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Contributions from
the Column
Facts and trends
New old hope development aid?
WTO negotiations on agriculture stalled
Chair of Development in Utrecht
Africa Days at the Friedrich Ebert Foundation
Learn from the South: a citizens' budget for Berlin
UN Anti-Corruption Convention: dispute over monitoring
First German investigation into bribery abroad
Voluntary self-regulation
Corruption threatens to hamstring Sri Lanka reconstruction
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Global Development Finance 2003
New old hope development aid?
The hope that private capital could take the place of official development aid is proving increasingly illusory. That is the conclusion that can be drawn from this year's World Bank report on global development finance published on 2 April (Global Development Finance 2003, GDF 2003). Last year, the developing countries paid nine billion US dollars more in interest and redemption to private creditors than they received from them in new loans. What is more, direct investment in developing countries in 2002 was significantly lower than in the preceding year. In the light of these figures, World Bank chief economist Nicholas Stern writes in the foreword of GDF 2003: "With private capital flows low, raising the flow of official development assistance – as agreed to at the Monterrey Conference in 2002 – is of key importance to the poorest countries." In other words: hopes are pinned once again on development aid, because private capital is not accomplishing what, until recently, it was expected to accomplish.
The report looks in detail at how development assistance could be made more efficient. The US government and Congress have repeatedly criticised the World Bank for shelling out billions of dollars for decades without achieving any noticeable progress in the development of recipient countries. On this point, the report retorts that low income countries (LICs) which received comparatively high levels of development aid in the second half of the 1990s reported higher growth rates than other LICs. "The relative success of those large aid recipients that maintained peace does show that some of the gloomier assessments of aid recipients' performance are unwarranted." Nevertheless, the World Bank, too, sees a need to improve efficiency. Unlike the US government, however, which is plotting a unilateralist course with its new Millennium Challenge Account, the World Bank advocates better donor coordination and more budget support rather than project funding.
What the Bank reckons is underestimated at present is the development-funding significance of the money transferred home by developing country nationals working abroad. Those money transfers now form the second-biggest capital flow to the developing world after direct investment and, for the poorest countries in particular, represent a major source of finance in relation to GDP. According to the World Bank, studies have shown that a large portion of that money is invested in the recipient country and not merely consumed. So transfers home go at least some way to making up for the economic loss caused by (generally better qualified) labour leaving poor countries (brain drain). The World Bank appeals to both the developing countries and the industrialised nations to simplify the modalities for international money transfers, lower the cost of making them and pave the way for greater freedom in international labour migration. (ell)
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