PRESS CONFERENCE ON WORLD ECONOMIC AND SOCIAL SURVEY 2005

PRESS CONFERENCE ON WORLD ECONOMIC AND SOCIAL SURVEY 2005

Noting that official development assistance (ODA) was expected to increase by around $50 billion in the next five years, from around $80 billion in 2004 to $130 billion in 2010, Under-Secretary-General for Economic and Social Affairs José Antonio Ocampo stressed the need to focus on the quality of such aid.

Briefing correspondents at a Headquarters press conference today on the major issues covered in the World Economic and Social Survey 2005, Mr. Ocampo stressed the critical need for assistance to build capacity and support expenditures on the internationally agreed development goals, particularly the Millennium Development Goals.

The Survey, which had been presented to the General Assembly’s Second Committee (Economic and Financial) yesterday, showed that the increase in ODA since the International Conference on Financing for Development ( Monterrey, 2002) had been concentrated in such areas as technical assistance, humanitarian assistance and debt relief.  The amount of aid going to “normal” development projects had not significantly increased since 1990.  It was important, therefore, to ensure that increases in aid this year went toward development projects.

The Paris Declaration on Aid Effectiveness, which was approved in February and established the principle of aid alignment with recipient country policies, was a basic point in terms of the quality of aid, he said.  The Survey stressed the importance of channelling development assistance through the budgets of recipient countries, making it subject, therefore, to national budgetary and planning processes, as well as parliamentary scrutiny.

As in the Monterrey Consensus, the Survey emphasized the strong correlation between national savings, investment and economic growth in developing countries, he added.  Despite globalization, there was a close association between domestic investment and national savings.  The Survey emphasized the importance of inclusive finance, or how financial assistance was assigned to serve the poorest countries.

In relation to private external financing, the report stressed the importance of designing more international institutions to manage the strongly cyclical pattern of financial flows to developing countries, he said.  In that regard, it suggested a set of policies that had already been tried on a small scale, including gross domestic product link bonds and bonds in international markets in developing countries’ currencies.

On debt sustainability, he said the report welcomed the decision of the Group of 8 industrialized nations regarding the Heavily Indebted Poor Countries (HIPC) Debt Initiative, recently endorsed by the Bretton Woods institutions.  It emphasized, however, that the debt issue of developing countries went beyond the HIPC, as there were many poor and middle-income countries that were under heavy debt burden.  It was also important to concentrate on the concept of debt sustainability proposed by the Secretary-General in his “In Larger Freedom” report.

The Survey, he said, also attached importance to South-South cooperation, which not only included a growing world of technical assistance but also many forms of cooperation, including development banks owned by developing countries, research funds to facilitate crisis management in developing countries and microeconomic policy coordination.

Responding to a question on aid levels, he said the amount of aid in 1990 was some $65 billion.  The international community would only surpass the levels of ODA as a proportion of GDP by the end of the decade.

Was the some $150 billion in remittances considered part of South-South cooperation? a correspondent asked.

Mr. Ocampo replied that the Survey did not consider remittances as part of South-South cooperation or aid, although they were an important flow, surpassing ODA levels.  There were two forms of financing -- remittances and ODA.  Remittances were used for consumption purposes by the families that received them.  There was evidence that remittances reduced poverty in recipient families.  It was important not to mix the two forms of financing, however, as they were two different sources of development funding.  Official development assistance was essential for the poverty-eradication programmes of the poorest countries.

If by stressing the quality of aid, was the report saying that quantity was not important? another correspondent asked.  Responding, Mr. Ocampo noted that, according to current commitments, ODA was expected to increase by $50 billion in the next couple years.  While the figures were very positive, the quality of aid needed to be emphasized.  The Paris Declaration stressed the need to look at the composition of aid so that the development programmes needed to achieve the Millennium Development Goals were effectively targeted.

There were many problematic patterns, not only in terms of the changing composition of ODA, but also in terms of highly unstable flows that individual countries received, he said in response to another question.  There had been increasing concentration of ODA in a few successful countries, which had become the so-called “aid darlings”, while others had become “aid orphans”.  Broad attention on the poorest countries was needed.

Regarding Arab institutions, he said one problem with Arab cooperation was that it was extremely sensitive to the price of oil.  In periods of lower oil prices, aid from Arab countries had decreased.  The Andean Development Bank, also mentioned in the report, showed that it was possible to have a successful multilateral development bank entirely owned by developing countries.

Asked to elaborate further on the issue of remittances, he noted that while such transfers were a major source of financing, they were not a major source of financing for public sector programmes or investment.  And while there was a growing world of cooperation associated with remittances, such transfers were not a substitute for ODA.

* *** *

For information media • not an official record