The Least Developed Countries Report 2009

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The Least Developed Countries (LDCs) are a group of countries that have been classified by the United Nations as least developed in terms of their low GDP per capita, their weak human assets and their high degree of economic vulnerability. This Report argues that the impact of the global economic crisis is likely to be so severe in LDCs that “business as usual” is no longer possible. The crisis offers the necessity and opportunity for change. The Report sketches out a concrete, alternative economic strategy and a fresh agenda for LDC policymakers, which includes institutional capacity-building and the strengthening of the market-complementing developmental State.

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Tailoring industrial policy to LDCs

Least developed countries (LDCs) are currently looking for a combination of effective macroeconomic policy measures and international financial support to limit the damage they face from the economic crisis. However, they must also look to ways of reducing their vulnerability to future shocks. In this respect, industrial policy, as broadly defined in this Report, will have to play a critical role. In particular, building a more diversified economic structure remains the surest way of reducing vulnerability to shocks and ensuring more rapid recovery once a shock has hit. Moreover, the simultaneous effort to raise investment levels, build new backward and forward linkages across the economy, and upgrade technological capacity — which is at the heart of the industrial policy challenge — is intimately connected to promoting a more strategic integration into the world economy that can ensure more reliable sources of foreign exchange and avoid the economic dangers of the lopsided reliance on private capital flows that has been exposed by the current crisis. However, shrinking policy space can jeopardize efforts at autonomous policymaking and impede an effective policy response.

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