Development Co-operation Report 1999

How can aid and private flows interact to produce a high-quality stream of development financing that reduces poverty and fosters sustainable development? Helping developing countries to establish effective systems for mobilising, allocating and monitoring capital, in productive and sustainable ways, are now key roles for development co-operation, and a main theme of this year’s Development Co-operation Report. The Report finds that ODA has an essential role to play, but future increases in ODA volume will depend on its demonstrated effectiveness in helping to achieve the international development goals, both through country-level partnerships and in broader efforts to expand the supply of global public goods. Thirty years ago, the Pearson Commission wrote that with dynamic growth, developing countries would no longer need aid financing by the end of the century. A growing number of developing countries have indeed made the transition to autonomously financed development, as the Pearson Commission foresaw. And while many poorer countries remain highly dependent on aid, the pattern of their development financing will become more diversified as they establish the private sector-led growth needed to reduce poverty. In the 1990s, private capital flows to developing countries have risen dramatically, with secular expansion of foreign direct investment, but considerable volatility in other forms of private finance. At the same time, the DAC ODA/GNP ratio has fallen to around 0.25%, well below the 0.33% average maintained in the 1970s and 1980s. This is some $20 billion per annum less than aid would have been had the previous level of effort been maintained. This Report suggests that private flows will henceforth remain a multiple of aid flows. In this context, successful integration of developing countries as full partners in the global economy becomes imperative. The Report thus stresses three key strategies for development co-operation in its broadest sense: partnership, governance and policy coherence, and reviews key policy developments in 1999 from this perspective.