|Department of Public Information • News and Media Division • New York|
Press Conference to Launch ‘World Economic and Social Survey 2010’
While the Group of 20 (G-20) had been important in addressing the global financial crisis, after more than a decade in existence, it had not significantly addressed the challenges of poverty eradication, labour equality, and the environment, which remained necessary for sustainable development, Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development in the Department of Economic and Social Affairs, said at Headquarters today.
At a press conference to launch World Economic and Social Survey 2010, Mr. Jomo said that, although it had encouraged fiscal-stimulus measures in some developing economies, the G-20 was perceived as unable to agree on macroeconomic and financial reform issues. To some, its approach appeared “ad hoc and piecemeal”, seeming to undermine the policy coherence needed to sustain real economic development, he added.
Subtitled “Retooling Global Development”, the Survey looked at key areas of policy inconsistency and weakness in local governance, Mr. Jomo said. “The report seeks to achieve greater coherence in financial regulation, macroeconomic coordination, aid distribution, and other issues such as climate change.”
He went on to note that many developing countries suffered from volatile aid flows and conditionality, which undermined Government planning efforts. It was, therefore, necessary to overhaul the existing aid architecture as it interacted with trade, debt, and other policies, he added.
Presenting the Survey, Robert Vos, Director of the Department’s Development Policy and Analysis Division, also underscored the need to restructure the “architecture” of aid, global trade and international finance to ensure a sustainable global economy. “Many of the current major crises facing the world today — financial, food, energy, and climate — are the result of major systemic weaknesses and a lack of coherence.”
The Survey’s focus this year was on prospects for post-crisis global development, he noted. It concluded that a major rebalancing of the global economy was needed. As the world faced rising inequality, ongoing demographic changes, ageing populations, growing urbanization, and increased environmental threats, a sustainable globalization was required to help strengthen the capacities of developing countries to design their own development strategies, Mr. Vos said.
To address the necessary retooling of the aid architecture, global trade, and international finance, he continued, the international community should consider establishing a global economic mechanism that would exceed the present extension of the G-20. “A quick recovery of the global economy will end up in unsustainable patterns of global development if not done correctly,” he stressed.
It was important not only to focus on poverty reduction, he said, but also to incorporate strategies for economic growth and fighting climate change, and to make major adjustments to the trade system so as to allow for effective technology transfer, adjusted property rights regulations, and large financial transfers, where needed.
Looking back at successful poverty-reduction experiences, especially in Asia and other parts of the world, Mr. Vos said that sustained coherence across different areas of development was one key element of their success.
According to the report, a major reform of the existing aid architecture was needed to better serve low-income countries that relied heavily on assistance for development finance. Too little aid was being provided, and it was too fragmented and too volatile. Furthermore, aid fragmentation had increased, with the average size of projects dropping from $3 million per project to less than $1 million. “All aid projects come with strings attached, and that does not help countries align the support with their broader national development strategy,” Mr. Vos said.
The report proposes a much more needs-based system whereby donors would combine their resources and align them behind national development strategies. It sees a general incoherence between the trade, finance and environmental regimes, and calls for greater coherence in those areas. It further calls for greater flexibility in World Trade Organization rules, and for more resources for trade, to support productive capabilities, export diversification and upgrading in the poorest countries.
With regard to reform of the international financial architecture, the report says financial market liberalization has not sufficiently fostered real investment and growth. There is a lack of coordination in addition to the absence of a proper mechanism for working out sovereign debt. “Because of increasing instability in capital flows, many developing countries have moved to accumulate a lot of foreign exchange reserves as a buffer to protect against financial woes,” Mr. Vos said. “This has led to global imbalances, since these countries accumulate more reserves than they need, particularly much more than they would need if there were a global reserve system that provided sufficient coverage for all countries in the world.”
He continued: “Global economic coordination should be achieved through enhancing developing countries’ voice and representation in multilateral institutions. The international community must think of a global economic coordination council that would seek and ensure coherence.”
When asked whether there was any indication that Governments were taking up such ideas, Mr. Vos replied that some ideas, particularly those relating to national development strategies, were particularly successful, while other elements had yet to be equally persuasive.
In response to a question about the feasibility of creating a new multilateral financial authority, Mr. Vos said such an authority would examine specific areas for financial regulations seen to spill across borders, as in the recent debt crisis in Europe.
Mr. Jomo added that, under the current frameworks, only national regulations were addressed. “By default, the only existing international rules and regulations are under the financial services agreement under the WTO, which basically facilitates the flow of services across orders, rather than regulating them. There is, for all intents and purposes, minimal regulation currently in effect,” he said.
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