Source: g7+ Secretariat
Note: The g7+ LDCs are: Afghanistan, Burundi, Central African Republic (CAR), Chad, Comoros, Democratic Republic of the Congo (DRC), Guinea, Guinea-Bissau, Haiti, Liberia, São Tomé and Príncipe, Sierra Leone, Solomon Islands, Somalia, South Sudan, Timor-Leste, Togo and Yemen.
Diversifying exports for greater stability
In fragile contexts, certain key structural features of LDC economies are more pronounced. The relative importance of trade is higher and exports tend to be even more concentrated in a few commodities. The top three export products in these economies represent over 40 percent of merchandise exports, reaching up to 99 percent in South Sudan.
Consider the drastic fluctuations of commodity prices over the past 10 years. The volatility of trade flows can have destabilising effects. The composition of exports in certain valuable commodities may provide incentives to fight for as well as undermine state institutions and thus the quality of public policies, including to promote a good business environment for private sector development and economic diversification.
Whether instability arising from fluctuations in trade flows translates into conflict depends, however, on contextual factors. So for g7+ LDCs, economic diversification can serve as a contributing factor for greater stability.
Further, policies that promote inclusion and reduce inequality enhance the resilience of societies to the risk of conflict. Policy and regulatory efforts can, for example, direct firm incentives towards productive rather than rent seeking activities and improve transparency. Supporting small and medium-sized enterprises can help ensure that the benefits of economic growth are more broadly shared.
Greater economic, social and political participation of youth and women is instrumental for greater stability. When women are included in peace processes there is a 35 percent increase in the strength of peace agreements lasting at least 15 years.
"The Chadian economy is mainly based on cash crops (especially cotton) and extractive industries (mining and oil). The strong economic growth – 7.4% between 2003 and 2015 – was mainly due to the use of oil resources. The country is extremely vulnerable to the external shocks including fluctuation of commodity prices. To diversify its economy, Chad will rely on sectors with high export potential including leather, sesame and gum arabic identified in the DTIS Update of Chad," said Djabre Dadi from Chad's Ministry of Mines, Industrial Development, Trade and Promotion of the Private Sector in his response to the aid for trade monitoring and evaluation exercise (AFT M&E) 2019.
"Improving organisation of those sectors will contribute to greater economies of scale thereby helping with greater integration into the global value chains,” he added.
Export concentration in the g7+ least developed countries