German Chancellor Angela Merkel told a UN summit on Tuesday that developing nations needed better governance and urged them to take more responsibility for building up their economies to combat poverty.
She also said the United Nations had to accept that efforts to eliminate poverty and hunger had fallen short of the Millennium Development Goals set a decade ago.
Germany is the world's third largest aid donor and Merkel said there should be more "results-based financing" to poorer nations who have demanded greater financial aid from the industrialised world at the summit.
"There is one thing we have to accept. The primary responsibility for development lies with the governments of the developing countries," Merkel said.
"It is in their hands whether aid can be effective. Therefore, support to good governance is as important as aid itself."
Merkel insisted that development assistance "can, apart from emergency situations, only be a contribution to national resources, never a substitute for them.
"Development aid cannot continue indefinitely. The task therefore is to use limited resources as effectively as possible. This can only work through good governance which taps that country's potential."
The German chancellor also called for greater efforts to promote a market economy and small businesses.
"Without self-sustaining economic growth, developing countries will find the road out of poverty and hunger to steep to climb."
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