Beware of LDC Label – Expert

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By Wezi Tjaronda WINDHOEK Namibia’s quest for a Least Developed Country (LDC) status may bring in negative repercussions in terms of investments, a researcher opined. Being in the Low Middle Income bracket means Namibia does not qualify for soft loans and cannot access other benefits offered by donors and other international agencies. The country has been lobbying for a LDC status to deal with its high HIV/AIDS prevalence rate and increasing poverty. In addition, Namibia has one of the highest unequal income distributions in the world. Although it is termed a middle-income country, the reality of its situation is very different. The country has the highest Gini Co-efficient in the world and makes the situation on the ground look like people are living in two worlds. By 2015, the world is supposed to have the targets set by the Millennium Development Goals, but according to a progress report, Namibia lags behind. Due to this and other challenges, Mocks Shivute, Permanent Secretary of the National Planning Commission said the country has approached selected countries and institutions for their support although they have not yet made a formal submission. “We have not made a formal request and do not expect a formal response,” said Shivute. At independence, Namibia was temporarily classified as an LDC by the United Nations General Assembly in 1990, a status that was later withdrawn. But, according to Dr Henning Melber, Research Director of the Nordic Africa Institute, the LDC label could send wrong signals to potential investors, because LDCs are generally perceived as weak economies with a serious lack of reliable material infrastructure such as transport and communications. Except when they are accorded preferential trade schemes such as the African Growth and Opportunity Act (AGOA), LDCs are hardly seen as promising environments for private investments. In contrast to this, noted Melber, Namibia has a healthy investment climate and reliable material infrastructure to offer. “Several locations are able to provide standards for industrial outlets, which match all basic requirements for advanced production.” The LDC status therefore would become a stigma, which might result in an opposite effect, said Melber. “Policy makers therefore ought to make a strategic decision, whether they want to embark on a beggar’s avenue with some short-term gains mainly for outside capital without lasting local improvements through schemes such as AGOA, or if they prefer to advertise Namibia as a promising and solid investment opportunity for foreign capital with a medium to long-term perspective under shared benefits, contributing towards a more sustainable development path,” added Melber. During his visit to the United States of America (USA) in June last year, President Hifikepunye Pohamba said Namibia was treated unfairly by being accorded a middle-income status, which compromised its chances of benefiting from what was due to LDCs. The country’s per capita income of close to US$2 000 is deceiving especially for the people that have not visited the country. By November last year, Namibia had yet to receive feedback on its request to be recognised as an LDC after it took its plea to the United Nations. While the country cannot access soft lending due to this treatment, it has also seen the dwindling of overseas development assistance due to the official status. The United Nations in the country also supports this request, as it would recognise the development challenges that Namibia faces. If it was treated as an LDC, Namibia would get finances at zero or low interest rate. Its debt would also be forgiven. Apart from these, Namibia could also have access to the World Bank’s International Development Agency loans, which are given to LDCs interest free. Other benefits are in the form of low contributions to some United Nations agencies. If a country is an LDC, it contributes less than rich countries do. Melber said trade policy pursued on the basis of preferential treatment under LDC status might be a “double-edged sword and backfire when used as a tool to reduce poverty and inequality”. In November last year, however, the country was selected together with 22 others as eligible to apply for assistance from the Millennium Challenge Account (MCA) for the 2006 fiscal year. Shivute said although the country has now been selected to benefit from the MCA, it is a process that is just starting. He added that Namibia continues to talk to some countries on the issue. The MCA is a United States government corporation initiative that promotes democratic change and sound economic policies in developing countries by linking additional US aid to reforms designed to combat corruption and stimulate economic growth. The Millennium Challenge Corporation (MCC) administers the account to some of the poorest countries in the world, based on the principle that aid is most effective when it reinforces good governance, economic freedom and investments in people that promote growth and elimination of extreme poverty.