The volunteering organisation, which supplies NGOs, government ministries and local level community groups with skilled volunteers, is reducing the number of countries that it operates in to 30 by pulling out of places including Thailand, Belize in Central America, Russia and the Balkans.
Mark Goldring, chief executive of VSO, said: "We want to focus our resources in fewer countries and on fewer issues. We're withdrawing from areas that have progressed and are now sufficiently developed that they can staff most of their institutions."
In certain regions, governments and local organisations pay the cost of funding volunteers for things such as living allowances and accommodation, but sometimes VSO pays these.
Goldring said: "In some countries we're saying this is very expensive and we don't think it's working very well and what we have to offer is of more use elsewhere."
The charity has piloted a scheme to recruit volunteers from developing countries and intends to double the number to 200 by at least 2005. Goldring said: "As part of this plan, we're adding to the number of countries from which we recruit so that half of our volunteers will eventually come from outside the UK. We're asking for skilled people who are more experienced and specialised."
The next area in which the charity will explore volunteer recruitment is India.
The level of skilled people has steadily increased in developing countries especially in the medical and teaching professions.
Under the strategic plan Focus for Change, the charity will target six areas: education, HIV and Aids, disability, health and social well-being, secure livelihoods and participation, and governance. Education and HIV will take priority over the next two years.
VSO is also seeking more corporate partners under its Business Partnership scheme, following a three-year successful pilot programme with companies including Shell and management consultants Accenture, which are supplying a stream of people for various programmes.
"We want to get people who are fully involved in their UK careers and show that it's of benefit to them and their employers when they take part in a programme,
Following the pilot schemes, VSO has decided to become more flexible about the length of placements for those taking part in the Business Partnership schemes.