UN-backed meeting calls for improved tax collection in poorest countries

UN-backed meeting calls for improved tax collection in poorest countries

Under-Secretary-General Cheick Sidi Diarra
Improved tax collection and stronger capital markets form the critical bases for long-term financing for development in the world's 49 least developed countries, a United Nations-backed meeting of the concerned nations and their partners declared today.

“Despite significant efforts to mobilize domestic resources and attract more private capital inflows, there is still a huge savings-investment gap in most of the least developed countries,” ministers and economists from the LDCs and their development partners concluded at a meeting in Lisbon hosted by Portugal and the UN office overseeing LDC affairs.

Despite past efforts, LDC domestic savings have stagnated at around 13 per cent of their gross domestic products (GDPs), due to the subsistence nature of much of the economies and rates of extreme poverty which exceed 50 per cent of the populations on average. Ministers therefore focused also on external means of improving resource flows, including through development assistance, private investment, innovative financing and debt relief.

Cheick Sidi Diarra, UN Special Adviser on Africa and its High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, noted that the Lisbon meeting would lay the groundwork for an international action plan to be adopted at the fourth UN global conference on LDCs, taking place in mid-2011 in Istanbul.

“Domestic resources are sine qua non for self-sustained economic growth and development,” he told the opening session yesterday. “Mobilizing domestic resources requires greater domestic savings and investment, higher export earnings, and improved private capital flows, including foreign direct investment.

“In order to achieve this, LDCs as well as their development partners must adopt a comprehensive approach that optimizes the synergies between domestic resource mobilization, aid, trade, private capital inflows and debt relief.”

Looking to external sources to complement domestic mobilization, the ministers noted that foreign direct investment (FDI) had been the most rapidly increasing resource flow to LDCs over the past decade, with the source shifting from predominantly developed countries to developing and transition countries.

Along with measures to attract and better utilize this investment and also tap remittances from overseas migrants, the meeting called for a stronger surge in official development assistance (ODA). Less than half of the ODA increase pledged at the previous global conference on LDCs in Brussels in 2000 has been fulfilled.

Critically, both debtors and LDC creditors need to address the current debt burden. Debt service takes up a large part of scarce budgetary resources that could be directed to productive and social areas, and the debt overhang harms the internal and external investment climate.

Despite significant debt relief, the total debt service burden of LDCs has reached $6.03 billion per year.