Many developing countries have shown signs of economic recovery but the battle against poverty has been disappointing. Because of the fact that many people live with less than $2 a day, millions are poorer than they were 25 years ago and 15% of the world live in ?fragile states?. This is undoubtedly a blot on the global economy and a tinge on the conscience of even the most inconsiderate.

There is a consensus that the Millennium Development Goals of reducing poverty by 2015 will not be achieved and we need focused action and not grand gestures. Luckily, after the disaster caused by the tsunami there is greater interest in poverty reduction. Never before have we seen such commitment from world leaders. It appears that the $50 billion yearly aid to meet the goals set by the United Nations General Assembly will be obtained as major leaders like Chirac and Blair have committed themselves to devoting at least 0.7 per cent of their GDP to Official Development Assistance by 2012.

In addition those who are highlighting wrong prioritizing at the global level are being listened to. The truth remains that each year US $ 350 million supports farmers in rich countries, while less than one-sixth of that amount flows to poorer countries in the form of aid. It has also been estimated that more than $12 billion of aid is tied or partially tied to export purchases from donors. [ Economic Report on Africa (2004) ]

In terms of new solutions, the UK has proposed the creation of an International Finance Facility (IFF) to stabilize human development programs. The UK-sponsored Commission for Africa report which was published in March this year, argued for, amongst other things, a doubling of aid, $20bn in infrastructure spending, extension of debt relief, commitment by G8 countries to repatriate proceeds of corruption in 2006 and $4bn to cushion African countries against economic shock. France is pushing for global taxes to reduce poverty. President Chirac has suggested a small levy, about one ten thousandth on international financial transactions and some taxes on air transport and shipping fuel.

It is however clear that aid should not be the only component in the development strategy. There are many examples of countries being provided with aid but showing next to no change. Bad governance, rampant corruption, incompetence, weak private and public sectors and waste have led to gross misallocation of funds.

These are real problems and it is unfair to blame those asking for caution. This has rightly led to increased attention on programs which can be monitored. Debt relief, direct budgetary support, aid with higher grant content, capacity building, technical assistance, enterprise support particularly to SMEs, investment in infrastructure, skills development, regional integration, enhancing competitiveness, raising agricultural productivity and access to markets are very important.

However, the real long-term solution is greater penetration of poor countries in world trade through improved access to markets. It is useful to highlight that both India and China really started developing after they opened their economies although they wisely concentrated first on internal development and were thus better placed to face the rigours of the global economy.

It is really unfair for developed countries, which are protecting uncompetitive industry and agriculture to ask developing countries to be immediately compliant on a range of factors. The vicious circle of aid not reducing poverty will persist as long as market access is difficult, developing countries do not have the capacity to compete and solve supply-side constraints (weak infrastructure, inadequate physical and human capital etc) and the global economy becomes increasingly competitive.

Developing countries have their share of blame but many face declining real commodity prices and negative return on aid. According to one study, non-oil-exporting African countries suffered cumulative terms of trade losses between 1970 and 1997 of almost 120% of GDP, offsetting the benefits of increased aid flows after 1973 (World Bank, 2000).

In addition aid needs to be disbursed more effectively. The sad truth is that ?A total $52 billion of aid (net of debt service) is disbursed to developing countries each year. Of this, only half, or $26 billion, is spent in recipient countries. The rest is spent as follows:$3 billion on bilateral aid administration, $13.6 billion on technical assistance, little of which actually enters the recipient economy, $2.3 billion on debt relief, actually paid to other creditor agencies, and $3.2 billion on emergency assistance.? (DAC, 2003).

To avoid the stalemate of mutual recriminations, sterile exchanges of statistics and cynicism, we urgently need to create an environment of opportunities with G8 nations providing incentives, assistance and support to develop both large enterprises and SMEs through partnership or alone. This is vital as there is a lot of catching up to do and many countries cannot compete or have not diversified and will remain in the ?poverty trap?. The links between poverty, low savings, low investment and low capacity to manufacture are too true to be ignored and only better targeted aid and support as well as special differential treatment (SDT) will help.

One does not need complex econometric analyses to realize that some special support is needed in the early stages of development. UNCTAD (2003) has already made the case for a diversification fund and the report of the High-Level Panel on Financing for Development (the Zedillo Report) has argued that WTO negotiations need to consider how to legitimize time-bound protection of certain industries, by country, in the early stages of industrialization. Consider this truism: ?However misguided the old model of blanket protection intended to nurture import substitute industries, it would be a mistake to go to the other extreme and deny developing countries the opportunity of actively nurturing the development of an industrial sector? (UN, 2000).

The key solutions are therefore well known and now we need to accept basic truths. Above all, it is naïve to assume that freer domestic and international trade, more open financial markets and deeper integration in the regional and global economy will happen even though developing countries have huge structural supply constraints and lack technological depth. It was a great victory when the Commission for Africa funded by the UK stated ?Trade liberalization cannot be forced on Africa as a condition of trade or aid negotiations?. Focus on private sector-led growth, private/public partnership, coupled with long term commitment by donors and transparent governance by developing countries is the agreed recipe for solving poverty.

We now need to speed up the implementation process. That can only be achieved by new national and international agreements, which are emerging with the support of Tony Blair and Peter Mandelson the EU trade commissioner. The latter stated at a recent meeting that the EU would support temporary exemptions for poor countries needing more time to implement new trade rules and also extra aid to improve trading facilities. We should rejoice as such concessions can have spillover effects on the request for special facilities for small vulnerable states.

To conclude, the saying ?To him, who hath, shall be given? will continue, but this can be speeded up if more live better lives and we pursue solutions that promote both good economics and good politics.

<B>by V. APPANAH