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Financial Flows Key to Developing Country Growth

The United States is the world's largest single contributor of official assistance to developing countries today. But even at $16.3 billion, our development assistance is dwarfed by the resources flowing into or generated by developing countries from other sources. Developing countries today have access to a broader range of international financial resources than ever before, and the United States is seeking to enable their most effective use in support of achieving sustainable economic development.

Worldwide, official development assistance (ODA) from all sources in 2003 totaled $77 billion. That is just a fraction of the total resources available to developing countries, according to figures compiled by the U.S. Department of State.

For example, developing country exports in 2003 totaled $3.1 trillion -- more than one-third of the countries' combined gross domestic products. Foreign direct investment from OECD (Organization for Economic Cooperation and Development) countries into developing countries totaled $192 billion, portfolio investment flows were $27.4 billion, and workers' remittances totaled $93 billion.

In addition to providing the largest amount of development assistance, the United States works to maximize developing countries' ability to tap into other financial resources.

In 2003, more than 40 percent of developing country exports went to other developing countries; 20 percent went to the United States, making it the largest single-country market for the developing world. According to the World Bank, aggregate developing country income would climb by $532 billion annually by 2015 if developing and developed country markets removed their trade barriers.

Non-trade financial flows from the United States to developing countries are growing, totaling about $48 billion in 2003 -- almost triple U.S. official development assistance. The United States has worked to make it easier for workers to send money to their home countries, and such remittances accounted for an estimated $28 billion in 2003. Private grants from the United States to developing countries amounted to $6 billion and net private investment an estimated $14 billion, according to State Department figures for 2003.

An innovative new program developed by the Bush administration -- the Millennium Challenge Account (MCA) -- would increase U.S. assistance by $5 billion a year by 2006, with the new funds directed to countries that adopt pro-development policies. As a result, U.S. assistance in 2006 will be double its 2000 level.

The three basic criteria for MCA eligibility are good government, social investment and economic freedom, all of which are key to sustainable development.

Attached is a State Department slide presentation providing more details on the MCA and U.S. development assistance.