GLOBAL CAPITAL FLOWS TO THE THIRD WORLD

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP08S01350R000300700001-7
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 22, 2016
• Document Release Date: April 9, 2012
• Sequence Number: 1
• Publication Date: October 1, 1970
• Content Type: REPORT

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GLOBAL CAPITAL FLOWS
TO THE THIRD WORLD
Trade and Aid Conference Paper
London, England
October 1970
Directorate of Intelligence
3?
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Global Capital Flows To The Third World*
Introduction
The developing nations are still faced with
critical shortages of capital. Authorities estimate
that developed countries should provide a minimum of
$250 billion to $300 billion of capital during the
decade of the 1970s. The need to help poor nations
reach acceptable standards of living was recognized
as an international problem early in the 1940s, and
in 1944, with the creation of the International Bank
for Reconstruction and Development (IBRD), machinery
was introduced for the first time to provide inter-
national financing for development in the Third World.
This was followed in 1946 with national aid
organizations established by the United Kingdom and
France and later in the United States, as an outgrowth
of the Marshall Plan. Since that time, a series of
national and international aid structures have been
established that together comprise vital forces for
development of the less developed nations. Most
important among these have been two IBRD subsidiaries
which were intended to expand the scope and character
of the Bank's undertakings: the International Finance
Corporation (IFC) established in 1956 to provide
risk capital, and the International Development As-
sociation (IDA) created in 1960 to provide soft loans.
In addition, regional financial institutions, such
as the African Development Bank and the Asian Develop-
ment Bank, have been organized to supplement the as-
sistance provided under international auspices.
Also of significance has been the emergence of a
number of aid coordinating mechanisms, especially
the Development Assistance Committee (DAC), under the
Organization for Economic Cooperation and Development
(OECD). The,DAC was organized to induce an expanded
'' Third World refers to the Less developed countries
of the Free World, which include the following: (1)
all countries of Africa except the Republic of South
Africa; (2) all countries of East Asia except Japan;
(3) Portugal and Spain in Europe; (4) all countries
in Latin America except Cuba; and (5) all countries
in the Near East and South Asia.
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flow of aid from Western developed countries and
to increase the efficiency of national aid undertak-
ings by providing a forum to exchange information on
global aid efforts and to harmonize aid policies.
The United Nations also has provided the impetus
for a more sophisticated approach to development
problems, especially. through its Conference on Trade
and Development (UNCTAD). The public review of
goals and the identification of alternatives for
achieving them have highlighted many of the critical
issues among donors and recipients and have provided
new challenges for their solutions Three recent
major reports (the Pearson Report, sponsored by the
IBRD.; the Jackson Report, prepared by the UN Commit-
tee for Development Planning; and the Peterson Re-
port, prepared at the request of the President of
the United States). recommend increases in the amount
of aid and suggest that multilateral agencies play a
larger role in aid determinations (see Appendix B).
In spite of these continuing efforts and in
spite of the vast increases in global capital flows
during the past two decades, for the most part the
developing countries still have not passed beyond
the most elementary stages of development. They
continue to look to the developed world for ever
larger amounts of capital to help them achieve their
goals. But the offerings fall short of Third World
requirements as the developed nations tend to look
inward and are reluctant to expand their undertak-
ings by significant amounts. Moreover, the net
availability of external capital is being reduced
as the flow to less developed countries from official
sources has levelled off and debt service obliga-
tions have continued to grow.
This memorandum reviews the dimensions of the
global aid effort as it has evolved over the past
16 years, from 1954 to 1969, with particular emphasis
on official bilateral capital movements to the devel-
oping nations of the Free World. It covers both
Western and Communist participation and looks to
the future, as an attempt is made to estimate the
amount of net capital that will flow to the Third
World at the end of the Second Development Decade.
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Total Capital-Flows, 1954-69
1. As a result of international cooperation
and national initiatives by the developed countries,
the volume of foreign capital flowing to the less
developed countries of the Free World has expanded
enormously. Since the mid-1950s, following the
reconstruction efforts of the post-World War II
period, the developed countries -- both Free World
and Communist -- have provided about $90 billion of
aid to the less developed countries through official
bilateral and multilateral channels. In addition,
capital provided through foreign private sources has
totaled more than $50 billion (see Appendix Tables
A-II, and A-III). From an annual average.flow\
some $5.5 billion during 1954-59, the global flow
of capital to the developing countries increased
to more than $8.5 billion by 1960, and in 1969 a-
record level of about $14 billion was reached (see
Table 1).
Gross Capital Flows
to Less Developed Countries
of the Free World a/'
Million US $
Total.
Bilateral
Contributions
Multilateral
Agencies
to
Private
Sources
1954-59 b/
5,486
2,876
276
2,334
1960
8,600
4,849
601
3,150
1965
11,373
6,759
449
4,165
1969 c/
14,346
7,558
1,000
5,788
a. Contributions to multilateral agencies and capita from
private sources are net figures and thus are understated.
Official sources exclude flows from New Zealand, Portugal,
Spain, South Africa, and Yugos Zavia.
b. Annual average.
e. Preliminary estimates.
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2. Official bilateral assistance has made by
far the most important contribution to the total
flow of international capital that has gone to
Third World countrieso It rose very rapidly be-
tween the mid-1950s and the mid-1960s and then
slowed, as contributions from principal donors,
especially the United States, lagged. Between 1954
and 1965, official aid provided directly through
government sources increased almost 2-1/2 times,
rising from about $2.9 billion at the beginning of
the period to $6.8 billion at the end. From 1965
to 1969, the increase was little more than 10%. At
the same time, official contributions to multilateral
agencies were nominal although.they rose to $1 billion
in 1969. It has been the private sector -- always the
most volatile part of the total -- that has shown the
largest dollar increase since 1965 and has accounted
for the largest part of the expansion in capital
flows in most recent years. Between 1960 and 1969
private net flows rose by more than $2.6 billion,
which roughly equalled the increase in total gross
official bilateral flows during the period.* But
private sector capital movements had increased 85%
between 1960 and 1969, compared with little more than
a 55% increase for total official flows. Although
official bilateral aid still accounts for more than
one-half of the total capital flow, its share has
declined in recent years, while the share of private
capital had increased to about 40% in 1969 from about
35% in 1960.
Official Bilateral Flows
3. The total flow of capital through bilateral
channels between 1954 and 1969 equalled $82 billion.
Of this amount DAC member nations provided $78 billion,
or 95% of the total, and Communist countries provided
the remainder. Gross-official bilateral capital flows
to Third World countries during 1954-68 are shown in
Figure 1. The comparison of Western and Communist aid
disbursements in Table 2 shows that the threat of
competition posed by Communist countries, when they
launched their aid offensive in the mid-1950s, never
materialized and the total of all Communist aid delivered
during 1954-69 was only $4.5 billion. Moreover, except
The comparison between gross bilateral official
flows and net private flows understates the relative
increase in the private sector.
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Gross Official Bilateral Capital Flows to
Third World. Countries, by Donor
1954-68
--------------
9q?lo
OAC MEMBERS
TOTAL: US $ 74.6 Billion.
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Gross Official Bilateral Capital Flows by Major
Donors for Selected Years a/
1954-69
Million US $
7
b~
1965-4--fr9-
1954_59
1960
1964.
1965
1968
1969
I ft Total
2,876
4,849
6,355
6,759
7,390
n n -r n n
'
73
DAC members c/ 2,812
4,700
5,798
6,233
6,934
d/ 77,634
~~~o
United States 1,742
3,149
3,479
3,665
3,775
S-0 ,1V.0
France 710
779
768
793
913
Z163
11, 482
United Kingdom 173
332
493
490
458
`4g? 5,065
West Germany 68
135
450
521
643
L
ntl- 4,350
Japan 30
63
228
190
334
V3
(933) l,624
Other 90
241
379
574
811
4,799
64
149
556
526
456
408
4,515
USSR
42
107
376
356
303
286
3,094
Eastern
Europe 12
32
116
92
107
78
893
China
10
10
64
78
46
45
528
a. Because of rounding, components may not add to the totals shown.
b. Annual average.
c. Includes 15 Western nations and excludes Portugal.
d. Preliminary estimate. The distribution among DAC members is not available.
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for the decline in 1962, total.official bilateral
aid disbursements by Western nations have increased
in every year.since 1954, while Communist aid, after
reaching a record of slightly more than one-half
billion dollars in 1964, has declined in every subse-
quent year, to some $400 million in 1969. Aid from
all Communist countries for the 16-year period, 1954-69,
has been roughly equal to the official bilateral dis-
bursements made during that period by West Germany,
the fourth ranking Western donor. But West Germany's
annual disbursements, which were about equal to those
of-Communist countries in 1965, continued to expand
after 1965, while Communist aid was, falling. Among.
the Communist countries, the USSR has been by far
the largest donor, having accounted for almost 70%
of the total. East European countries provided
about 20% and Communist China the remainder.
4. Even though Western official flows have
continued to increase in almost every year, since
the mid-1960s there has been a tendency toward
stagnation mostly because of the reduced growth of
US aid. US aid has fluctuated between $3.5 billion
and $3.8 billion since 1964, and-there has been little
change in the dollar value of assistance from the
United Kingdom since the mid-1960s although some
increase may have taken place in 1969. French dis-
bursements, however, rose sharply in 1968 and 1969,
contrasting with the 1962-66 period when French
capital outflows had been constant. Most other DAC
member countries, especially West Germany and Japan,
have consistently expanded the amount of aid they
have provided annually to the developing nations. By
1968, the contributions from the group of "other coun-
tries" that are DAC members also rose rapidly to a
level of almost 3-1/2 times that of 1960. US aid
has been by far the largest part.of the DAC member
total, amounting to $43 billion during 1954-68, but
it has represented a declining share in recent years.
In 1968, US aid'disbursements were only 54% of the
total, compared with 67% in 1960. France and the
United Kingdom have ranked second and third although
the volume of West Germany's annual aid disbursements
began to exceed those of the United Kingdom in 1965.
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5. The distribution of official bilateral
assistance has been highly concentrated for all.
donors. In the aggregate, the largest share has.
gone to Near East and South Asian countries; the
countries of Africa ranked second; and East Asia
and Latin America followed, with respective shares
of 19% and 16% (see Table 3).
6. There are significant regional variations
among donors, often a reflection of historic and
political ties or of current strategic considera-
tions. For example, 73% of French aid and 43% of
the UK's aid have gone. to Africa; more than one-half
of Japanese aid.has been provided to East Asia; and
only the United States among all the major donors
has made a significant contribution to Latin America,
though 40% of total US aid went to the Near East
and South Asia. and 26% to East Asia. In the case
of the USSR, 85% of its aid-deliveries have gone
to the Near East and South Asia. Within these area
preferences, all aid donors have tended to concen-
trate their undertakings in a few countries, often
.the same countries. Thus, about half of the offi-
cial bilateral aid from all sources delivered during
1954-68 went to ten countries (see Table 4). For
Communist countries,.theratio was somewhat higher.
Four of the ten countries (India, Indonesia, Pakistan,
and the UAR) also were principal Communist aid recip-
ients although not in the same order of rank as for
Western countries. These countries also are the
nations that are being most seriously burdened by debt
payment requirements. At least three have already
asked their creditors for relief; a number of the
others may be expected to follow shortly.
Repayment Terms for Official Bilateral Flows
7. Against the benefits derived from the use
of foreign capital, Third World countries must
weigh its cost. Out of total official bilateral
deliveries of some $80 billion during 1954-69, about
one-half was provided as outright grants; the remainder
was in the form of long-term credits with contractually
fixed debt servicing obligations.* To meet these fixed
* This memorandum, where possible, has excluded credits
with repayment periods of less than five years. The
recent DAC definition of development capital, that
excludes all export credits and includes only credits
intended for development purposes, was not used.
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Gross Official Bilateral Capital Flows
by Donor and Recipient Area a/
1954-6y?
Million US $
.,Icc`1- 067
Communist
United
United
Total
Countries
Total
States
France
Kingdom
Other
r19
t/
12-,973
cw
Total b/
74, 591
4,107
711x4-8'4
403;--1-63
1 2
5)-06 5
4-0'3,
Near East and
-33
/1A14
L,(,73
South Asia
25,735
3,094
2 ;6-41.
17;10'0-
1,-473
3,~0
I7
18I
?~ ,)- 66
c 3v/
2,30"1
`
Africa
16i247
507
)
1-5-;,-74 0
-3 252
8i?-77
2 ,=l 6-0-
1; 9 5
0
IN92.
1"2 1111
3 2x2_
:2, So O
East -Asia
13,810
425
3785
i12?57
251.
240'
1,-x6'3 7
1
I~,9Z1
~)r
q2_'2-
53?
11U15
Latin America
11,62
81
1,1-,5-61
8&,938=
7 ?
.4=93
lye
i,.v -15?
1)3~. ?
7q
~
ate
10
,
Europe
1,748
--
1;-7?48'
1,338
_
.2-O
1.61
g) X39.
11%
Other c/
5,409
--
5;4`09
1-,278
el ,8 2
~y-Frs2
a. Data for 1969 by donor and recipient are not available.
b. Because of rounding, components may not add to the totals shown.
c. Including unspecified countries.
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Distribution of.Gross official
Bilateral Capital
Among Principal Recipients a/
1954-68
Million US $
a. Data for DAC member countries' isburse-
ments in 1969 are not avaiZabZe.
Total
DAC
Members
Communist
Countries
Total
74,591
70,484
4,107
India
10,688
9,754
934
Pakistan
4,489
4,379
110
Algeria
3,838
3,780
58
South Vietnam-
3,769
3,769
0
South Korea
3,709
3,709
0
Brazil
2,843
2,813
30
Turkey
2,316
2,292
24
Indonesia
1,914
1,613
301
UAR
2,256
1,415
841
Chile
1,352
1,352
0
Other
37,418
35,609
1,809
obligations, the developing nations made payments
of approximately $11 billion for debt amortization 4
and interest during the 15-year period, 1954-68.
Repayment terms have varied widely among donors and
over time. At one extreme is Australia's aid program
which is all grant; at the other is the East European
program which is no-grant and characteristically eight
years for amortization and 3% interest. The terms
allowed by major donors for commitments made in 1962
and 1968 are given in Table 5.
8. Of special interest is the fact that Com-
munist terms -- often referred to as "easy" -- are
the "hardest" among all the donors. Most importantly,
Communist countries do not generally extend grant
aid. With the exception of $130 million in grants
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Repayment Terms for Aid Commitments
1962 1968
Loan Terms a/
Loan Terms a/
Grant Number Grant Number
(Percent of Years Interest (Percent of Years Interest
DAC Members of Total) Maturity (Percent) of Total) Maturity (Percent)
United States 67 28.6 2.5 39 30.'0 3.6
France 56 17.0 b/ 4.0 b/ 70 17.6 3.7
United Kingdom 58 24.3 5.8 37 24.0 1.0
H West Germany 11 15.2 4.4 24 18.0 4.5
7d Japan 16 10.0 6.0 36 18.1 3.7
~ i. tzJ
DAC Average 60 24.5 c/ 3.5 43 26.0 3.6
Communist d/
USSR Negl. 12 2.5 Negl. 11.8 2.4
Eastern
Europe. Negl. 8 3 to 3.5 Negl. 8.6 2.6
China 25 10 e/ 0 Negl. 10.0 e/ 0
a. Weighted averages.
b. Based on disbursement data.
c. An average grace period of six years usually is included.
d. Terms cited for 1962 are an average for 1960-62.
e. These payments usually begin after a 10-year grace period.
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provided to Afghanistan in 1959, the USSR has ex-
tended grants only for small emergency-type assist-
ance and the occasional model farm,hospital equip-
ment, or training facility.. Communist.China pro-
vided grants to Nepal and Cambodia of -$65 million
and $50 million, respectively, and also has given
small amounts of budgetary support and commodity
assistance as gifts. For the USSR, generally
amortization of credits has been extended over a
12-year period with interest of 2.5%. East European
countries have been somewhat less liberal, and Com-
munist China somewhat more concessionary because of
a 10-year grace allowed before the start of amortiza-
tion and no interest charges. On the other hand,
Western aid donors, in 1968, on the average, allowed
26 years for repayment and charged 3.6% interest, but
some 43% of the a.id.did not require repayment..
9. Compared with 1962, repayment terms generally
have. become more burdensome for aid recipients.
DAC member countries in 1968 reduced the high grant
ratios of earlier years by 17 percentage points,
although average amortization periods were increased
by.1-1/2 years. The increase in interest on US
development loans, from a statutory minimum interest
rate of 3/4% in 1962 to 3% in 1968, was counter-
balanced to some extent by the reduction in average
UK interest rates from almost 6% to 1% and in Japan's
interest charges from 6% to 4%. Recently the growing
volume of export supplier type credits* provided by a
number of donors has contribu#ed to the hardening of
terms.
Repayments and Net Aid Flows
10. During 1954-68 the less developed countries
of the Free World made payments of approximately $1.1
billion .to the developed nations for servicing the
debts incurred for official bilateral assistance.
About-$7 billion of the total was for repayment of
their principal debt and more than $4 billion was
for interest payments (see Table 6).
In the case of some countries, such as West
Germany, these credits may be extended directly to
the buyer rather than supplier-.
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Total Principal and Interest Payments
by Third World Countries to Major Donors
of Economic Aid
1954-68
Million US $
Total
Principal
Interest
Total
11,028
6,954
4, 074
DAC Members
10,107
6,302
3,805
United States
6,096
3,817
2,279
France
861
629
232
United Kingdom
973
456
517
West Germany
1,030
670
360
Japan
261
149
112
Other
886
581
305
Communist Countries
921
652
269
USSR 600
420
180
Eastern Europe 321
232
89
11. Debt servicing obligations have increased
very rapidly in recent years for credits extended
by both Western and Communist countries. Between
1960 and 1968 the total annual debt service tripled,
rising from $550 million in 1960 to $1.7 billion in
1968 (see Appendix Table A-IV). Both interest and.
principal had roughly the same growth rate over the
nine-year period and contributed the same share to
the total in each year. Interest was 37% of the
total and the principal was 63% during 1954-68.
Repayments of principal and interest to DAC member
countries accounted for $10 billion of the $11 billion
total repaid, with only about 8% of the total going
for repayment on Communist aid. The somewhat higher
interest rates charged by the Western donors and
shorter amortization periods for Communist aid are
reflected in the fact that the interest paid Western
countries was a larger percentage of the total than
paid to the Communist countries.
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12. Aggregate principal repayments for official
bilateral aid during 1954-68-have reduced the capital
flow to the developing nations by about 10%. Interest
payments reduced it by another 5%. Harder terms
imposed by a-number of donors curtailed the net
amount of capital outflow from these countries by
more than the average. For example, debt amortiza-
tion absorbed 35% of Austria's gross disbursements
during 1954-68, 30% of Italy's, and 15% of West
Germany's. For Communist countries the repayment/
delivery ratio rose more rapidly than for DAC member
countries and principal payments for amortizing
previous deliveries exceeded the average 10% mark
in 1964. By 1968, when the average principal repay-
ment delivery ratio had risen to 14% for all donors,
Communist principal payments were preempting 36% of
their total deliveries. Interest payments for Communist
aid reduced the flow by an additional 13%. Thus, com-
pared with total Communist deliveries of about $455
million in 1968, payments for interest and principal
amounted to $220 million. This was a far heavier
drain on aggregate flow than was recorded for any of
the DAC countries. As a consequence, Communist
deliveries will approach the debt service level with-
in the next few years unless deliveries are increased
significantly or debt relief is granted (see Figure 2).
For DAC members there is still a wider spread between
deliveries.and repayments. Inasmuch as the grant
portion still constitutes a large part of total
deliveries the annual net availability of official
capital from DAC countries has increased somewhat in
most years, reaching $5.5 billion in 1968 compared
with $4.9 billion in 1964. On the other hand, the net
flow. of capital from Communist countries was an esti-
mated $235 million in 1968 and $465 million in 1964.
13. In spite of continued increases in net
Western aid, the debt structure is not evenly dis-
tributed among recipients and some countries have
had serious problems in meeting their debt service
obligations. As the gap between deliveries and
repayments has narrowed before these countries could
increase their export capabilities, they have de-
faulted. Indonesia and Ghana, among others, already
have had problems in meeting their contractual
obligations for debts incurred under nationally
sponsored aid programs, and have had to ask for debt
servicing relief. India and the UAR have similar
problems. Either the terms of aid must be made
easier or gross lending vastly expanded to compensate
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Net Official Bilateral Capital Flows to Third World Countries
BILLION US $
8~ -
.TOTAL DELIVERIES
NET FLOW
0 C
1954-59
Annual
Average
PRINCIPAL
INTEREST
BILLION us $ FROM COMMUNIST COUNTRIES
8r-
TOTAL DELIVERIES
r
1960
1966 1968 1954-59
Annual
Average
PRINCIPAL
INTEREST
1968
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for the increased reverse flows that are taking place.
Originally, suggested reductions in repayment terms
were a means for achieving uniformity among donor
aid offerings. More recently, recommendations to
soften. terms are intended to provide relief to aid
recipients whose export surpluses are not large
enough to service debts being created under existing
agreements and who in some cases, because of debt
obligations, are able to make only small net additions
to capital formation.
14. To cope with this problem, the DAC adopted
a resolution in 1965 calling for a softening of
terms for official flows (see Appendix B). This was
followed by similar recommendations at UNCTAD II and
in 1969 in the Pearson report. To expand the net
capital flow to developing nations, the.report suggested
targets for net official development aid of 0.7% of
donor GNP to be achieved by 1975 if possible but no
later than 1980. To provide greater uniformity in aid
recipient debt structures, the report recommended that
official assistance carry 25 to 40 year maturities with
grace periods of 7 to 10 years'and maximum interest of-
2%.
Prospects for the.1970s
15. If the Pearson target of 0.7% of GNP for
net official aid flows had been implemented in 1968,
developed countries would have had to double their
net disbursements of official capital. As shown in
Table 7, the net flow of official capital (including
disbursements to multilateral agencies) in 1968
averaged only about 0.34% of GNP. The Soviet con-
tribution, which was less than 1/10 of 1% of GNP,
represented the smallest drain among all countries
on GNP. Only France met the 0.7% target. Australia
and the Netherlands provided more than 0.5% of their
GNP, and the United States, the United Kingdom,
Belgium, and West Germany about 0.4%.
16. Under the Pearson assumption, disbursements
in 1975 would be more than three times the amount
actually disbursed in 1968. To reach the Pearson
target by 1975, the USSR would have to increase its
annual net disbursements about twentyfold''(see Figure 3).
But such a rapid acceleration,. while impossible for the
USSR to implement, is not even being contemplated inas-
much as Moscow has refused to accept any imposed uni-
form aid target. Nor is it likely that major Western.
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Net Official Flows Required to Reach Pearson
Target of 0.7 Percent a/
19.75 Compared with 1968
Actual
Net Flow
as Percent
of GNP
Million US $to Reach
0.7 Percent of GNP
1968
1968
1975
0.34
14,359
19,942
DAC members
0.41.
11,587
16,173 b/
Australia
0.59
186
255
Austria
0.24
80
103
Belgium
0.45
145
194
Canada
0.33
454
587
Denmark
0.23
87
124
France
0.75
788
1,162
West Germany
0.40.
1,016
1,202
Italy
0.16
524
691
Japan.
0.25
993
2,062
Netherlands
0.52
176
239
Norway
0.26
63
86
Sweden
0.29
179
230
Switzerland
0.11.
118
151
United Kingdom
0.43
718
853
United States
0.42
6,060
8,234
0.05
2,772
3,769
flows are excluded.
a. This category includes net bilateral and multi-
lateral flows; the total is understated since pro-
jections for East European and Communist Chinese
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~r UI'cr. 1
Figure 3
Net Official Capital Flows* Required
to Reach Pearson Report Target of 0.70% of GNP
BILLION US $
22r- -
/
DAC MEMBERS NET) FLOW
SOVIET NET FLOW ,j
I
01~
1954-59 1960 1962
Annual
Average
PEARSON REPORT TARGET
PEARSON REPORT TARGET
*Excluding principal repayments.
- 1.8?-
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donors will triple their. disbursements during the
next several years or even by the end of the decade.
Only five nations, that would account for less than
10% of the total projected target flow for 1975, have
indicated their intention to reach or exceed the target.
In its present domestic mood, the United States probably
will. not undertake major new bilateral aid initiatives
.but will try to sustain recent levels and may expand
its contributions to multilateral agencies. Other
major donors, especially Japan-and West Germany, will
probably continue to expand their undertakings, but
not so rapidly as the Pearson targets require.
1.7. The vastly expanded flow of capital envisioned
in the Pearson report would be associated also with
a reduced debt service ratio. Under the recommenda-
tion, total interest charges would equal about $400
million for each $1 billion of debt, compared with
$558 million, if 1968 terms were applied and total
annual debt service for principal and interest on
each $1 billion of debt would be reduced by an average
$18 million a year, from $75 to $57 million. The
acceptance of this recommendation would be a modest
2% to the annual net flow of aid.
18. The failure of the developed world to assume
significant new responsibilities for the development
efforts of Third World countries in the Second
Development Decade will affect the fulfillment of
their development plans, and some of the developing
nations will continue to have difficulties in meet-
ing their debt servicing obligations. More nations
will request moratoria and rescheduling of their
debts.
Conclusions
19. Increased world concern for the continuing
development needs of Third World countries has led
to pressures on national and international agencies
to expand the volume of assistance to these countries
and to improve the efficiency of these undertakings.
As a result of the. initiatives by international
groups, national aid undertakings have become an
international issue and donor nations are being
pressed to conform to uni.fnrm criteria and standar-
dized repayment terms. Acceptance of the Pearson
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recommendations would transform the concept of aid
from national "largessee" to one of public respon-
sibility, and the political and-strategic overtones
of aid-giving would be reduced. In spite of these
efforts, national aid determinations are being sub-
jected to more and more critical review by many
developed countries, as the major donors become
increasingly preoccupied with the growing domestic
claims on their resources, with balance-of-payments
problems and-an indifferent public. Thus, the
opening years of the Second Development Decade may
be a crossroads for economic aid programs. Developed
nations must decide whether their aid programs will
continue as adjuncts of their national policy
interests or.whether they will identify them more
generally with the objectives of international
agencies. In the long run, there undoubtedly will
be a tendency toward greater multilaterialization,
and a reduced national role,
20. In the shorter term the outlook is less
encouraging. In spite of international efforts to
reduce differences between rich and poor nations,
the gap has widened in recent years. While it is
hoped-that-total annual gross capital flow to poorer
countries from all sources will exceed the present
level by significant amounts, many of the developed
nations have been reluctant to assume greater aid
burdens by committing themselves to specific targets.
In the short run, more uniform national aid struc-
tures may evolve, and the new perspective of aid as
a worldwide undertaking will undoubtedly begin to
take'root. Possibly, one of the contributions of
the Second Development Decade will be that it will
have set the stage for the Third Decade when aid to
developing nations will have reached a greater state
of maturity.
20 -
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Statistical. Tables
,SECRET.
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ILLEGIB
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Donor
Total
1954-59\
7,651 Cl
1,658
Australia
136
23 d/
Austria
52
5 e/
Belgium
186,
46
Canada
274
47
Denmark
101
13 e/
France
517
76 e/
West Germany
1,297
544
Italy
288
46
Japan
273
42
Netherlands
256
39
Norway
110
18
Sweden
207
24 e/
Switzerland
61
42
United Kingdom
801
327
United States
2,087
366
N
I/
6.01 744 527 365 -'380 449
8
19
27
5
65
101
27
30`
11
9;
.'6
2
95
198
2 8 2 5
23\ 15 ' 16 2
16 \ 12 8 16
6 N7 9 8
73 116 29 21
286 102 N 25 10
15 32 ~\1 -5
11 7 12 10
26 18 2016
8 6 18 1,4
7 15 16 19'
17 3 3 3
40 41 45 46
202 138 142 204
5-3,
Estimated
1966
1967
1968
1969 b/
530
736
661
1,000
13
24
10
6
7
14
14
24
19
31
46
43
16
16
13
29
42
38
36
54
100
91
34
8
50
45
49
42
38
24
8
11
10
33
34
32
-8
-3
5
56
53
45
a. Most of which is grant and,not reimbursable. The subscriptions to international loans, however,
are on a net basis. Figures exclude disbursements by Portugal; figures for 195?4-55 are based on an
annual average for 1950-55.
b. 1969 data cannot be distributed among donors.
c. Including undistributed total for 1969. Parts may not add to total due to rounding.
d. Figures are for the period 1957-59.
e. Figures are for the period 1956-59.
1960 1961 1962 1963 1964 1965
DAC Member Disbursementsto Multilateral Agencies a
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Net Flow of Private Capital from DAC Member Countries
to Less Developed Countries and Multilateral Agencies a/
Total
Donor
1954-1969
1954-59
1960
1961
1962
1963
19
/
64
1965
1966
1967
1968
1969 b
52,492
14,005 c/
3,150
3,106
2,453
2,557
3,200
4,165
3,826
4,209
6,033
5,788
Australia
A
i
170
7
--
--
--
--
15
15
20
25
30
5
ustr
a
B
l
i
206
-3
6
18
17
4
7
16
16
21
46
8
5
e
g
um
C
d
1,368
419
81
72
49
95
93
119
97
66
150
8
127
ana
a
819
302
70
26
55
32
14
45
55
59
94
Denmark
227
8
32
25
7
1
21
2
-5
-3
45
67
4
Cn
France
West German
7,200
6
078
1,661
1
343
477
463
418
391
529
547
575
516
846
9
777
y
It
l
,
,
276
229
143
186
283
253
297
594
1
028
1
44
CO)
a
y
2,989
276
193
177
280
243
197
173
517
131
,
401
,
6
4
Japan
N
th
l
2,130
228
103
160
118
94
79
132
159
214
391
01
45
e
er
ands
Norway
2,045
148
683
5
203
144
49
97
69
169
160
115
142
2
214
rnJ
S
d
N.A.
18
N.A.
1
6
27
4
15
35
we
en
S
it
l
d
537
75
40
43
19
30
34
35
51
61
57
37
9
w
zer
an
U
it
d
i
1,933
348
153
187
156
197
101
188
107
130
223
2
1
n
e
K
ngdom
U
it
d St
6,089
1,969
474
442
323
306
426
547
413
343
341
43
505
n
e
ates
20,553
6,684
1,042
1,102
819
880
1,326
1,897
1,360
1,922
2,204
1,317
a. This category covers private direct investment (incuing reinvested earnings), portfolio and other
lending (bilateral and multilateral), and guaranteed private export credits (including unguaranteed portions).
b. Preliminary estimates.
c. Figures are understated due to lack of available information.
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Annual Debt Service for DAC Member and Communist Official
Bilateral Aid, Principal,
and Interest Payments ,
Total
1954-59
1960
1961
1962
1963
1964
1965
1966
1967
1968
Total repayments
11,028
1,804
550
643
637
730
1,015
1,116
1,388
1,452
1,693
Principal
6,954
1,402
341
412
364
402
581
639
866
898
1,049
Interest
4,074
402
209
231
273
328
434
477
522
554
644
DAC member total
10,107
1,779
526
610
596
670
925
1,001
1,248
1,280
1,472
Principal
6,302
1,385
324
389
336
364
520
559
766
773
886
Interest
3,805
394
202
221
260
306
405
442
482
507
586
ist total
C
921
25
24
33
41
60
90
115
140
172
221
n
ommun
Cr1 ,
Principal
652
17
17
23
28
38
61
80
100
125
163
Interest
269
8
7
10
13
22
29
35
40
47
58
03
Soviet total
600
21
19
23
29
40
64
73
89
104
138
Principal
420
16
14
16
19
25
43
50
63
74
100
Interest
180
5
5
7
10
15
21
23
26
30
38
East European total
321
4
5
10
12
20
26
42
51
68
83
Principal
232
1
3
7
9
13
18
30
37
51
63
Interest
89
3
2
3
3.
7
8
12
14
17
20
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The 1965 DAC Recommendation
on Financial Terms and Conditions
1. That 70% or more of each DAC member's total
official aid commitments to developing nations
should be grants or grant-like contributions that
involve no repayment in foreign exchange; or
2. That members should reach the 1964 perfor-
mance level, which would allow them either:
a. to provide 81% of their assistance
as a combination of grants and 3% loans, or
b. to provide 82% of their assistance
as a combination of grants and loans with
repayment periods of 25 years or more and
grace periods of 7 years.
The 1969 DAC Supplement to the 1965
Recommendation on Financial Terms and Conditions
1. That DAC members that do not contribute 70%
or more of their total official development assist-
ance as grants or grant-like contributions should
either:
a. provide a minimum concessional
element* of 61% for each transaction on at
least 85% of their total commitments for
official development assistance, or
b. provide an overall concessional
element of at least 85% on 85% of their
commitments of official development
assistance.
* A "concessionaZ element" is defined as the face
value of a financial commitment, less the discounted
present value plus interest payments, using a 10%
discount rate.
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Recommendations on Terms by the Second United
Nations Conference on Trade and
Development (UNCTAD II), March 1968
UNCTAD II established a target of 1% of GNP as
a minimum for the net annual flow of financial
resources (both public and private) from the devel-
oped to the less developed nations.
. The Pearson Report, 1969
1. The report suggested greater multilaterali-
zation.of.aid and recommended that 20% of official
development assistance should be shifted to,a multi-
lateral structure.by 1975. The International'
Development Agency (IDA) should be given a more
central role in multilateralizing aid, and its
resources should be increased from $400 million to
$1.5 billion by 1975.
2. The volume of net official development
assistance should be increased to 0.7% of donor's
GNP by 1975 if possible, but in no case later than
1980. If private investment is included, the net
flow of capital from donor countries should be
increased to 1% of GNP.
3. Terms on official assistance should be re-
vised to increase maturities to 25 to 40 years,
with grace periods of 7 to 10 years, and maximum
interest of 2%.
B-5
The Jackson Capacity Study, 1970
1. Recommended an overhaul in the UN system
to assure it a more effective role in technical
cooperation programs with less developed countries.
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2. To be accomplished through integration and
rationalization of presently dispersed efforts.
a. A United Nations Development Coopera-
tion Cycle to be established to synthesize
the process of programming and to ensure pro-
cedures for evaluation and followup. This
would include:
(1) synchronizing technical
cooperation with the development plan-
ning cycle of each country,
(2) relating these planning cycles
to IBRD plans for subsequent investment.
3. Policy decisions should be centralized in the
UN Development Program and operational authority
should be decentralized.
The Peterson Report, 1970
1. Recommends that the United States propose
joint action by lending countries and international
lending institutions to devise a strategy for deal-
ing with the external debt problems of less developed
countries and to provide for rescheduling their
debts.
2. Terms of development assistance should be
improved to avoid future debt problems.
3. Recommends that the United States propose
that all industrial countries agree to untie their
bilateral development lending.
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