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The Least Developed Countries Report 2006

Developing Productive Capacities

image of The Least Developed Countries Report 2006

The Least Developed Countries are a group of 50 countries which have been identified as “least developed” in terms of their low GDP per capita, their weak human assets and their high degree of economic vulnerability. The 2006 Report focuses on the development of productive capacities for sustainable pro-poor economic growth strategies and an analysis of the progress made on some of the quantified targets of the Programme of Action agreed during the Third UN Conference on the Least Developed Countries.

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The infrastructure divide

Poor physical infrastructure is a major constraint on faster economic growth, substantial poverty reduction and the development of productive capacities in the LDCs. Physical infrastructure encompasses a diverse range of structures, equipment and facilities, including the following: power, plants, transmission lines and distribution lines; telephone exchanges, telephone lines and transmitting facilities for mobile phones; roads, railways, bridges, harbours and airports; dams, reservoirs, water pipes, water treatment plants and sewers; and garbage dumps and incinerators for solid waste collection and disposal. The mere existence of these structures and facilities does not bring economic benefits or contribute to human welfare. But the services made possible by the stock of physical infrastructure increase the productivity of other productive resources (land, machinery and equipment, and labour) and are essential for the exercise of entrepreneurial capabilities and the development of production linkages. They contribute to increasing enterprise-level productivity and profitability by reducing input costs, removing supply bottlenecks which lead to capacity underutilization and augmenting the productivity of other factors of production. Infrastructure investment can also play a catalytic role in crowding in investments in directly productive activities because it opens up new investment opportunities for entrepreneurs. Infrastructure services can also contribute to household welfare (for example, through releasing time previously spent in fetching water) and enhance access to schools, health centres and jobs.

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