The United Nations (UN) is unlikely to meet its own target of reducing the number of least developed countries (LDCs) by half within 2020, as the process of socio-economic transformation is moving ahead slowly in many LDCs, including Nepal, says a latest report.

The Istanbul Programme of Action (IPoA) introduced in 2011 had envisaged graduation of at least half of 49 LDCs by 2020.

But so far only four LDCs-Botswana, Cabo Verde, Maldives and Samoa-have moved to the grouping of developing nations, says the Least Developed Countries Report 2016 launched by the UN Conference on Trade and Development.

The UN has projected 16 LDCs to graduate in between 2017 and 2024. But even if all of these countries graduate, the target of reducing the number of LDCs by half within 2020 will not be met.

Many LDCs are likely to remain where they are in the years to come because they suffer from a poverty trap, according to the report.

Low income and limited economic growth are giving rise to high levels of poverty in LDCs, which in turn act as a brake on economic growth.

Also, many LDCs suffer from a commodity trap, as they depend heavily on commodity production and trade for employment, income, savings and foreign exchange, says the report.

Commodity dependence increases vulnerability to exogenous shocks, such as adverse terms of trade movements, extreme meteorological events and climate change impacts. It also often gives rise to a “natural resource curse”, when exchange rate appreciation undermines the competitiveness of the manufacturing sector or when rent-seeking behaviour prevails, limiting incentives for investment, including in human capital.

Other problems that LDCs face is weak productive base and limited export diversification, which give rise to a very high import content in production and consumption, and chronic current account deficits. These factors in turn result in aid dependence and accumulation of foreign debt.

All these problems have led to fall in economic growth in LDCs, says the report.

Economic growth in LDCs has declined steeply since 2012, reaching to a low of 3.6 percent in 2015. This is the slowest pace of expansion this century and far below the target growth rate of at least 7 percent per annum recommended by the IPoA, the report says.

To help LDCs accelerate the pace of economic development international support measures, such as official development assistance (ODA) and preferential market access like duty-free-quota-free schemes, have been put in place.

But most of the international support measures are vague, non-binding in nature or slow to come into operation, says the report.

For instance, “schemes like duty-free-quota-free are mentioned in paper, but countries that wish to tap these facilities face lots of hassles”, said Basudeb Guha-Khasnobis, senior economist at the UN Development Programme-Nepal. “Besides, there is information gap on what is available under duty-free-quota-free schemes and how a country can gain access to these facilities.”

Another problem faced by LDCs is fall in ODA.

In 2014 ODA to LDCs declined by 12.2 percent to $26 billion, which is around 27 percent of total aid to developing countries, says the report. In terms of per capita ODA, official development assistance to LDCs has been continuously falling for the last few years, while the assistance to ‘other developing countries’ is on the rise.

To improve access of LDCs to funds, the report has proposed establishment of LDC finance facilitation mechanism, which could serve as a one-stop shop for least developed countries.

This mechanism would identify appropriate funding agencies for investments identified as priorities in LDCs’ national development strategies and match them with the particular criteria, priorities and preferences of potential funding sources, says the report.