News Brief August 2002

Development aid holds steady; Russian visit; Early check-up for business ethics; IT outlook is not so dim; Trade fall eases?

Developemnt aid holds steady 

The US was the world’s largest aid donor in 2001, resuming the position it ceded to Japan in 1992, while aid from several European Union (EU) countries also rose. However, overall net official development assistance (ODA) from the OECD was little changed from the previous year. Japan’s ODA fell by 18% in real terms, partly due to a 12.7% fall in the value of the yen, but also because of the timing of disbursements to multilateral organisations and the receipt of loan repayments from Asian countries that have recovered from the Asian financial crisis.

The level of aid as a proportion of combined gross national income of member countries in the OECD’s development assistance committee (DAC), which accounts for at least 95% of total world ODA, was unchanged from the previous year at 0.22%. Denmark, Norway, the Netherlands, Luxembourg and Sweden continued to be the only countries to meet the United Nations’ adopted ODA target of 0.7% of gross national income.

US aid rose to US$10.9 billion, or 0.11% of gross national product, up slightly from the previous year, with much of the increase reflected in a US$600 million disbursement to Pakistan for economic support following the events of 11 September. Japan was the second largest donor with US$9.7 billion, followed by Germany, the UK, France and the Netherlands. Total aid from EU countries came to US$26 billion, while aid from the European Community rose 21.1% to US$5.91 billion.

The annual meeting of development ministers and heads of development agencies from member countries of the OECD Development Assistance Committee (DAC) in Paris on 15-16 May welcomed the significant increase in ODA that is expected over the next four to five years, largely following commitments made at the Financing for Development summit in Monterrey in March. The meeting underlined that the increase in aid would go hand in hand with intensified efforts to improve aid effectiveness and achieve measurable progress in transforming the lives of poor people.

Representatives of the New Partnership for Africa’s Development (NEPAD) attended the meeting, and ways to tackle the problems underlying the lagging development performance in a large part of Africa were discussed. In particular, there would have to 5 be more sharing of methods to assess when countries in difficulty are in danger of slipping into violent conflict and acting quickly to stop this from happening. This included using development co-operation to help identify and deal with the risks of terrorism.

OECD (2002), The DAC Journal: Development Co-operation Report 2001 – Efforts and Policies of the Members of the Development Assistance Committee Volume 3 Issue 1

Russian visit

Russian Prime Minister Mikhail Kasyanov discussed areas for further co-operation with the OECD during a visit to OECD Secretary-General Donald Johnston in Paris in July. According to Russian press sources, Mr Kasyanov also said his country would be interested in joining the OECD after Russia has become a member of the World Trade Organisation. The OECD’s programme with Russia is the organisation’s largest with a single non-member country and the OECD issued its fourth Economic Survey of the Russian Federation in February 2002.

Agricultural markets may recover 

Global agricultural commodity markets have taken a long time to recover from a precipitous drop in prices during the second half of the 1990s, caused by slack demand and trade in the wake of a general downturn in world economic growth, as well as continued high levels of government spending on farm support. However, according to the OECD’s Agricultural Outlook 2002-2007 published on 16 July, world agricultural prices should gradually rise from their current weak levels as the economic recovery strengthens at the end of this year and into 2003. It forecasts a more marked increase in prices for certain meats and dairy products than for cereals and oil seeds.

The report says world agricultural markets will improve between now and 2007. Much of this will be due to stronger demand and growing imports in rapidly developing countries outside the OECD. The growth in trade of livestock products and feedstuffs will continue to be faster than that of food grains. Yield and productivity rather than increased land use will contribute most to crop expansion.

Early check-up for business ethics 

Business ethics are in the spotlight everywhere and OECD countries have agreed to bring forward a planned assessment of the OECD Principles of Corporate Governance to 2004 from 2005. Meanwhile, the OECD plans to examine governance developments in corporate and financial spheres in a bid to identify lessons that can help the assessment. The decision to bring the assessment forward was made at the OECD annual ministerial council in Paris in May (see, page 54) and follows several headline stories where business behaviour was called into question, from failure to transmit information to shareholders to alleged false accounting.

Ministers agreed at the May meeting that effective enforcement of corporate governance rules is essential and they determined to improve the rules to enhance transparency and accountability and so strengthen investor confidence and market stability. They also stressed that governments and supervisory bodies need to be vigilant to ensure that financial standards, regulations and market surveillance protect the interests of stakeholders.

OECD ministers adopted the non-binding Principles of Corporate Governance in 1999. The principles are intended to serve as a reference point for countries’ efforts to evaluate and improve their own legal, institutional and regulatory framework for corporate governance. The OECD is co-operating with the World Bank to promote corporate governance reform efforts worldwide, using the Principles of Corporate Governance as a benchmark.

IT outlook is not so dim

Prospects for the information technology industry remain strong despite the recent downturn, the latest OECD Information Technology Outlook says. New products and services such as broadband will continue to drive demand from firms, households and governments, and falling costs and technological developments will help. And despite the slowdown, markets for information and communications goods and services were equivalent to 8.3% of total GDP of OECD countries in 2001, compared with less than 6% in 1992. Just as the information technology sector was affected by, and contributed to, the current downturn, there is strong reason to believe it will have a significant role to play in the next recovery, the report says.

Trade fall eases? 

The fall in merchandise trade in OECD countries levelled off in the first quarter of 2002 after nine months of accelerating decline, but remained at a low level compared with last year. In value terms and at current prices, merchandise exports increased by 1.1% in the first quarter of 2002 compared with the fourth quarter of 2001 while imports fell by 0.4%. On a year-on-year basis, trade was still sharply lower. Compared with the first three months of the previous year, exports in the first quarter of 2002 were down 8.9% and imports dropped 11.0%.

In volume terms, trade fell both on a quarter-on-quarter and year-on-year basis, with G7 exports down 5.8% from a year earlier compared with a fall of 7.0% in the final quarter of 2001, and imports down 5.1% compared with a 4.5% drop the previous quarter. But the quarter-on-quarter figures showed stabilising negative growth, with exports down 2.3% and imports falling 3.7%.

The United States suffered the sharpest fall in export growth in volume terms, down 12.7% from a year earlier, while imports dropped 5.8%. France saw the heaviest fall in import volume, down 11.2%, with exports in volume terms down 4.4%. Japan’s export and import volume fell less sharply, with export volume down 2.9% from a year earlier and imports down 5.6%. Compared with the previous quarter, exports edged up 0.2% in volume terms while imports fell 5.4%.

©OECD Observer No. 233, August 2002 

Economic data


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