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Sources of Finance for Development - Activity

A hand offering some rice.

Image: Are handouts by the developed countries the way forward for the developing world? Copyright: Davide Guglielmo, stock.xchng

One thing that is agreed about developing countries is the need to help them get finance to promote development. Traditional methods have involved foreign direct investment (FDI) and various forms of aid coordinated through international institutions as well as through national governments' own initiatives.

The establishment of the Millennium Development Goals (MDGs) by the United Nations has meant that a renewed focus on how to finance development in the poorest countries of the world has been put to the forefront of the economic and political agenda once again.

There are problems, however, as the establishment of these goals puts increased pressure on already tight national budgets to give more to the developing world. This Activity will guide you through some of the issues that the world community will have to consider if it is to meet some or all of the goals it has set itself.

Task 1

Go to the Virtual Developing World and look at the theories relating to the provision of finance for development.(http://www.bized.co.uk/virtual/dc/aid/theory/th1.htm) Ensure you are comfortable with the main issues, which are:

  • The arguments for and against foreign aid
  • The reasons for the international move towards providing development assistance
  • The role of international institutions such as the World Bank
  • The reasons why the developed world might wish to encourage development in poorer countries

A family living in a shack.

Image: In many cases, there might be very obvious reasons to promote international development but the political and economic ramifications in the countries where the burden will have to be shared are often stumbling blocks. Copyright: Peter Wilhjelm, stock.xchng

Task 2

Look at and note the main aims of the Millennium Development Goals by going to the UN Web site.(http://www.un.org/millenniumgoals/) Note especially the comments made in the right hand section which provide a little more detail on the goals.


Task 3

Look at the summary of the proposals on finance for development from a United Nations conference on 'Feasible Additional Finance for Development' held in New York in 2003 [PDF, 121 KB](http://www.carnegiecouncil.org/media/4991_Feasible_Additional_Sources_Finance_Development.pdf?PHPSESSID=24f6e1f2062690a5aacbbc883515607d). There are 12 pages in the summary but you should use your skim reading skills to identify the main points coming out of the conference discussions. Note down these main points. For example, the first section deals with the International Finance Facility (IFF). You will need to have a brief understanding of what the IFF is, how it might work and the problems associated with setting it up.


Task 4

Having armed yourself with the main facts associated with the issue, work in groups of no more than three to consider the extent to which the measures proposed at the conference would be likely to meet the MDGs in the time available (i.e. 2015). You should then discuss your ideas with the rest of the group in the class and come to an agreement on how realistic the MDGs are.

A run-down building.

Related Web sites for Research

Image: The challenges facing the developed world in improving living standards are massive - are the MDGs too ambitious? Copyright: Gilbert Tremblay, stock.xchng