United Nations

A/51/270


General Assembly

Distr. GENERAL  

8 August 1996

ORIGINAL:
ENGLISH


                                                     A/51/270
         

General Assembly
Fifty-first session
Item 98 (a) of the provisional agenda*

*       A/51/150.


                 SUSTAINABLE DEVELOPMENT AND INTERNATIONAL ECONOMIC 
                 COOPERATION:  IMPLEMENTATION AND FOLLOW-UP TO MAJOR
                           CONSENSUS AGREEMENTS ON DEVELOPMENT

              Implementation of the Declaration on International Economic
               Cooperation, in particular the Revitalization of Economic  
               Growth and Development of the Developing Countries and the 
                International Development Strategy for the Fourth United   
                                 Nations Development Decade

                              Report of the Secretary-General

                                         CONTENTS

                                                      Paragraphs  Page

  I. BACKGROUND ......................................   1 - 4      2

 II. POLICY CONCERNS .................................   5 - 11     3

III. 1990-1995:  THE "BACKDROP" ......................  12 - 25     4

 IV. PERFORMANCE OF THE DEVELOPING COUNTRIES .........  26 - 50     8

  V. ROLE OF THE INTERNATIONAL ENVIRONMENT ...........  51 - 85    14

 VI. DEVELOPMENT OF THE LEAST DEVELOPED COUNTRIES AND
     SPECIAL MEASURES ON THEIR BEHALF ................  86 - 105   25

VII. ROLE OF THE UNITED NATIONS SYSTEM ............... 106 - 117   30

VIII.CONCLUSIONS ..................................... 118 - 123   33


                             I.  BACKGROUND


1.      The Declaration on International Economic Cooperation, in Particular
the Revitalization of Growth and Development of Developing Countries was
adopted by the General Assembly in 1990 at its eighteenth special session. 1/ 
Later that year, the International Development Strategy for the Fourth United
Nations Development Decade was adopted by the Assembly at its forty-fifth
session. 2/  Both of these resolutions, while deploring the uneven and often
disappointing growth performances of the 1980s, stress the need to renew the
growth of the world economy, and especially to accelerate development in the
developing countries through strengthened international cooperation.  In 1994,
the General Assembly requested a comprehensive and analytical report, to be
submitted to the Assembly at its fifty-first session, "for the purpose of
reviewing and appraising in 1996 the implementation of the commitments and
agreements of the Declaration and the Strategy, with particular emphasis on
those commitments and agreements that are not fully implemented, and to
identify the constraints to implementation". 3/  The present report has been
prepared in response to that request.

2.      The Declaration on International Economic Cooperation was adopted by
the General Assembly in the spring of 1990, as a response to the fact that the
economic and social progress that had taken place in the 1970s had come to a
halt in many developing countries during the 1980s.  According to paragraph 12
of the Declaration, therefore, the "most important challenge for the 1990s is
the revitalization of economic growth and social development in the developing
countries, which calls for sustained growth of the world economy and
favourable external conditions.  This major challenge has to be addressed in
the context of the increasing interdependence and integration in the world
economy".

3.      The International Development Strategy for the Fourth United Nations
Development Decade incorporates many of the principles contained in the
Declaration.  It, too, aims to ensure that the 1990s are a decade of
accelerated development in the developing countries and strengthened
international cooperation.  Although the Strategy does not seek to establish
quantitative targets to be attained by the developing countries as a whole, it
not only touches upon many of the developmental concerns of the United Nations
system, including, for example, improved health, special measures for women
and children, and protection of the environment, but also singles out six
interrelated goals:

        (a)   Heightened economic growth, especially in the developing
countries;

        (b)   Responsiveness to social needs (especially, poverty reduction,
human resources and skills development, protection of the environment);

        (c)   Conducive international finance and trade systems;

        (d)   A stable world economy through sound macro-management (the
maintenance of internal and external balance);

        (e)   A strengthening of international development cooperation;

        (f)   Special efforts on behalf of the least developed countries.

4.      The developments of the first half of the 1990s thus need to be
assessed vis-a`-vis these six stated goals or objectives.


                           II.  POLICY CONCERNS

5.      The first half of the 1990s - the time-frame of the present report -
has been characterized by a number of idiosyncratic trends.  Arguably the most
important of these has been the increased globalization and liberalization of
the world economy.  The former has taken several forms.  First, there is the
fact that international trade has been growing at a rapid rate.  In just five
years, the total value of world merchandise exports increased from 13 per cent
of gross world product in 1990 to 17 per cent in 1995.  Secondly,
international capital flows have increased dramatically in this same five-year
period.  For example, foreign direct investment in developing countries more
than tripled between 1990 and 1995.  Thirdly, firms are becoming increasingly
"internationalized", setting up branches wherever costs are lowest and often
using multiple production sites to avoid non-tariff barriers and minimize
production costs.  Fourthly, regional trading arrangements or trading blocs
continue to proliferate.  Lending special significance to trade concerns at
this time is the fact that this is the first such assessment since the
follow-up activities associated with the conclusion of the Uruguay Round of
multilateral trade negotiations - in which developing countries played a
pivotal role.

6.      A second characteristic of the first half of the Decade has been the
continuation of relatively high real interest rates in industrialized
countries.  While long-term rates have actually fallen since the 1980s, 4/
historically they remain at quite high levels - especially when compared to
the post-Second World War period until the end of the 1970s.

7.      A third notable feature of the first half of the 1990s has been a
resurgence of faith in the efficacy of the market.  Thus, in an increasing
number of countries, free-market advocates have urged Governments to be
non-interventionist and to concentrate only on providing public goods and
"getting the basics right".  The latter means that Governments are tending to
focus only on the provision of public goods - such as defence, infrastructure
and basic education - while avoiding high tax rates, price controls or any
other significant distortion of relative prices.

8.      Fourthly, a new orthodoxy as to what constitutes an effective
development policy has emerged.  What is remarkable about this current vogue
in economic development policy, which applies both to the developing economies
and to economies in transition, is the extent of convergence that has evolved
as to what constitutes an "appropriate" or efficacious economic strategy. 
Termed the "Washington consensus", this list of policy desiderata emphasizes
fiscal rectitude, undistorted prices and limited government intervention. 5/

9.      The policy prescriptions of the Washington consensus were formulated
in the wake of the early economic successes of the four East Asian newly
industrialized economies of Hong Kong, the Republic of Korea, Singapore and
Taiwan Province of China.  Clearly, their achievements cast doubt on the
export pessimism that had led policy makers to pursue import-substitution
policies.  Moreover, in seeking a new "recipe for success", the view emerged
that the impressive growth rates of these Asian economies could be attributed
to market-oriented policies and the reduced role of government
intervention. 6/

10.     However, in the light of the disparate experiences of developing
countries in the first half of the Decade, it has become clear that there can
be no such universal policy panacea.  Moreover, what needs to be appraised at
this juncture is not so much the outcome of countries' development policies,
but the efforts being undertaken by them and by developed countries and the
international community on their behalf.  The reason for this focus is that
development policies, by definition, are long-run initiatives.  The five-year
period under review is thus too short a time-span in which to see final
results.  By the same reasoning, mid-Decade is too early for a definitive
evaluation.

11.     At this point what is clear is that exogenous factors have both helped
and hindered development efforts.  Furthermore, initial conditions differed
among countries. 7/  In addition, the policies pursued by developing countries
have differed dramatically.  Some have followed the tenets of the "Washington
consensus" conscientiously.  Others have had "stop-go" policies.  Development
strategies have thus differed greatly and their eventual outcomes are far from
predictable.  The one certainty is that "success" or "failure" cannot be
expressed by one magic number, such as gross national product (GNP) per
capita.  Development is far too rich and complex a process to be described by
such a simplistic indicator.


                      III.  1990-1995:  THE "BACK-DROP"

12.     The growing interdependence between countries implies that the
prognosis for any individual economy is acutely sensitive to overall global
conditions, as well as to its subregional and regional economic environment. 
From this perspective, the current state of the world economy must be factored
into any assessment of the current situation and future outlook of developing
countries.

13.     For the world economy as a whole, the first half of the 1990s
represented a clear-cut slow-down from the growth rates of the 1980s.  Whereas
output grew at just under 3 per cent per annum, on average, in the 1980s, it
increased only about 1.4 per cent per annum between 1991 and 1995.  The
deceleration emanated from two sources:  first, a recession in the first few
years of the 1990s in the majority of the developed economies and, secondly,
the dramatic drops in output in the economies in transition as their
transformation processes took hold in 1989 and 1990.


              Table 1.  Growth of world population, output and
                        per capita GDP, 1980-1995

----------------------------------------------------------------------
                               Annual average rates of growth
                         ---------------------------------------------
                                   GDP               Population 
                         ---------------------------------------------
                         1981-   1991-   1995-   1981-   1991-   1995-
                         1990    1995    1996    1990    1995    1996
----------------------------------------------------------------------
World                     2.9     1.4     2.5     1.7     1.6     1.5

Developed economies       2.9     1.5     2.0     0.6     0.6     0.6

Economies in transition   2.0    -7.7     2.0     0.7     0.2    -0.2

Developing countries      3.1     4.8     5.5     2.1     1.9     1.6

   Latin America          1.2     2.7     2.5     2.1     1.9     1.8

   Africa                 2.0     1.6     4.3     2.9     2.9     2.8

   West Asia             -1.3     2.3     3.0     4.0     2.9     2.7

   South and East Asia    6.0     6.0     6.8     2.1     2.0     1.3

   China                  9.0    11.3     9.0     1.5     1.1     1.0

   Mediterranean          2.1    -0.9     3.5     1.8     1.4     1.5

Memo items:           

   Sub-Saharan Africa     1.8     1.0     5.0     3.1     3.1     3.0

   Fifteen heavily
   indebted countries     1.1     2.2     2.8     2.2     2.0     2.0

   Least developed        2.0     2.0     4.8     2.5     2.9     2.9
----------------------------------------------------------------------


----------------------------------------------------------------------
                                    Annual average rates of growth
                               ---------------------------------------
                                             GDP per capita
                               ---------------------------------------
                                 1981-1990    1991-1995    1995-1996
----------------------------------------------------------------------
World                                1.2         -0.2          1.0

Developed economies                  2.3          1.0          1.4

Economies in transition              1.3         -7.9          2.2

Developing countries                 1.0          2.9          4.0

   Latin America                    -0.9          0.8          0.8

   Africa                           -0.9         -1.3          1.5

   West Asia                        -5.3         -0.6          0.3

   South and East Asia               3.9          4.0          5.0

   China                             7.5         10.2          8.0

   Mediterranean                     0.3         -2.3          2.0

Memo items:           

   Sub-Saharan Africa               -1.2         -2.0          2.0

   Fifteen heavily indebted
   countries                        -1.1          0.2          0.8

   Least developed                  -0.5         -0.9          1.9
----------------------------------------------------------------------
     Source:  World Economic and Social Survey 1996 (United Nations
publication, Sales No. E.96.II.C.1), tables I.1, I, 3, A.1 and A.4 and
estimates of the Department for Economic and Social Information and
Policy Analysis.


14.     Despite the backdrop of more sluggish global growth, developing
countries as a whole have made substantial progress during the first
half of this decade.  As a group, these economies - whose output
increased at roughly 3.1 per cent per year during the 1980s -
registered a gross domestic product (GDP) growth rate of 4.8 per cent
per annum in the first half of the 1990s.  A further indicator of the
situation of developing countries is the number of such economies with
rising per capita GDPs.  Thus, from 1990 to 1994, GDP per capita rose
in 50 to 60 of the 93 developing countries whose trends are regularly
monitored.  These economies accounted for roughly four fifths of the
developing countries' total population.  In 1995, the phenomenon of
rising per capita output became more widespread:  71 economies enjoyed
rising GDP per capita, or almost 90 per cent of the total population
of developing countries.  For 1996, the comparable figure is expected
to be 75 countries, accounting for 96 per cent of their total
population 8/.  There are thus two striking features of the present
world economic situation - both of which should encourage optimism. 
First, economic growth has become more prevalent.  Secondly, such
growth - at mid-Decade - has the potential for sustainability in a
significant number of countries. 9/

15.     The "success stories" of south-east Asia, as well as China, are
thus not isolated phenomena.  The least developed countries, for
example, breaking away from the low growth rates that have attended
them since the mid-1980s, began to make significant growth gains in
1995 and are expected to grow again in 1996.  At least 21 out of the
48 least developed economies registered growth in per capita GDP in
1995, a trend likely to continue through 1996 - a vast improvement
over the experience of the early 1990s, when only some one quarter of
this group registered positive growth rates.

16.     Nevertheless, while the Decade's mid-point appears to mark a turn-
about of sorts for a number of developing economies, the fact remains
that, in many developing countries, the growth of per capita GDP has
been small and average levels of per capita output in most regions
still remain below their levels in real terms in 1980.  This holds
true, for example, in Africa (where per capita GDP in 1988 dollars
stood at $657 in 1995, as compared to $721 in 1980), in Latin America
and in West Asia.  South-east Asia and China are the two dramatic
exceptions. 10/

17.     Moreover, because South and East Asia, together with China,
currently account for some 50 per cent of the output of developing
countries as a whole, the very high growth rates that these economies
have achieved in the past few years heavily influence the aggregate
figures, concealing dramatic regional and national differences in
economic performance.

18.     Africa, in particular, bears mention because, as a region, it is
currently experiencing its fastest economic growth since the start of
the Decade. Moreover, the improvement was fairly broadly based.  About
a dozen countries in Africa (including Angola, Benin, Botswana,
Burkina Faso, Chad, Co^te d'Ivoire, Equatorial Guinea, Ethiopia,
Ghana, Kenya, Malawi, Mauritius and Togo) recorded GDP growth rates of
5 per cent or higher in 1995 - owing, in part, to higher prices and
stronger demand in international commodity markets.  The prospects,
furthermore, remain good, and in 1996 Africa is expected to see an
increase in GDP per capita for the first time since 1985 - thanks to
favourable external conditions and an ameliorated policy environment. 
Nevertheless, as will be discussed below, most African countries are
among the poorest in the world:  33 out of the 48 least developed
economies are in Africa.

19.     International trade has been one of the most buoyant elements of
the world economy since the start of the Decade, growing by 7.5 per
cent per annum between 1990 and 1995.  With developing economies now
accounting for more than 40 per cent of world GDP, they have - as a
concomitant - also become increasingly significant actors on the world
trade scene.  For example, Latin American exports and imports grew by
9 and 14.5 per cent, respectively, over this half decade.  China's
exports increased by 19 per cent, while those of the six East Asian
traders - Hong Kong, Malaysia, the Republic of Korea, Singapore,
Taiwan Province of China and Thailand - grew by 14 per cent. 11/

20.     The volume of world merchandise exports is expected to rise above
7 per cent in 1996, almost three times the increase in world output
and the sixth consecutive year in which trade growth will have
exceeded output growth by a wide margin. 12/  A notable variable in
the phenomenon of merchandise trade continuing to outstrip output
growth by a meaningful amount has been the rapid expansion in
developing countries of processing trade - in other words, the
assembly of manufactured goods for re-export using components and
materials imported under special tariff regimes.  For example,
processing and assembly factories in China accounted for nearly half
that country's exports in 1995 and about 45 per cent of its imports. 
Trade has also been boosted greatly by the information technology
revolution.  The value of exports of office and telecommunications
equipment rose by more than one quarter in 1995, now accounting for
some 12 per cent of global trade.  Moreover, in 1993, developing
economies supplied 22 per cent of world exports of office machinery
and data-processing equipment, and 33 per cent of telecommunications
equipment - compared with only 6 and 12 per cent, respectively, in
1985. 13/

21.     A significant number of developing countries - especially least
developed countries, as will be discussed below - remain economically
dependent on their ability to export a small number of non-fuel
commodities.  The international prices - in dollar terms - of these
non-fuel commodities remained quite depressed through much of the
1980s, though they recovered somewhat at the end of that decade. 
Moreover, the beginning of the 1990s once again saw depressed
commodity prices, though there has been a "mini commodity boom" since
the second half of 1993.  However, average dollar prices can be a
misleading measure by themselves, as the value of the dollar
vis-a`-vis other currencies shifts and the prices of other goods, in
dollar terms, change. 14/  Of course, what is important in this story
- whichever measure is used - is not the price levels per se.  Rather,
what is significant is the tendency of commodity prices to be
extremely variable, combined with the fact that the economies of
several developing countries are disproportionately dependent on a
small number of non-fuel primary commodities for their export earnings
- including, for example, Chile's heavy reliance on copper exports, El
Salvador's on coffee, or Papua New Guinea's on copper and gold.

22.     While developing economies' exports are growing, since the
beginning of the decade they have also been significant importers, in
some instances running substantial trade deficits vis-a`-vis the
industrialized economies. 15/  Between 1990 and 1995, import growth
exceeded export growth in Latin America and Africa and, to a lesser
degree, in parts of Asia.

23.     Another notable global trend - one specifically related to the
post-"cold war" era - has been the decline in military spending that
began in the mid-1980s and continued through 1995. 16/  This has
potentially significant implications for both non-military spending
and fiscal adjustment.  Thus, world military spending declined some
1.3 percentage points of GDP between 1985 and 1990, with declines in
all regions and in both developed and developing countries.  More
recent data for the period 1991-1995 indicate that this downward trend
has continued.  Information for 130 countries suggests that military
spending worldwide dropped to a low of 2.4 per cent of world GDP in
1995, down from 3.6 per cent in 1990. 17/

24.     This dramatic reduction in military spending could imply large and
growing global resource savings, generally referred to as the "peace
dividend".  For example, if military expenditure as a share of GDP had
been maintained at its 1990 level, spending in 1995 would have been
some 345 billion dollars higher.  Similarly, if the ratio of military
expenditure to GDP had continued at its 1985 level, such spending
would have been at least 720 billion dollars higher in 1995.

25.     The issue, of course, is how countries have used the "peace
dividend". While this question is a complex one, there is some
indication that those countries that made sharp cuts in military
spending also tended to reduce their non-military spending, as well as
their overall fiscal deficits.  This suggests that the "peace
dividend" may have been used, in part, to finance social expenditures
and, in part, returned to the private sector, potentially boosting
private investment.  Conversely, countries that raised military
spending also tended to increase non-military expenditure, as well as
their fiscal deficits, while cutting capital spending - suggesting
that military expenditure may "crowd out" both private and public
investment. 18/


               IV.  PERFORMANCE OF THE DEVELOPING COUNTRIES

26.     In the first half of the Fourth United Nations Development Decade,
developing countries as a group grew at almost three times their
annual average rate of growth of per capita GDP in the 1980s - namely,
2.9 per cent per annum in contrast to a 1.0 per cent per year growth
rate in the period 1981-1990.  As is always the case, however, such
averages mask great variations in individual situations.

27.     Through 1994, many of the economies of Latin America and the
Caribbean enjoyed far faster economic growth than they had experienced
in the 1980s. Inflation fell to 25 per cent per annum by the end of
1995, a record low in the past 22 years and a significant achievement
in the light of the region's not-so-successful attempts to control
inflation in the past.  However, a financial crisis hit Mexico in
December 1994 and while the fallout was minimized to the extent
possible - through concerted international efforts - there were,
nonetheless, profound negative consequences.  This took the form of an
interruption of the economic recovery that the region had been
experiencing since 1991.  Almost overnight, the outlook changed.

28.     In 1995, inflation fell dramatically in 14 of the 18 countries
monitored. Argentina, in fact, currently has one of the world's lowest
inflation rates.  The exceptions were Bolivia, Costa Rica and El
Salvador - in all of which inflation increased somewhat, reflecting
fiscal imbalances - and Mexico, the only country in Latin America to
experience a significant acceleration of its rate of inflation - from
7 per cent in 1994 to 52 per cent in 1995 - as a consequence of the
devaluation of the peso and higher value-added taxes.

29.     While the devaluation of the Mexican peso in December 1994 and the
temporary reversal of capital inflows to the region triggered economic
recessions in Mexico and Argentina (in the latter case, putting an end
to substantial rates of growth), the reverberations from the Mexican
financial crisis spread even further.  The tight monetary policies
adopted in Brazil - in an attempt to contain the deterioration of the
country's trade balance and prevent runs on its currency - led to a
sharp deceleration of growth in that country.

30.     Other economies in the region were less affected by the volatility
of short-term capital flows - either because they had not attracted
such flows in large amounts or because they did not have extensive
trade links with either Mexico or Argentina.  A case in point is
Chile, which registered the fastest rate of growth in the region,
thereby continuing an impressive performance.

31.     While Argentina and Mexico may be recovering as of mid-Decade,
several of the economies of the region - including Brazil, Colombia
and Peru - may feel the fallout from the Mexican financial crisis for
several years to come.  In point of fact, the situation in the region
illustrates the extreme vulnerability of many developing countries to
exogenous shocks.

32.     The situation at mid-Decade in many of the African economies
epitomizes both the advantages of well-conceived adjustment policies
(such as the devaluation of the CFA franc in January 1994), the
importance of international measures (such as debt relief), as well as
the obvious advantages of a favourable external environment.

33.     Thus, in 1996, Africa is expected to see an increase in per capita
GDP for the first time since 1985.  Some of this growth emanates from
the fact that progress has been made in establishing macroeconomic
stability in many African countries.  As a consequence, consumer price
inflation has exhibited a declining trend for the region as a whole. 
Zaire managed to reduce consumer price inflation from 23,000 per cent
in 1994 to 542 per cent in 1995.  Structural reforms are also
progressing in many of the economies of the continent.  Egypt, for
instance, has undertaken a new privatization programme.

34.     Economic performance, moreover, has generally improved in the
franc zone since the devaluation of the CFA franc in January 1994. 
The region has benefited from favourable external trade conditions -
of which it was better able to take advantage after devaluation - as
well as from a surge in official and private inflows of financial
resources.  Several CFA countries thus registered growth rates as high
as 5 per cent or more in 1995, including Benin, Burkina Faso, Chad,
Co^te d'Ivoire, Equatorial Guinea and Togo.

35.     However, structural reforms have barely commenced and it is thus
too early to gauge to what extent they will succeed in raising the
long-term growth potential of these economies.  What is clear at this
point is the extreme sensitivity of Africa to its external
environment.  Much of the "success" of these economies at mid-Decade
has been attributable to higher prices and stronger demand in
international commodity markets, mainly from the developed economies
which absorb roughly two thirds of Africa's exports.  Thus, despite
the current upturn, future economic performance remains in doubt -
impeded by long-term structural constraints to development, such as
poorly developed institutions, low levels of human capital development
and unequal distribution of and access to resources, such as inputs
and finance.  An additional handicap is that African countries
continue to suffer from high external indebtedness (see table 7).

36.     In March 1996, the United Nations launched a system-wide special
initiative on Africa aimed at surmounting a number of these
constraints.  Entitled the United Nations System-wide Special
Initiative on Africa, this programme is the system's most significant
mobilization of support for Africa, as well as its largest coordinated
effort.  The Special Initiative will focus on areas such as basic
health, basic education, water and sanitation.  Its total cost is
expected to be 25 billion dollars over a 10-year period - which will
come mostly from the reallocation of existing resources at the
national and international levels.

37.     After experiencing negative rates of growth in the 1980s, higher
oil prices and export revenues boosted economic recovery at mid-Decade
in most of the oil-exporting economies of West Asia.  However, efforts
to implement economic reforms and reduce budget deficits constrained
their growth.  Meanwhile, in the region's oil-importing countries,
strong growth in private investment and consumption helped economic
recovery.  Furthermore, the progress being made towards peace in the
Middle East stimulated new investment, tourism and construction -
particularly in Israel, Jordan and Lebanon.

38.     A number of oil-exporting countries in the region - including the
Islamic Republic of Iran, Kuwait, Oman, Saudi Arabia and the United
Arab Emirates - have initiated reform programmes in recent years,
involving measures to reduce budget deficits, restructure the public
sector and promote private sector participation.  Nevertheless, budget
deficits are still large and there is a clear need to further
rationalize public spending, to reform public enterprises, to reduce
subsidies and to raise non-oil revenues.

39.     In fact, despite efforts geared at reducing the dominant role of
oil in the economy, the production structures of most of the countries
in the region remain largely undiversified.  This is particularly true
of the oil-exporters - where oil provides more than 80 per cent of
government revenues and accounts for close to 50 per cent of GDP. 
This high dependence on oil makes these economies extremely vulnerable
to fluctuations in oil prices and affects not only the oil-exporters,
but the oil-importers as well, through employment opportunities for
their expatriate workers, workers' remittances and intraregional
trade. Reducing this dependence is a task for the second half of the
Decade.

40.     South and East Asia and China have in recent years registered very
rapid rates of growth.  Even with growth rates moderating at
mid-Decade, for most of these economies - including China, India,
Indonesia, Malaysia, Singapore and Thailand - the task at hand is to
restrain inflation while maintaining or strengthening economic growth. 
Such deceleration of economic activity as has taken place in recent
years has been the result of tightening monetary policies in response
to upward price pressures.

41.     Much has been written both to explain the "success" of these
rapidly growing Asian economies and seeking to use them as role
models.  Attention has been focused, for example, on China's "open
door" policy, which led to high rates of foreign investment and
exports.  Economic liberalization and market reform, as well as
flourishing export expansion, are the variables most frequently cited
to illuminate the accomplishments of most of these economies. 19/  The
reality is more complicated, however.  In the Republic of Korea, for
example, chemicals and heavy industry were protected from foreign
competition in the 1970s.  While there clearly are certain common
denominators - such as incentives for investment, export promotion and
diversification and a focus on developing human capital - the point
has been made that one cannot ascribe growth merely to getting certain
fundamentals "right" ex ante. 20/  Nevertheless, countries seeking to
emulate these Asian "miracles" can undoubtedly learn a great deal from
the experiences of these countries. 21/

42.     The Strategy singles out not only intensified economic growth, but
also "responsiveness to social needs" as a basic development
objective.  As has been noted elsewhere, a nation's poverty level -
or, conversely, its wealth - manifests itself through a wide range of
indicators, including income level, health and educational standings,
or access to goods and services.  However, it is difficult to measure
poverty in such a way as to capture its multidimensional nature and,
therefore, a common marker of poverty has long been the income or
consumption level of households.  However, to get a fuller picture of
poverty it is important also to take into account social indicators -
such as life expectancy, infant mortality rates and school enrolment
rates. 22/

43.     Regardless of which specific indicators are used, two points are
apparent. Social variables always shift slowly; progress on such
fronts as life expectancy does not occur overnight.  Nevertheless,
tremendous strides have indeed been made over the last few decades in
raising living standards in developing countries.  For example, in the
past quarter century, average per capita incomes have roughly doubled
in the developing world - an attainment that took the United States of
America almost 40 years and the United Kingdom of Great Britain and
Northern Ireland some 60 years.  Moreover, when income measures are
supplemented with other measures of human welfare, it is clear that -
on average - populations in developing countries are today living
longer, healthier and better-educated lives than was the case a
generation ago.  Furthermore, they have greater access to services
such as electricity and running water.

44.     Significant progress has clearly manifested itself in various
areas.  For example, the infant morality rates for East Asia and the
Pacific, as well as for South Asia, improved by roughly 25 per cent
over the course of only a decade.  In the Middle East and North
Africa, progress was even more dramatic - namely, more than 40 per
cent reduction in the infant mortality rate.

45.     All in all, therefore, there has been a narrowing in the gap
between "rich" and "poor" even over the past 10 years or so (see table
2).  That being said, however, it is obvious that there are still
dramatic variations between regions. For example, in 1993, the infant
mortality rate for sub-Saharan Africa was almost three times that of
East Asia and the Pacific.  The rate for South Asia was more than
three times that of Europe and Central Asia.


                  Table 2.  Selected social indicators

----------------------------------------------------------------------
                           Infant mortality rate      Life expectancy
                          (Per 1,000 live births)         (Years)
                          --------------------------------------------
                               1982     1993          1982      1993
----------------------------------------------------------------------
East Asia and Pacific           48       35            65        68

Europe and Central Asia         33       24            68        69

Latin America and Caribbean     57       43            65        69

Middle East and North Africa    90       53            59        66

South Asia                     110       84            55        60

Sub-Saharan Africa             112       93            48        52

Developing countries            71       54            61        65
--------------------            --       --            --        --
OECD                            20        7            75        77


                                Gross primary school enrolment ratios
                                            (Percentage)
                                --------------------------------------
                                       1982                 1993
----------------------------------------------------------------------
East Asia and Pacific                   111                 118 a/

Latin America and Caribbean             105 b/              107 c/

Middle East and North Africa             91                  96 a/

South Asia                               77                 106

Sub-Saharan Africa                       74                  67 d/

Developing countries                     95                 107 c/
--------------------                     --                 ---
OECD                                    102                 103
----------------------------------------------------------------------
     Source:  Poverty Reduction and the World Bank:  Progress and
Challenges in the 1990s (Washington, D.C., World Bank, 15 April 1996),
table 1.1.

        a/    1992.

        b/    1980.

        c/    1991.

        d/    1990.


46.     The life expectancy indicators are less disparate.  Nevertheless,
life expectancy in South Asia and sub-Saharan Africa is substantially
lower than in other regions.  Similarly, gross primary school
enrolment ratios differ significantly between regions, being notably
lower in sub-Saharan Africa than in the rest of the world.

47.     In fact, more than one fifth of the world's population lives on
less than one dollar a day, according to a recent report on poverty. 
According to this study, the number of people living on less than a
dollar a day increased between 1987 and 1993, reaching about 1.3
billion in the latter year. 23/

48.     What this implies from an individual country perspective can be
seen from table 3, showing those World Health Organization (WHO)
members that have, or have not, achieved all three "health-for-all"
targets.  The three targets in the WHO strategy for health-for-all by
the year 2000 relating to health status are:  life expectancy at birth
above 60 years; an under-five mortality rate below 70 per 1,000 live
births; and an infant mortality rate below 50 per 1,000 live births.


              Table 3.  Number of WHO member States meeting the three
                        health-for-all targets, by region

----------------------------------------------------------------------
                      Above all three targets  Below all three targets
----------------------------------------------------------------------
Africa                              4                 38

Americas                           25                  2

Eastern Mediterranean              12                  5

Europe                             45                  0

South-East Asia                     3                  4

Western Pacific                    13                  3
----------------------------------------------------------------------
     Source:  The World Health Report 1996 (Geneva, World Health
Organization), table A2.


49.     While there are far too many countries to list individually, note
should be taken of the fact that only Algeria, Botswana, Cape Verde
and Mauritius in Africa meet all three WHO targets. 24/  The same
holds true for the Democratic People's Republic of Korea, Sri Lanka
and Thailand in South-East Asia. Conversely, only Bolivia and Haiti in
the Americas have values below all three targets, as do Bangladesh,
Bhutan, Myanmar and Nepal in South-East Asia.  China, it should be
pointed out, is categorized as a "Western Pacific" economy and is
cited as fulfilling all three targets.  Furthermore, a number of large
economies - including Brazil, Egypt, Pakistan, Turkey, India and
Indonesia, have not been classified - as they neither met all three
targets, nor failed on all three counts.

50.     The present report comes at a juncture which - depending on the
perspective - is either extremely timely or inopportune in the
extreme.  The former viewpoint focuses on the fact that, at
mid-Decade, the average annual rate of growth of per capita GDP for
developing economies as a whole was almost three times the growth rate
they registered in the 1980s - 2.9 per cent for the period 1991-1995
versus 1.0 per cent in 1981-1990.  Moreover, forecasts suggest that
healthy growth will continue through 1996. 25/  The latter viewpoint,
based on a more pessimistic outlook, notes that, while the overall
incidence of poverty is declining worldwide, the number of people
living in poverty - however defined - continues to rise. 26/  The
question, therefore, is whether current robust growth is an enduring
trend - which will result in poverty reduction worldwide - or simply a
short-run "blip", which will have little ultimate impact on global
poverty.


                  V.  ROLE OF THE INTERNATIONAL ENVIRONMENT

51.     According to both the Declaration and the Strategy, the
international community has an obligation to assist the developing
countries on a number of fronts.  Included here is financial
assistance.  Thus, the issue is what measures were taken, during the
period 1991-1995, to support the developing countries with their debt
and debt service obligations.  Moreover, there is the question of
whether resource flows were directed to developing countries to
supplement their internal savings and provide capital for investment.

52.     Assistance was also to be rendered to the developing countries on
the trade front, through an increasingly open and liberal global
trading system and improved market access.  With the conclusion of the
Uruguay Round, this appears to have transpired, though many instances
of protectionism - especially in areas of concern to a number of
successful developing country exporters - clearly remain.  Such
protectionist pressures may even be increasing at the present time. 
Moreover, regional economic integration schemes - which are not
illegal standards, by the World Trade Organization (WTO) much as they
were not illegal according to the General Agreement on Tariffs and
Trade (GATT), having been sanctioned by article XXIV - should be
trade-creating, rather than trade-diverting and should be building
blocs to a more open trading system.  While bloc formation has
flourished in the first half of the 1990s, it is not clear that all
these schemes meet these requirements.  Efforts were also to be made
to ensure that the terms of trade (especially, commodity prices) did
not move in such a fashion as to hurt developing primary commodity
exporters.  Or, if they did decline, measures were to be taken to
mitigate the problems caused by these adverse trends.


                              A.  Trade

53.     Three striking characteristics define the first half of the 1990s
in the global trade arena.  First, there is the ever-increasing
integration of a number of developing countries into the world
economy.  A second pre-eminent development on the trade front since
the last assessment has been the follow-up associated with the
conclusion of the Uruguay Round of multilateral trade negotiations -
in which developing countries have played a pivotal role, in keeping
with their growing importance in the world economy.  And the third
defining feature of this period, as far as the international economy
is concerned, has been the continued proliferation of regional trading
arrangements or blocs.


              1.  Increasing participation in world trade

54.     "Export pessimism" dominated much developing country thinking in
the 1970s and early 1980s, leading many developing economies to pursue
inward-looking trade strategies and largely unsuccessful South-South
regional trading arrangements.  For the most part, this approach has,
since the mid-1980s, been replaced by outward-oriented trade policies
and increased global trade integration. 27/  For example, the ratio of
world trade to GDP - one measure of integration - rose by 1.2
percentage points per annum during the period 1985-1994.  This was
three times faster than during the previous 10-year period and nearly
twice as fast as in the 1960s. 28/  Developing countries as a group
participated extensively in this "quickening" in the pace of
integration. Nevertheless, certain countries have fared far better in
this regard than have others.  Overall, the share of developing
country exports in total world exports rose between 1990 and 1994. 
However, averages clearly mask individual performances, which are far
more varied.

55.     One indicator seeking to assess integration trends is the "speed
of integration" index.  This measure is derived from changes - between
the early 1980s and early 1990s - in four indicators:  real trade to
GDP, the share of inward foreign direct investment to GDP,
institutional investor credit ratings, and the share of manufactures
in exports. 29/

56.     Carrying out this exercise yields striking disparities in
developing countries' speeds of integration. 30/  Most of the
fast-growing economies of East Asia have the highest speed of
integration indices, as a result of exceptionally large increases in
trade, manufactured exports and high foreign direct investment ratios. 
Economic reformers - such as Argentina, Chile and Mexico in Latin
America, Morocco and Ghana in Africa, and Turkey in Europe - also
record high indices.  Conversely, the majority of low-income countries
in sub-Saharan Africa, as well as many middle-income economies in
Latin America (including Brazil, Colombia, Ecuador and Peru) and in
the Middle East and North Africa (including Algeria and Saudi Arabia)
fare poorly - as reflected by this index.  Their median trade ratios
and credit ratings have fallen, while median foreign direct investment
ratios have either fallen or have been stagnant.

57.     Another perspective from which to look at the issue of global
"assimilation" is to observe the "top" exporters in world merchandise
trade. Clearly, these slots will go to large economies, small ones
finding it difficult to make much of a dent on global trade figures -
even though their dependence on trade may be greater than is the case
for some of the larger, more self-sufficient economies.

58.     Thus, while developing countries in both 1985 and 1995 constituted
11 of the top 30 leading exporters, the first five "slots" have
consistently been large, developed economies:  the United States of
America, Germany, Japan, France and the United Kingdom of Great
Britain and Northern Ireland.  However, individual developing
economies - such as China, Hong Kong or Taiwan Province of China -
have made tremendous strides as regards export expansion so that,
while there are 11 developing economies in the top 30 in both 1985 and
1995, those 11 accounted for 13.7 per cent of world exports in the
former year and 20.5 per cent in the latter, an almost 50 per cent
increase over the course of a decade.


         Table 4.  Leading developing country exporters in world
                   merchandise trade, 1985 and 1995

----------------------------------------------------------------------
                          1985                       1995
----------------------------------------------------------------------
                  Value                               Value
                (Billions                           (Billions  
                   of       Share                      of     Share
Exporter        dollars) (Percent.) Exporter        dollars)(Percent.)
----------------------------------------------------------------------
                                    Hong Kong a/       173.8    3.5

Top 10                                                         60.5
----------------------------------------------------------------------
  Taiwan
  Province of
  China            30.7      1.6    China              148.8    3.0

  Hong Kong a/     30.0      1.6    Republic of
                                    Korea              125.2    2.5

  Republic of
  Korea            30.3      1.6    Singapore a/       118.6    2.4

  China            27.3      1.4    Taiwan
                                    Province of
                                    China              111.4    2.2

  Saudi Arabia     27.0      1.4    Mexico              79.8    1.6

  Brazil           25.7      1.3    Malaysia            74.0    1.5

Top 20                                                         80.0
---------------------------------------------------------------------
  Singapore a/     22.8      1.2    Thailand            55.8    1.1

  Mexico           21.5      1.1    Brazil              46.8    0.9

  Indonesia        19.7      1.0    Saudi Arabia        45.5    0.9

  Malaysia         15.3      0.8    Indonesia           45.0    0.9

  United Arab
  Emirates         14.4      0.7

Share of the above
in world                    13.7                               20.5
----------------------------------------------------------------------
World           1 922.0    100.0    World            5 020.0  100.0
----------------------------------------------------------------------
     Source:  Data for 1995 from WTO press release (PRESS/44), 22
March 1996; data for 1985 from GATT, International Trade 1985-86,
appendix table A4.

     a/   Includes significant trans-shipments.


                  2.  World Trade Organization follow-up

59.     It is perhaps indicative of the increased globalization of the
world economy that all nations today have a major stake in the
activities of WTO. Thus, developing countries accounted for more than
80 of the 106 members of WTO as of August 1995. 31/  Hence, a number
of the organization's undertakings - which are both novel and only
just beginning to click into place - are worthy of mention.  Some of
these, which are of particular concern to developing countries, will
be noted.

(a)     Trade dispute resolution

60.     The new dispute settlement system of WTO is one of its more novel
features. Not only is it reasonably swift, but it is also inherently
difficult to thwart the process.  Thus, generally less than 10 months
after a dispute is brought to the Dispute Settlement Body of WTO, a
report detailing the findings and conclusions of the case is adopted
by the Body - unless there is a consensus against adoption.  This
system basically deprives an interested party of the ability to stall
the process.  It was precisely the fact that parties to trade disputes
could obstruct the dispute settlement process that was viewed as a
major weakness of the old GATT system.

61.     Developing countries are increasingly utilizing the multilateral
dispute settlement mechanism - much more so in WTO than was the case
in GATT.  For example, on 5 March 1996, the Dispute Settlement Body
established two panels - at the request of the Philippines and Costa
Rica, involving desiccated coconut and textile products, respectively. 
This raised the number of active panels to four - three of which
involve developing country complainants.  Also under panel examination
is a complaint against the European Union by Chile and Peru relating
to scallops, as well as a case disputing Japanese taxes on alcoholic
beverages brought by Canada, the European Union and the United States.

62.     The first panel report that was issued under WTO auspices - and
that is currently under appeal - was in response to complaints by
Brazil and Venezuela regarding United States' standards for
reformulated and conventional gasoline. The first dispute brought to
WTO - which was then settled bilaterally - pertained to a dispute
between Malaysia and Singapore.  The current situation is thus in
notable contrast to the dispute settlement mechanism under GATT
auspices, where the vast majority of cases were between developed
countries. 32/

(b)     Agriculture

63.     Although the original GATT agreement applied to trade in
agriculture, it did so ineffectively - especially as regards export
subsidies.  The Uruguay Round agreement thus sought to reform trade in
agriculture, providing a basis for more market-oriented policies. 
Market access for agriculture is hence now governed by a "tariffs
only" regime.  Tariffs resulting from this "tariffication" process
will be reduced by an average 36 per cent in the case of developed
countries and 24 per cent in the case of developing countries. 
Reductions take place over six years for industrialized economies and
10 for developing.  Least developed economies are not required to
reduce their tariffs. 

64.     Meanwhile, domestic support measures are disciplined by reductions
in the total aggregate measurement of support (total AMS).  This is a
means of quantifying the aggregate value of domestic support or
subsidy given to each category of agricultural product.  Commitments
made entail a 20 per cent reduction in total AMS for developed
countries over six years.  For developing countries, the commitment is
13 per cent over 10 years, while there is no reduction required of
least developed economies. 33/  Domestic support measures deemed to
have a minimal impact on trade (termed "green box" policies) have been
excluded from reduction commitments.  Such policies include general
government services - for example, in the areas of research, disease
control or food security.  Also included here are direct payments to
producers - for instance, forms of direct income support that are not
judged to encourage production, as well as structural adjustment
assistance and direct payments under environmental and regional
assistance programmes.

(c)     Textiles/clothing

65.     Since 1974, trade in textiles and clothing was largely governed by
the Multifibre Arrangement (MFA).  The MFA provided the basis on which
many industrialized countries - through bilateral agreements or
unilateral action - established quotas on imports of textiles and
clothing from the more competitive developing countries.  The
integration of this sector into WTO disciplines was a much-hailed
accomplishment of the Uruguay Round and is being implemented in stages
over 10 years.

(d)     Anti-dumping

66.     Article VI of the GATT agreement allowed countries to apply
anti-dumping measures on imports of a product whose export price was
below its "normal value" 34/ if such dumping caused injury to the
importer's domestic industry. While more detailed rules governing the
use of such measures were negotiated in the Tokyo Round, the use of
such measures as a protectionist ploy proliferated in recent years -
causing the Uruguay Round to re-examine the issue.  The new agreement
provides for greater clarity and more-detailed rule as to the
determination that a product has been "dumped".  Moreover, an importer
is now required to establish a clear causal relationship between
dumped imports and injury to the domestic industry.

(e)     Quantifying the outcome of the Round

67.     What is the expected magnitude of the benefits emanating from the
Uruguay Round agreement?  A number of studies have already attempted
to address this question.  One such study, carried out under the
auspices of WTO, estimated benefits of 94 billion dollars a year, in
1992 United States dollars.  When induced investment is incorporated
into the picture, the gains rise to 214 billion dollars a year, of
which almost half is estimated to accrue to developing countries.  A
second study, this one carried out under the sponsorship of the World
Bank, found total income gains of 171 billion dollars, with roughly a
third to developing countries.  Yet a third investigation focused
primarily on manufactures and incorporated the growth and structural
change anticipated over the period up to the full implementation of
the Round in 2005. This methodology tends to increase estimated gains
since the global economy becomes larger over time and, without the
Round, would be more distorted in 2005 than it was in 1992.  In this
model, therefore, income gains are estimated at 258 billion dollars
per year, roughly a third of which would accrue to developing
economies.  Another significant consideration affecting the level and
distribution of benefits from liberalization is the performance of
labour markets. 35/  A fourth study incorporated this factor and came
up with an estimated 235 billion dollars per year in gains, with 56
billion dollars going to developing countries. 36/

68.     Of course, none of these estimates can be taken on faith.  Rather,
they are an indication of possible orders of magnitude.  The same may
be said of an analysis of the real income and real wage effects of the
Round, disaggregated by region.  In each instance, the outcome depends
on efficiency gains from each country's liberalization, terms of trade
effects, as well as the implications of abolishing the Multifibre
Arrangement.  The largest gains, according to this study, accrue to
East Asian WTO members - such as Indonesia, Malaysia, the Republic of
Korea and Thailand - which have committed themselves to fairly
rigorous liberalization of both agriculture and manufactures. 
Following this train of thought, the Middle East and North Africa, as
well as the economies in transition, are estimated to reap small GDP
gains because they undertook relatively few commitments to liberalize
under the Round.  In fact, many of these economies are not yet WTO
members.  Meanwhile, there is an estimated loss to sub-Saharan Africa,
reflecting the lack of liberalization, small increases in world prices
for some foodstuffs, and higher prices for imported textiles and
apparel. 37/, 38/


                           3.  Trade blocs

69.     It no longer makes sense to think in terms of the desirability of
trade bloc proliferation.  Regional trading arrangements are a clearly
established feature on the current trade horizon.  Not only do all
major industrialized countries belong to at least one such grouping,
but - in a trend that characterizes the first half of this decade - a
large number of developing economies have become active participants
in their formation and/or enlargement as well (see table 5). 39/ 
Moreover, between 1990 and 1994, intraregional trade in North America,
Asia and Latin America expanded faster than interregional trade
(though the opposite trend was observed in Western Europe and
Central/Eastern Europe and the former USSR).  In 1995, according to
available data, there was once again a faster increase in
intraregional trade for Asia and Latin America. 40/


                Table 5.  Six major and recent trading blocs

---------------------------------------------------------------------
                        Entry into
           Name           force                     Members
---------------------------------------------------------------------
1. North American Free    1989        Canada, Mexico, United States
   Trade Agreement                    of America
   (NAFTA)            

2. Asia-Pacific Economic  1989        Australia, Brunei Darussalam,
   Cooperation Forum                  Canada, Chile, China, Hong
   (APEC)                             Kong, Indonesia, Japan,
                                      Malaysia, Mexico, New Zealand,
                                      Papua New Guinea, Philippines,
                                      Republic of Korea, Singapore,
                                      Taiwan Province of China,
                                      Thailand, United States of
                                      America

3. Southern Cone Common   1991        Argentina, Brazil, Paraguay,
   Market (MERCOSUR)                  Uruguay

4. ASEAN Free Trade Area  1991        Brunei Darussalam, Indonesia,
   (AFTA)                             Malaysia, Philippines,
                                      Singapore, Thailand, Viet Nam

5. Southern African       1992        Angola, Botswana, Lesotho,
   Development Committee              Malawi, Mauritius, Mozambique,
   (SADC)                             Namibia, South Africa,
                                      Swaziland, United Republic of
                                      Tanzania, Zimbabwe, Zambia

6. West African Economic  1994        Benin, Burkina Faso, Co^te
   and Monetary Union                 d'Ivoire, Mali, Niger, Senegal,
   (UEMOA)                            Togo
---------------------------------------------------------------------- 
   Source:  Based on information collected by the Department for
Economic and Social Information and Policy Analysis.


70.     Deepening and widening of trading arrangements, as in Europe, was
numerous and rapid during the first half of the 1990s.  However, the
big question that of course arises is what the ultimate welfare
effects of all this bloc activity will be. 41/  The classical
dichotomy between trade creation and trade diversion - as expounded by
Viner and Meade - has been the take-off point for any discussion of
the subject for many decades, making it clearly recognized that
regional trade blocs may be welfare-reducing - though the actual
welfare implication of a particular pattern of regionalization, it has
been assumed, had to be determined on a case-by-case basis.

71.     At the beginning of the 1990s - along with renewed interest in
bloc formation - came renewed warnings of the possible negative
welfare implications of such schemes. 42/  Since then, attempting to
allay such fears, models have been devised showing that blocs may be
welfare-improving, under the right conditions. 43/  The most recent
academic discussions, meanwhile, have centred around two concepts. 
First, the notion of "continental", or "natural" trading blocs has
been modelled, thereby incorporating the effects of transport costs on
trade flows.  Secondly, the concept of "open regionalism" has been
articulated. This latter term, which is dismissed by some as an
oxymoron, argues that some regional bloc structures are better able
than others to minimize trade diversion.

72.     Clearly, the issue of whether regional trading arrangements are
"stepping stones" or "stumbling blocks" to global free trade is not
yet resolved. 44/  Suffice it to say that, while the chief pillar of
WTO as regards trade in goods, services and intellectual property is
non-discrimination, the cornerstone of regional trading arrangements
is - by definition - discrimination.  A key issue, therefore, is
whether the stipulations of any proposed arrangement will conform to
WTO provisions.  Article XXIV of the 1994 GATT/WTO Agreement, adopted
as part of the Uruguay Round accord, spells out the guiding principles
for such schemes - namely, the blocs are to facilitate trade between
members, while not raising barriers vis-a`-vis non-members.  Whether
this condition is actually met is easier to assess in theory than in
practice, however, and it remains to the international community
therefore to ensure that such bloc-formation as occurs is
welfare-enhancing for the world at large.  One important recent
development in this vein was the decision taken at the WTO General
Council meeting, on 15 December 1995, to create a committee to examine
all new regional agreements. The terms of reference of the Committee -
agreed to on 6 February 1996 - are far-reaching.  It will examine all
regional trading agreements of whose creation WTO is notified.  It
will develop procedures to improve the examination process, receive
reports on existing agreements and consider the systemic implications
of regional arrangements and initiatives on the multilateral trading
system at large. 45/

73.     New items on the agenda include trade and environment and trade
and labour standards issues.  Several developed countries have
proposed putting these two items on the future agenda of WTO, though a
number of developing countries fear that these issues could become a
pretext for protectionist measures by industrialized countries.


                     B.  Debt, capital flows and aid

74.     A reference to the period 1973-1981 - which witnessed massive
capital flows to many developing economies, largely in the form of
private bank loans to the public sector - is generally obligatory in
any analysis of financial flows to low- and middle-income developing
countries.  Customarily, mention is then made of the fact that such
lending essentially "dried up" for most - but not all - developing
countries in the debt crisis period, 1982-1989.

75.     Events have, in many respects, come full circle in the first half
of the 1990s.  Thus, in recent years, a number of developing countries
in various regions of the world have, once again, become recipients of
substantial inflows of foreign capital.  However, two factors
distinguish the story at this point: first, the disparity in the
trends between private capital versus other resource flows and,
secondly, the high degree of concentration of private capital inflows.


             Table 6.  Selected capital flows to developing countries

                            (Billions of 1993 dollars)

----------------------------------------------------------------------
                  1970s a/ 1980s a/  1991  1992   1993   1994  1995 b/
----------------------------------------------------------------------
Net foreign
direct investment   3.0     13.0     34.5  44.9   64.0   80.1  90.3

Portfolio
investment          4.2      3.5     17.5  24.3   86.6

Net commercial
bank lending        9.8     11.8     18.9  14.5    5.5

Grants plus
official debt flows 9.9     34.4     59.3  47.3   52.3
                  ----------------------------------------------------
     Total         23.1     62.5    113.1 131.0  208.3  207.4  231.3
----------------------------------------------------------------------
     Source:  For 1970s to 1993, see Finance and Development (December
1995), p. 7; for 1994 and 1995, see World Debt Tables, 1996, vol. 1.

     a/   Figures represent the annual averages for 1971-1980 and
1981-1990, respectively.

     b/   Preliminary.


76.     Private capital flows are playing a growing role in economic
development. For example, foreign direct investment to the developing
world quadrupled from an annual average of 12.6 billion dollars in
1980-1985 to more than 50 billion dollars in 1992-1993.  It rose
further to 70 billion dollars in 1994.  Developing countries received
roughly one third of total world foreign direct investment during
1992-1994, up from one fifth in the first half of the 1980s. Moreover,
the share of foreign direct investment in the gross capital formation
of developing countries more than doubled between 1986 and 1992,
exceeding 6 per cent in 1993. 46/

77.     At the same time that direct investment is swelling, some other
forms of capital flows are diminishing in relative importance.  For
example, concessional assistance has been continuously declining as a
share of capital inflows since the 1960s, when it accounted for some
two thirds of total capital inflows.  As recently as the 1980s, aid
constituted more than 50 per cent of total capital inflows.  In 1993,
the comparable figure was one quarter.  Moreover, commercial bank
lending - a major source of funds in the 1970s - has practically dried
up since the debt crisis of the 1980s.

78.     Portfolio investment has also shown impressive growth during this
period - in fact, increasing to a substantially greater extent than
has direct investment.  The point generally made about portfolio
investment, however, is that it is both volatile and risky - an
assessment borne out by outflows from Mexico in December 1994. 
Meanwhile, foreign direct investment is viewed as having the added
benefit of bringing with it technology, management know-how and access
to export markets - all variables in high demand in developing
countries. 47/

79.     As advantageous as foreign direct investment is, it remains highly
concentrated.  Eight countries, comprising 30 per cent of developing
country GDP, garnered two thirds of overall flows in 1990-1993. 48/ 
In 1994, 11 countries accounted for roughly three quarters of total
foreign direct investment flows to the developing world. 49/  The bulk
of these countries are in East Asia and Latin America.  In 1995,
foreign direct investment to China alone jumped 12 per cent, making
that country the largest recipient of foreign direct investment,
accounting for about one third of such flows. 50/

80.     In fact, private capital flows in general - not just foreign
direct investment - are highly concentrated.  In 1993, for instance,
12 countries accounted for 77 per cent of private flows.  Meanwhile,
only 10 countries issued nearly 90 per cent of all emerging market
bonds in 1993:  Mexico, Brazil, Argentina, Hungary, Republic of Korea,
Greece, Turkey, China, Venezuela and Thailand (cited in descending
order of the dollar value of bonds issued). 51/

81.     While a selected - albeit widening - number of developing
countries are attracting the lion's share of ever-growing private
capital flows, a notable feature of the 1990s is that the stream of
official development assistance (ODA) has meanwhile stagnated, and
actually declined in real terms.  Thus, over the period 1990-1994,
receipts of ODA by developing countries remained more or less level -
apart from a small spike in 1991 - at a plateau established in the
mid-1980s. 52/  In 1994, ODA from all Development Assistance Committee
members to developing countries and multilateral organizations
amounted to 0.30 per cent of their combined GNPs, compared to an
average of 0.34 per cent in the early 1980s. 53/  Basically stagnant,
ODA disbursements increased only from $51.3 billion in 1990 to $54.5
billion in 1994, though they were slightly reallocated over this
period, so that a somewhat greater proportion of ODA was directed
towards Africa, south of the Sahara, and towards selected countries in
North and Central America and Far East Asia.  Thus, allocations to
Haiti and Mexico increased considerably, as did ODA to China,
Cambodia, Mongolia and Viet Nam. 54/

82.     As noted above, the debt crisis of the 1980s left many casualties
in its wake.  However, a notable feature of the first half of this
decade has been the increasing differentiation that has taken place in
the situations of various debtor nations.  On the one hand, a number
of middle-income developing countries, especially in Latin America,
appear to have gotten a handle on their external debt situations by
virtue of having regained access to international capital markets.  On
the other hand, many low-income countries - and a number of lower
middle-income countries, as well - continue to face considerable
debt-servicing difficulties.



            Table 7.  Debt indicators for capital-importing developing
                      countries, 1990, 1994 and 1995

                                                 (Percentages)

----------------------------------------------------------------------
                                       1990       1994       1995
----------------------------------------------------------------------
External debt to GNP ratio             39.1       37.0       31.6

   Latin America                       44.9       37.1       39.6

   Africa                              70.4       76.4       65.0

      Sub-Saharan Africa               98.9      135.8      120.9

   Asia                                27.2       28.5       26.8

   Least developed countries           82.6       98.5       89.8

External debt to exports ratio        138.9      122.8       98.8

   Sub-Saharan Africa                 327.1      384.5      366.3

   Least developed countries          368.0      435.3      410.8

Debt service to exports ratio          15.7       12.9       12.9

   Sub-Saharan Africa                  17.7       16.7       19.3

   Least developed countries           14.1       11.3       16.8
--------------------------------------------------------------------
     Source:  World Economic and Social Survey 1996 ..., annex table
A.37.


83.     A strategy designed to return debt-ridden economies to sustainable
debt-servicing situations has thus far focused on the debt problems
associated with commercial bank debt, as well as debt owed to
governmental creditors. However, at the joint World Bank/International
Monetary Fund (IMF) Development Committee in October 1995, the
Committee decided to address the problems associated with debt owed to
multilateral institutions at its spring 1996 meeting. 55/  A
preliminary assessment identified eight countries as carrying
"unsustainable debt" - where the threshold for "sustainability" was
set at 20 to 25 per cent for the ratio of debt-service to exports and
200 to 250 per cent for the ratio of debt to exports:  Burundi,
Guinea-Bissau, Mozambique, Nicaragua, Sao Tome and Principe, Sudan,
Zaire and Zambia.  Other countries deemed to be under huge stress were
Bolivia, Cameroon, the Congo, Co^te d'Ivoire, Ethiopia, Guyana,
Madagascar, Myanmar, the Niger, Rwanda, the United Republic of
Tanzania and Uganda. 56/  A mutually acceptable plan to assist these
20 economies has yet to be elaborated.  The issue will next come
before the Development Committee at its autumn 1996 meeting. 57/ 
Critics, however, have already focused on the requirement of a track
record of "sustained reform" as a prerequisite for eligibility, noting
that only Bolivia and Uganda would meet this criterion at this point.

84.     While a coherent World Bank/IMF plan is not yet in place, in March
1995, donors from more than 30 countries did agree to some 22 billion
dollars of funding for the International Development Association
(IDA), the concessional lending arm of the World Bank.  The agreement
calls for countries to provide some 11 billion dollars over three
years, commencing in July 1996, with the remainder coming from
repayments of IDA credits, past contributions and funds from the Bank
itself.  IDA allocations potentially benefit some 78 poorer countries,
with a total population of more than three billion.  Nevertheless,
this level of funding represents a substantial reduction of the amount
donor countries provided to IDA in previous replenishments - when some
18 billion dollars were pledged, with the remaining three billion
dollars coming from reflows and Bank profits.

85.     Whatever minor optimistic notes can be sounded, the fact remains
that there is a sub-set of heavily indebted poor countries - notably,
in sub-Saharan Africa - for which the debt burden story has not
changed at all in the past few years.  In point of fact, from the
perspective of the three debt "indicators" cited in table 7, their
situation has actually worsened since 1990.


               VI.  DEVELOPMENT OF THE LEAST DEVELOPED COUNTRIES AND
                    SPECIAL MEASURES ON THEIR BEHALF

                          A.  Economic performance

86.     For a decade and a half, the economic performance of the least
developed countries, as a group, has been disappointing and continues
to be a matter of deep concern for the international community. 58/ 
Despite the fact that the economies of the least developed countries
improved in 1995, their economies actually worsened when looked at
over the five-year period 1991-1995 as a whole - with GDP per capita
declining by about 0.9 per cent, compared to stagnation in the 1980s -
though there are, of course, wide variations across countries.  Only
17 of the 48 least developed countries achieved robust growth rates
and managed to improve their living standards.  Another 16 faced weak
economic growth and were unable to avoid a deterioration in per capita
income.  The remaining 15 performed poorly - mostly owing to political
unrest, civil strife and war.

87.     There might be several explanations for these diverging trends
among least developed countries.  The best performers - all but eight
of which are located in Asia -  benefited from substantial capital
inflows (workers' remittances, ODA, foreign direct investment and
loans), as well as market opportunities. 59/ They managed to expand
their economic productive base, moving away from primary commodities
into manufactures.  This protected them somewhat from depressed
commodity prices. 60/  Moreover, they have also successfully increased
export earnings, owing to the strong economic growth and increased
intra-trade of the Asian region.

88.     Meanwhile, stagnant least developed countries faced many
constraints that prevented them from raising their living standards. 
Output grew, but was outpaced by rapid population growth which led to
declining per capita income.  The weak economic growth of these
economies was mainly attributable to supply-side constraints - such as
an overdependence on non- or semi-processed commodities, rudimentary
technology, a shortage of skilled manpower and an inadequate physical
infrastructure.  Natural disasters such as drought caused real GDP to
decline in many countries, further exacerbating the problems of these
structurally weak economies.  Not surprisingly, these economies - all
but two of which are in Africa - faced terms-of-trade losses. 61/

89.     Civil war and acute political instability had devastating effects
on a large number of least developed countries through 1994 and only
five of them managed to end their civil wars and/or civil strife.  As
a result, a great deal of physical infrastructure was destroyed,
agricultural production collapsed 62/ and industrial output declined. 
In many instances, a rural exodus took place, with many people
displaced, some of them becoming refugees in neighbouring countries. 
Scarce resources were diverted from economic development to financing
war efforts.  As a result, average output growth in these countries
fell, as did per capita income.


                            B.  Policy responses

90.     Caught between slow - or even negative - per capita income growth
and macroeconomic imbalances, most least developed countries carried
out a wide range of policy reforms (as of April 1996, 38 had
implemented adjustment reforms).  While there were significant
intercountry variations in the design and impact of reforms, policy
changes - together with key instruments - were broadly similar in
their orientation, consisting of demand management (restrictive fiscal
and monetary policies) to eliminate both internal and external
imbalances and reduce inflation; expenditure and production-switching
(exchange rate and wage policies) to promote exports and
import-substitution; and market-oriented, supply-side reforms (such as
liberalization, deregulation and privatization) to enhance the
efficiency of resource allocation.

91.     As fiscal and external imbalances persisted, most least developed
countries undertook major reassessments of their fiscal and
development programmes, with a significant shift towards budgetary
restraint.  Recruitment of civil servants was frozen, reducing wages
and eliminating fringe benefits.  Civil service reforms stressed
downsizing.  Consumer subsidies were removed and social expenditures
on education and health, for example, were drastically cut - mostly
reflected in a decline in capital spending on new schools and
hospitals.  Capital spending was rationalized by concentrating and
redirecting investment to productive activities.

92.     Privatization has been a key element in the fiscal adjustment
package.  To help release pressure on the government budget and reduce
borrowing requirements, public enterprise reforms were launched in the
1990s in most least developed countries.  Privatization included not
only divestiture or the sale of state assets, but also transferring
the management of state activities through contracts and leases to
private parties, contracting out or granting franchises in undertaking
activities that were previously performed by the State, and joint
ventures between public and private sectors. 63/

93.     Prior to reform, low or negative interest rates discouraged
saving, increased capital flight and provided room for easy credit
expansion.  Consequently, most least developed countries implemented
policies to restrict credit and raise real interest rates.  In many
countries, administrative controls were removed and banks were allowed
to set interest rates freely.  This was accompanied, in some
countries, by financial market liberalization, allowing non-banks -
such as large corporations and credit institutions outside the banking
system - to directly finance the fiscal deficit.

94.     Some least developed countries (including Burundi, Madagascar,
Mozambique, Sierra Leone, Uganda and the United Republic of Tanzania)
resorted to devaluation to stimulate production, to increase their
competitiveness, attract foreign capital, reduce excessive demand for
foreign exchange and, in some cases, eliminate illegal currency
trafficking and smuggling.  Even those countries in the CFA zone that
had enjoyed fixed exchange rates for many decades devalued their
currencies by 50 per cent against the French franc in January 1994. 
Nine of these are least developed countries. 64/

95.     External trade policy shifts included the removal of quotas,
replacing them with tariffs, the elimination of export taxes, the
rationalization of tariff schedules, and the conversion of tariffs to
an ad valorem basis.  At the same time, deregulation measures were
implemented and, accordingly, price controls were lifted for most
commodities and the state monopoly on domestic trade was dismantled in
some countries (Benin, Burkina Faso and the Gambia).


                        C.  Assessment of policy changes

96.     While most least developed countries have been implementing
economic reforms since the mid-1980s, the external environment has not
always been supportive.  Thus, Africa's terms of trade were depressed
during the 1980s and in the first half of the decade (its terms of
trade declined by 3.2 per cent between 1991 and 1995).  Even
south-east Asia's terms of trade - which had benefited Asian least
developed countries during the 1980s (rising by 2.6 per cent) -
declined by 0.8 per cent during 1991-1995.  Moreover, between 1992 and
1994, drought affected 10 least developed countries, while civil war
continued in others until 1992.  These various unfavourable external
factors (declining terms of trade, drought, civil war and strife)
affected the performance of the least developed countries during the
first half of the 1990s.

97.     Stabilization programmes during the period 1991-1995 have had a
negligible impact on per capita income growth.  However, many least
developed countries succeeded in restoring macroeconomic balances. 
Thus, based on a sample of 31 countries for which budget as well as
balance-of-payments data were available as of 1993, the last available
year, 16 reduced their fiscal deficit (excluding grants) ratios to GDP
and in some countries - Benin, the Comoros and Ethiopia - the cut was
significant.  The improvement in the balance of payments was equally
impressive.  Fifteen of the 31 countries substantially reduced their
current account deficit to GDP ratio.  However, the improvements in
the fiscal and current account ratios reflect, respectively, the
compression of public expenditures and imports rather than the
expansion of public revenues and exports. 65/  Twenty of the 31 failed
to reverse the decline in per capita GDP, the improvement was marginal
in eight others, while the remaining three - Lesotho, Myanmar and
Guinea-Bissau - managed to increase per capita income above 2 per
cent.

98.     Economic reforms had a limited effect on domestic resource
mobilization.  All 31 countries faced negative resource balances -
which in some countries reached as much as 50 per cent of GDP in 1993. 
These resource gaps were financed by external capital inflows.  The
inability of least developed countries to mobilize domestic resources,
as well as their heavy reliance on external resources, have raised
concerns about sustainability.  Thus, remittance flows depend on the
migration policies and attitudes of host countries.  External
assistance is contingent on donors' budgetary constraints, additional
demands on their resources and general perceptions of the limited
absorptive capacity of some least developed countries. 66/

99.     Privatization has progressed slowly in the least developed
countries since 1989 owing in part to the underdevelopment or lack of
capital markets, making it difficult for potential national investors
to raise sufficient capital. Moreover, the administrative and
financial resources needed to prepare privatization proposals
constitute another binding constraint.  Many Governments lack the
expertise or the administrative capacity to effectively conduct a
privatization programme.  Furthermore, because privatization has
usually involved labour retrenchment, trade unions in many countries
have displayed strong opposition to the implementation of such
programmes.  Last, but not least, foreign buyers have shown limited
interest in public enterprises.

100.        Although there were significant shifts of production away from
agriculture in some least developed countries, agriculture continues
to be the backbone of the bulk of these economies, accounting for 46
per cent of their combined GDP and 69 per cent of their total labour
force in 1994 (in contrast to 13 per cent and 57 per cent,
respectively, for all developing countries).  Agriculture remains the
main source of export earnings, income and budget revenues.
Consequently, manufactured goods constituted only 21 per cent of the
total exports of the least developed countries in 1992, compared to 59
per cent for all developing countries.  Some least developed countries
(Bangladesh, the Lao People's Democratic Republic and Nepal), however,
have achieved a fair amount of success in exporting labour-intensive
manufactures - such as garments, footwear, toys and carpets - thus
reducing their dependence on primary commodities.  Nevertheless, their
export base still remains narrow, with a very limited number of
manufactured items dominating their total exports (in some least
developed countries, three to five manufactured goods account for more
than 70 per cent of total exports).

101.         To help redress these policy-induced weaknesses, many least
developed countries resorted to liberalization of the industrial
sector.  Measures taken included the following:  de-licensing in order
to remove barriers to entry and promote the growth of firms; reduction
of trade barriers to encourage import competition; and establishment
of policies and institutions geared to the development of export
industries. 67/  While several countries - Bhutan, Equatorial Guinea
and Malawi - have seen an increase in their manufacturing value-added,
the least developed countries, as a whole, performed very poorly.  The
contribution of the combined manufacturing sector to aggregate GDP has
been declining (9 per cent in 1994 as compared to 11 per cent in 1980)
as have average growth rates (-0.4 per cent between 1990 and 1994
against 2 per cent during 1980-1990).  Thus, certain least developed
countries have been deindustrializing, while others have failed to
strengthen or maintain manufacturing growth. 68/


               D.  External resource flows, debt and trade

102.        The least developed countries are becoming increasingly
dependent on official development assistance flows.  In 1994, grants
represented 78.6 per cent of total financial flows to the least
developed countries (at constant 1980 prices and exchange rates)
compared to 59.5 per cent in 1985 and 65.2 per cent in 1990. 
Meanwhile, the share of grants in total flows to developing countries,
as a whole, declined - from 42.8 per cent in 1985 to 28.6 per cent in
1994.  While per capita ODA increased between 1981-1987 and 1988-1994,
the least developed countries' share of total ODA flows did not really
increase between the same two periods.  The increasing requirements of
the least developed countries for concessional assistance contrast
with the static aid efforts of donors.  Longer-term trends suggest an
apparent marginalization of the least developed countries as regards
the provision of aid.

103.        With the exceptions of Angola and Liberia, least developed
countries have not benefited from the boom in foreign direct
investment to developing countries in recent years.  Against a
background in which foreign direct investment to developing countries
was increasing dramatically, the least developed countries' share of
total foreign direct investment to developing countries declined from
1.7 per cent, on average, during the period 1983-1988, to 1 per cent
in 1994. 69/  At the same time, a substantial profit remittances
outflow, estimated at about $0.7 billion annually, cancelled out the
inflow of foreign direct investment during the period 1989-1994.

104.        The stock of outstanding external debt of the least developed
countries has grown from $82.5 billion in 1986 to $117.3 billion in
1995.  Ninety per cent of that debt is long term, and almost all of it
is official.  The external debt- service ratio is high, averaging 73
per cent of the combined GDP of the least developed countries in 1993. 
More than half of the least developed countries are considered
"severely indebted".  They are hence caught in a vicious circle: their
high level of external indebtedness means that their credit ratings
are generally poor, which, in turn, implies that they are not eligible
for commercial loans.  Moreover, their export base, being small,
cannot generally provide enough foreign exchange to finance their
external needs.  Thus, to finance the imports necessary to increase
productive capacity, most least developed countries have become
heavily and increasingly dependent on official foreign aid.

105.        A number of debt-relief schemes for the least developed
countries and other low-income countries have been set up in recent
years and most least developed countries have benefited from these
plans. 70/  Debt forgiveness was the most important debt-relief
measure undertaken, particularly for the most debt-distressed least
developed countries.  Some donor countries cancelled ODA debt,
benefiting several least developed countries - including Afghanistan,
Bangladesh, the Lao People's Democratic Republic, Myanmar and Nepal. 
In some instances, donors rescheduled official bilateral debt. 
Although the share of obligations to the Paris Club in least developed
countries' total debt is relatively low, flows from Paris Club donors
still account for a significant share of the debt-service payments of
the least developed countries (some 30 per cent in 1993, including ODA
loans).  The new "Naples terms" are thus a welcome step forward. 71/ 
As of 1994, 23 out of 48 least developed countries had benefited from
buy-back operations or discount debt exchanges that helped them to
reduce their commercial bank debts.


                 VII.  ROLE OF THE UNITED NATIONS SYSTEM

106.A number of major international conferences have been successfully
concluded since the adoption of the Declaration and the Strategy.  The United
Nations Conference on Environment and Development, the International
Conference on Population and Development, the World Summit for Social
Development, the Fourth World Conference on Women and the United
Nations Conference on Human Settlements (Habitat II) have further
demonstrated the vast scope, complexity and multisectoral character of
development issues, as well as the involvement of multiple actors. 
The outcome of these conferences reflects and builds upon many of the
concepts and issues raised in the Strategy and emphasizes the
importance of the role of the United Nations system in achieving
development goals through greater cooperation and collaboration.

107.The United Nations system, both through these global conferences and other
activities, has been a major actor in promoting a holistic approach to
development by linking social, economic and environmental
considerations as the foundation for policy and action.  As a result,
the understanding of development has deepened and evolved, with
numerous and profound consequences for the formulation of policies at
the national and international levels.  The specialized agencies,
funds and programmes are assisting countries to promote a people-
centred, environmentally sound and sustainable development, focusing
on poverty alleviation, employment and sustainable livelihoods, the
advancement of women, protection and regeneration of the environment,
and sound governance, to ensure an enabling environment conducive to
economic and social development.  Within this spectrum of activities,
attention has been given to many of the issues that received
particular attention in the Declaration and the Strategy.

108.In both the Declaration and the Strategy, external debt and international
trade figure prominently.  Work on external debt continues to be important
in the United Nations system, including the Bretton Woods
institutions.  For example, the World Bank and the International
Monetary Fund are continuing their joint efforts to reduce the
external debt, including multilateral debt, of the heavily indebted
poor countries to an acceptable level.  The United Nations Development
Programme (UNDP) has been studying the external debt problem,
analysing the impact of existing debt-relief measures and examining
what further actions are required.  At the country level, UNDP, as
well as other donors, have provided Governments with the Debt
Management and Financial Analysis System of the United Nations
Conference on Trade and Development (UNCTAD) to strengthen their
capacity to record, monitor and analyse their external debt.  The
System has become a key instrument in the management of the external
debt of many countries.  Some countries have requested UNDP support to
prepare debt-reduction strategies, which have been used by those
countries in negotiations at the Paris Club.  The UNCTAD secretariat
actively participates in Paris Club meetings, where it presents an
analysis of the economic circumstances and future prospects of the
debtor country.  It also provides technical support to debtor
countries seeking to reschedule their debt.  A pilot operation for
organizing debt swaps for social development is also actively pursued
with other United Nations agencies and bilateral donors.

109.In the previous review and appraisal, the establishment of WTO and its
relationship with the United Nations was noted.  Following the
exchange of letters on 29 September 1995 between the Secretary-General
of the United Nations and the Director-General of WTO, UNCTAD and WTO
have agreed, in line with their respective mandates, to enhance
cooperation, in particular the technical assistance activities of the
International Trade Centre UNCTAD/WTO.  Regular meetings at the
executive level and among trade policy and trade promotion experts
have strengthened working relationships among the three organizations. 
This new approach to collaboration is aimed at assisting developing
countries, and especially the least developed among them, to integrate
themselves into the multilateral trading system and to draw the
maximum benefit from trade and investment opportunities.  UNCTAD
activities related to the follow-up to the Uruguay Round include
identification of trading opportunities arising in the sectors of
agriculture, textiles and clothing, and other industrial products;
determining ways to translate the Round's special provisions for least
developed countries into concrete action; enhancing the understanding
of the implications of the new rules deriving from the agreements and
their follow-up; and identifying ways in which developing countries
and countries with economies in transition could be assisted to make
use of special clauses providing for differential and more favourable
treatment.  UNDP has also supported various programmes and projects to
enhance the competitiveness of national economies.  Through policy
development, training, and institutional and organizational
development at the country level, UNDP projects have increased
national capacities in trade-related areas, strengthened the
institutional, legal and regulatory environment and improved trade
information systems.

110.The Strategy recognizes the crucial importance of commodity
diversification to the growth and stability of the exports of developing
countries, particularly in Africa.  In this regard, the Food and Agriculture
Organization of the United Nations (FAO) prepared, at the request of
the Secretary-General, a proposal for a diversification fund for
African commodities.  The General Assembly called for donor support to
this proposal, but so far the response has been limited.

111.Among the various policies and measures necessary for the reactivation of
development, the Strategy called for building up the scientific and
technological capability of developing countries.  In this regard, the
United Nations Industrial Development Organization (UNIDO) convened,
in 1995, a global forum on industry, entitled "Perspectives for 2000
and Beyond", which highlighted technology as a core requirement for
achieving competitiveness.  In addition to strengthening the
capacities of developing countries in the area of scientific and
technological research and development, UNIDO has more recently
focused on the commercialization and application of new technologies
in the industrial sector.

112.Eradication of poverty is a primary objective of the United Nations system
and its activities have been geared towards achieving this goal,
especially in the light of the launching of the International Year for
the Eradication of Poverty, as well as the First United Nations Decade
for the Eradication of Poverty.  With regard to hunger, it remains
unclear what the actions called for in the Final Act of the Uruguay
Round mean for the poorest households in low-income food-deficit and
least developed countries but the Final Act includes a commitment to
ensure the availability of sufficient levels of food aid during the
implementation of the reform programmes in developing countries.  In
this regard, the World Food Programme (WFP) is working with IMF, the
World Bank and FAO in an informal group to examine the roles that
those institutions might play individually and jointly should the
world food situation worsen markedly.

113.Concerning population, the United Nations Population Fund (UNFPA) has
developed a strategy to develop an international public, government and
parliamentary constituency in support of population programming and
assistance that will provide universal access to reproductive health
services and bring about full equality for women.  It also aims to
convince both developing and developed countries that population
should be a mandatory element of national budgets.  The approach of
UNFPA to resource allocation pays special attention to low-income
countries, least developed countries and countries in Africa, as
recommended in both the Programme of Action and the Strategy.

114.Throughout the Strategy, the need for implementation of policies and
measures at the regional and subregional level is stressed.  The analytical
studies and reports, statistical data and social indicators, and
workshops and training programmes of the regional commissions have
contributed to improved policy formulation by member countries in
their efforts to alleviate poverty through accelerated economic
growth, to improve asset and income distribution and to enhance access
of the poor to credit and social services.  Their reviews have focused
on macroeconomic performance and policies, recent changes in
development strategies, the state of international trade and
investment flows, and the prospects of regional economies.  Some
commissions have undertaken in-depth analyses of reforms and
liberalization of the financial sector and the role of the private
sector in development in order to shed light on the policy
improvements and safeguard measures needed in those areas.  The
analyses underscore the need to strengthen regional coordination and
harmonization in trade, investment and monetary and fiscal policies in
order to create a favourable environment for enhanced intraregional
trade and investment flows.

115.In the previous review and appraisal, reference was made to the rapid
escalation of internal conflicts and civil strife and to the fact that
the magnitude of the resources required to deal with humanitarian and
emergency assistance posed an enormous drain on the United Nations
system.  As a result, increasingly large proportions of resources
within the United Nations system had to be diverted to address urgent
needs, leaving less available to address the long-standing development
objectives espoused in the Strategy and the Declaration.

116.This situation has not improved.  The need for humanitarian assistance has
increased and resources have been diverted from development to meet
the demand for emergency and short-term assistance.  In the light of
this trend, agencies, funds and programmes have taken measures to
mitigate the impact of the retrenchment in resources.  To reduce the
cost of programme delivery, for example, UNDP has changed the mix of
national and international expertise.  Decentralizing the decision
process for development (for example, shortening the time for
processing projects) is also contributing to the efficiency of
resource allocation.  UNIDO, despite its shortage of internal manpower
and funding resources, has substantially increased project
implementation in its areas of competence.  The United Nations
Environment Programme (UNEP) is increasingly entering cooperative
arrangements at the country level with other funding agencies or
bilateral donors.

117.The Strategy emphasized that the work of the United Nations system should
be given greater coherence by closer inter-agency cooperation and
coordination and by organizational measures that strengthen the
contribution of the system to development.  As a follow-up to the
sequence of global conferences, three ad hoc inter-agency task forces
were established by the Administrative Committee on Coordination (ACC)
in 1995, around the following interrelated themes:  (a) the enabling
environment for social and economic development; (b) employment and
sustainable livelihoods; and (c) basic social services for all.  The
task forces are expected to produce concrete outputs, such as
guidelines, which will help resident coordinators in developing among
the specialized agencies an integrated approach to economic and social
development at the country level.  The task forces are goal-oriented
and time-bound and are contributing to improved inter-agency teamwork
at both the headquarters and the country levels.  ACC has stressed
that close links had to be established by the task forces with the
Inter-agency Committee on Women for the follow-up to the Beijing
Conference, and with the Steering Committee on the Special Initiative
on Africa.


                           VIII.  CONCLUSIONS

118. Since the adoption of the Declaration and the Strategy, as countries
deepen their global economic links, there appears to have been a growing
convergence of opinion as to what constitutes an "appropriate"
economic development strategy.  For example, in pursuing reform, a
distinction has to be drawn between the attainment of macroeconomic
stability, which is a requirement even in the short run, and achieving
structural reform, which is a long-run necessity.  A second lesson
appears to be that "getting prices right" may be a necessary condition
for development success, but it is by no means sufficient. Then, too,
it appears that the sequencing of reform is an important
consideration.  Perhaps most importantly, it has increasingly become
evident that - to be successful in the longer run - policies need to
focus not just on growth, but on improving the lot of the population
at large, as well.

119.No country is a "blank canvas" waiting to be converted into a market
economy.  In attempting to implement market reforms, complications inevitably
emerge, sometimes exceedingly unexpected and destructive ones. 
Secondly, for a number of countries, an external constraint - such as
poor export prices or a heavy debt burden - has become a semi-
permanent situation.  Short-term palliatives to such long-term
problems are bound to fail.  Thirdly, a certain degree of economic
intervention characterized most, if not all, successful developers.

120.In reality, very little is conclusively known about the determinants of
economic growth.  Recently, for example, there has been considerable
debate focusing on the so-called "East Asian miracle" and questioning
whether the high growth rates observed in this region should be
attributed mainly to productivity gains or to factor accumulation. 
While there is no categorical answer to this question, one thing that
is known is that a significant and sustained rate of technological
progress is the only possible way, in the long run, for an economy to
achieve a sustained rate of growth of output per person.  The
question, therefore, immediately arises of what the "correct" degree
of policy intervention should be to encourage the requisite
productivity growth.  Here there are numerous different
recommendations, ranging from the view that the Government should only
concentrate on providing so-called "pure public goods" and services
and on "getting the basics right" to the conviction that, since there
are many market imperfections, especially in poorer countries, the
Government should play a central role in helping to acquire
technology, allocating funds for key projects and guiding the
development of the economy. 72/  The choice among these policies - or,
any combination thereof - is complicated by the fact that there is no
proved, tested relationship between selective policy interventions and
effective development strategies.  As has been noted, successful East
Asian economies have exhibited an assortment of policies and
institutions - ranging, for example, from highly interventionist
(Japan and the Republic of Korea) to non-interventionist (Hong Kong
and Thailand) and from emphasis on large conglomerates (Republic of
Korea) to an accent on small, entrepreneurial firms (Taiwan Province
of China). 73/

121.The proposition has been advanced, however, that a number of initial
conditions prevalent in the East Asian context - relatively equitable
distribution of land and income, high school enrolment and life
expectancy and low fertility rates - may "explain" the phenomenal
growth rates observed in East Asia after 1960. 74/  While initial
conditions do, indeed, appear to be important, it is not clear what
the normative implications of these findings are.  Thus, knowing that
"initial conditions count" says very little about the specific
policies that Governments should pursue - beyond getting the basics
"right" - as part of a coherent development strategy.  Even examining
the set of effective "integrators", no simple recipe or formula for
success has surfaced so far.

122.Since the adoption of the Declaration and the Strategy, each of the global
conferences convened under United Nations auspices has resulted in
international agreement on strategies for its area of concern and has
identified a wide range of supportive measures and actions. 
Inevitably, because of the intimate interrelationships between
development issues, there is considerable overlap in the content of
these agreements.  Collectively, however, they point to a growing
international convergence of views on the necessary ingredients for
development.  They therefore refine and advance the Declaration and
the Strategy.  Moreover, these views on development are currently
being distilled by the working group of the General Assembly on an
agenda for development.  It seems likely that the action that will be
taken by the General Assembly as a result of the work of this group
will call for follow-up by the Assembly.  The Assembly may wish to
combine future review and appraisal of the Declaration and the
Strategy with this follow-up to the work on the agenda for
development.

123.In addition to these reviews of performance against previously established
goals and programmes, the Assembly may also wish to undertake forward-
looking reviews of selected new and emerging trends and issues that
might need to be taken into account in national and international
development strategies.  In the past, the Assembly has undertaken
examinations of long-term trends in social and economic development
(see, for example, document A/50/429), but the Assembly has not
provided for consideration of such long-term issues in its future
programme of work.


                                 Notes

        1/    General Assembly resolution S-18/3 of 1 May 1990.

        2/    General Assembly resolution 45/199 of 21 December 1990.

        3/    General Assembly resolution 49/92 of 19 December 1994.

        4/    See, for example, Global Economic Prospects and the
Developing Countries 1996 (Washington, D.C., World Bank, 8 March
1996).

        5/    For a discussion of these points, see Dani Rodrik,
"Understanding economic policy reform", Journal of Economic
Literature, vol. 34, No. 1, pp. 9-41; and John Williamson, The
Political Economy of Policy Reform (Washington, D.C., Institute for
International Economics, 1994).

        6/    See Rodrik, loc. cit.; and Michael Sarel, "Growth in East
Asia:  What we can and what we cannot infer from it", IMF Working
Paper, No. WP/95/98 (September 1995).

        7/    Empirical evidence shows that a relatively small set of
favourable initial conditions can "explain" a large percentage of the
phenomenal growth rates in East Asia after 1960; see Sarel loc. cit.

        8/    See World Economic and Social Survey 1996 (United Nations
publication, Sales No. E.96.II.C.1), chap. I.

        9/    For a further discussion of these issues, see World Economic
and Social Survey 1996 ..., chap. II.

        10/   See World Economic and Social Survey 1996 ..., table 1.3;
figures for 1995 are preliminary.

        11/   See World Trade Organization (WTO), press release (PRESS/44),
22 March 1996, p. 9.

        12/   For further details, see WTO, op. cit.

        13/   For further details on trade in so-called "new" products, see
World Economic and Social Survey 1995 (United Nations publication,
Sales No. E.95.II.C.1), chap. XI.

        14/   For example, the international prices of non-fuel commodities
were fairly robust throughout the 1980s (with the exception of 1986
and 1987) when expressed in units of special drawing rights (SDRs) -
which consist of a hypothetical "basket" of five major currencies. 
But, in SDR terms, international prices of non-fuel commodities were
less solid, on average, in the period 1991-1995 than in the 1980s -
though they improved by 1995.  Yet a third measurement alternative
consists of deflating the dollar index by the dollar prices of the
manufactured exports of developed economies - thereby deriving a
so-called "real" price.  In real terms, the international prices of
non-fuel commodities were strong throughout the 1980s, but dropped
significantly in 1991-1993, only recovering as of mid-1993.  For
further details, see World Economic and Social Survey 1996 ..., chap.
III.

        15/   See The Wall Street Journal, 8 July 1996.

        16/   See also, World Economic and Social Survey 1995 ..., chap.
XIII.

        17/   All figures from IMF Survey, 3 June 1996, pp. 181-182.

        18/   Ibid., p. 182.

        19/   See, for instance, Alan Taylor, "Growth and convergence in
the Asia-Pacific region:  On the role of openness, trade and
migration", National Bureau of Economic Research Working Paper, No.
5276 (Cambridge, Massachusetts, 1995).

        20/   See Alice Amsden, Journal of Economic Literature, vol. 34,
No. 2, p. 806.

        21/   The point has been made that "large positive outliers ...
contain more information than large negative ones", thereby justifying
their closer examination; see Amsden, op. cit.

        22/   For a full discussion of these issues, see Poverty Reduction
and the World Bank:  Progress and Challenges in the 1990s (Washington,
D.C., World Bank, 15 April 1996).

        23/   Ibid.

        24/   Cape Verde, moreover, is the only least developed economy in
this grouping.

        25/   The forecast for 1996 for the developing countries as a whole
is for an average annual rate of growth of per capita GDP of 4 per
cent; see World Economic and Social Survey 1996 ..., table I.3.

        26/   See, for example, Poverty Reduction and the World Bank ...

        27/   For an in-depth discussion, see Judith Dean, "From
protectionism to free trade fever?  Recent reforms in developing
countries", Open Economies Review, vol. 6, No. 4.

        28/   See Global Economy Prospects and the Developing Countries,
1996 ..., p. 2-1.

        29/   The speed of integration is then defined by an index number
which is the simple average of changes in these four indicators,
during the period from the early 1980s to the early 1990s, expressed
as standardized scores.  The standardized score is the variable, less
its mean, divided by its standard deviation.  The resulting standard
variable has a mean of zero and a standard deviation of one.  This
procedure prevents the composite index from being dominated by
constituents with the highest volatility; see Global Economic
Prospects and the Developing Countries, 1996 ..., p. 2-7ff.

        30/   South Asia and sub-Saharan Africa - with speed of integration
indices of 0.87 and -0.46 - are the two extremes; see Global Economic
Prospects and the Developing Countries, 1996 ..., appendix table 1.

        31/   WTO press release, 28 August 1995.

        32/   For further details, see WTO Focus, newsletter of the World
Trade Organization, No. 9 (March-April 1996).

        33/   The base period on which reductions were based was 1986-1988.

        34/   This is usually defined as the comparable price of the
product in the domestic market of the exporting country.

        35/   The logic here is that if real wages are tied to the cost of
living - so that real wages exceed the full-employment level and there
is, therefore, unemployment - then liberalization may provide a
substantial impetus to employment and output by lowering living costs
and hence the cost of employing labour; see, I. Goldin and D. van der
Mensbrugghe, "The Uruguay Round:  An assessment of economy-wide and
agricultural reforms", in Will Martin and L. Alan Winters, eds., The
Uruguay Round and the Developing Economies, World Bank Discussion
Paper No. 307 (Washington, D.C., 1995).

        36/   For further details, see World Bank Policy Research Bulletin,
vol. 6, No. 5 (November-December 1995).

        37/   For further details, see G. Harrison, T. Rutherford and D.
Tarr, "Quantifying the Uruguay Round", in Martin and Winters, op. cit.

        38/   For further studies estimating the potential gains from the
Uruguay Round, see report of the Secretary-General entitled
"Macroeconomic policy questions:  long-term trends in social and
economic development" (A/50/429), pp. 33-34.

        39/   For further details on trading blocs, see Clinton Shields
"Regional trade blocs:  Trade creating or diverting", Finance and
Development (March 1995), pp. 30-32; see also Sheila Page, "Regional
groups among developing countries:  A framework for analyzing their
formation and effects" (London, Overseas Development Institute, 1995).

        40/   For further details, see WTO press release (PRESS/44),
22 March 1996.

        41/   See, for example, Junichi Goto and Koichi Hamada, "EU, NAFTA
and Asian responses:  A perspective from the calculus of
participation", National Bureau of Economic Research Working Paper,
No. 5325 (Cambridge, Massachusetts, 1995).

        42/   See, especially, Paul Krugman, "Is bilateralism bad?", in
E. Helpman and A. Razin, eds., International Trade and Trade Policy
(Cambridge, Massachusetts, MIT Press, 1991).

        43/   See, for example, Paul Krugman, "The move toward free trade
zones", in Federal Reserve Bank of Kansas City, Economic Review
(November/December 1991), pp. 5-25.

        44/   See, for example, Jagdish Bhagwati and Arvind Panagariya,
"The theory of preferential trade agreements:  Historical evolution
and current trends", in American Economic Review, Papers and
Proceedings, vol. 86, No. 2 (May 1996), pp. 82-88.

        45/   See Gary P. Sampson, "Compatibility of regional and
multilateral trading agreements:  Reforming the WTO process", in
American Economic Review, Papers and Proceedings, vol. 86, No. 2
(May 1996), pp. 88-98.

        46/   See Joel Bergsman and Xiaofang Shen, "Foreign direct
investment in developing countries:  Progress and problems", in World
Bank, Finance and Development (December 1995), pp. 6-8.

        47/   A study by Chander Kant attributes yet an additional benefit
to foreign direct investment.  According to Kant, foreign direct
investment inflows are always associated with a reduction in capital
flight and such flows can, therefore, be expected to have magnified
effects on the host economy; see Chander Kant, "Foreign direct
investment and capital flight", Princeton Studies in International
Finance, No. 80 (April 1996).  Another study, by Borensztein,
De Gregorio and Lee, suggests that foreign direct investment is an
important vehicle for the transfer of technology, contributing
relatively more to growth than domestic investment.  However, this
higher productivity of foreign direct investment holds only when the
host country has a minimum threshold stock of human capital; see
Eduardo Borensztein, Jose' De Gregorio and Jong-Wha Lee, "How does
foreign direct investment affect economic growth?", IMF Working Paper
(September 1994).

        48/   See World Bank, Global Economic Prospects and the Developing
Countries, 1996 ..., pp. 2-4.

        49/   Bergsman and Shen, op. cit.

        50/   Financial Times, 6 February 1996.

        51/   Cited in Robin Broad and Christina Landi, "Whither the North-
South gap?", Third World Quarterly, vol. 17, No. 1 (1996), pp. 7-17. 
Note that these 10 countries are not all designated as "developing" by
the United Nations Secretariat.  For further information on private
flows, see, also, World Bank, Global Economic Prospects and the
Developing Countries, 1995 (Washington, D.C.), table 7, pp. 84-85.

        52/   See Development Assistance Committee, Organisation for
Economic Cooperation and Development, Development Cooperation:  1995
Report (Paris, 1996), p. 59.

        53/   Ibid., annex table 4.

        54/   Ibid., annex table 33.

        55/   Repayments to multilateral creditors - mainly IMF and the
World Bank - have increased steeply, from 20 per cent (or $1 billion)
of total debt service payments in 1980 to 50 per cent (or
$3.3 billion) in 1994; see Financial Times, 14 March 1996.

        56/   As a domestic indicator of the magnitude of the problem
facing some of these countries, it should be noted that an Oxfam
International study found that Uganda spends $3 per person annually on
health care and $17 on debt repayment; cited in The New York Times,
10 June 1996.

        57/   A new study by the World Bank and IMF, in preparation for
their October meeting, estimates the cost of reducing the debt level
of the poorest and the heavily indebted countries at between $5.6 and
$7.7 billion over six years.  The study - carried out as part of an
attempt to hammer out a debt-relief plan - constitutes a first attempt
by these agencies to put a precise dollar value on the cost of debt
relief; see The New York Times, 10 June 1996.

        58/   As evidenced by the High-level Intergovernmental Meeting on
the Mid-term Global Review of the Implementation of the Programme of
Action for the Least Developed Countries for the 1990s, New York,
26 September 1995.  Moreover, at the recent G-7 economic summit at
Lyon, France, from 27 to 29 June 1996, countries committed themselves
to concentrate resources on those countries that need them most and
that can use them effectively; grants and concessional financing
should be directed primarily to meet the financial requirement of the
poorest countries, which have no or limited access to the
international capital markets, once they can demonstrate their
commitment to create the conditions to use them effectively.

        59/   The Least Developed Countries, 1996 (United Nations
publication, Sales No. E.96.II.D.3), p. 8.

        60/   Real commodity prices declined by 3.7 per cent between 1985
and 1990.  Though they recovered slightly during 1991-1995, increasing
by 1.2 per cent, this was mainly attributable to a one-time increase
in 1994, when commodity prices rose by 14.4 per cent.

        61/   Africa's terms of trade (excluding South Africa) declined by
8.1 per cent between 1985 and 1990 and by 3.2 per cent during the
period 1991-1995; see World Economic and Social Survey 1996 ...,
p. 240.

        62/   Per capita food production declined in all war-torn least
developed countries by an average of 3 per cent during the 1990-1994
period; DESIPA calculations, based on The Least Developed Countries,
1996 ..., annex II, table 4.

        63/   Economic and Social Commission for Asia and the Pacific,
"Mid-term review of the implementation of the Programme of Action for
the Least Developed Countries for the 1990s:  The Asian and Pacific
Region" (TD/B/LDC/GR/Misc.1/Add.4/Rev.1, 24 August 1995), p. 34.

        64/   Benin, Burkina Faso, the Central African Republic, Chad, the
Comoros, Equatorial Guinea, the Niger, Mali and Togo.

        65/   The Least Developed Countries, 1993-1994 Report (United
Nations publication, Sales No. E.94.II.D.4), p. 33.

        66/   Economic and Social Commission for Asia and the Pacific,
"High-level Intergovernmental Meeting on the Mid-term Global Review of
the Implementation of Action for the Least Developed Countries for the
1990s" (TD/B/LDC/GR/Misc.1/Add.4, 26 May 1995), p. 26.

        67/   Ibid., p. 30.

        68/   The Least Developed Countries, 1995 (United Nations
publication, Sales No. E.95.II.D.2), p. 49.

        69/   Ibid., p. 33.

        70/   The Least Developed Countries, 1996 ...

        71/   Ibid.

        72/   These viewpoints are spelt out in Sarel, loc. cit.

        73/   See Dani Rodrik, "King Kong meets Godzilla", in Albert
Fishlow and others (eds.), Miracle or Design?  Lessons From the East
Asia Experience (Washington, D.C., Overseas Development Council,
1994).

        74/   Ibid.


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