Highlights

In recent years, many least developed countries (LDCs) have achieved higher rates of economic growth than in the past and even higher growth of exports and of FDI inflows. But this is not translating effectively into poverty reduction and improved human well-being. Moreover, the sustainability of growth is fragile as it is highly dependent on trends in commodity prices, aid inflows, trade preferences and weather conditions.

UNCTAD´s Least Developed Countries Report 2006 argues that the development of domestic productive capacities and concomitant expansion of productive employment opportunities is the key to sustained economic growth and poverty reduction in the least developed countries (LDCs).

Defining productive capacities as "the productive resources, entrepreneurial capabilities and production linkages which together determine the capacity of a country to produce goods and services and enable it to grow and develop", the Report shows that the core processes through which productive capacities develop - capital accumulation, technological progress and structural change - have been very weak in most LDCs. As a result, labour productivity is low and there is widespread underemployment. This is the basic cause of persistent mass poverty in the LDCs.