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UN: World Bank Official Says Reform Unlocks Aid And Investment

A major international conference has begun in the northeastern Mexican city of Monterrey with the goal of improving the efficiency of aid programs to developing countries. On the conference's opening day, delegates were reminded that millions of the world's impoverished live in former Soviet states whose living standards plunged with the fall of communism. RFE/RL's United Nations correspondent Robert McMahon is in Monterrey and spoke with a World Bank official about the needs, and responsibilities, of these and other nations seeking development assistance.

Monterrey, Mexico; 19 March 2002 (RFE/RL) -- A UN conference on development is underway amid a key debate over the effectiveness of the billions of dollars in aid given out since the end of World War II.

The World Bank, one of the main channels of development assistance, says such aid has lifted millions of people out of poverty. But it says much more is needed to reduce poverty among a majority of the world's population. It is calling for donor nations to double their aid levels over the next few years to $100 billion.

Such a pledge is unlikely to emerge from the conference, taking place in the northeastern Mexican city of Monterrey, but most rich states are acknowledging the need to increase aid levels. Summit-level meetings on 21-22 March involving U.S. President George W. Bush and 50 other government leaders are likely to produce a commitment to reduce poverty despite disagreements over aid amounts.

The conference is expected to stress several themes -- domestic reforms, improved trade conditions, debt reduction, and increased private investment. But countries must have the resources to tackle reforms, and that requires aid, says the vice president of UN relations at the World Bank, Mats Karlsson. He tells RFE/RL that aid is essential to build the conditions in poor countries that will attract outside investors.

"Private investment, especially domestic private investment, is very much needed, but it is when you get all the wheels moving at the same time, that this investment is coming. So [development] aid is needed to leverage private sector investment. There are calculations to show that a dollar in aid brings with it two dollars in private sector investment," Karlsson says.

Development experts say this formula worked especially well in countries such as Hungary, Poland, the Czech Republic, and Slovakia during the 1990s. They have not received International Monetary Fund (IMF) assistance for more than five years, and the World Bank is scaling down its lending to these countries. All are preparing for membership in the European Union.

But for many other former communist states in transition, sluggish reforms and corruption have stymied progress. Karlsson says the institution of the rule of law, which is the basis of a good investment climate, has been lacking in many former Soviet states.

"Certainly, the challenge in the former Soviet Union and, of course, even Russia itself, has been to establish good rule of law, respect for property rights, a market economic environment that is sound, stable and not prone to corruption or the misuse of position for the interest of new elites," Karlsson says. "That's been a major debate, I think, in the past decade, and that's something that has to be focused upon."

Karlsson says another reason for the rising poverty levels of some countries in the region is poor attention to the social consequences of the economic changes they were attempting: "I think perhaps in many instances countries were late in recognizing that they also needed to look at strengthening their social systems, making sure that they're affordable, making sure that they are also modernized -- new pension systems, social security systems that fit with the new institutional arrangements in a market economy. So there are lots of things you need to do, but there's no reason why also the poorer countries in Eastern Europe and Central Asia over time should [not] be able to turn around the fallen incomes that came in the first period [after the fall of communism]."

On the first day of the Monterrey conference yesterday, delegates heard an appeal for more support for this region from Brigita Schmognerova, a former Slovak finance minister and the new executive secretary of the UN's Economic Commission for Europe.

Schmognerova said a recent seminar on seven low-income countries of the Commonwealth of Independent States -- Armenia, Azerbaijan, Georgia, Kyrgyzstan, Moldova, Tajikistan, and Uzbekistan -- found that about 20 million people there live in extreme poverty. She said they will not achieve sustained growth without further institutional and policy reforms. And she said they will need support from the international community in the form of market access, financing, debt relief, and policy advice.

Two of these countries -- Armenia and Moldova -- are sending delegations headed by their prime ministers to Monterrey. Kyrgyzstan originally announced it was sending Prime Minister Kurmanbek Bakiev but later pulled out of the conference. A diplomat at Kyrgyzstan's UN mission, Nuren Niyazaliev, told RFE/RL that his government could not afford to send a delegation to Monterrey.