Developing countries should be protected amid world financial crisis

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Tuesday, 17 March 2009 11:06

A World Bank report warns that 129 developing countries are facing an investment shortfall of 270 to 700 billion U.S. dollars this year. International institutions alone are not expected to be able to fill this gap.

The developed countries are continuing to focus on stimulus packages for their own economies and withdraw capital from foreign markets. However, it is necessary for them to realise that developing countries should also be protected in order to facilitate a global recovery.

“This global crisis needs a global solution and preventing an economic catastrophe in developing countries is important for global efforts to overcome this crisis,” World Bank President Robert Zoellick said.

An economic catastrophe may have yet to reach the developing world since the waves of the crisis have not entirely hit ashore far away from where they were generated.

Developing countries with lower anti-risk capabilities, especially the rising economies, may have to stand up to larger and more devastating impacts.

Many of the developing countries lack the resilience to sustain risks because of their simplified economic structures and incomplete financial systems.

Justin Yifu Lin, World Bank chief economist and senior vice president, said that the sharp fall in foreign trade and investments of the developed countries will leave the developing countries to bear much more of the brunt during the current economic crisis.
Lin urged developed countries to spend a portion of their stimulus plans on developing countries.

“Channeling infrastructure investment to the developing world where it can release bottlenecks to growth and quickly restore demand can have an even bigger bang for the buck and should be a key element to recovery,” he said.