Models for the 21 s t Century

United States of America

Successful Development
All fathers and mothers, in all

societies, want their children to be

educated, and live free from

poverty and violence. No people

on Earth yearn to be oppressed or

aspire to servitude....

President George W. Bush

January 29, 2002

”

“
How can the poorest nations

attract the resources necessary to lift their people out of

poverty? The starting point is

good governance and the

rule of law: political leadership determined to make

honest choices and deliver

basic goods and services.

It also begins with the hard

work and initiative of the

people who live in the developing world. Workers in

these countries produce the

overwhelming majority of

their nations’ goods and

services. Their annual

domestic savings of $1.7 trillion is one of the largest

sources of funds available for

development.

But breaking the cycle of

poverty cannot occur in isolation. Developing nations

need to gain access to the

global marketplace, where far

greater resources for development reside. In the past

decade, for instance, trade

with the developing world

has more than doubled. At

the same time, foreign private investment in developing countries quadrupled to

$225 billion. Foreign trade

and investment provide more

than just money—they bring

ideas and innovations that

can raise productivity and

build the foundation for

domestic industries.

Official development assistance can be the catalyst for

economic growth. Whether it

is bilateral funding from one

government to another or

that channeled through multilateral institutions, development assistance can reinforce

sound governance, promote

investment in people, unlock

local resources, build capacity

to attract foreign trade and

investment, and help attack

poverty through increased

productivity. 

The stories that follow are

about developing countries

that have made smart choices

at home that have attracted

both private and official

funds. In particular, they

showcase how development

assistance has deepened

institutional foundations to

unleash the productive and

entrepreneurial energies of

people around the world. 

These examples also show

how useful official development assistance can be as a

catalyst for change when

developing countries:

• Take the lead in addressing

their own development

challenges,

• Strive for visible results

through the efficient use

of capital, and

• Combine public and private efforts and resources.

These models for the twentyfirst century illustrate that

providing tangible economic

benefits for the poor will

require the deliberate, purposeful, and united efforts of

all nations, donors, and sectors. Yet in the end, it is

sound local governance,

inspired local leadership, and

sustained human effort that

are the essential elements of

successful development. 

The Challenge 1

The Challenge
Ghana: A Smooth Transition

Encourages Foreign Investment

Despite the presence of local

and international monitors,

the credibility of Ghana’s 1992

and 1996 elections suffered

from allegations of fraud. In

1996, five days passed before

the Electoral Commission

could certify final results of

the presidential contest. The

equipment used (ballot boxes,

seals, etc.) afforded little protection from tampering. 

In the year leading up to the

December 2000 election,

Ghanaians took steps to

ensure the legitimacy of the

vote. With the help of a U.S.-

organized consortium of

international donors, Ghana’s

Electoral Commission computerized its operations. A

broad network between the

commission in Accra and

each of the country’s 12

regions collected and transmitted election results almost

as soon as they were certified.

Radio stations conducted exit

polls and did spot reporting

on irregularities. A Web site

was created for posting election results—which were also

announced by the media.

With these reforms, Ghanaians

knew the election results

within 24 hours. This rapid

turnaround increased public

confidence in the outcome. In

the context of such transparency, the defeated former

government had little choice

but to leave office peacefully,

and a smooth, democratic

transfer of power resulted.

Central Europe: Improving

Energy Management

The collapse of the Soviet

Union exposed central

European energy systems as

inefficient, bureaucratic, corrupt monopolies with subsidized prices and old, polluting

technologies. The transition

required the newly independent republics to develop modern energy laws, price energy

more rationally, restructure

utilities, and reform energymarket policies. A new generation of energy managers and

professional regulators has

emerged to devise and implement these mechanisms. 

In addition to building technical skills, this group represents

the beginnings of economic

democratization and a line of

defense against corruption. To

expand industry knowledge,

15 regulatory agencies—from

countries in central Europe,

the Baltics, and the former

Soviet Union—created an

Energy Regulators Regional

Association (ERRA). The

United States has worked

closely with the international

financial institutions and bilateral donors in the development of ERRA’s programs

and initiatives. For example,

through the U.S. Agency for

International Development

(USAID), the United States

brokered a cooperative agreement with the U.S. National

Association of Regulatory

Utility Commissioners under

which American regulators

and the federal government

donated their time to ERRA’s

tariff and licensing/competition committees.

ERRA and its members have

helped improve the energypricing environment, create

greater predictability for

investors, provide more transparency of collections, and

ensure protection of the poor,

pensioners, and other consumer groups. ERRA is

developing a plan to achieve

financial self-sufficiency

2 Successful Development: Models for the 21st Century

Sustained development

of market economies

depends on sound and

honest governance.

Without safeguards

against instability and

corruption, foreign

investors will seek other

opportunities and local

businesses will face

major impediments to

growth.

Sound Governance and Local Leadership International Foundation for Election Systems

Voter registration, Ghana
within three years. Special

working groups are examining issues related to interregional electricity trade and

European Union accession.

ERRA is formally interacting

with the Council of European

Energy Regulators, with the

goal of creating an integrated

European electricity system. 

The Philippines: Economic

Governance Enhances Growth

In the Philippines, centuries

of centralized economic policy-making restrained local

authority and popular participation. In the last decade,

however, the power of local

authorities has increased. This

devolution of power and

resources has resulted in a

burst of creative local governance initiatives.

The Philippines’ local governance revolution began with

the passage of the 1991 local

government code, which

ordered one-third of national

revenues returned to local

government. Along with

resources to the localities, a

host of new local powers

emerged—from authority

over the management of

municipal coastal waters and

forests to the ability to raise

funds through bonds and

negotiate grants directly with

international donors. 

Communities took advantage

of the devolution of health

services to begin direct procurement of medications,

often at substantial savings.

Several cities began floating

municipal bonds to finance

local infrastructure. To facilitate investment, some municipalities streamlined services

through “one-stop shops”

where investors could obtain

all necessary municipal

authorizations. 

With new responsibilities,

local officials were made

increasingly accountable to

their electorates. Because of

their shared interests vis-à-vis

the central government,

leagues of local mayors and

governors emerged.

For almost two decades, the

United States has assisted in

the development of local governance in the Philippines.

Initially the assistance was in

the form of contributions to

existing local projects, but

USAID ultimately found

opportunities to expand into

direct programming. 

In 1998, a consortium of private Philippine banks, in conjunction with a government

development bank, established the Local Government

Unit Guarantee Corporation

(LGUGC). The purpose of

the corporation was to provide financing mechanisms to

complement and strengthen

the new authorities of local

government. With a partial

guarantee from USAID’s

Development Credit

Program, LGUGC provides

bond guarantees to private

financial institutions to fund

municipal infrastructure projects. As a result of the decentralization, local projects have

become increasingly attractive

to private investors.

With these reforms, local

government and civil society

in the Philippines have been

provided a broad spectrum of

new tools and sources of revenue to pursue dynamic new

approaches to development.

Sound Governance and Local Leadership 3 ARD, Inc.

Discussing local governance, Philippines
El Salvador: Banding

Together for Clean Water and

Healthy Children 

Twenty-five years ago, only

one in five residents of Cara

Sucia—a community of

about 2,000 families in western El Salvador—had access

to potable water. Intestinal

diseases and diarrhea, among

the great killers of very

young children, were part of

daily life. Decade after

decade, the people of Cara

Sucia sought government

help to build a new water

system, but the cost, estimated at nearly $2 million, frustrated their efforts. 

Five years ago, this all

changed. Cara Sucia’s people

reached into their own pockets for $115,000 toward

waterworks construction

costs and committed themselves to provide labor and

other nonmonetary services.

The local municipality

chipped in an identical sum,

followed by commitments

from El Salvador’s health,

environmental, and soil conservation officials. Even the

staff of a nearby national park

(in which Cara Sucia’s watershed area lies) joined in, as

did a U.S. Peace Corps volunteer working in the area.

The web of support did not

stop there. The private voluntary organization CARE,

plus a local group named

PROSAGUAS, brought the

community’s plan to

USAID, which provided

financial and technical support. And Official

Development Assistance

(ODA) from the European

Union paid for a third of the

total cost of Cara Sucia’s new

system. 

In short, no fewer than eight

institutions joined in the

project, leveraging resources

that individually were insufficient to solve Cara Sucia’s

drinking water problems.

Today, with a new system in

place, Cara Sucia’s diarrhea

rate for children 5 and

younger plummeted to

nearly half that of a few

years ago. Better hygiene

will push this figure down

even further in coming

years. The public-private,

local-foreign teamwork that

made this vital improvement

possible has remained in

place for the equally important task of maintaining

what has been built. 

Senegal: Shared Commitment

Cuts HIV/AIDS Infection Rates

The west African country of

Senegal has emerged as a

leader in HIV/AIDS prevention. The country’s infection

rate is one of sub-Saharan

Africa’s lowest, with new

infections of the at-risk population remaining steady at

1.4 percent per year. AIDS

has devastated sub-Saharan

Africa, striking the continent’s middle classes as much

as other segments of the population. The contrast

between Senegal and much

of the rest of Africa—where

infection rates can be as high

as 35 percent—is distinct. 

Why has Senegal succeeded?

The answer lies first and foremost in Senegalese political

will. Government, community, and religious leaders all

committed to heightening

awareness and reinforcing

core strategies: increased use

of condoms, abstinence education, medical examination

of commercial sex workers,

and improved access to antiretroviral drugs.

Senegal’s determination to

confront the pandemic found

a willing supporter in the

United States, the world’s

leading provider of ODA to

combat HIV/AIDS.

American leadership and

medical expertise, such as

that concentrated in the U.S.

Centers for Disease Control

and Prevention, have supported the determined effort

of countries like Senegal. 

4 Successful Development: Models for the 21st Century

A healthy and productive

labor force is the

bedrock of economic

growth. Public health

crises can quickly erode

hard-won development

gains. Sound investments

in health and education

can create and preserve

a work force capable of

meeting the economic

challenges of this

century.

Investing in People

Charles North, USAID

Villagers use new potable-water

faucet, El Salvador
Senegal’s dramatic commitment to limiting the spread

of AIDS was crucial to the

success of U.S. assistance.

Between 1998 and 2001, the

rate of HIV-infection for

pregnant women dropped

from 1.08 percent to 0.9 percent. In Ziguinchor, the city

where commercial sex workers suffer the highest HIV

prevalence rates, infection

rates for that population

dropped from 34.4 percent

to 26.8 percent in the same

three-year period.

Uganda: Basic Education

Improves Incomes, Lives 

Over the past decade, many

developing countries have

worked to reform their primary education systems. Few

have succeeded as well as

Uganda, which has used

ODA from the United States

and other sources to effect

far-reaching changes. 

The Ugandan Ministry of

Education has worked for

over a decade to unite parents, teachers, and pupils in

an expansive reform of basic

education, reinvigorating

what once had been among

the finest education systems

in Africa.

Working with USAID and

other donors, Uganda has

achieved:

• Universal primary education:

A program announced in

1997 eliminated all primary-level school fees for

up to four children per

family. 

• Increased funding: Education

spending now amounts to

31 percent of the country’s

total recurrent public

expenditure—and of this,

more than 70 percent goes

to primary education.

• Higher teacher salaries:

Uganda increased teachers’

incomes from $8 to $72

per month and completely

revamped its teacher training systems.

• Education Reform: The

comprehensive reform of

the primary-school curriculum included enabling

the private sector to supply

school textbooks. 

In each aspect of this success, U.S.-provided ODA

supported the Ugandan government to finance the

reform. The Support to

Ugandan Primary Education

Reform program focused

American support for

Uganda’s primary education

reforms on two components—overall reform policy

and technical assistance.

With political commitment

and on-the-ground donor

collaboration, Uganda is

now working toward an

even bigger objective—

implementation of a Poverty

Eradication Action Plan,

which aims to cut poverty to

just 10 percent of the population by 2017.

Investing in People 5

Sara A. Holtz

AIDS Day parade in Dakar, Senegal

Schoolchildren at recess, Uganda

Meddie Kidugavu
Kazakhstan: Access to Local

Lending 

With no history of nationhood or market economies,

the five former Soviet

republics of central Asia

faced profound hurdles upon

independence. One of them,

Kazakhstan, responded to

those challenges with a serious program of economic

reform, tackling exchangerate stabilization and fiscal,

legal, and regulatory reform. 

As a complement to these

macroeconomic reforms, the

government increased access

to financing for small private

enterprises. These fledgling

businesses helped alleviate

the country’s widespread

unemployment.

With U.S. government assistance, the Kazakhstan

Community Loan Fund

(KCLF) became the first

microenterprise organization

in Kazakhstan to be licensed

by the country’s national

bank. The license permitted

KCLF to operate as a nonbank financial institution and

to open branches around the

country. KCLF’s primary

function is to provide credit

and training to small-scale

entrepreneurs (83 percent of

whom are women) in need

of working capital and technical assistance. Based on

KCLF’s success, the United

States has supported its

expansion.

KCLF has made more than

29,000 loans averaging $270

each, for a total of nearly $8

million. Incomes in the

poorer sections of cities

where KCLF is active have

increased significantly, and

an estimated 3,000 jobs have

been created or retained as a

result of the loans. KCLF

recently began an individual

lending program with the

support of donor funds and

was able to target small and

medium-size enterprises

with loans of up to $5,000.

With 80 percent of clients

planning to expand or renovate their businesses, more

job creation is anticipated. 

Bolivia: Financial Institutions

for the Poor

Long one of Latin America’s

poorest countries, Bolivia has

had a vast informal business

sector comprising mainly

microenterprises. These small

businesses were largely separated from the established

sector, especially in terms of

access to financial services.

In 1992, Bolivian business

leaders and the nongovernmental organization Acción

Internacional joined with the

U.S. government and other

investors to form BancoSol,

the world’s first privatecommercial bank dedicated

to microenterprise. Pooling

the deposits of microenterprises, BancoSol provides full

banking services and has

grown to accommodate an

increasingly broad portfolio,

including a recently introduced line of credit for the

purchase or reconstruction of

homes. 

U.S. technical assistance and

a seed grant of $4 million

played a central role in

empowering BancoSol to

emerge as a profitable commercial bank. The bank no

longer has any need for subsidy or external assistance

and today has a vast branch

network, 60,000 clients,

and generates an average of

6 Successful Development: Models for the 21st Century

Domestic savings are

often overlooked as a

source of finance for

economic growth.

Successful development

begins with harnessing

local sources of capital.

Tapping Local Resources

©Michael Forster Rothbart, 2002

Processing fish caught in the

Caspian Sea, Kazakhstan

Kristine Heine, USAID

Small-business woman, Bolivia
more than $115 million in

new loans every year for the

Bolivian economy.

In 1997, BancoSol broke

new ground by issuing dividends. Due in part to

BancoSol’s success, Bolivia

has one of the most competitive microfinance markets in

the world. With increased

competition, opportunities

for microfinance have proliferated, creating thousands of

valued new bank customers

in Bolivia.

India: Modernizing Municipal

Finance

The slum population of

Ahmedabad, the largest city

in the Indian state of Gujarat,

doubled in the 1980s. Living

conditions for the city’s poor

became dangerously

unhealthy, with streets

crowded with animals, hawkers, and garbage. More than

one-third of the city’s residents lacked safe and reliable

drinking water. By 1990, the

city government was totally

dependent on state grants and

had neither the plans nor the

funding for the capital projects needed to address deteriorating conditions.

In 1994, Ahmedabad took

control of its destiny and, on

its own, sought independent

sources of funding for its

much-needed capital

improvements. The United

States saw an opportunity to

help as the city developed

into a model for India.

Refusing to wait several years

for Gujarat to provide the

first grant funds for its $147

million capital improvement

plan, the city government

turned to the Indian capital

markets. Ahmedabad sought

its own credit rating and was

awarded “investment grade.”

The city then tailored a $25

million bond issue to the

domestic Indian financial

market. Indian investors

immediately oversubscribed

the bonds. 

The United States supported

Ahmedabad in adapting and

applying U.S. municipal

bond-financing techniques

to the Indian capital markets.

Specialists worked closely

with the city government,

private Indian investment

firms, an Indian credit-rating

agency, and legal experts.

Besides Ahmedabad’s own

$25 million bond issue, a

U.S. government $22.5 million loan guarantee provided

matching support from private U.S. lenders for the

city’s improvement plan. 

By 1995, Ahmedabad had

gone from budget deficits to

surplus. After it issued the

first municipal bonds in

1998, the city’s improvement

plan progressed steadily.

Water, sewer, and sanitation

services for 3.3 million people have improved. Further,

the municipal bond-financing model is taking root, and

more than 30 Indian cities

have sought credit ratings for

use as either the basis for

issuing municipal bonds or as

a guide to improving their

overall financial condition.

The growing appetite for

municipal bonds among

India’s institutional investors

opens a substantial new

source of financing for the

development of India’s cities.

Tapping Local Resources 7
Mozambique: Economic

Restructuring and Trade

Liberalization

Few countries have faced a

need for economic restructuring on the scale of

Mozambique, which

emerged from a costly civil

war in the 1990s. Yet, while

still in the midst of conflict,

the country established one

of Africa’s most impressive

economic reform programs,

reducing price controls, liberalizing trade, and drastically

cutting bureaucratic impediments to trade. 

Working with donors from

the European Union, the

United States moved from

active involvement in the

peace process of the early

1990s toward support for

improved governance, continued macroeconomic

reform, and low tariffs. 

Relative price stability and

continuing donor support created a rise in foreign investor

interest and helped stimulate

domestic investment. Despite

setbacks from severe floods in

2000, Mozambique’s economy rebounded in 2001, growing between 10 percent and

12 percent. 

Jordan: Joining the World

Economy

A small country in an unstable region, Jordan’s economy

endured erratic growth

through much of its history.

Foreign investment levels

remained low, while the

country suffered from relative isolation and growing

debt. Trade inefficiencies

and poor international competitiveness contributed to

the country’s problems.

Today, Jordan is both a member of the World Trade

Organization (WTO) and is

one of a select group of countries to secure a free trade

agreement with the United

States. The country’s progress

testifies to the role that

ODA—when combined with

good policies and innovative

approaches—can play in accelerating national development. 

Determined to modernize,

Jordan launched an ambitious

set of economic reforms. The

country dramatically expanded access to international

markets and increased domestic market competition.

Jordan’s rapid accession to the

WTO in 2000 was accompanied by far-reaching reforms.

In December 2001, Jordan

joined Canada, Mexico, and

Israel as the only countries to

share in a free trade agreement with the United States.

Jordan also has established

free trade agreements with

both its Arab neighbors and

the European Union. 

The United States worked

closely with Jordan during its

WTO accession period. In

cooperation with the State

Department and the Office of

the U.S. Trade

Representative, USAID provided extensive technical

assistance and training to both

the Jordanian government

and business associations.

Likewise, the United States

has helped strengthen Jordan’s

capacity to promote and facilitate foreign direct investment

and streamline customs procedures. USAID continues to

provide substantial assistance

to promote the effective

implementation of the free

trade agreement. 

Jordan’s reforms helped pave

the way for improved economic performance and sev8 Successful Development: Models for the 21st Century

Worldwide, levels of

foreign trade and

investment exceed 

$9 trillion annually. By

connecting to these

flows of money and

products, developing

countries gain access to

the capital to fund

growth and the ideas and

innovations to enhance

productivity. 

Attracting Trade and Investment Food for the Hungry

Sesame seed trader, Mozambique
eral new private-sector trade

and investment initiatives.

Despite the difficult external

environment, Jordan’s economy showed remarkable positive signs in 2001, with a 4

percent growth in GDP and a

25 percent surge in exports.

The launch of the Aqaba

Special Economic Zone in

May 2001 has positioned

Jordan’s only port as a business hub and “growth pole”

for the country’s southern

region. Jordan’s commitment

to trade and investment says

to the world: “We are open

for business.” The world is

responding. 

Mexico: Growing Through

Reform and Trading 

For most of the last century,

Mexico’s economy was

markedly inward-looking.

Reforms came slowly, economic growth was intermittent and plagued by periodic

crises, and vast disparities in

income and widespread

poverty persisted. During the

1980s and early 1990s, however, Mexico’s major trading

and investment partners

joined domestic groups in

increasing the pressure for

economic reform, and the

government responded. 

In 1994, Mexico concluded its

treaty with the United States

and Canada on the accession

and compliance requirements

of the North American Free

Trade Agreement (NAFTA).

NAFTA encouraged the

deepening and broadening of

Mexico’s pro-market reforms.

NAFTA also led Mexico to

significantly relax the relationship between the dollar and

the peso and, eventually, separation of the two currencies.

In late 1994, however, the

peso was sharply devalued,

triggering a domestic economic crisis that severely affected

the banking sector and caused

havoc in international financial

and capital markets.

Despite the setback, Mexico

remained committed to its

reform path and to NAFTA.

This determination encouraged trading partners and

international and domestic

investors, and in short order

Mexico returned to the international credit market.

Privatization of state-owned

enterprises continued, as did

the restructuring of the banking sector. Finally, the federal

government began to pay

serious attention to fiscal

imbalances, loose monetary

policy, and relationships with

the provinces. 

Economic cycles remain a fact

of life, and individual countries address them differently.

Though Mexico’s growth has

slowed recently, it has avoided

the scale of contraction faced

by its trading partners. Until

last year, Mexican GDP and

trade growth held at 7 percent

and 12 percent respectively.

And, after Canada, Mexico is

the United States’ most

important trading partner.

Fueled by U.S. manufacturing-sector demand for commodity and semifinished

inputs, exports have been the

primary engine of Mexico’s

growth.

Since 1994, Mexico has

maintained the reforms necessary to comply with its

commitments and to realistically address the demands of

the global economy. While

the reforms have not been

without cost, they have

brought Mexico great credibility for its courage and commitment and helped solidify

its status as a regional leader. 

Attracting Trade and Investment 9

Joanne Giordano, USAID

Aqaba Special Economic Zone, Jordan
Mali: Price Information Boosts

Agricultural Productivity 

Until the late 1980s, Mali

sought to limit urban discontent through food subsidies.

By centralizing control of food

marketing and trade in staple

cereals, the government tried

to ensure reliable food supplies

at reasonable prices. Instead,

these actions created severe

disincentives for increased

food production and distorted

the distribution of crops.

Recognizing the problem,

Mali initiated an agriculture

reform program and got out

of the business of fixing agricultural prices. The reforms,

above all, aimed at increasing

productivity in a previously

stagnant sector. 

Eighty percent of Mali’s people rely on agriculture, raising

livestock and growing millet

and sorghum. As elsewhere,

improving market efficiency

requires better and faster

information, in particular

about the relative demand for

product. But how could Mali

increase the flow of price

information to its widely dispersed farming communities,

in an environment hampered

by difficult transportation and

a shortage of written material? 

It works like this: Using solarpowered laptop computers,

agricultural market-watchers

send e-mail containing crop

and livestock information to

142 privately owned rural

radio stations. Each evening,

an estimated 70 percent of

Mali’s rural population, even

in the remotest villages, tune

in to the timely broadcast of

information collected from 64

markets. Rice growers along

the Niger River follow paddy

field rice prices, and herders

in the arid Timbuktu region

hear the latest prices for goats.

Crop and livestock price

information and news about

better growing techniques

have reinforced the government’s commitment to market reform. This nationwide

agricultural information system, funded by USAID,

helped boost agricultural productivity. 

Agricultural production has

now reached a point where

Mali, once chronically

dependent on food aid,

exported 55,000 metric tons

of cereal in 2001. With trading

in private hands, surplus cereals in some districts are shifted

to others that face shortages. 

An estimated $100 per year

(in a country with a $260

average per-capita annual

income) has been added to the

income of more than 1 million small farmers who use the

market information system. 

Bangladesh: From Famine to

Food Security

Once, densely populated

Bangladesh seemed unable to

escape from chronic food

deficits and avoided famine

only with foreign food aid. Yet,

over two decades, Bangladesh

has steadily reversed policies

that unintentionally increased

food insecurity. 

USAID and other donors

have assisted Bangladesh

through this challenging period of reform. Contributions

have been applied to varying

facets of agricultural development. In total, these investments had a strong effect on

the functioning of

Bangladesh’s agricultural

markets. Efforts include:

• Development of an agricultural research system;

• Improved food-aid management and targeting to

10 Successful Development: Models for the 21st Century

Increased labor

productivity is the key to

poverty reduction,

enabling workers to

produce more and retain

more from their labor.

Higher productivity also

attracts more investment

as returns to capital

grow commensurately.

Attacking Poverty Through Productivity Millie Morton

Mali grain trader listens to the weekly radio broadcast of cereal prices 
reduce disincentives to local

production;

• Liberalized agricultural

service industry, including

fertilizer and machinery

inputs; and

• Steadily improved rural

infrastructure, including

roads and electricity.

While other factors have also

contributed, the steadily

widening role of the private

sector has had a significant

impact. Rice production has

risen from under 12 million

metric tons in the mid-1970s

to 20 million metric tons by

the end of the 1990s. With

private traders now prominent, Bangladesh’s agricultural

exports have risen nearly 5

percent annually over the last

five years. New diversification

into livestock production and

maize cultivation points to

further gains from agriculture,

once seen as a dead-end sector.

The lesson in Bangladesh is

that ODA—when applied in

conjunction with a country’s

serious effort to resolve its own

development challenges—can

yield dramatic results.

Costa Rica: ODA Reinforces

Economic Diversification

Costa Rica, caught in a lowgrowth, high-inflation bind

20 years ago, has adroitly used

ODA to achieve a high-value

transformation, developing its

tourism sector and building

on its high-quality education

system to attract high-tech

industrial investment. The

country’s determined focus

on political stability and

strong institutional foundations enabled these changes to

occur rapidly. 

Costa Rica’s transformation

shows the crucial importance

of building the capacity to

engage with the international

trading system. Costa Rica

seized upon opportunities

presented by a rapidly evolving international trading system. For example, Costa Rica

early on saw the advantage of

preserving its tropical forests

and marketing them as Latin

America’s best ecotourist destination. Tourism, which

brought in $87 million in

1980, exceeded $1 billion

only 20 years later. 

The Costa Rican government

also seized the opportunity of

a partnership with computerchip manufacturer Intel,

resulting in the building of a

microprocessor plant near San

Jose. Microprocessors have

now displaced bananas and

coffee as Costa Rica’s largest

export earner. Overall, agriculture’s share of GDP has

fallen from 25 percent in 1980

to about 13 percent today, and

78 percent of Costa Ricans

work in the service and manufacturing sectors.

How did ODA enable these

successes? American assistance

sought to leverage Costa

Rica’s own efforts at policy

reform. ODA also supported

Central America’s regional

development through investments in highways, electrical

and telephone connectivity

with neighboring states, and

expanded regional institutions

for public and business

administration and nutrition. 

The overall impact of this

modest but focused assistance,

given the structural changes

enabled by Costa Rica’s flexible, pro-market leadership, is

profound. The number of

Costa Rican households living

in poverty has dropped by 50

percent since the early 1980s,

and the country’s per-capita

GDP has more than doubled.

Attacking Poverty Through Productivity 11 Gene Thiemann, Lutheran World Relief

Farmer tends his crops, Bangladesh
The United States stands

behind the efforts of the

developing world to achieve

sustainable growth and prosperity. Doing so requires

public resources. President

George W. Bush’s budget for

fiscal year 2002 includes a

10-percent increase for official development assistance.

But increased funding is not

the only answer. 

As these stories attest, successful development requires

partnerships between developing and developed countries. USAID, with staff on

the ground in nearly 100

countries, works with government ministers, elementary school teachers, business

leaders, farmers, and others

to make the changes necessary for long-term growth. 

Development also means

trade and investment. As the

leading destination for developing country exports, the

United States is focused on

the successful completion of

the “Doha Development

Round” of multilateral trade

negotiations, which will further open world markets to

trade and encourage investment in developing countries.

Real development occurs

only when countries are

willing to shoulder the difficult burden of economic and

political reform. When

countries take on this challenge, the United States and

other donors can help by

providing technical assistance

to governmental and civic

leaders, building physical and

market infrastructure, and

offering vital services to ease

the transition. 

It is the commitment of the

United States to help those

who are determined to help

themselves escape from

poverty and realize the

promise of lasting prosperity.

12 Successful Development: Models for the 21st Century

Our Commitment
Political freedom and economic freedom are

inseparable. Their power for good is

increasingly felt all over the world. The

embrace of accountable, representative

government, respect for human and

minority rights, respect for the rule of law,

civil society and open markets, all of these

coming together are making economic

development and poverty reduction possible

for countries on every continent....

Secretary of State Colin L. Powell 

October 29, 2001

”

“
For more information, contact

U.S. Agency for International Development

Washington, D.C. 20523-1000

Telephone: 202-712-4810

Internet: www.usaid.gov

PN-ACN-908