions of aid to long-term needs of developing countries as an input to UNCTAD I and this provided the basis for important analysis on the parameters which could lead to a debt crisis in developing countries – (D Avramovic – 1964)
The report of an Expert Group which was entitled “International Monetary Issues and Developing Countries” in 1965 have led to the debate on the reform of the international monetary systems. However, the slow increase in exports earnings and the deterioration of the terms of trade have reduced the ability of developing countries to repay back their debt.
The 2nd UNCTAD Conference continued to analyze the problem of the international monetary system. The growth and development of the developing countries were set to be the priority goals during its debates. Since there were a lot external financial resources wastages among the developing countries, it was argued that these countries should be helped financially to enable them for their own development.
There was a lot of uncertainty and disturbance in the international monetary system in the early 1970s. There were lots of discussions that were going on that subject matter in the conference like the adverse effects on developing countries with respect to terms of trade, reserves, and debt servicing payments due to changes in exchange rates. It was recommended by UNCTAD that the developing countries should be compensated for that.
The oil shocks in the 1970s also led to lots of discussions concerning financing issues for the developing countries. Some developing countries had surpluses while many developed countries were making losses in their balance of payment. In 1972 the Santiago UNCTAD set a goal of a 6 % economic growth rate in the 1970's for the underdeveloped countries.
Furthermore, more attention was drawn to the worsening of the debt problems of the developing countries at UNCTAD III and as such there was the urgent need to adopt debt relief measures. A resolution was passed at UNCTAD IV entitled “Debt problems of developing countries”. It was the governments of developed countries that responded quicker to find solutions for the debt relief problems of developing countries.
With the increase in lending in the 1970s, the debt problem of the developing countries became an international concern. A Group of Government Experts on the Debt problem of Developing Countries was established in 1974
In 1974 after the Sixth Special Session of the United Nation General Assembly, all matters concerning money, finance and debt for the developing countries were shifted from UNCTAD forum to the UN General Assembly. But the UNCTAD Secretariat continued to carry out analysis and presented its findings to the UN General Assembly.
The United Nations General Assembly in 1974 established the New International Economic Order (NIEO) with the help of Dr Raul Presbich, whose main aims were to improve the terms of trade of primary products, loans obtained by the developing countries more easily and at a lower interest rate, amending the international monetary systems, LDCs being given more preferences in trade agreements, among others.
UNCTAD V in 1979 adopted a resolution entitled the ‘International Monetary Reforms’ which requested the IMF Interim Committee to consider the creation of a development ideas in allocating special drawing rights (SDRs) to developing countries. Also conditions should be applied when giving loans.
The 1980s was a decade of debt crisis for the developing countries. This was a matter of concern, not only for UNCTAD but for many other organizations. It was essential to cope with this debt crisis so as to protect the development process of developing countries and gave a greater security to the international monetary system.
In the 1980s, a number of developing countries were facing a situation of negative net transfer, that is, an excess of interest and debt repayments over current financial receipt. UNCTAD have tried to find out measures on debt relief and debt rescheduling to the developing countries.
It was to be noted that the debt problem was due to the decline in the commodity prices. Therefore, there was the adoption of a resolution entitled “Compensatory financing of export earnings shortfalls” in order to combat the debt crisis.
In order to combat this problem, UNCTAD secretariat suggested different measures like increasing the amount of funds available to developing countries, more efforts by developing countries to increase the flow of foreign exchange earnings and foreign investment and the help of developed countries to lower the unemployment rate, protectionist measures and so on.
In the 1990s the ways in which the financial system of developing countries would integrate the global financial system was the main issue.
The closure of the Committee on Invisibles and Financing relating to trade (CIFT) after UNCTAD VIII in 1992 made UNCTAD’s work more difficult more difficult in the field of money, finance and debt.
The Heavily Indebted Poor Countries (HIPCs) Initiative launched by the Bretton Woods Institutions in September 1996 became the standardized framework for all debt negotiations for all developing countries. UNCTAD secretariats were thus verifying the HIPC Initiative. Many important modifications took place in the HIPC framework in 1999 in order to improve the effectiveness of the system. The initiative was for the poor countries but three quarter of the HIPCs were LDCs.
- Criticisms
UNCTAD has promoted effective, development-oriented and durable solutions to the debt problems of LDCs. The Debt Management and Financial Analysis System, (DMFAS) Programme has provided technical assistance in debt management. (UNCTAD SECRETARY)
Moreover, Mr. Cosio-Pascal also observed that the introduction of the UNCTAD debt monitoring system in some countries had indeed had positive results in this regard.
UNCTAD had been made obsolete by the creation of the World Trade Organization.
UNCTAD has something that the billions of dollars of the World Bank and IMF could not buy: legitimacy among developing countries. A vigorous UNCTAD that competes in the process of defining global rules for trade, finance, investment, and sustainable development is essential in a pluralistic global economic regime where global institutions, organizations, and agreements complement as well as check one another. (Karl Theodore Paschke, UN Office of Internal Oversight Services)
UNCTAD has demonstrated and will continue to demonstrate its unique vitality and versatility in the United Nations system by being able to adapt to the changing international economic environment and by responding to the challenges of change and adjustment. (Sha Zukang, Chinese Ambassador)
- Analysis
UNCTAD has promoted effective, development oriented and durable solutions to the debt and financial problems of the developing countries. Even after the matters concerning money, finance and debt was shifted to the UN General Assembly in 1972, UNCTAD continued to find solutions to help developing countries to fight against the debt problems which was becoming a real concern in the 1980s. The diagram below shows the change in the amount of debt of developing countries.
From the diagram, it can be seen that since 1974 the amount of debt of developing countries have been increasing. It was only in the year 2002 that the trend was negative and the debt started to fall. For instance, the debt problem of developing countries has grown from $871 billion in 1983 to a little over $1 trillion in 1986.
While verifying the Bretton Woods HIPC Initiative in 1996, UNCTAD secretariats concluded that changes had to be made in the way it operated. As such the minimum ratio of debt to exports was reduced from 200 – 250% to 150% and the minimum threshold for the export to GDP was lowered from 40% to 30% and that of revenue to GDP ratio was reduced from 20% to 15%.
These changes however increased the number of countries eligible for the HIPC framework. This initiative was also linked to poverty reduction. But the LDC Report 2000 stated that the enhanced HIPC framework was not effective and the debt problems of developing countries would not be reduced. It can thus be said that UNCTAD has not been able to reduce the amount of debt of developing countries.
Chapter 5: The Importance of Technology Transfer
UNCTAD was among the first organizations that have recognized the importance of technology transfer. UNCTAD argued in its annual report on Least Developed Countries (LDCs) that science, technology and innovations are not luxuries for the world’s poorest countries but necessities. The transfer of technology to the developing nations has been an important aim for UNCTAD.
Member countries infact identified technology as the most important aim for UNCTAD in order to help the developing countries to progress in the world economy. The reasons why UNCTAD decided to transfer technology to developing countries are that technology would increase productivity which would promote economic growth and also the problem faced by the developing countries to gain access to advanced technology due to high costs.
The consolidation of commodity production and marketing capabilities in the developing countries could be achieved through the transfer and adoption of suitable production technologies (Gustavo Capdevila).
Soon after UNCTAD II, UNCTAD Trade and Development Board (TDB) at its 10th session decided to establish an Intergovernmental Group on Transfer of Technology (IGGTT) to enable the transfer of technology to developing countries more fairly. In 1970, the IGGTT was thus established. The group was formed after UNCTAD secretariats had identified specific areas regarding technology that required researches and analysis. This showed that member states are aware of the problems associated with technology transfer.
UNCTAD secretariats thus concentrated on the terms, cost and transfer of technology to the developing countries in the early 1970s. As a result, a Committee on Technology Transfer (CTT) was established in 1974 to enable transfer of technology at an affordable cost and in a more systematic way. The CTT was replacing the Intergovernmental Group on Transfer of Technology (IGGTT). According to the developing nations, the IGGTT was a failure. It was within the CTT that the researches and analysis were being carried out by the UNCTAD secretariats.
The UN General Assembly decided to form a UN Conference on an International Code of Transfer of Technology. Its objectives were to improve the international transfer of technology and economic growth and also encourage the participation of small and medium enterprise in developed and developing countries in the international transfer of technology.
Technological transfer was only seen as the transfer of means of production from developed countries to developing countries in the early 1970s. Therefore there was loss of technical skills for the developing countries. Developing countries had to depend on foreign experts from the developed nations for the loss of skills. This problem thus became a matter of concern for UNCTAD and a group of governmental experts was set to deal with this issue.
In the 1980s, it was seen that technological transfer was much more complicated than it was assumed. As such there was a shift in technological transfer to technological learning and this led to a rapid growth of technology which gave rise to an increase in the volume of trade and development of many countries. Development such as information technology, biotechnology and materials technology were being witnessed.
Moreover, UNCTAD’s work also focused on helping developing countries to understand the technological base needed to use the technological innovations more efficiently.
UNCTAD work in the 1990s became more important. The eighth UNCTAD Conference agreed to set up the Working Group on the Interrelationship between investment and transfer of technology. The UN Centre for Science and Technology was moved from New York to Geneva in the early 1990s and as a result there was the transfer of responsibility of the United Nations Commission on Science and Technology for Development (CSTD) to UNCTAD.
The CSTD was established in 1992 to give advice to the UN General Assembly and ECOSOC. UNCTAD secretariats were responsible for the proper function of the CSTD. There were also a number of international agreements in favour of developing countries for technology that were finalized in the 1990s.
The Trade Point Programme was sent forth by UNCTAD in 1992 with the objectives of helping the developing countries to gain access to international markets, using the most up to date technologies in electronic commerce. Global Trade Point Network (GTPNet) was the main instrument for the electronic commerce to take place. The Trade Point Programme brings together under one roof all parties to international trade.
As such small and medium enterprises (SMEs) in developing countries can make their product known to a larger amount of customers and they can also find business partners in other countries. These services are offered at a lower cost in order to promote participation of the developing countries. The Global Trade Point Network now consists of 144 Trade Points in 117 countries.
In 1995, UNCTAD organized a World Symposium on Trade Efficiency in Columbus which was entitled “New Technologies for Efficient Global Trade, UNCTAD's Tradepoint Network." Trade Ministers, Chief Executives and senior officials were present in order to discuss about the new technologies concerning banking, insurance, transport, telecommunications and information about trade.
- Criticisms
UNCTAD’s research potential is very important. It helps countries and civil society to better understand the reality of trade and investment flows. This potential should be strengthened and cherished, since it is one of the rare sources of valuable information on development. UNCTAD has a historical tie to the topic of technology transfer at the multilateral level in that it was the first forum to address this issue and out of its early work drafted the International Code of Conduct on Technology Transfer which failed to be adopted due to disagreements amongst parties on the text and substantive issues. The draft code of conduct provides a legal mechanism to regulate anti-competitive practices of multinationals in the area of technology transfer. (Francine Mestrum, UNCTAD, 54th session of TDB)
In UNCTAD's own work, science and technology have always figured prominently. As the lead entity for science and technology within the UN system, UNCTAD has contributed significantly to the conceptualization of technology issues such as the legal environment for technology transfer and the various channels for acquisition, the terms and conditions of the technology transfer process, the technological capacity building process and best practices for obtaining access to technology.
(Mr. Kobsak Chutikul, Special Adviser to the Secretary-General of UNCTAD)
UNCTAD has assumed an active role in promoting the transfer of technology from developed to developing countries. It has conducted a number of studies not only outlining the problem of technological disparity among nations, but also recommending particular strategies for alleviating the problem. (David M Haug)
- Analysis
UNCTAD’s work in the area of technology started very early whereby focuses were mainly on technology transfer. But differences in the economic power of developing and access of information between the buyer and seller showed that technology transfer was a one way process. Then technology learning was adopted and more improvements were seen as from that time concerning technology in the developing countries.
The following table shows the difference in production and exports of developing countries due to technology.
Developing country shares (%) |
1985 |
1995 |
|
All exports |
25 |
26.9 |
Total manufactures |
14.7 |
24 |
Total manufactured exports:
1985 |
1990 |
1995 |
|
East Asia |
90.1 |
94.2 |
90.5 |
South Asia |
1.2 |
1.1 |
0.6 |
Latin America & Carribean |
5.8 |
4.1 |
8 |
Africa |
2.9 |
0.9 |
0.9 |
Source: S.Lall.C.Pietrobelle, Failing to compete: technology Development and Technology Systems in Africe, Edward Elgar Cheltenham, UK 2002
Table 5
In 1985, developing country’s shares of world production was 14.7% and it provided 25% of world exports. Due to the transfer of technology that were made available to the developing nations, their total production increased to 24% of world production and they exported 26.9% of world exports.
It can also be seen that developing countries in Asia and Latin America have done fairly well whereas exports from Africa has been reduced from 2.9% of world exports in 1985 to 0.9% of world exports in 1995. Technology transfer in Africa was thus ineffective.
Furthermore, technology transfer in developing countries propagated more in other sectors, other than the production sector. Developing countries shares in ICT exports increased from 4% in 1995 to 28 % in 2005. For instance, it was seen that mobile phones were the main communication tool for small businesses in developing countries as it reduces costs and increases the speed of transaction.
As such mobile phone subscribers have almost tripled in developing countries over the last five years and now make up about 58% of mobile subscribers worldwide. This technology can help to improve the economic life of the population. Moreover internet availability in developed countries in 2002 was 10 times higher than in developing countries. But this has been reduced to only 6 times in 2006.
So it can be said that technology is spreading to the developing countries but more money had to be spent by UNCTAD on agriculture technology because developing countries are dependent on commodities and this will help to increase production. FDI by private companies’ infact produced little in the way of technology transfer into the poorest countries.
Chapter 6: Problems Faced By LDCS In Trading
UNCTAD must take account of the increasing differences among developing countries and concentrate more on promoting the development aspects of international trade. (Mario D’Urso)
The General Secretary Report at UNCTAD’s first Conference suggests approaches towards a global strategy of development. He suggested that the bad results were due to the lack of development policy that is available in the developing countries.
Imports in the developing countries continue to rise faster than exports. This thus led to economic vulnerability and there was saving gap. An outward oriented industrialization which would create a new international division of labour was thus the solution.
The early debate by UNCTAD on LDCs also enable land locked developing countries (LLDCs) to ask for measures in their favour for their geographical handicaps. UNCTAD in 1964 thus adopted the Principles Relating to Transit Trade-locked Countries.
Researches carried out by UNCTAD secretariats enable the adoption of a resolution in the second Conference entitled “special problems of the land-locked countries”. All problems faced by LLDCs were thus presented.
There was also the adoption of a resolution in 1968 which consists of special measures in favour of the least developed among developed countries which aimed at increasing their trade and their economic and social development. The General Secretary of UNCTAD was told to identify the LDCs so that specific measures can be taken to help them.
UNCTAD secretariats also made researches on Land Locked Developing Countries (LLDCs) through an Action Programme about the problem of high costs faced by them and thus try to improve this situation through trade.
Researches were carried out by the General Secretary and 30 LDCs were identified as per index taken for the year 1965. They were rated as per their capita per GDP and other socio-economic indicators like per capita GDP at factor cost in terms of US dollars, the percentage of manufacturing in GDP, percentage of manufactured products in total exports, per capita consumption of energy, number of doctors per 100000 inhabitants, the literacy ratio and others.
In 1971, during the 7th session of the ECOSOC, the Committee for Development Planning (CDP) stated that the way UNCTAD identified the LDCs was technically complicated and difficult due the lack of data. Therefore CDP found an alternative way to identify the LDCs. These were per capita GDP of less than US$100 in 1965, share of manufacturing under 10% of GDP and an adult literacy rate under 20%.
By the time of UNCTAD III, the developing countries have lost hope due to the increasing change in trading, economic problems and a deteriorating international financial situation that they were facing. UNCTAD III underlined the different interests of the different third world countries in various situations.
The Declaration and principles of the Lima Action Program was the most important ground for arguments for the developing countries during UNCTAD III, as this program would try to guarantee the role of developing countries in the world economic system. It was decided however in the conference that the developing countries would suggest their arguments in all forums as from that time and they would have the right to express themselves.
A group of experts at UNCTAD III studied and identified the problems faced by the Island Developing Countries (IDCs). The findings of this study were presented in 1974. Based on these findings, the secretariats made a number of policies in favour of the IDCs which was incorporated at UNCTAD IV.
A new Group of Experts on Feeder and Inter-island Services by Air or Sea for Developing Island Countries was summoned for the analysis of the new policies adopted in 1977. The resulted was presented in 1978. It was at UNCTAD V that the problems faced by the developing countries were identified and the remedies were proposed.
A special fund was established by the UN General Assembly in favour of LLDCs in 1976. The fund was too limited and it was never used by the LLDCs. This also prevented UNCTAD in carrying out its work effectively in this field.
In the 5th UNCTAD Conference, a Substancial New Programme of Action was adopted. This Programme’s aims were to create sustainable development in the developing countries and keep minimum standards of nutrition, health, transport, communication, housing, education and job opportunities.
In 1979, the United Nations General Assembly decided to establish a United Nations Conference on Least developed countries to adopt, support and finalize measures for the developing countries in the 1980s. It was because there were many countries identified as LDCs which were unable to develop their economies ensure a good standard of living for their population.
The 1st Conference was held in 1981 in Paris and there was the adoption of the Substantial New Programme of Action for the 1980s for the Least Developed Countries which directs principles to the LDCs for action which should be undertaken by them.
Furthermore, the UNCTAD Secretariats also carried out a study on the establishment of a fund for the land locked developing countries. The study was submitted to the UN General Assembly and it was established in 1976. However, the fund had too limited resources and it was never operational.
From the early 1980s to the beginning of the 1990s, UNCTAD secretariats carried out studies on the problems faced the by the LDCs, LLDCs and IDCs and tried to find possible remedies to help them.
In 1981, there was the establishment of the United Nations Conference on Least Developed Countries (UNLDC) to help the LDCs. Development financing was proposed for the LDCs in the first UNLDC by UNCTAD General Secretary.
In 1991, UNCTAD General Secretary called for a meeting of experts to help the CDP and tried to improve the methodology and indicators used by the CDP to identify the LDCs. Subsequently CDP adopted a new set of indicators and criterias and a new methodological framework with more rules being added. As per to the new rules, 5 more countries were added to the list of LDCs and 2 more were added in 1994.
UNCTAD secretariats added nine newly LLDCs in its research activities in the early 1990s.
LDCs have a combined share of less than 0.5 % in global trade and estimates show that this share is declining. It had been always been difficult for LDCs to integrate the multilateral trading system (UNCTAD estimates).
In 2001, the UN General Assembly tried to carry out the first International Ministerial Conference on Landlocked and Transit Developing Countries and Donor Countries and International and Financial Development Institutions on Transit Transport Cooperation. UNCTAD was thus requested to support this conference.
The LDC Report 2002 analysed the relationship between poverty, commodity and the LDCs.
The LDC Report 2006 argues that the development of domestic productive capacities and expansion of domestic employment facilities could lead to a sustained economic growth and poverty reduction in the LDCs.
Currently, under the UNCTAD lists, there are 50 countries recognized as LDCs, out of which 10 are in Asia, 34 in Africa and 6 from Oceanie. The LDC lists are reviewed by ECOSOC every 3 years.
- Criticisms of LDCs
UNCTAD says that, despite major policy reforms initiated by many of these countries, and supportive measures taken by a number of donors in the areas of aid, debt relief and trade, the economic situation of the LDCs as a whole worsened during the 1980s.
Today UNCTAD remains a valid instrument to seek a better and more effective system of international economic cooperation, whereby the division of the world into areas of poverty and plenty may be banished and prosperity achieved by all and to promote development and dialogue between developed and developing countries. (H. E. Archbisho Silvano M. Tomassi)
Ultimately, the success of UNCTAD’s work is measured by the difference it makes to the poor in developing countries. Many of the world’s poorest countries continue to be left out of growth. (Dr Supachai Panitchpakdi)
UNCTAD has done little to spur either trade or development. Instead, the organization has gained a reputation as one of the most anti-Western and ineffectual members of the U.N. family. Worse, it embraces a philosophy of economic development that relies almost exclusively on state control and planning and is hostile toward free market and private enterprise options As such, UNCTAD has become of increasing concern to Washington policy makers who now in contrast with the 1970s, want to encourage Third World nations to try economic strategies that have a history of success. (J. Michalak Stanley)
Since the mid-1970s UNCTAD has offered technical assistance to help land-locked developing countries and their transit neighbors to intensify their cooperative arrangements for the development of transit infrastructure, institutions and services in order to facilitate faster movement of goods in transit. (UNCTAD)
- Analysis
UNCTAD was infact created to help the LDCs to trade in the international market. First of all, the LDCs had to be recognized and from then UNCTAD started to find solutions to their problems. The diagram below shows the number of LDCs that have been recognized by UNCTAD.
Year |
Number of LDCs |
1970 |
30 |
1991 |
35 |
1994 |
37 |
2007 |
50 |
Table 6(a)
From the diagram it can be said that the number of developing countries has always been increasing for the past 40 years. So it can be said that UNCTAD has been unable to reduce the number of LDCs for the past years.
Moreover, the economy structure of the LDCs is not well organized. The production structure of most LDCs has hardly changed over the past 15 years, during which the agricultural sector remained the main source of growth. The share of long-term private capital inflows to LDCs has dropped by at least 30% since 1990. The net FDI inflows as a % of GDP is given in Table 6(b).
1989 - 1993 |
1999 - 2003 |
|
LDCs |
1 |
2.6 |
African LDCs |
1 |
4.6 |
Other LDCs |
0.9 |
0.3 |
Table 6(b)
Today LDCs benefit from only 4% of long term capital flows to developing countries and in the 1990s they attracted only 1.4% of FDI going to developing countries as a whole.
The proportion of people in 29 African LDCs living below $2 per day has increased from 82% in the late 1960s to 87.5% in the late 1990s. However for those in extreme poverty, that is those living under $1 per day, the increase was from 55.8% to 64.9%. Daily consumption declined from $0.66 in 1975-1979 to $0.59 in 1995-1999. So poverty is increasing in Africa and it will be more and more difficult to evade this problem.
In contrast, this has not been the case in Asian LDCs. The proportion of poor people in Asian LDCs has declined steadily and the daily consumption of the extremely poor in Asia rose from $0.84 in 1975-1979 to $0.90 in 1995-1999.
Conclusion
UNCTAD dealt in matters like commodities, technology, FDI, shipping, money, finance and debt and LDCs to achieve its objectives of promoting international trade. UNCTAD has not been successful in all these matters. For instance, UNCTAD has not solved the commodity and debt problems of developing countries and the LDCs.
Prices of certain commodities have continuously declined over the years and the amount of debt of developing countries has not been reduced. Moreover, the number of LDCs has increased over the years and some of them are becoming poorer.
In contrast, it can be said that UNCTAD has been very successful in FDI and shipping issues. FDI flows in developing countries have increased by a greater amount in the developing countries in the past years. About two third of world trade are being carried out by sea. Technology has propagated in developing countries but the transfer of technology was not beneficial to increase production in the developing countries.
However, it has been observed that since the 1980s there has been a massive increase in openness to trade in developing countries. Infact, trade volumes have grown faster than the world average over the period since the early 1980s. Developing countries now account for a third of world merchandise trade.
But UNCTAD’s work has not been beneficial to all developing countries. Asian developing countries or LDCs have benefited more from UNCTAD than African LDCs or developing countries. FDI flows in Asia have increased in greater proportion than those developing countries in other part of the world. Also the number of poor people in Asian LDCs has decreased over the years.
So it can be said that UNCTAD has achieved its objectives to a certain extent. More work should be done by UNCTAD to help those developing countries, especially those in Africa, that have not been able to gain from UNCTAD.
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- East- South Relations at UNCTAD: Global Political economy and the CMEA, Robert R Cutler, 2000
- UNCTAD: Time to lead, time to challenge the WTO, by Walden Bello, 2004
- Statement by UNCTAD, Carlos Fortin, 1995
- New Internationalist, Feb1990, THE POOR STEP UP, TRADE WARS, by David Ransom
- The UNCTAD Meeting: Will poor countries benefit, by Dr Odeem Ishmael, 2004
- Review of maritime transport 2003, 2006, 2007
- LDC Report 2007
- WIR 2000-2007
- Financial flows to developing countries: Recent trends and near term prospects, by Philippe Suttle, 2006
Websites:
- www.unctad.org
- UNCTAD.Org : A Brief History of UNCTAD
- UNCTAD.Org : Competition law and Policy
- UNCTAD.Org : Former Secretaries-General and Officer in charge
- UNCTAD.Org : Trade Related Capacity Buildings
- UNCTAD.Org : Intergovernmental process
- UNCTAD.Org : The LDC Report
- UNCTAD.Org : Strategic Planning Workshop for senior shipping management
- UNCTAD.Org : The review of the maritime transport
- UNCTAD and NGOs, “A Loyal Opposition” by Tony Hill
- UNCTAD.Org: General description of UNCTAD and its programs, current press releases, and selected publications.
- WTO.org/English/thewto_e/tif_e/fact5
- http://www.wto.org/english/thewto_e/whatis_e/tif_e/fact5_e.htm
- http://www.himalayantradepointkathmandu.com/about us/tp.htm
- http://www.twnside.org.sg/title/financing.htm
- http://www.iatp.org/unctadxi/headlines.cfm?id=31521
- http://www.sesrtcic.org/files/article/102.pdf
