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Financial Post, Weekly edition, Wed 18 Sep 91, page 10. Editorial.


Not only Soviets need West's aid

In the ebbing summer of 1991, the Soviet Union is at the top of the international agenda. With Mikhail Gorbachev back in power, representatives of the Group of Seven nations are considering new forms of economic assistance.

What it will cost is uncertain; at their annual summit last July, the leading industrialized countries offered nothing substantial beyond technical and food assistance. Still, it seems inevitable that the West will eventually divert resources to the Soviet Union and Eastern Europe.

The worry is that the crumbling of the empire will unleash ethnic unrest, invite economic collapse, and ultimately, cause civil war. Fifteen warring republics, some of them armed with nuclear warheads, could cause havoc.

No doubt the need of the Soviet Union is great. But while it continues to decline, the world must not forget the plight of other continents. However desperate the Soviet Union, the need of Latin America, Asia and Africa remains more pressing.

Fresh evidence comes from a new study by the Organization for Economic Co-operation and Development in Paris. It reports that the collective external debt of the Third World was US$1.45 trillion at the end of 1990, up from US$1.39 trillion in 1989. The 4.5% increase was largely due to fluctuations in exchange rates. On the whole, debt burdens have begun easing and the flow of resources to the Third World is increasing.

Since the 1980s, there has been a steady recovery in the volume of general financial transfers and a decline in debt ratios. What's more, the report finds that fears of a diversion of funds from the developing world to Eastern Europe (and the Middle East) appears ''so far unfounded.''

That, however, is the extent of the good news. Whatever the progress in Latin America and Asia, sub-Saharan Africa remains in disastrous shape. Indeed, it is now widely accepted that the 1980s were ''a lost decade'' for Africa. Indeed, last year, while Latin America's debt remained unchanged at US$455 billion, Africa's climbed to US$164 billion from US$156 billion.

The problem with these figures, however encouraging most of them are, is that they do not reflect recent events in the Soviet Union and the Middle East. The rebuilding of Kuwait, for example, has already diverted Arab aid from Africa to Kuwait. Reconstruction of the Soviet Union will similarly divert aid away from Africa.

Obviously, the West has limited resources; it cannot satisfy everyone, particulary when its own economies are stagnant. But the news from the OECD is another reminder for the wealthy nations to continue to address the issue of debt reduction, provide aid to the Third World, and encourage trade and investment in the world beyond Europe.

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