A Helping Hand?

Do developed countries do all they can do to help developing countries strengthen their economies?

November 27, 2001

Do developed countries do all they can do to help developing countries strengthen their economies?

In the second installment of our facts on developing countries, we examine the relationship between developed and developing countries. In particular, we focus on aid given by highly developed countries to poor nations. We trace how and where the money flows — from international financial institutions or private investors — into developing countries.

What is the U.S. involvement in global aid policy?

In 2000, while the average American believes that the United States provides 40% of all foreign aid granted to developing countries worldwide, the country’s actual share is only 18%.

(OECD)

How much do people in the developed world invest into developing countries?

In 2000, net investment flows from developed countries into developing countries in form of company ownership, bonds and loans amounted to $166 billion. Since 1992, a total of well over $1.5 trillion have been invested.

(Institute of International Finance)

Do all developing countries benefit equally from these funds?

Between 1998 and 2000, the Middle East and Africa — home to 15% of the world’s population — attracted less than 4% of total investment flows to all developing countries.

(Institute of International Finance)

How much do developing countries owe?

In 2000, the foreign debt of all developing countries totaled about $2 trillion. This is equal to 11% of their combined GDP.

(IMF)

What could be done to strengthen the economies of developing countries?

To achieve a 6% rate of economic growth throughout the developing world, developing countries would need to receive capital inflows at least 50% higher than they have been during the 1990s.

(United Nations)

What has actually been done?

Since the 1960s, a total of $1,000 billion have been spent on aid to developing countries. That is equal to 10% of U.S. GDP in 2001.

(Financial Times)

What is the developing countries’ financial track record?

The value of developing countries’ stock markets has more than quadrupled, from $587 billion in 1990 to $2.7 trillion in 1999.

(Worldwatch Institute)

What about the poorest countries?

As of 2000, the 48 poorest countries in the world account for a mere 0.4% of world trade.

(UK Department for International Development)

How does that compare on the global level?

While developing countries’ share of world trade was only 25% in 1970, that figure has increased to 33% by 2000.

(Dresdner Bank)

How do developing countries organize themselves globally?

As of 2000, developing countries constituted the majority of the 135 WTO member states — with a further 31 countries waiting to become members.

(UK Department for International Development)

What could improve the economic situation of developing countries immediately?

As of 2001, a reduction in trade barriers by 50% globally would yield welfare gains in order of an estimated $400 billion annually for the global economy — with developing countries capturing one-third of these gains.

(IMF)

What impact does protectionism have on developing countries?

In the late 1990s, developing countries were losing about $700 billion a year in export earnings because of protectionist measures by industrialized countries. That is equal to about 12% of their combined GDP.

(United Nations)