Foreign aid and economic growth in the developing countries - a  (Page 8/21)

Despite immense resources and dynamic societies, deep inequalities of wealth persist in most LACcountries, with almost one-third of the region's people living in poverty. Economic performance has not been very good with theinstability of some leading economies namely Brazil and Argentina. Over the period 1987-1998, the share of the population living onless than US$1 per day in this region remains almost unchanged, i.e.15.3% and 15.6% in 1987 and 1998 respectively (see Appendix1).

3.4. Middle East and North Africa (MENA)

MENA is an economically diverse region that includes both oil-rich countries in the Gulf and resource-scarcecountries such as Egypt, Morocco and Yemen. The region’s economy over the past years has been influenced basically by two factors,i.e. the oil price and the mix of economic structure and state policies. In the 1980s, many countries in the region had undertakenreforms, which induced tremendous improvements in economic growth by the late 1990s.

However, the region is still facing economic and social problems, among which the most serious one is theunemployment, estimated at about 15% of the workforce. There are as twice as many jobless young people in some countries compared withregional average, requiring the creation of 4 millions jobs a year in the next few years in order to accommodate new entrants into thelabor market. The Iraq war and the ongoing Palestine-Israel conflict also had a negative impact on the economic performance ofthe region in 2002. As a result, regional economic growth fell from 3.2% in 2001 to 3.1% in 2002 with continuing declines of investors’confidence, exports and tourism.

3.5. Sub-Saharan Africa

Africa has continued to make progress in many areas. Sixteen out of 47 countries achieved on average more than 4%growth over the last decade. Investment and trade trends have been steady. Net foreign direct investment (FDI) to Africa rose to $6.8billion in 2001 but was heavily concentrated in oil-exporting countries and South Africa. Africa had the highest returns on FDIin the world, and the flow of workers’ remittances back to the continent doubled in only two years, reaching $4 billion in2002.

Nevertheless, the continent continues to face enormous development challenges. Half the population lives on lessthan $1 a day. The share of poor population remains unchanged over the period 1987-1998. This is the region with lowest income percapita and highest population growth. Lack of safe water, HIV/AIDS and political conflicts are the burning issues of the region.Overall GDP growth is roughly 3%, almost equaling the population growth.

Even though the donor community has been providing huge aid amount to this region, its economic performanceis still very poor. Obviously, the question lies not in the quantity of aid but in its effectiveness, which remainsambiguous.

3.6. South Asia

South Asia is the second largest region in terms of population in the developing world, with 1.4 billionpeople. It experienced rapid economic and social development during the 1990s. Although it has been among the world's fastest growingregions, it remains a region with second highest share of population living below the poverty line, i.e. 40% in 1998.