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Role of agriculture in the economy

1. The agricultural sector is at the heart of the economies of the least developed countries (LDCs). It accounts for a large share of gross domestic product (GDP) (ranging from 30 to 60 percent in about two thirds of them), employs a large proportion of the labour force (from 40 percent to as much as 90 percent in most cases), represents a major source of foreign exchange (from 25 percent to as much as 95 percent in three quarters of the countries), supplies the bulk of basic food and provides subsistence and other income to more than half of the LDCs' population. The strong forward and backward linkages within the rural sector and with other sectors of the economy provide added stimulus for growth and income generation.

2. Thus, significant progress in promoting economic growth, reducing poverty and enhancing food security cannot be achieved in most of these countries without developing more fully the potential human and productive capacity of the agricultural sector and enhancing its contribution to overall economic and social development. A strong and vibrant food and agricultural system thus forms a primary pillar in the strategy of overall economic growth and development. Agriculture in LDCs cannot continue to be treated as a residual sector for policy attention and investments.

The challenges of globalization and trade liberalisation

3. Although globalization offers opportunities for growth and development in all parts of the world, the hopes and promises attached to rapid liberalisation of trade and finance have not so far been fulfilled in many developing countries, and particularly so in LDCs. In fact, the latter are increasingly becoming marginalized, especially in agriculture. The combined share of their agricultural exports declined from about 5 percent of world agricultural exports in the early 1970s to just around 1 percent in 1996-98.

4. LDCs face many difficulties, both internal and external, in their efforts to develop their agriculture and to achieve their objectives of improving food security and increasing export earnings. Internal difficulties include low productivity, inflexible production and trade structures, low skill capacity, low life expectancy and educational attainments, poor infrastructure, and deficient institutional and policy frameworks. At the same time, with the growing integration of markets due to globalization and liberalisation, their economies face a more fiercely competitive external trading environment. They continue to export a limited range of primary commodities that are highly vulnerable to instability in demand and a decline in terms of trade. In addition, their external debt remains large. Their inability to compete on world markets, as well as in their home markets, is also reflected in their rising food import bills.

5. Effective ways need to be found to support LDCs with a view to improving their economic and social conditions, achieving structural transformation, diversification and international competitiveness, overcoming their supply-side constraints and, ultimately, accelerating sustainable growth.

Scope of the paper

6. This paper focuses on the role that the agricultural sector can play in accelerating the economic growth and development of the LDCs and their integration into global trade. The objective is to identify elements of a strategy for action by LDCs - with the support of the international community - to exploit their agricultural potential by strengthening their competitiveness and supply capabilities so as to take full advantage of trading opportunities under the multilateral trading system. To that end, an assessment is made of the main constraints facing their agricultural development, including those associated with globalization and the international trading regime for agriculture. Policy lessons of relevance to LDCs are drawn, based on the experience over the past three decades or so and focusing on success stories in agricultural development and the enhancement of competitiveness. In this connection, the paper assesses the implications of trade liberalisation and puts forward some policy guidelines for integrating LDCs' agriculture into the global economy in a manner that would help these countries to maximise the benefits accruing to them in terms of growth and development. Accordingly, it addresses the following specific questions:


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