Foreign aid and economic growth in the developing countries - a  (Page 17/21)

Recent experience of some South Asian countries in the study is another good example of success.Bangladesh has performed relatively well over the last decade with average annual GDP growth of 5% with more and more entrepreneursemerging recently. Good macroeconomic management has kept inflation relatively low. Recent reforms in fiscal management, governance,state-owned enterprises, banking, telecommunication and energy have shown promising results. Increasing FDI flows with the amount ofprivate FDI of nearly US$ 400 million in fiscal year 1997-1998 strengthened infrastructure, energy and export-oriented industries(World Bank, 2003a).

The National Strategy for Economic Growth, Poverty Reduction and Social Development, which is Bangladesh'sInterim Poverty Reduction Strategy, aims to substantially reduce chronic poverty and invigorate social development. It focuses onfive key areas (i) pro-poor economic growth for increasing income and employment of the poor (ii) human development of the poorthrough education, health, nutrition, and social interventions (iii) women's advancement and closing of gender gaps in development(iv) social safety nets for the poor and (v) participatory governance for enhancing the voice of the poor and improving wellbeing in areas such as security and social inclusion and removing institutional hurdles to social mobility. The strategy also sets amedium-term macroeconomic framework and addresses the issues of trade reforms, governance, and sector-specific reforms.

It is noteworthy that the NGO community in Bangladesh is one of the most active in the world. The strongpartnership between government and NGO community in many areas such as micro-credit, non formal education and assistance with socialmobilization has contributed effectively to the successful economic performance of the country.

Pakistan has made significant development progress in its 56 years since independence. Health and educationservices have expanded and improved, and life expectancy has increased from 59 years in 1990 to 63 years in 2001. Infant andmaternal mortality rates have dropped, as have illiteracy rates. After a decade of inward-looking policies, in November 1999, thecountry launched a significant economic reform program and has since achieved considerable improvements. In 2002, the GDP grew at5.1% while inflation remained low at 3.3% and the budget deficit was 4.6% of GDP (World Bank, 2003b).

Donors support Pakistan’s fundamental reform through a program of analytical services, institutional capacitybuilding, and lending. The World Bank assistance strategy focuses intently on supporting the government's development strategy and isorganized around three mutually reinforcing pillars (i) strengthening macroeconomic stability and government effectiveness(ii) strengthening and enabling the investment climate and (iii) supporting pro-poor and pro-gender equity policies.

Sri Lanka was the one of the first developing countries which understood the importance of human resourceinvestment. As a result, it has achieved human development outcomes more consistent with that of high income countries. Sri Lankaliberalized its economy in the 1970s, far ahead of the other developing nations. Its economic performance has been stable andpositive thanks to sound macroeconomic management and progress in trade liberalization and financial sector reform. Sri Lankan incomeper capita is among the highest in the region, at US$820 (World Bank, 2003c). Furthermore, unemployment and inflation arehistorically low, the external current accounts have been strengthened, export increases and diversifies and foreign directinvestment rises. These are factors that contribute to the successful performance of Sri Lanka over past decades.