Commentaries
Support Of Finance For Development Meetings
September 15, 2004
In 2002, world leaders changed the paradigm for development assistance at the Financing for Development Conference at Monterrey. They agreed that we had to change the old models of the past focused primarily on resource transfers. To finance development, the leaders agreed that what is needed are solutions premised on good governance, sound policies, the rule of law and mobilizing all resources -- public and private, including trade and investment. All countries, developing and developed alike, have responsibilities under this agreement, and today many are meeting their commitments. Several developing countries have embarked on bold reform efforts; total Official Development Assistance (ODA) has increased by 30 percent since 2000, and the world has made critical progress on the Doha Development Agenda trade talks. The U.S. has already met and exceeded its Monterrey commitment to increase ODA by 50 percent over 2000 levels by 2006.
But we want to do more and to build on the Monterrey Consensus so that all nations are using every source of finance to eliminate hunger and eradicate poverty - global and domestic as well as private and official resources. The evidence is indisputable: private sources such as foreign investment, trade and private remittances have expanded dramatically over the past decade. However, many poor countries have been unable to attract or use these private resources effectively. Effective financial markets, investments in economic infrastructure including information technology, capacity to meet international standards for both products and business practices, sound macroeconomic frameworks and responsive and efficient microeconomic arrangements will unlock unutilized capital, encourage entrepreneurship, and increase the productivity of farms and businesses. Sustained growth will replace the economic stagnation of the past.
We must work to improve aid effectiveness. For example, the U.S. has actively sought out new mechanisms to improve its own aid effectiveness, as evidenced by the newly enacted Millennium Challenge Corporation, which will provide up to $5 billion in additional assistance per year for poor countries. The U.S. has also been a strong supporter of the Global Alliance for Vaccines and Immunization (GAVI), a dramatic effort to bring together donors' ODA, private foundations, and commercial firms to address the most serious plagues threatening humanity today. The U.S. has dramatically increased its support for trade development to help leverage growth through integration into global markets.
On September 20, Ministers and leaders from around the world will gather in New York to reaffirm their determination to reduce poverty and hunger. The United States shares the concern of many, that more needs to be done to end the cycle of famine, poverty, and despair in developing countries. As the world's largest donor of humanitarian assistance, including food aid, the U.S. recognizes every day that such aid is only a stopgap, however vital it may be. We must find ways to stabilize production and incomes in famine prone countries. In Africa, we must join together to support the new initiatives coming out of NEPAD to transform African agriculture. We must build the capacity for governments to protect their populations in crises while at the same time opening domestic and regional markets to allow people to help themselves.
Development aid for a country with a good policy environment can help attract private capital and private investment that, over time, will replace official assistance. This contribution from the private sector is not insignificant. When private trade and investment flows are added to government assistance, the United States provides more total resources - about $700 billion per year to developing countries -- than any other country. In addition, in 2001, U.S. immigrants sent $23 billion back to their families in their countries of origin, more than ODA from any single country. According to the 2004 UN report, "Unleashing Entrepreneurship: Making Business Work for the Poor," remittances to developing countries now top $90 billion annually. At the same time, Africa loses $40 billion each year in capital flight. The answer to stopping that flow is not ODA, but policies in the recipient countries that implement good governance, attract private international investment flows, mobilize domestic resources, and promote international trade opportunities.
The industrial countries can do their part by ensuring access to their markets. Clearly, broad reform of the international trade system is needed, reform that will put an end to destructive export subsidies and domestic supports. That is why successful conclusion of the Doha Development Agenda, the trade negotiations currently being conducted under the auspices of the World Trade Organization, is so important. Estimates are that developing countries would gain an additional $500 billion in income annually once the results of the negotiations are implemented.
Together, we are making progress in the war against hunger and poverty. Development indicators show progress in many of the poorest countries. Much more needs to be done, but it is not one-sided. We in the developed countries must build a response to poverty country by country with sound and effective investments, public and private, responding to local conditions, capacity, and constraints. Recipient nations must come to a full recognition of the vital role of markets and the private sector, of global networks of information and technology, in order to better utilize the effective and catalytic support from official donors. We all need to stay focused on the ideals of the Monterrey Consensus -- that each country is responsible for its own development by enacting reforms that generate growth and create an enabling environment for trade and investment. Industrial and developing countries, in partnership, can make a difference in giving hope to the millions that seek to make a better life for themselves and their children.
Frank Lavin
U.S. Ambassador