The New Nation - Internet Edition

UNB, Dhaka

Bangladesh should have a policy of its own to use foreign aid effectively, says a United Nations Conference on Trade and Development (UNCTAD) report on least developed countries.

The 'Least Developed Countries Report 2008' was launched worldwide Thursday. Private research organisation Centre for Policy Dialogue released the report in Dhaka. Despite rapid growth, the number of poor was still rising in the LDCs, the report warned, adding that increased income inequality in Bangladesh was hindering poverty reduction. CPD executive director Mustafizur Rahman briefed the press on the key findings of the report and where Bangladesh stands. On LDC export driven growth, the report says it veils real vulnerability as global outlook worsens. It also recommended that poorest nations design and 'own' policies to use foreign aid effectively saying that rules and policies attached to these aids were so stringent that governments were hindered from tailoring development plans to meet local and national conditions.

Identifying aid as a tool to mobilise domestic resources to spur economic progress, the study says such aid cannot be 'an engine for long-term development'.

According to the document, ongoing aid delivery system continued to undermine effective country ownership due to lack of transparency, coordination between aid and government plans and poor alignment between donors and recipients.

UNCTAD suggests a new tool, Aid Management Policy, stressing mutual accountability of donors and recipient governments and aims at reducing transaction costs. It also provides framework to strengthen state capacities for effective use of foreign aid.

The study shows aid inflows are mainly directed towards improving social services and infrastructure including governance mechanism rather than increasing productive capacities and promoting structural change and economic diversification.