Focusing on the contribution that international capital makes to economic development, this report shows how countries at different stages of development have used external finance productively; how the institutional and policy environment affects the volume and composition of financial flows to developing countries; and how the international community has dealt with financial crises. Part I, an overview and historical perspective, considers historical context, national policies, financial mechanisms, and prospects and options. Part II deals with the role of economic policies and covers macroeconomic and trade policy in industrial countries from the perspective of a developing country, foreign borrowing and developing-country policies, and managing foreign finance. Part III deals with mechanisms for international financial flows, including the international financial system and the developing countries, official development flows, international bank lending and the securities markets, and direct and portfolio investment. Part IV deals with perspectives and policies for the future. Following this is a statistical appendix containing 12 data tables and a section of bibliographical notes. The final section is an annex containing 28 data tables showing world development indicators, including demographics, economic indicators, government spending, education, and urbanization. Technical notes on the tables and a bibliography of data sources conclude the report. (IS)