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This is an archived USAID document retained on this web site as a matter of public record.
Sources and amounts of private investment and lending
>> Foreign Aid in the National Interest >> Chapter 6 >> Sources and amounts of private investment and lending Jump to Chapter 6 Sections:
>> Objectives, Outcomes and amounts of foreign aid >> Sources and amounts of private investment and lending >> Sources and amounts of private aid >> Taking the full measure of U.S. International assistance >> Notes >> Background paper >> References
Over the past 20 years private capital flows have had a dramatic effect on developing countries. Until the early 1990s most international resource flows to developing countries came from governments. Now these flows are primarily private. The shift began in 1992, when foreign direct investment and financial markets took off in emerging economies-and private flows exceeded official development finance for the first time (figure 6.2).
Private capital flows peaked in 1996 at $273 billion, or 78 percent of resource flows to developing countries. Although this level was not sustainable, especially for bank and bond lending, foreign direct investment proved resilient, reaching a high of $188 billion in 1999. Growth in private investment and lending meant that emerging economies were attracting the kind of capital that creates and sustains development. Progress has been made in improving trade, governance, financial systems, and political and macroeconomic stability and in creating a receptive environment for private business.
In 2000 resource flows to developing countries dropped sharply, reflecting the global recession. ODA fell 5 percent, though ODA to the least developed countries rose slightly to 22 percent of the total. But net private flows from DAC donors were $117 billion, down dramatically from 1999 and the lowest since 1993. As investors pulled out of foreign markets, equity flows plunged by $50 billion. Foreign direct investment fell somewhat but remained the largest transfer. Despite the downturn in 2000, private investment and lending to developing countries still far exceeded government aid. Even at their lowest level since 1993, private capital flows are still more than twice government aid to developing countries.
U.S. investors have channeled enormous amounts to developing countries, especially since the early 1990s. When these private investment and lending flows are added to ODA and other flows, the United States moves into first place among bilateral donors (table 6.3). While the United States ranked lowest in terms of ODA as a percentage of GNP in 2000, it had the largest total resource flows, at $25.3 billion. The United States is the clear leader in all measures of private assistance to the developing world. Again, ODA fails to reflect the full measure of U.S. commitment, because it does not include private capital flows-the most important measure of sustainable development. Most significantly, ODA does not include private aid from U.S. foundations, private and voluntary organizations (PVOs), corporations, churches, and individual remittances. This giving is much higher than in other countries because of the unique U.S. tax structure and the country’s strong tradition of private giving.
Sources and amounts of private aid
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Last Updated on: October 07, 2009 |
