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Wednesday, June 19, 2002 - Web posted at 7:47:38 am GMT

UNITED NATIONS, June 18 (Reuters) - Washington needs to increase and target foreign aid for specific health and education projects in poor countries rather than worry only about its own interests, a leading economist said in conjunction with a U.N. report which was released on Tuesday.

Challenging U.S. Treasury Secretary Paul O'Neill's analysis of impoverished African nations, Harvard economist Jeffrey Sachs said too many countries simply did not have the means to eradicate disease and educate the young.

O'Neill, who recently visited four African nations with Irish rock star Bono, said an antidote to widespread poverty lay with private-sector growth and blamed corruption for much of the impoverishment he found.

But Sachs said that in Nigeria, for example, the country's oil wealth amounts to about $91 a year per person for its 120 million people. "It is a poor country made even poorer by corruption," said Sachs, a key U.N. adviser on development.

He spoke at a news conference about a comprehensive report by the Geneva-based U.N. Conference on Trade and Development on the world's 49 poorest countries. The study said they were sinking deeper into an "international poverty trap."

Saying O'Neill had his "heart in the right place," Sachs, however, warned the secretary about generalizations.

"When development assistance has been targeted towards urgent social needs, like fighting African river blindness or eradicating small pox it works," he said.

"You get what you invest in. If you don't invest in vaccines or in fighting AIDS or in drilling wells ... you won't get results," he added.

But Sachs said most U.S. foreign aid went to middle-income developing countries "that are of political interest to us." And since the Cold War ended, aid has dropped to new lows.

"Why did we give Mobutu aid?," he asked about the late dictator of Zaire, now the Democratic Republic of the Congo.

"Not for development assistance but as a proxy in the Cold War. And now we might want to use development assistance actually for development," he said.

Such assistance is not wasted. In Bangladesh, he said 20 years of targeted aid has reduced infant mortality and fertility and allowed economic growth.

"When Secretary O'Neill stood in a hospital ward and looked dying people in the face, who are dying because they can't get $1 a day for their pills, he should understand we can make a difference. And to come back and generalize is unacceptable in my view," Sachs said.

"How are people dying by the millions going to get treatment to keep them alive? That stuff is not for free. And they can't pay for it," he said.

Sachs said many health and education projects were easy to monitor and development would benefit for the entire country.

"There are ways to do this that have very high returns. That is not what the United States has been doing. We give very little and we don't target it very well," he said.

Until about two years ago there was almost no money going to fight the AIDS pandemic in Africa, not even from the World Bank. "Things are starting to change but we just weren't doing it for a long time," Sachs said. Nampa-Reuters