18/4/2005
Press Release
ECOSOC/6149


Economic and Social Council

Special High-Level Meeting

5th & 6th Meetings (AM & PM)


SECRETARY-GENERAL ASKS, ‘IF NOT NOW, WHEN?’, AS HE UNDERSCORES NEED TO TACKLE


POVERTY, TERRORISM, DEADLY WEAPONS, KILLER DISEASES IN HIGH-LEVEL MEETING


Momentous Decisions Expected, He Says as Economic and Social

Council, Bretton Woods Institutions, World Trade Organization, UNCTAD Hold Talks


”If not now, when?” United Nations Secretary-General Kofi Annan asked nearly 70 national and international finance and development officials gathered at Headquarters today, as he underscored the urgent need for steps, to deal with poverty, terrorism and the spread of lethal weapons and deadly diseases.


The Secretary-General told the Economic and Social Council’s special high-level meeting with the Bretton Woods institutions, the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD) that the reports of the Millennium Project and the High-Level Panel on Threats, Challenges and Change, taken together with his own report (“In Larger Freedom”), had aroused wide expectations that the time for momentous decisions had arrived.  The stakes could scarcely be higher, he stressed.


Urging everyone to plan their work around the September summit to review implementation of the 2000 Millennium Declaration, as well as the integrated follow-up to major United Nations conferences and summits in the economic, social and related fields, he said that in the last three years especially -- since the 2002 Monterrey Conference on Financing for Development -- approaches to aid, debt, trade and development had coalesced around the Millennium Development Goals.  The coming months offered a unique opportunity to make real changes in the international system that could make the world freer, fairer and safer for all its inhabitants.


No less important was the need to complete the Doha round next year, with its promised focus on development and duty-free quota-free market access for all exports from the least developed countries as a crucial first step, he said.  Also needed were more specific commitments to address the special needs of Africa, and -- last but not least -- to explore all means to mitigate climate change and its effects.  The chances of winning all those commitments were greater if placed squarely in the context of the September summit.


Also speaking in today’s morning session were: Munir Akram (Pakistan), President of the Economic and Social Council; Trevor Manuel, South African Finance Minister and Chair of the Development Committee; Mary Whelan (Ireland), President of UNCTAD’s Trade and Development; and Agustin Carstens, Deputy Managing Director of the International Monetary Fund (IMF).  The context for their statements was the conclusion yesterday in Washington, D.C., of the spring meeting of the IMF/World Bank.


Those opening statements were followed by the convening of six ministerial-level round tables on the following topics:  “Policies and strategies” (Round Tables A and B); “Trade, investment, and private flows” (Round Tables C and D); and “ODA, innovative sources of financing and debt” (Round Tables E and F).  The afternoon session heard the respective Chairs brief participants on their discussions.  That was followed by an exchange of views among civil society and private sector representatives, and delegates, including officials from national capitals.


The representative of the United States said there was plenty of evidence that a lack of official development assistance was not the most critical constraint on a country’s development, noting that India and China had racked up growth on the basis of contributions that were far less than 1 per cent of gross domestic product.  While aid could help, real economic growth lay in enabling countries to tap those flows to realize the goals established in the Millennium Declaration.  That meant taking steps to open markets everywhere.  It meant steps by developing countries to create a favourable environment for market-led growth.  If that was done, there was a good chance of meeting the Millennium Goals, which would help countries escape the “aid trap” into which so many had fallen.


Mozambique’s representative pointed out, however, that to compare the growth of India and China to that of Africa was erroneous, owing to the huge gap separating the starting points of those two realities.  Africa had a serious illiteracy problem and a shortage of technical skills at all levels and in all fields.  One must be realistic when talking about a poverty incidence of 60, or 70 or even 80 per cent of a population, and when considering that some people could not even stand up because they lacked the minimum basic calories required.  Additionally, in order to reduce poverty through economic growth, they had to prepare their economies to be competitive and to seriously upgrade and transform their basic human and physical infrastructures, as well as science and technology, all of which required significant funding.


The President of the 54-member Economic and Social Council said, in his closing remarks, that there had been a wide measure of convergence on many issues, but also differences of perception on several others.  In the months before the Council’s high-level segment in June, those issues should be addressed in-depth in order to promote a greater convergence of perception, leading to decision-taking by the September summit.  Three things would be essential:  continued cooperation and coordination between the United Nations, the Bretton Woods institutions, the WTO and UNCTAD, and leadership from the capitals; a sincere commitment to fulfil the agreements; and a better international macroeconomic environment, where the imbalances, concerns and threats mentioned today would be ameliorated, so as to enable the development agenda to go forward.


Providing briefings on the round table discussions were their respective Chairs:  Carin Jamtin, Minister for International Development Cooperation of Sweden; Séraphine Wakana, Minister for Planning, Development and Reconstruction of Burundi; Fernando Canales Clarion, Economy Minister of Mexico; Eckhard Karl Deutscher, Executive Director of the World Bank in Germany; Tom Scholar, Executive Director of the IMF and World Bank in the United Kingdom; and Yahya Al-Yahya, Dean of the Board, World Bank.


Also making statements this afternoon were representatives of Jamaica (on behalf of the “Group of 77” developing countries and China), Luxembourg (on behalf of the European Union), France, Benin (on behalf of the Least Developed Countries), Brazil, Nigeria, Tunisia and Venezuela.


Additional statements were made by:  Brigita Schmognerova, Executive Secretary, Economic Commission for Europe (ECE); Jo Marie Griesgraber, Chairperson of the New Rules for Global Finance Coalition; and Maria Livano Cattaui, Secretary-General of the International Chamber of Commerce.


The Economic and Social Council will meet again at a date to be announced.


Background


The Economic and Social Council met this morning in a special high-level meeting with the Bretton Woods institutions, the World Trade Organization (WTO) and the United Nations Conference on Trade and Development (UNCTAD)(for details see Press Release DEV/2506-ECOSOC/6147, of 15 April).


Statement by Economic and Social Council President


MUNIR AKRAM (Pakistan), President of the Economic and Social Council, noted that the Millennium Project report had outlined an effective method of achieving the Millennium Development Goals, suggesting that the elimination of hunger and poverty was achievable in our lifetime.


He said today’s large multi-institutional and high-level attendance demonstrated the importance that Member States, as well as development and financial institutions, attached to development issues.  The outcome of today’s meeting, the first in a series of important events this year, should make a useful contribution to the review of agreed development goals at the September summit.  It was fitting that the theme focused on coherence, coordination and cooperation among development issues, in the spirit of the Monterrey Consensus.


Secretary-General’s Statement


KOFI ANNAN, United Nations Secretary-General, said that everyone was working on the same issues -- aid, debt, trade and development -- and today, thanks to the United Nations conferences of the 1990s, there was also a shared vision.  In the last three years especially -- since the Monterrey Conference -- the approaches had coalesced around the Millennium Development Goals.  The coming months offered a unique opportunity to make real changes in the international system -- changes that could make the world freer, fairer and safer for all of its inhabitants.


He said that the General Assembly’s High-Level Dialogue on Finance for Development in June would be followed by the Economic and Social Council’s own high-level segment, the G-8 summit in July, the autumn meetings of the World Bank and the International Monetary Fund (IMF) in September, and the WTO ministerial meeting in December.  All those meetings should be seen in the broader context of the agenda for the United Nations summit in September, when a whole range of vital commitments could be brought together. 


On the development side, those commitments must come from both developing and developed countries, he said.  All developing countries must commit themselves to sound, transparent and accountable national strategies, which they themselves devise and of which they would take full ownership, for mobilizing all their resources in the fight against poverty.  And, all donor countries must commit themselves to timetables for reaching the 0.7 per cent national income target figure devoted to official development assistance (ODA), with front-loading through an international finance facility or other mechanisms, and an active search for new sources, as well as new ways to ensure that the developing countries’ debt burden was genuinely sustainable.


No less important was the need to complete the Doha Round next year, with its promised focus on development and duty-free quota-free market access for all exports from the least developed countries as a crucial first step, he said.  Also needed were more specific commitments to address the special needs of Africa, and -- last but not least -- to explore all ways, both political and technical, of mitigating climate change and its effects.  The chances of winning all those commitments were greater if placed squarely in the context of the September summit. 


It was not possible to enjoy development without security, or security without development, and it was not possible to enjoy either without respect for human rights, he said.  That was why he had proposed a comprehensive agenda, giving equal weight and attention to those three great purposes of the United Nations, all of which must be underpinned by the rule of law.  It went without saying that the agenda had to be agreed through negotiations among States, conducted in a spirit of give and take.


He said he was hoping that Member States would be galvanized, not only by the self-evident urgency of taking steps to deal with poverty, as well as terrorism and the spread of deadly weapons, and indeed, deadly disease, but also by a sense of the unique opportunity that this year presented.  Both on the development side and on the security and institutional side, there was now a widespread sense of “if not now, when?”  The reports of the Millennium Project and the High-Level Panel, taken together with his own report (“In Larger Freedom”), had aroused wide expectation that the time for momentous decisions had arrived.


The September summit to review progress since the Millennium Declaration would be the ideal moment to take those decisions, he said.  The Declaration, after all, had been endorsed at the highest level by all nations, and it laid out shared objectives across the whole spectrum of common concerns.  So the summit provided the perfect deadline, the perfect opportunity for world leaders to bring together the work that their representatives were doing in different forums, and to enshrine it in a form clearly stamped with their unique authority.  The stakes could scarcely be higher and everyone was urged to plan their work with that deadline, and that opportunity, clearly in mind.


Statement by Development Committee Chair


TREVOR MANUEL (South Africa), summarizing yesterday’s Development Committee discussions, said that progress in reaching development goals had been made on many fronts, including significant reforms by developing countries and important gains in reducing income poverty.  However, based on current trends, most Millennium Development Goals would not be met, especially by countries in sub-Saharan Africa.  Yesterday’s meeting had emphasized that sustainable and inclusive growth must be accelerated in many developing countries.  It had also underscored the importance of macroeconomic stability, the need to strengthen public sector financial management, the promotion of good governance, including combating corruption, and promoting the rule of law.  In addition, it had stressed the need to improve the business climate, and to regulate and develop local financial markets, in order to enable private sector-led economic growth.


The Committee had endorsed the emphasis on country-led and owned development strategies and urged that the Millennium Development Goals be operationalized in poverty reduction strategies, he said.  Meeting key development goals would also require a major scaling up in education, health and basic infrastructure services, including water and sanitation.  The Committee had also underlined the vital importance of an ambitious outcome for the Doha Development Agenda and the successful completion of the negotiations in 2006.  It had stressed the need for “aid for trade” and called on the World Bank and IMF to work with others on proposals to help developing countries adjust to and take advantage of the Doha round.


Financing the development agenda remained a significant challenge, requiring sustained action on domestic resource mobilization, private investment and trade, he continued.  Developing countries had made some progress in that regard, but domestic efforts must be complemented by action on the part of development partners.  A significant increase in aid would be needed and bilateral assistance must be more optimally used.  Further debt relief beyond the Heavily Indebted Poor Countries (HIPC) Debt Initiative was needed in specific cases to secure long-term debt sustainability and support progress towards the Millennium Development Goals.  Moreover, the voice and participation of developing and transition countries in international economic policy decision-making and norm-setting was an important issue, which must be addressed through broad consensus at the political level.


Statement by President of Trade and Development Board


MARY WHELAN (Ireland), President of the Trade and Development Board, discussed the role of the United Nations Conference on Trade and Development in relation to the Millennium Development Goals; the role of trade and poverty reduction; and South-South cooperation.  The UNCTAD was seeking to maximize trade for development, and its work on trade and development indicators and benchmarks could complement the systematic monitoring towards achieving the Goals.  The São Paulo Consensus, agreed last year, had, among other things, addressed development strategies in a globalized world economy and ensured development gains from the international trade system and trade negotiations.  Often controversial ideas had been floated in the “UNCTAD-11” preparations, but no one could doubt that phrases such as “policy space” had entered the lexicon of international discourse on development issues.


She said that developing countries could gain up to $300 billion annually from trade.  That was a very optimistic assessment but, like others, it noted that major gains from Doha were likely to accrue to developing countries, among which the major gains were likely to go to those already enjoying a competitive edge.  The increase in merchandise exports had centred on South Asia and South-East Asia and parts of Central and South America.  The question was how to ensure that some developing countries, especially the least developed countries, were not left behind.  Africa’s share of world merchandise exports had fallen from 6.3 per cent in 1980 to 2.5 per cent today.  Most African countries depended on two to three commodity exports, external performance and reversing indebtedness.  For the trading system to complement efforts to meet the Millennium Development Goals, that must be underpinned by solidarity in making trade an instrument to reduce poverty.  In addition, trade-related issues must be considered in a coherent manner. 


An open, equitable, predictable and rule-based multilateral trading system -- everyone knew what needed to be done, she said.  The political will was there to achieve an outcome that would make the Doha promises of 2001 a reality, but the successful conclusion of Doha in 2006 was only the beginning of a process.  A successful end to trade talks would allow all groups of countries to be in a position to exploit trade opportunities, which required physical infrastructure, effective trade arrangements, access to financing, a business-friendly environment and appropriate policies in a regulatory framework, among other things.  On trade and poverty reduction, 1 per cent of world trade had engaged the least development countries in the international trading system and their share had consistently remained less than 1 per cent of world trade since the 1980s.  If that trend continued, the number of people living in poverty could increase. 


The links between trade expansion and poverty reduction, however, were neither simple nor automatic, she warned.  Lives and livelihoods in most of the least developed countries were not directly linked to the international economy.  World trade could play a powerful role, but poverty reduction was being realized in only a few of the least developed countries.  The challenge was to focus on national development strategies, with improvements in the international trade regime, including issues that went beyond the scope of the WTO.  What was required was not just export expansion, but also development linkages between export growth and the rest of the economy.  Export trade alone could not reduce poverty, whereas investment was not enough to support sustainable economic growth. 


She cited three conditions for ensuring a better trade/poverty relationship in the least developed countries:  the emergence of a domestic entrepreneurial class; increased effectiveness of international and financial support to build production and trade capacity; and a lasting exit from debt.  South-South investment was growing faster than that of developed to developing countries, but two thirds of South-South trade took place in Asia.  The UNCTAD’s raison d’être was to maximize trade’s contribution to development.


Statement by Chair of International Monetary and Finance Committee


AGUSTIN CARSTENS, Deputy Managing Director of the International Monetary Fund and designated representative of the Chair of the International Monetary and Finance Committee, recounted the highlights of the Committee’s 16 April meeting, noting that global growth would likely remain robust in 2005, but that widening imbalances across regions and rising oil prices, as well as oil market volatility had increased risks.  The potential for a sharper-than-expected rise in long-term interest rates and increased exchange rate volatility also called for vigilance.


Stressing that poverty reduction must remain at the top of the international agenda, he said that most developing countries were at risk of falling well short of the Millennium Development Goals.  The key challenge remained to press ahead with reforms to strengthen the investment environment and foster private sector-led growth.  The global community must support reform efforts by meeting commitments to increase and better coordinate financial and technical assistance, further debt relief, policies to improve remittance flows, and improved market access for developing countries.  Successful and ambitious multilateral trade liberalization was central to sustained global growth and economic development.


Outlining the IMF’s strategic direction, he stressed that surveillance was vital and that its effectiveness and impact should be enhanced.  Work on financial-sector issues and international capital markets should be further strengthened to reduce vulnerabilities and promote financial stability.  The Fund’s lending function was also critical and further reflection was needed on how the needs of members could be met through IMF arrangements, and whether new instruments or revisions to existing facilities were required.  The IMF also played a vital role in helping low-income countries to reduce poverty and achieve strong, sustainable growth through sound policies and institutions for macroeconomic stability.  In addition, an adequate voice and participation by all members should be assured, and the distribution of quotas should reflect global economic developments.


Briefs on Round Tables


CARIN JAMTIN, Minister for International Development Cooperation, Sweden, briefed on Round Table A -- “Policies and strategies” -- saying that the discussion had stressed the importance of more and better aid.  Speakers had underlined the importance of debt cancellation, but acknowledged that debt relief did not always release new resources.  Also discussed were the risk of “brain drain”, which was becoming a kind of converted aid drain, and the role of development assistance to fragile States.  Several participants had touched on the role of employment in poverty reduction, the role of the private sector and the need for job market impact assessments.  While hundreds of millions of people were living without jobs, there were also those with jobs who lived on less than $1 a day.  Also discussed was the issue of national and international capacity gaps, in parallel with the resource gap.


She stressed the critical importance of capacity-building, which was perhaps even more effective in times of policy change.  Speakers had also discussed the possibility of using aid to provide conditions that were conducive to building government, and not only after government structures were in place.  It had been agreed that policies on the movement of labour should be examined, and in that connection, speakers had welcomed the creation of a global commission on migration.  Governance issues had also been discussed and good governance constantly underlined as a precondition for country-level ownership, which, in turn, was a precondition for poverty reduction.  The importance of transparency and the role of non-State actors in governance had also been considered.  Property rights were seen as unleashing the potential of the poor, and many participants had touched on the importance of the private sector, both to create growth and jobs, but also to reduce poverty as a whole. 


Indeed, she said, there was a need for better articulation of measures for private sector initiatives, as well as for fighting corruption at all levels.  Some had stressed the need to develop instruments to help countries absorb shocks.  Underlying the entire discussion was the need to repeat the collaboration that had emerged in the Monterrey process.  Participants were looking forward to the Monterrey follow-up in June and to strong participation from capitals and from the Bretton Woods institutions, as the latter were so important for poverty reduction. 


SÉRAPHINE WAKANA, Minister for Planning, Development and Reconstruction, Burundi, briefing on Round Table B on the same topic, said participants had concurred with the need for urgency in building momentum ahead of the September summit.  That required an effort to strengthen policies and deliver more effective aid.  Speakers had also stressed that each country must develop its own strategy for achieving the Millennium Development Goals.  A clear long-term vision of development goals was essential as a guiding framework for short- and medium-term policy actions and decisions.  A long-term vision also needed for medium-term implementation strategies.  Several speakers had underscored the difficulties for developing countries to prioritize their needs while preparing their development strategies.  Concern had been expressed at the recent shift towards human capital development, which might lead to neglect of the centrality of infrastructure. 


In terms of domestic policies, she said that many speakers had emphasized the need to give far more weight to the creation of productive jobs, in order to attain the objective of halving the number of those who lived in extreme poverty by 2015.  Others had highlighted the current disconnect between output growth and job growth, which required a rethinking of the relationship between growth, investment and jobs.  Investment policies should focus on the self-employed, micro- and small- and medium-sized enterprises, which created the bulk of jobs worldwide.  There was a clear need to strengthen the role of the State, including by improving the climate of private-sector activity by removing excessive regulation.  Concern had been expressed over the continuing negative transfers of natural resources from developing to developed countries, which the former used as a form of self-insurance against excessive volatility in the international financial markets.  There had been a broad wide consensus that attainment of the Millennium Development Goals would require additional international resources. 


It had also been agreed that the challenges of countries with special needs required greater attention, she said.  Proposals for innovative finance sources could also be important in mobilizing additional resources.  Speakers had called for greater efforts towards harmonization among donors to enhance the effectiveness of aid flows.  Participants had underscored the crucial link between trade and development, and supported the commitment made at Monterrey to a rules-based, non-discriminatory and equitable multilateral trading system, as well as the urgency to move quickly to a successful conclusion of a truly development-oriented Doha agenda.  There was also a need for greater coordination among the international financial institutions.  The United Nations conferences of the last 15 years had built a broad consensus on development objectives and what was needed to achieve them.  Urgent action was needed to close the growing credibility gap between commitments and delivery.


FERNANDO CANALES CLARION, Economy Minister of Mexico, reporting on the discussions of Round Table C -- “Trade, investment and private flows” -- said participants had expressed diverging views on trade and recognized the need for country-tailored policies rather than a one-size-fits-all solution.  In light of the forthcoming WTO meeting in Hong Kong, countries must reach agreement on reducing trade barriers and eliminating agricultural subsidies.  They had also attached great importance to promoting exports and increasing national productive capacities, particularly in impoverished African countries.  Regarding investment, the banking sector must be expanded and capital investment promoted through better information.  Countries with lower levels of capital needed greater access to banking services, he said, noting the importance of opportunities offered by the African stock market and South-South investment.  Moreover, an established rule of law was necessary to attract private capital.


Participants had also highlighted the socio-economic benefits of remittances from migrants, particularly those in the United States, Canada, European Union and Japan, to their countries of origin, he said.  Such funds could be invested to increase recipients’ standards of living, create businesses, and, combined with government funds, to strengthen infrastructure.  Representatives of middle-income countries, in particular, called for greater emphasis on their needs.  Their fruitful discussion had also focused on the Millennium Development Goals and the need to reach substantive agreements during the December WTO meeting aimed at implementing the Doha agenda.


Summarizing the debate of Round Table D, also on trade, investment and private flows, ECKHARD KARL DEUTSCHER, Executive Director of the World Bank in Germany, stressed that translating political will into concrete action during the forthcoming Hong Kong meeting would be crucial to concluding the Doha round.  The international community must assist developing countries in adjusting to the impact of trade liberalization and capacity-building, providing them with preferential treatment and adequate technology transfer.  On how to reduce the need for large foreign exchange reserves and to increase private capital flows to developing countries, participants had broadly agreed that currency volatility was a major impediment and that strengthening government institutions was a long-term solution to reducing the risk of abrupt changes in exchange rates.  Floating exchange rates would also be helpful, as would stepped up borrowing by countries, in local currencies, which would reduce the risk of financial crisis by eliminating currency mismatches.  However, infrastructure development, assisted by technology transfer, must come first, and on the question of increasing remittance flows, efforts should focus on lowering remittance costs.


Turning to the effectiveness of public-private partnerships in stimulating investment, he stressed the importance of a favourable regulatory environment, transparency and enabling infrastructure.  Weak regulatory regimes had impeded many developing countries’ ability to create such a climate.  That challenge was greatest in small, fragile economies.  Greater understanding of public-private partnerships was crucial, and multilateral organization could assist the private sector through advice and capacity-building to strengthen institutions, infrastructure and information. 


TOM SCHOLAR, Executive Director, International Monetary Fund and World Bank, United Kingdom, said Round Table E had discussed aid and innovative finance mechanisms, as well as debt relief.  On aid, there had been strong calls for countries to step forward to meet the agreed 0.7 per cent official development assistance targets, as well as a discussion of various countries’ plans to achieve interim targets.  There had also been strong support for the Secretary-General’s call for all countries to set timetables in that regard.  Participants had been made aware of an analysis of the composition of existing aid flows, which concluded that there was a need to ensure that, within existing and increased aid flows, sufficient resources would be provided in the form of cash transfers to enable countries to finance the Millennium Development Goals.


On aid effectiveness, he said speakers had stressed the importance of stable, predictable and long-term financing, and of greater progress on harmonization, as well as the central nature of country ownership.  Also emphasized had been the need to further streamline conditionality and increase the focus on results, as well as the need to improve the ability to measure aid effectiveness to enable improved efforts.  Speakers had also underlined the need to prepare for external shocks.  Also discussed had been the vital role of the private sector and the importance of managing aid flows in a way that did not disrupt private credit and investment.  Speakers had also stressed the different contributions that could be made by innovative financing mechanisms.  It was felt that the international finance facility offered a way to front-load resources to help countries meet the Millennium Goals.


Participants had highlighted global taxation as a mechanism for supplementing aid flows and providing a source of stable, predictable and long-term financing, he said.  Support for that idea had been accompanied by three points:  money should be delivered through existing mechanisms; that was not a substitute, but a supplement; and there was a need to move ahead rapidly.  There had been significant advances in the past six months and now was the time to reach agreement.  Speakers had welcomed two proposals with which to progress on a private basis, namely the international finance facility plan for immunization, and the private tax on airline tickets, which would be nationally applied and internationally coordinated.


On debt, he said he had noted strong calls for relief beyond the HIPC Debt Initiative.  A number of principles had been set out to guide the debate, as follows:  debt relief should provide additional resources and not divert others; there was a need to ensure equity across countries; and extra debt relief should be linked to good governance and strong domestic policies.  Speakers had also stressed the need for an adequate level of grants in a system that complemented debt relief.  There was also a need for an international debt arbitration mechanism.  Speakers had insisted that debt forgiveness was not, in itself, enough to address developing countries’ financing for development.  A sense of urgency had marked the discussion, with some speakers expressing scepticism about the international community’s ability to deliver on its commitments, given its past record.  Yet, it was time to act on those proposals.


YAHYA AL-YAHYA, Dean of the Board, World Bank, briefed on Round Table F, saying the discussion had benefited from diverse views on the subjects of official development assistance, innovative financing sources and debt.  It had also benefited from the note of the Secretary-General on the meeting, as well as the outcomes of the 2005 spring meetings of the Bretton Woods institutions.  The debate had anchored itself in the Monterrey Consensus and the Millennium Development Goals, and several speakers had reminded participants of the magnitude of the agenda.  On the developing countries’ side, speakers had emphasized the need to improve governance, growth, infrastructure, absorptive capacity and domestic resources mobilization.  The need to address debt sustainability had also been underscored, and not just in low-income countries, but also in middle-income countries.  On the developed countries’ side, speakers had stressed issues of finance and reminded colleagues of the importance of trade and market access as a major financing source.  There was also a need to enhance capacity-building and address the major challenges and imbalances, especially currency fluctuations in the global economy.


He said the group had also had its share of the debate on loans versus grants, but it had been unable to advance that any further.  All participants had agreed that higher levels of official development assistance were needed to meet the Millennium targets by 2015 but there had been no consensus as to how to achieve that goal.  It had also been agreed that innovative sources of financing, for interested donors, could be a way to provide additional development assistance, and that debt relief should supplement existing official development assistance levels.


Statements by Civil Society and Business Sector


JO MARIE GRIESGRABER, Chairperson of the New Rules for Global Finance Coalition, said a broad-based coalition of civil society organizations was engaged in a global call to action to mobilize support for poverty eradication.  This year, marking the 10-year countdown to implementing the Millennium Development Goals, as well as reflection on follow-up to the financing for development process, was opportune for once again placing development centre stage.  Civil society representatives were particularly concerned with the need for greater aid flows to developing countries in order to fight poverty.  The Lula Initiative could provide a template for greater stability and predictability in aid and financing flows for development.  Broad-based support from donor countries and speedy implementation of the Lula Initiative should include creation of global tax policies and the meeting by donor governments of the 0.7 per cent official development assistance target.


International private capital flows were also essential to meeting the Millennium targets, she said.  However, foreign direct investment was concentrated in a few countries and was highly volatile.  Such volatility must be reduced through prudent regulation, capital controls, anti-trust laws and performance requirements to ensure that capital flows fostered economic development.  Regarding debt, the current sustainability frameworks of the Bretton Woods institutions failed to make poverty reduction their core objective.  There was a need to provide exclusively grant-based finance and 100 per cent debt cancellation to assist indebted nations, as well as a better review process to assess debt sustainability.


MARIA LIVANO CATTAUI, Secretary-General of the International Chamber of Commerce, said the Monterrey Consensus had been a turning point in the international construction of the financial underpinnings needed for economic and social progress, proving itself as a landmark in delineating the respective roles and responsibilities of developed and developing countries in that endeavour.  The Monterrey process itself had been noteworthy for its inclusion of the business sector and civil society in the preparatory phases, in the Conference, and in the follow-up.  That had made it possible to develop new forms of engagement with governments and international institutions.  The International Chamber of Commerce had played a lead role in organizing a strong business presence throughout the process. 


Noting that the business sector had delivered a range of innovative proposals and actions on marshalling private resources for investment, as well as on building practical models for partnerships with governments and international institutions, she said the business group continued to refine and further develop those proposals.  Since the Monterrey Conference, much of the intergovernmental discussion on development financing had revolved around follow-up.  Of course, official development assistance levels were at the centre, but one main area on which business involvement in the follow-up had also focused had been the development of local capital formation, local enterprise and investment.  The traditional emphasis for development had been on macroeconomic and political conditions.  But an essential complement must be the microeconomic environment in country-specific situations. 


Exchange of Views among Participants


BRIGITA SCHMOGNEROVA, Executive Secretary, Economic Commission for Europe (ECE), said regional initiatives to prevent crisis and promote trade, investment and financial cooperation must be encouraged.  Greater collaboration between the Bretton Woods institutions and regional development banks must be promoted to help developing countries and economies in transition to better manage the external shocks of globalization.  Those countries’ high vulnerability to external shocks was due in large part to their high dependence on exports and it was important that they diversify for economic sustainability and poverty reduction.  Intraregional trade was increasingly recognized for its important role in that process.  However, the developing world had yet to create intraregional trade to the extent that it should, particularly in the Middle East and Africa, where intraregional trade flows remained extremely low.  Greater efforts were needed to strengthen the institutional capacity of developing countries and economies in transition to forge adequate free-trade accords, as well to compensate for losses.


Echoing Ms. Griesgraber, she said that in some regions the bulk of investment flows was concentrated in a few countries and greater efforts were needed to foster increased regional and intraregional distribution of resources.  While countries were competing to do so through several strategies, including offering tax breaks to attract investment, better solutions were needed to address the situation. 


Exchange of Views among Member States


DEIKA MORRISON, Minister of State, Ministry of Finance and Planning of Jamaica, said on behalf of the “Group of 77” developing countries and China that globalization required effective governance that focused on four key elements:  democratization of international economic decision-making; integrated consideration of trade, finance and developmental issues by international institutions; reform of the international financial architecture; and establishment of a strong mechanism for surveillance and regulation.  Policies and strategies for attaining the Millennium Development Goals must uphold the principles of good governance, at both the national and international levels, as well as take account of the fact that there was no single sustainable model for development.  Developing countries needed the “policy space” to select their own options.


She said that the effective mobilization of financial resources for development, as well as the creation of a conducive international environment posed the greatest challenge to developing countries.  Those countries, therefore, required urgent action in the area of trade investment and financial flows through, among other things, the creation of an open, rule-based multilateral trading system.  The 0.7 per cent official development assistance (ODA) target should be fulfilled as a matter of priority, and additional resources should be generated to achieve the Millennium Development Goals.  Identification of new and innovative developing financing sources should be complementary to official development assistance (ODA) and not impose additional burdens on developing countries.  Additionally, there was an urgent need to improve the effectiveness, not just the volume, of assistance by improving the process and delivery mechanisms and reducing transaction costs.  Another important issue, which had been correctly highlighted, was the relationship between growth and employment. 


JEAN-MARC HOSCHEIT (Luxembourg), speaking on behalf of the European Union, said the Millennium targets could only be achieved by 2015 through serious national and international efforts to stand by commitments and fully implement the Monterrey Consensus.  Developing countries must make good on their promise to create an enabling environment, with good governance and optimal domestic resource mobilization; developed nations must fulfil their commitments concerning official development assistance (ODA), trade and debt.  The recent renewal of the European Union-the African, Caribbean, and Pacific Group of States Convention was a good example of the European Union’s consistent efforts to increase official development assistance.  It provided 55 per cent of global official development assistance, which would reach 0.39 per cent of gross domestic product by 2006.


Increasing aid was not enough, he said, stressing that improving its quality and effectiveness was equally important.  Last year, the European Union had conducted a full assessment of how its members could best contribute to the full implementation of the harmonization and alignment agreement resulting from the Rome Agenda.  It had further committed to improve the quality of aid, streamline aid procedures and regularly measure national and global progress levels against agreed indicators and targets.  Implementation of those agendas would require harmonization of operational procedures, alignment of aid with country-owned priorities and more predictable aid delivery.


On the issue of trade, he said the European Union was committed to improving and increasing trade-related technical assistance to developing countries, allocating on average 700 million euros annually for that end.  Concerning debt relief, the long-term debt sustainability of low-income countries was essential for economic stability, growth, and development.  The European Union welcomed new strategies for dealing with their multilateral debts, including private-sector participation in the process.


SICHAN SIV (United States) said that expanding the circle of prosperity was a fundamental goal of his county’s policy and that he agreed with the Secretary-General on how to achieve that goal, namely through good governance; respect for human rights; a vibrant society; free, open and competitive markets; and an entrepreneurial private sector.  The critical point made at Monterrey was that developing countries had their own responsibility for development, and developed countries had a responsibility to support those efforts.  Before Monterrey, President Bush had pledged to increased official development assistance  by 50 per cent by 2006 and had achieved that level two years early.  That represented a near-doubling of assistance from the 2000 level and the equivalent of nearly one quarter of all assistance provided by developed countries that year.


He said that United States assistance to Africa had tripled since 2000 and, more importantly, had ensured that those funds went to individuals in need, particularly those suffering from AIDS or famine, and to those countries that had proven their capacity to use those funds well.  In 2004, the Millennium Challenge Account had been established, and today in Washington, D.C., the United States and Madagascar were signing a $110 million four-year compact, which exemplified the commitment of the United States to a results-based approach to development.  Those funds would allow the rural poor in Madagascar to secure property rights, access to credit, and better understand market opportunities. 


There was plenty of evidence that official development assistance was not the most critical constraint on a country’s development, he said.  India and China had racked up growth on the basis of official development assistance contributions that were equivalent to far less than 1 per cent of gross domestic product.  Africa as a whole in 2003 had received assistance equivalent to almost 8 per cent of gross domestic product (GDP).  Today, trade for investment, remittances and private transfers to developing States dwarfed the amounts contributed for official development assistance. 


He said that foreign direct investment from the Organisation for Economic Cooperation and Development (OECD) States had amounted to $192 billion, and workers’ remittances had totalled $92 billion.  In contrast, official development assistance from all sources had amounted to about $68 billion.  That was a substantial sum, but still only a small fraction of the hundreds of billions of dollars available to support investment in developing countries.  The world economy was driven by private finance and trade and it was time that everyone recognized that fact.  Aid could help, but real economic growth lay in enabling countries to tap those flows to realize the goals established in the Millennium Declaration.  That meant taking steps to open markets everywhere, and that meant steps within developing countries to create a favourable environment for market-led growth.  If that was done, there was a good chance of reaching the Millennium Development Goals, which would help countries escape the “aid trap” into which so many had fallen. 


Mr. LEROY (France) said aid should not substitute, but rather complement, trade liberalization.  Innovative financing such as transfers, remittances and international taxation were necessary.  France lauded the decision made yesterday, during the spring meeting in Washington, D.C., by the IMF and World Bank to pursue analysis of global taxation policies.  France, Brazil, Chile, Spain and Germany were working together on international taxation policy cooperation.


OUSSOU EDOUARD AHO-GLELE (Benin), whose country chairs the Least Developed Countries (LDCs), said they were sceptical about the implementation of encouraging measures to attain the Millennium Development Goals.  The reference to those Goals and to the official development assistance target of 0.7 per cent also included foreign aid of 0.15 per cent to 0.2 per cent for the LDCs.  There was a precise timetable for the LDCs’ attainment of those targets by 2010, but the objective was very far from being met.  Although precise commitments had been undertaken, no one had explained how the objectives could be met and the LDCs were sceptical now.  In the case of official development assistance, there must be a distinction between resources for development and resources for humanitarian issues.


In terms of the LDCs, he said that foreign aid must help them to emerge from their underdevelopment and to develop their own capacities, so they could generate their own resources.  Humanitarian issues that received resources should not be confused with the aid option, while migrants’ remittances must also be included as development resources.  If such expatriation was encouraged because the nations of origin could not adequately provide for their nationals, then there would be no resources in those countries being drained.  That point should be made very clear in the present debate and beyond.


MARIA LUIZA VIOTTI, Director-General in the Department for Humanitarian and Social Affairs of the Ministry of External Relations of Brazil, noted growing support for the Brazil-France initiative to develop innovative financing to help developing countries, in particular, to attain the Millennium Development Goals.  More work was necessary to bring those proposals to the implementation stage.  While some financial instruments would indeed yield results in the short term, others would require more time for a consensus to be developed.  The initiative was not proposing the creation of international taxes but rather coordination at the international level of national taxes.  Brazil encouraged more countries to participate so that new approaches could be developed before the summit in September.


BULUS PAUL ZOM LOLO (Nigeria) said there had been general agreement in Round Table F on the need to increase official development assistance levels.  That would enable developing countries to undertake bold and ambitious steps in their national strategies towards achieving the Millennium Development Goals.  Grants should not be used to clear the commitments or arrears owed to the multilateral financial institutions. 


On debt and its effectiveness, he called for debt cancellation, and where that was not possible, for the swapping of debt with sustainable development as another alternative.  When discussing mechanisms for debt walkout, arbitration at the international level was one possible way.  In terms of multilateral debt walkout, one good example of that had occurred in Iraq, and Nigeria would like to see more support for that.  Where there was political will, there was always a possibility to resolve the debt issue. 


While agreeing with the United States and others that developing countries bore the primary responsibility for their own development, he sought movement on the Convention against Corruption, as well as transparency on the bankruptcy laws of developed countries, which seemed shrouded in secrecy.  More disclosure would “take the shine out of corruption” in Africa.  Concerning development financing, the focus should be on the end goal, which was to provide a better life “in larger freedom” for people -- freedom from want and freedom from fear.  Developing countries should take the real leadership and ownership of their development strategies, rather than acquiesce for the sake of expediency.


ALI HACHANI (Tunisia) stressed the importance of innovative sources of financing, saying they should take into account mechanisms made on a voluntary basis to fight poverty in the world’s poorest regions.  Such voluntary contributions could play an important role in organizing and managing resources.  The process aimed at achieving the Millennium targets should duly take into account the World Solidarity Fund.


JULIO VILORIA, Vice-Minister for Financial Administration in the Ministry of Finance of Venezuela, said his country had made significant strides through good governance, civil society participation and action to achieve the Millennium Development Goals.  It had developed successful programmes in health, education and culture.  A United Nations Development Programme (UNDP) report referred to Venezuela’s populist approach, but official development assistance should not be subject to conditions imposed by developed countries or international financial institutions.  Poverty eradication should be the focus of innovative financing for development and relief for the indebtedness of poor and middle-income countries.


PEDRO COUTO, National Director for Studies & Research of Mozambique, said the poorer countries in Africa had been trying to evolve strategies to solve their problems.  By now, it seemed that most countries had clear objectives.  They sought to have their economies enmeshed normally in the world market, including in trade, private investment flows, and so on, compared to the current situation where aid was taking the lead.  When those countries said they needed additional aid, it was not just for the sake of asking for more aid, but because real constraints led them to conclude that additional aid was required indeed.  If those countries wanted to reduce poverty through economic growth, they had to prepare their economies to be competitive.  To do that required a serious upgrade and transformation in basic infrastructure, starting with the human and physical infrastructures, science and technology, and so on, which required significant funding. 


Clearly, Africa was raising its efficiency and effectiveness and becoming more transparent, but greater human capacity was required, he said.  The differences were great between African countries on one hand, and China and India on the other.  Indeed, the starting point between those two realities was huge.  In Africa, for example, there was a serious illiteracy problem and a shortage of technical skills at all levels and in all fields.  One had to be realistic when talking about a poverty incidence of 60, or 70 or even 80 per cent of a population.  There were people who could not stand up because they did not have the minimum basic calories.  Countries with such populations had to rely on foreign resources, along with domestic resources, and they had to use them efficiently.  That should be clearly understood. 


Mr. AKRAM (Pakistan), President of Economic and Social Council, said in closing that, in today’s rich discussion, there had been a wide measure of convergence on many issues, but also differences of perception on several others.  In the months before the high-level segment in June, some of those specific issues needed to be addressed in greater depth so as to promote a greater convergence of perception and understanding and in order to take action by the September summit. 


He said three things would be essential to evolve that:  continued cooperation and coordination between the United Nations, the Bretton Woods institutions, the WTO and UNCTAD, and leadership from capitals; a sincere commitment to fulfil the agreements; and a better international macroeconomic environment, where the imbalances, concerns and threats mentioned today would be ameliorated, so as to enable the development agenda to go forward. 


* *** *