Developing countries should take charge of their economic growth – UN report

20 July 2006

Developing nations should take more initiative in determining economic policies that address their specific needs and chart their own reform path, the United Nations contends in a report issued to the current session of the UN Economic and Social Council (ECOSOC).

The UN’s World Economic and Social Survey 2006 recommends improving the trade environment – not just through freer market access and reduction of rich country farm subsidies, but also by giving developing countries better opportunities to participate in world service markets, including those that entail mobility of low-skilled labour.

“While trade liberalization has been the main policy trend in recent decades, in most parts of the world this has led to an expansion of export volumes, but not necessarily to higher economic growth,” states the Survey. “Countries able to diversify and change the structure of production to encompass activities of higher productivity have seen more visible growth gains.”

According to the report, lagging infrastructural development likely accounts for as much as one third of the income gap between East Asia and Latin America. In response, it recommends investments in infrastructure, with public funds if private sources fall short.

Contrary to some prescriptions, the UN says, immediate institution of large-scale governance reform is not a necessary condition for growth, or even sometimes beneficial in the short run. The experience of China and Vietnam indicates that incremental reforms, if credible and perceived as steps along the way to further change, can be highly effective in shepherding strong and sustained growth.

The UN study was discussed today by ECOSOC, currently meeting in Geneva, as delegates considered follow-up to the 2002 Monterrey Consensus, which set out an agreement on basic principles of development. It established responsibilities for the developed world, especially in maintaining an international environment conducive to development, but assigned primary responsibility to the developing countries themselves in selecting strategies to raise standards of living and enhance national capacities.