Third world: aid now, markets later
Washington — Industrialized countries seeking export markets should consider third-world regions, such as Latin America, and start investing money to bolster these countries' buying power, a Japanese economic research group recommends. The thrust of the proposal is not to assist third-world countries in developing their exporting abilities, but to raise living standards in these nations, thus increasing the popular demand for items produced in countries like the United States and Japan.
``In this context, a beginning can be made by creating an international fund for promoting private-capital flows from the developed to the developing countries,'' said Saburo Okita, head of the World Institute for Development Economics Research.
Mr. Okita, who compares the proposal to the post-World War II Marshall Plan, said the international fund could serve to back investments and bank loans in less developed countries. Okita suggests that the Japanese government dedicate 0.1 percent of its gross national product to the international fund, with similar contributions coming from other industrialized countries.
Although there are agencies that already lend large sums of money to developing countries, an economist in New York City says these institutions do not have the capital to undertake a new initiative of this type. Without such an organization, fresh money may be hard to come by.
``The problem is, there's no way to get banks who've taken high risks to invest more without backing'' from an outside institution, says Jerry W. Sanders, a senior analyst with the World Policy Institute.
Okita said the actual routing of the money to developing countries can be worked out later. ``What is required, however, is the political will of the industrial countries, which should agree to provide additional funds for this purpose over and above their official development assistance and contributions to multilateral institutions,'' he said in the Far Eastern Economic Review.