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 both the necessity and an opportunity for change. Coping with the impact of the crisis in LDCs will require dedicated policy action and resource flows, including from the international community. But beyond this, new policy approaches are necessary to ensure that development after the crisis will be more resilient and more inclusive.
Neither the good governance institutional reform agenda currently being implemented by many LDCs, nor the old developmental State, which includes successful East Asian economies, are entirely appropriate models now. Rather, it is necessary to build a new developmental State. This is not a matter of going back to old-style development planning, but rather a question of finding new forms of development governance that are appropriate for the twenty-first century.
A rebalancing between the State and the market is necessary in order to mitigate the effects of the crisis, to create resilience to external shocks through greater diversification and structural change, and to promote a more inclusive and employment-intensive growth path. Based on the experiences of proactive mixed economy models, the Report explores the role and functions of the State in alleviating structural bottlenecks and constraints on the growth of productivity and on the development of productive capacities, such as investment insufficiency.
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