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With reference to "Startling truth about capital flows" (Business Line, June 16), capital flows to developing countries have suffered a major change since the East Asian crisis.

Private capital flows to different categories of developing countries have also fallen significantly.

This decline in private flows was caused mainly by structural factors and, therefore, may be more permanent.

According to IMF data, net private capital flows to emerging market economies, which had peaked in 1995 to almost $240 billion in 1996, more or less halved to less than $120 billion in 1997, fell by around 40 per cent to less than $70 billion in 1998, and 1999, collapsed to less than $10 billion in 2000, and recovered only very faintly to $31 billion in 2001.

An important and high priority task, therefore, is to design measures that will encourage a return of sufficient private flows to developing countries, especially of more stable flows, and particularly including low-income countries.

C. Ramesh

Keeramangalam (TN)

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