Aid is effective only if it supports countries in which governments have demonstrated a commitment to sound policies. The development of the private sector in a market driven economy is the engine of socio-economic development. Experience has taught that that countries develop at a higher pace when they are integrated in the international markets of goods, services, capital and labour. Therefore, international co-operation needs to focus primarily on stimulating trade and investment. Reducing risks, which form the major bottleneck for development, is the most effective instrument for this purpose.
Aid has many negative side-effects, such as increasing dependency and disturbing local structures.
Loans, and above all guarantees, are potentially much more effective instruments. Perhaps it would be better to replace it by separate regional agreements which can take into account the differences in development between and within regions in the widely divergent ACP countries. The EU should formulate a coherent EU aid policy which is consistent with its trade policy and with its Common Agricultural Policy. The trade policy should be in alignment with the WTO rules. The EU aid policy should include all developing countries, without discrimination.