(by ESCAP): 1,5, 6
(by UNCTAD): 3, 4
Trade exposes domestic industries, both export and import-competing ones, to the rigours of external competition. The ‘flying geese' model showed how countries could, through a combination of trade and FDI, acquire competitiveness in successive stages of production. In addition, it generated a pool of expertise that enhanced the efficiency and competitiveness of both the traded and non-traded sectors of the economy.
Tariff barriers have been coming down steadily in both developed and developing countries and implementation of the Uruguay Round should strengthen this trend. However, other protective measures have not disappeared and in fact NTBs in several different forms are rising.
Dependence on trade increases the exposure of economies to events beyond their control. Diversification on products and markets is an obvious answer.
Until the early 1970s, ODA was the most important single source of capital for developing countries, now it is the smallest. During the 1990s net ODA flows have declined in absolute terms and prospects are not good, with ‘donor fatigue' likely to be the prevailing sentiment.
Even as the volume of aid declined, the number of aid agencies increased. In the eyes of recipients, conditionalities are stringent and excessive, often unrelated to the capacity of the country concerned to carry them out.
The debt problem involves a mixture of official, multilateral and private sector debt, including instruments issued through international financial markets. As the IMF and World Bank are in positions of leadership of the global financial system, it is incumbent on them to establish a set of principles to avoid the case by case approach usually adopted in debt restructurings by the private sector.
This subregion is one of the most geographically dispersed and individual island countries cannot maintain an acceptable standard of living with the available domestic resources. These countries are dependent on grant aid from official sources; thus far debt servicing is not posing a major problem. Foreign aid is likely to taper off and diminish in the next few years while overseas migration, which has provided substantial income from remittances, has resulted in the loss of skilled people. Private finance will not be available in the required volumes to fill the gap or will be available on onerous terms. Thus repayment problems will emerge, given the rather limited avenues to boost exports or increase income from remittances. Longer term development prospects are thus being adversely affected
Over the medium to long term these countries have to enhance their own strengths - diversifying agriculture, both subsistence and commercial, minimizing waste of public resources and enhancing human resource development in order to attract FDI in tourism and IT-related activities. There are also possibilities for developing niche markets in eco-friendly natural products where price is not a crucial consideration.
The full gamut of processes, priorities and policies driving development are better, but still not, fully understood. The major issues include the interaction between governments and the private sector, degree of openness, responding to the challenges of globalization and integration of economic, social and environmental concerns. In this broad context the development of human resources remains a key to development as well as its most important objective.
As ODA is on a declining trend, many countries that have acquired external resources through ODA will need to rely progressively on private capital. However, the latter is provided by institutions that tend to be more risk averse and are likely to price it differentially between countries as well as between uses. It is also difficult to see how private capital can replace official assistance forpublic goods such as social development where the financial rate of return is low and the return on the investment is seen only in the long term.
The developing countries have rarely had any influence in determining the priorities of ODA. The failure of developed countries to honour UN targets for giving ODA provides telling evidence of this. Also the modalities, e.g. whether ODA is provided through multilateral agencies or bilaterally, at what terms and for which use, remains ultimately the prerogative of the donor country.
There are a number of important global public goods, the financing of which remains tenuous. These include peace, economic stability, regulation of various global markets including trade, finance, and labour as well as, more recently, telecommunications and the Internet.