The impact of declining flows of concessional assistance partly offsets the beneficial impact of the HIPC Initiative. Strengthening private capital inflows is, of course, critical and will be greatly enhanced by the adoption of the type of policy framework discussed above. Private capital flows tend to be concentrated in a limited range of sectors in the relatively more advanced developing countries. They do not reach countries with the poorest infrastructure and the most difficult social conditions. The need for reviving ODA flows has been reinforced by the financial crisis, which has underscored the challenges of sustainable development and of reducing potential vulnerabilities of LDCs.
Official assistance is effective only when it complements locally-led efforts.
Aid flows must be supported by a transparent policy framework aimed at achieving quality sustainable growth. The need is for an integrated approach to economic policy design, combining international financial support with better targeting of resources to priority development goals. Improving infrastructure, basic health and education, and governance, as well as environmental sustainability, have emerged as key areas requiring donor assistance. Donors must improve coordination with the authorities and strengthen their bilateral assistance to countries that have demonstrated a commitment to reform. The third critical element of efforts to improve the growth performance and prospects of the poorest countries concerns trade.