Extremely low per capita GDP levels make LDCs unable to generate domestically the savings needed to finance investment for developing purposes. Inadequate physical, technical and social infrastructures create major bottlenecks which undermine their capacity to broaden and modernize their production structure. Their small domestic markets justify the local production of only limited number of goods, thus adding to their import burden. With a narrow export base, LDCs are at the mercy of the vagaries of world markets for their export earnings. Their share of world exports declined from 1.6% in 1950 to 0.4% in 1985, principally on account of three major factors: structural handicaps (shortage of skilled manpower and of administrative and managerial capacity), an adverse international economic environment (exports are few primary products for which demand increases slowly) and inadequate domestic policies (tendency towards overvaluation of currency). Their marginal place in world economy limits the leverage they have to negotiate technology contracts profitably and to secure access to international capital markets. Their capacity to absorb foreign assistance has in some cases been questioned.
The 1992 Annual Report by UNCTAD highlights that the process of domestic reform undertaken in LDCs remains extremely delicate, even under the most favourable conditions. The costs of reform are often immediate, directly evident and borne by the most vulnerable groups of the population. Governments have to ensure that the vulnerable are protected and their obligation to operate within the bounds of political consensus makes the reform process extremely fragile. For this reason, the Secretary General of UNCTAD warns that the possibility of a halt to, or a reversal of, the reform process is high. A reversal of the overall process would have consequences that reach beyond the economics of the LDCs themselves, namely: social and economic collapse, ecological damage, food insecurity, migration and massive displacement of populations.