Globalization and achieving lasting development

Globalization and achieving lasting development

Alan P. Larson, Jakarta

The World Bank and International Monetary Fund hold their
annual meetings on Oct. 2-3. As that gathering discusses
globalization and development, I hope it will be with a clear
recognition that it is private enterprise that is the basic
engine to both.

The United States' approach to development reflects our
nation's basic values, a generous heart combined with a hard-
headed demand for results. We see private initiative from
businesses and families as prime movers in any nation's
advancement and welcome the fact that entrepreneurship, personal
responsibility and property rights are taking their rightful
place in the venerable body of development ideals. As the UN's
recent report Unleashing Entrepreneurship makes clear, private
sector resources can make powerful contributions to development.

Take remittances -- the hard-earned money that foreign workers
send back to their families in developing countries. These amount
to roughly US$90 billion annually. Beyond helping families put
food on their tables, this money goes a long way toward helping
everyday people build houses, start businesses, and even hire
workers.

Another example is foreign direct investment. A flow that the
Institute of International Finance forecast at $225 billion this
year, it is an especially powerful development tool because it
spurs economic growth and development by transferring knowledge
and technology, creating jobs, boosting productivity, enhancing
competitiveness and stimulating entrepreneurship.

Domestic savings in the developing world is a far greater
source of development finance, estimated at more than $2
trillion a year. As countries put in place policies and
institutions that encourage domestic investment, these savings
can support rising income, productivity, and jobs.

And then there is trade. Time and again, trade has proven to
be a powerful engine for progress in emerging economies. Time and
again, countries that embrace trade find themselves moving onto a
faster growth path and converging with the developed world.

And also, time and again the United States has been at the
center of the effort to promote free and unfettered trade. The
U.S. is the top importer of goods from developing countries,
importing $680 billion last year -- more than 10 times greater
than all ODA to developing countries from all donors.

But there is still more work to be done. A World Bank study
estimates that a successful conclusion of the Doha negotiations
could lift more than 140 million people out of poverty and add
$350 billion annually to developing country incomes. The July
Geneva WTO framework agreement presents a unique opportunity to
move ahead on a final package that will open markets for trade --
especially in agriculture -- around the world. For this reason
all institutions and governments must press ahead to a successful
conclusion of the Doha round.

At the March 2002 UN Conference on Financing for Development
in Monterrey, Mexico, world leaders recognized that the best hope
for the developing world to achieve its potential is for each
country to take primary responsibility for its own development.
The Millennium Challenge Account or MCA, is the American response
to this challenge. The MCA provides grants to countries that
govern justly, invest in their people, and promote economic
freedom to encourage all developing countries to adopt sound
economic and social policies.

The MCA is a common sense idea that draws on lessons learned
about development over the past 50 years. In its five months of
operation, the MCA has selected 16 partner countries who are
reaching out to their citizens and putting forward innovative
ideas for how to overcome their greatest growth and development
hurdles.

With strong bipartisan support, Congress authorized the
Millennium Challenge Corporation (MCC) to administer the MCA and
provided $1 billion in initial funding for FY04. The President
has requested $2.5 billion for the MCA for the coming fiscal
year.

From 2006 on, the President intends to ask Congress to
appropriate it $5 billion annually -- an amount that is in
addition to an assistance budget that was already 50 percent
above its 2001 level in 2003. MCA, combined with the President's
HIV/AIDS initiative -- committing $15 billion over five years --
and growth in our traditional development assistance budget puts
us on track to increase our overall assistance levels in 2006 by
75 percent.

Debt reduction for the poorest countries is a priority of our
development strategy. Under the enhanced Heavily Indebted Poor
Countries (HIPC) initiative, 27 countries have had their debt
burden reduced by two thirds -- some $32 billion in present value
terms, enabling them to increase their spending on poverty
reduction. Moreover, the United States goes beyond the generous
parameters of this multilateral program and forgives 100 percent
of the debt these countries owe us.

But despite all this progress, we recognize that some
countries still face unsustainable debt burdens. That's why G-8
leaders at Sea Island this summer agreed to work toward extending
the HIPC initiative for two more years and to consider other
measures to help the poorest countries address their debt
sustainability.

Eradicating poverty is an expression of our nation's deep
humanitarian impulse. It reflects a recognition that our own
well-being depends on the well-being of fellow human beings.
Bringing all of the world's poor into an expanding circle of
opportunity is vital to raising hope, improving peoples' lives,
and creating a more secure, democratic, and prosperous world. Do
this, and we will have made lasting mark toward turning the
corner on poverty.

The writer is Under U.S. Secretary of State for Economic,
Business and Agricultural Affairs.