World Bank Document

Figure 7.1 Net receipts of official flows,
by source, 1970-83
ment profiles that often match the nature and character-
Multilateral flows
istics of projects more closely than most bank loans do.
Billions of dollars
However, there have been many cases of export 8 Official development
credits' supporting inappropriate and poorly designed I - I_ assistance
projects, promoting an excessive amount of borrowing, 6 ,Nonconcessional
N'
leading to overpricing of goods, or being an instrument
lending
of corruption. In recent years several developing coun- 4 /
tries have used short-term export credits to finance their
longer-term investments, thus exacerbating their exter- 2
nal debt position. Such problems arise because the basic
purpose of export credits is the promotion of exports, 0
not development; and some developing countries do not 1970 1973 1976 1979 1982
have any machinery for reviewing and controlling the Bilateral official development assistance
use of export credits.
Bilions of dolars
In order to promote their exports, industrial countries 19
have often provided credits on concessional terms. In the
DAC countries
late 1970s, they sought to reduce the rapidly expanding 15
use of subsidized loans. Under the OECD Consensus,
they adopted guidelines on the terms and conditions of
export credits, including mninimum interest rates and 10
maximum maturities. Many developing countries, however,
view this agreement not as an effort to improve the 5
quality of export credits, but rather as a cartel that
`> -7 OPEC members
reduces interest rate competition and increases the cost -- Nonmarket
of export credits. 0 economies and
To increase the contribution that export credits can 1970 1973 1976 1979 1982 other
make to longer-term programs of structural reform and
faster economic growth in developing countries, all gov- Source: OECD 1984.
ernments need to address two issues: first, how to
encourage export credit agencies to resume guarantees
and insurance to developing countries that are implementing
adjustment programs; and second, recognizing This chapter focuses on four issues.
that the basic objective of export credit agencies is to
* The basic arguments for official assistance and
promote exports, what steps to take to enhance the the way that the motives and objectives of donors
developmental impact of export credits. One key to both can influence the effectiveness of their assistance
objectives may be to increase the availability and use of programs.
information on adjustment and investment programs of
The criticisms that have been leveled against
individual developing countries.
aid.
* The attempts that have been made to measure
the impact of these official flows on development.
included are the private and religious relief agen- * Recent efforts to make aid more effective.
cies such as CARE, the Red Cross, and Catholic
Relief Services; their role is discussed in Box 7.3. Changing perceptions of development
Since 1980 the dollar value of the various types
of ODA has stagnated or fallen (see Figure 7.1). On The nature of official flows is strongly influenced
present prospects little or no real increase is likely by the way that donors and recipients perceive
for the foreseeable future. The recent decline has development. The success of the Marshall Plan in
occurred in the face of a continuing need for sub- the 1940s and 1950s led many to believe that a simistantial
external capital flows and a slowdown in lar transfer of capital to developing countries
the growth of commercial lending. It highlights the would, despite their physical, human, and instituneed
to ensure that external capital is put to the tional limitations, achieve similar results. The early
best possible use by the recipients. For that, the model of development therefore placed nearly
developing countries' own economic policies have total emphasis on increasing physical capital to
an important role to play-an issue discussed in raise production and income and to alleviate pov-
Chapter 4.
erty. This strategy meant investing not only in
97