Framework for a Global Partnership for Development Trade Foreign private investment Official flows Debt relief Developing country policies Priorities for action

Total net flows to countries receiving development assistance have been volatile following September 11 (US$ billion) Trade

Domestic subsidies to agriculture dwarf official flows and are a leading barrier to trade

Average protection in manufacturing is low, but tariff peaks and escalation discourage development Trade

Potential income gains from reducing barriers to trade are large… Potential income gains from reducing barriers to trade are large…. and can help reduce poverty Trade

Developing countries have made modest gains on trade issues in 2004 WTO declares that EU’s sugar subsidy regime and much of American cotton subsidies are illegal July WTO talks in Geneva among 5 principal ag. producers* agree to change the ways governments protect their farmers Eliminate all farm export subsidies Cut domestic farm support programs But Implementation timetables still to be worked out Remaining issues on exempting “sensitive” products Divided over cuts in industrial import tariffs *US, Europe, India, Brazil and Australia Trade

Potential gains from liberalization of services, especially migration, are larger still Source: Walmsley and Winters (2002) Trade

Private capital flows are recovering Foreign Private Investment

But foreign direct investment has declined - and low-income countries and Africa receive little Foreign Private Investment

Aid flows have risen – but not fast enough The third part of the compact is increased aid. The dollar value of aid declined during the 1990s, while rich-country GDP has grown The paper for the Development Committee shows that at least an additional $30 billion per annum in aid could productively be used over the next few years Aid quality could be improved as well through better allocation alignment with country priorities (through PRSPs, for example) harmonization of donor procedures predictable and sustained commitments support for current expenditures more grants Official Flows

The increase in ODA in 2002 was concentrated in special-purpose grants The third part of the compact is increased aid. The dollar value of aid declined during the 1990s, while rich-country GDP has grown The paper for the Development Committee shows that at least an additional $30 billion per annum in aid could productively be used over the next few years Aid quality could be improved as well through better allocation alignment with country priorities (through PRSPs, for example) harmonization of donor procedures predictable and sustained commitments support for current expenditures more grants Official Flows

The HIPC initiative is making a difference 27 heavily indebted poor countries (HIPCs) – 2/3 of all HIPCs – receiving debt relief Total debt relief: US$52 billion over time Savings in debt service payments: US$1.3 billion per year Funds freed up directed to programs to improve lives of poor people World Bank’s contribution: US$12.4 billion up to 2025 Official Flows - Debt Relief

The total debt burden of heavily indebted poor countries has declined Official Flows-Debt Relief

The proportion of aid provided in cash and more flexible forms is falling Official Flows

Institutions and policies matter growth, aid, and policy Official Flows

There is substantial scope for improving the allocation of aid Aid selectivity index, 2002 Policy Poverty selectivity Overall selectivity selectivity Total Aid 1.76* – 0.49* 1.12 Bil ateral Aid 0.63 – 0.38* 0.50 Multilateral Aid 2.57* – 0.83* 1.70 Five largest donors (by amount) United States 0.66 – 0.76* 0.71 Japan 1.90 0.01 0.94 France – 0.07 – 0.28 0.10 Germany 2.06* – 0.47* 1.27 The third part of the compact is increased aid. The dollar value of aid declined during the 1990s, while rich-country GDP has grown The paper for the Development Committee shows that at least an additional $30 billion per annum in aid could productively be used over the next few years Aid quality could be improved as well through better allocation alignment with country priorities (through PRSPs, for example) harmonization of donor procedures predictable and sustained commitments support for current expenditures more grants United Kingdom 3.66* 1.06* – 2.36 Good practice examples Denmark(bilaterals) 4.77* – 1.11* 2.94 IDA (multilaterals) 4.23* – 4.20* 4.22 Note: Emergency and disaster relief are excluded from these calculations. An asterisk denotes the elasticity is different from zero a t 10 percent significance level. The last column is an average of the first two. Source: Dollar and Levin (2004). Official Flows

Developing countries’ policies are improving — core of reform agenda is institutional Developing Country Policies

Percentage distribution of low-income countries Macroeconomic policies have improved — fiscal management is the main area for attention Percentage distribution of low-income countries Source: IMF staff assessments. Developing Country Policies

Spending on human development is rising — key issues relate to effectiveness of service delivery Developing Country Policies

Richer people often benefit more from public spending on human development Developing Country Policies

Public sector governance, though improving, remains the weakest area Percentage distribution of low-income countries Developing Country Policies

Private business climate — heavy regulation, weak institutions Developing Country Policies

Priorities for Action Industrialized countries Fostering a robust global economic recovery Moving forcefully, and leading by example, on the Doha Development Agenda Providing more and better aid — increasing aid commitments beyond current indications and ensuring timely delivery, improving aid allocation, providing aid in forms responsive to needs, and making rapid progress on the alignment and harmonization agenda Stepping up action on key global public goods Improving the overall coherence of policies in terms of their development impact

Priorities for Action Developing Countries Improving private sector enabling environment — deepening progress on macro policies, strengthening market institutions (property rights, rule of law) Strengthening capacity in the public sector and improving the quality of governance (transparency, accountability, control of corruption) Scaling up efforts to strengthen basic infrastructure Enhancing the effectiveness of service delivery in human development

Priorities for Action Multilateral Agencies Refining and strengthening institutional roles in low-income countries, including deepening of the PRSP process and harmonization of operational programs around country-owned strategies, while also continuing to adapt approaches and instruments to evolving needs of middle-income countries Furthering progress on the results agenda, including implementation of action plan agreed at Marrakech Roundtable on Managing for Development Results Improving selectivity and coordination of agency programs in line with comparative advantage and mandate to achieve greater systemic coherence and effectiveness

“Developed countries must meet their commitments to help accelerate progress… it is essential for (them) to do more to liberalize their markets and eliminate trade distorting subsidies …. More aid is required. It should be predictable, timely, long-term and more effective. We urged developed countries that have not done so to make concrete efforts towards the target of 0.7% of GNP as ODA … The IFIs are accountable for their contribution to implementing the Monterrey consensus.” Development Committee of the Boards of Governors of the World Bank and the International Monetary Fund, April 25, 2004

To conclude Partnership effectiveness: a question of quantity and quality Need for social welfare agencies to lobby their governments Need to think creatively about “agency”