ABSTRACT
THIS CHAPTER 1 Examines the nature of public and private capital flows to develop-
ing countries, including the rationale for and major types of foreign assistance to agriculture
2 Discusses the types, the objectives, and the positive and negative effects of food aid programs in less-developed countries
3 Identifies means for improving the effectiveness of foreign assistance
DEVELOPMENT ASSISTANCE PROGRAMS RELATED to AGRICULTURE Flows of capital into developing countries can help overcome a shortage of capital relative to labor. Private capital flows, however, may not be sufficient to meet development needs, for several reasons. Restrictions on investments and other forms of capital flows in developing countries create risks for private investors, as do political uncertainty and long gestation periods for projects. Many key forms of infrastructure have attributes of public goods, and it is difficult to charge for use of public goods. All these factors reduce the willingness of the private sector to undertake investments and, hence, can slow the flow of capital into developing countries. The absence of sufficient incentives to
invest can also result from incomplete development of international capital institutions. Foreign development assistance (aid) is one possible solution to help reduce the resulting capital imbalance, including assistance to the agricultural sector.
