United Nations
General Assembly
Second Committee

Statement


     
                                                              


                                      STATEMENT TO THE
                                      SECOND COMMITTEE

                                             by

                                       MR. NITIN DESAI
                                   UNDER-SECRETARY-GENERAL


                          DEPARTMENT OF ECONOMIC AND SOCIAL AFFAIRS


                                                                            13 October 1997



Mr. Chairman, Distinguished Delegates,

       Let me begin by congratulating you, Mr. Chairman and other members
of the bureau of the Second Committee on your election to this
distinguished body and join also in the tribute that you have paid to the
work of your predecessor Mr. Hamburger.  Your involvement and experience
in the work of the General Assembly and the role that you have played in
the revitalisation of the economic and social work of the United Nations
will guide us through a busy and important agenda for the Second
Committee.

       The backdrop of your work this year is provided by a mixed outlook
on the world economy, the agenda of your committee which reflects the
issues that dominate the development dialogue and a spirit of reform
within the United Nations system gearing itself to a new responsiveness
to all its clients.

1.     Review of the World Economy

1.1    Growth

       A review of the world economy would give cause for optimism or
pessimism depending on what one looks at.  This variety reflects at least
partly, the homogenisation of driving forces of the economy and the
continuing differences in the responses to these forces.  

       In the aggregate, the medium-term outlook for the world economy, in
the view of the international economic forecasting team of Project LINK,
which recently held its meeting in Kuala Lumpur (22-26 September 1997),
is that the current moderate rate of growth is likely to continue in the
next few years.  World gross product is forecast to grow at an average
rate of three per cent during 1997-1999.  World trade, after slowing down
to four per cent growth in 1966 from eight per cent in 1995, is expected
to expand at an average rate of six and a half per cent during 1997-1999. 
Inflation has reached historically low levels in many economies and is
likely to remain subdued.  Unemployment, however, has not fallen much in
many countries, despite the current economic expansion, and will continue
to be a serious problem and policy issue for many developed and
developing countries as well as the economies in transition.

       The prospects for the world economy give some grounds for cautious
optimism as well as deep anxiety.  In Africa 21 countries will grow at
five per cent or more.  However, optimism on the medium term prospects
for Africa is restrained - aid flows are stagnating despite the repeated
recognition of its special needs, overall FDI flows are low, the heavy
burden of debt is of serious concern.  Growth in developing Asia is
expected to continue at a somewhat slower pace because of the adjustments
called for by the recent financial turmoil.  In Latin America
expectations are that growth will accelerate and stability will increase.

       The economic performance of the economies in transition varies
significantly.  Some countries in Eastern Europe have experienced both
growth and a reduction in inflation, and are attracting significant
foreign direct investment.  But others are still at early stages of
stabilization and structural reform programmes, intended to liberalize
the economy and accelerate the privatization process.  Relatively little
foreign direct investment is going to these countries.

1.2    Debt burden

       The overall debt situation of net-debtor developing countries as a
group continued to improve in 1996, with both the debt-export ratio and
the debt to GNP ratio declining to their lowest levels since the onset
of the debt crisis.  Despite this positive aggregate trend, a significant
number of developing countries (51 according to World Bank■s definitions)
continue to suffer from a heavy debt burden.  The majority are low-income
African countries, which remain a central concern in the international
debt policy.

       The new multilateral debt initiative for a group of heavily indebted
poor countries (HIPCs) responds to the need for a comprehensive framework
based on equitable burden-sharing among all creditors, including
multilateral creditors, to bring the debt of these countries to a
sustainable level.  The Initiative■s implementation has made some
progress in the last year as a number of countries have, or are expected
to, become eligible for assistance under the Initiative.  However, its
complete success hinges on the contribution of additional resources -
including interim financing - from all creditors involved, as well as
enhanced flexibility in the application of the eligibility criteria and
the timely access to debt relief of a large number of countries.

1.3    Resource flows

       Overall net financial transfer (that its, net inflows after payment
of interest and dividends and net domestic financial outflows) to
developing countries was strong in 1996, totalling $87 billion.  Net
transfer through all official flows followed a trend of slow decline
while abundant private financial transfer in 1996 represents a continued
increase since the brief consolidation in 1994 due to the Mexican
financial crisis.

       The distribution of private financial transfer to developing regions
and countries has remained highly uneven, with the overwhelming majority
of financial transfer going to Asia and Latin America.  Of serious
concern is that the exclusion of most low-income developing countries
from access to significant amounts of international private finance
leaves them dependent on increasingly limited official finance.

       In contrast to private financial flows, official development
assistance (ODA) flows have been declining in real terms in the 1990s. 
For the Least Developed Countries (LDCs), which remain heavily dependent
on ODA for external financing, the problem is acute as flows from DAC
member countries declined markedly in real terms in the first half of the
1990s.

       The crux of the problem is that with the end of the cold war and
higher priority for fiscal consolidation in donor countries, there has
been a reassessment of large commitments of official development
assistance in some donor countries.  This has been exacerbated by the
diversion of considerable ODA funds from regular development programmes
since 1990 to meet increased financing needs for emergencies and
humanitarian assistance.

1.4    Financial vulnerability

       With growing integration of financial markets, increased access of
developing countries to international financing for investment has been
accompanied by vulnerability of individual countries to sudden reversal
of financial flows and possible spillover effects on countries in similar
circumstances.  This has been demonstrated in the 1994 Mexican financial
crisis and the present financial turmoil in South-East Asia.  The
resultant financial and economic instability entails drastic economic
adjustments in affected countries, with loss of output and employment.

       There is growing agreement that, on the one hand, sound domestic
macroeconomic policies and an adequately supervised and regulated
financial sector are essential for creating a conducive environment for
attracting more stable long-term international capital flows as well as
reducing the chances of abrupt reversal of flows and, on the other hand,
international policies and regulatory measures can also play an important
part.  Nevertheless, as managers of financial assets operate with
imperfect information and a premium is placed on quick responses to
perceived changing circumstances, a country in a fundamentally sound
economic and political situation could be vulnerable to the ■herd■
behaviour of investors and the speculative flows it sets in motion. 
Therefore, there is a need for continued international debate on issues
of direct government intervention in financial markets to reduce
volatility and vulnerability, the pace and sequencing of capital account
liberalization measures and emergency finance in the event of a crisis.

2      Major Policy and Issues for Development Cooperation

       Development cooperation involves more than the short-term management
of the world economy.  It is based not just on economic interactions
between nations but interdependence in a host of areas and the emergence
of shared values of solidarity and responsibility as a basis for
international relations.  In this context the issues which are repeatedly
brought to our attention are doubts about the sustainability of growth;
the increasing evidence of growing inequalities, both within and between
nations; the financial vulnerability of those developing countries
integrating rapidly into the global economy; the state of the world■s
natural resources and continuing concerns about the adequacy of our
efforts to address global environmental problems like global warming; the
pressure of endemic poverty, unemployment and social strife; the mixed
assessment of prospects in Africa and the Least Developed Countries, the
increasing marginalization of vulnerable groups and the difficulties in
gender mainstreaming.  These are all manifestations of the inadequacies
of the development strategies that we can or do pursue.  The fundamental
question we need to ask is whether the sustainability dimension, the
distributive dimension and the inclusion dimension of growth is purely
within the domain of national corrective action or is there a greater
role for international cooperation and public policy?  These are not new
issues.  In a way they have been at the heart of the agenda of the United
Nations Conferences of the nineties which, taken together have sought
agreement on a new approach to development -- a third way which seeks to
avoid the harmful consequences of both dirigiste interventionism and
laissez-faire.  They are an attempt to define a balanced role for the
State and for the market in the pursuit of a just and humane society at
every level -- the local, the national and the global.

       Let me turn then to a few of the policy issues that will need to be
addressed in the framework of development cooperation if we are to give
a practical form to this search for a third way.

2.1    Finance for Development

       The global agenda for development which has emerged from recent
United Nations Conference has focused on a wide range of concerns.  Each
of these programmes emerging from these Conferences have commitments on
financial flows.

       Globalization and integration of financial markets together with
outward-oriented policies in developing countries have generated
significantly increased private financial flows to certain parts of the
developing world.  However, the nature and composition of these flows do
not seem to match the priorities identified in the global agenda.  ODA
is declining and private flows are confined to a small group of
countries.

       Let me elaborate this point.  The management of natural resources
and human settlements, the provision of basic social services, the
support required for targeted programmes of poverty alleviation, social
protection, employment generation and skill development, the improvements
sought in public administration and governance are typically activities
that require public resources spent through public entities.  They cannot
be left to markets, even when markets are guided by appropriately
designed incentives and penalties.  They require public spending and that
is why the fiscal capacity of the public exchequer matters.  That is why
ODA is needed and private financial flows are not enough.  The United
Nations Conferences of the nineties recognized this and, in many cases,
estimated the extent of ODA support required.  It is truly unfortunate
that precisely at a time when we have an agreed programmatic basis for
development cooperation which can enhance the effectiveness of
assistance, ODA flows are declining.  What are we to do in this
situation?  Your discussions on financing development are therefore of
crucial importance in providing a sense of direction and enhanced
commitment.

2.2    Globalization and Policy Coherence

       The problem of finance for development must be placed in the broader
context of the processes of globalization that are under way.  The recent
Trade and Development Report of UNCTAD has dealt with the issues at stake
in the nexus between globalization, distribution and growth.  It draws
our attention to the growing gap between developed and developing
countries, the slow growth of employment, growing wage inequality between
skilled and unskilled labour, the ■hollowing out■ of the middle class and
the growing importance of finance over industry.

       The essential point about this analysis is that the processes of
globalization have to be managed intelligently and in the interests of
all countries and all segments of the population.  Precisely because what
has to be managed is a global process we need a measure of coherence
between countries and between different areas of policy, a coherence
which can be secured only with a constructive dialogue.

       With growing integration of the world economy, the interaction
between the macroeconomic, trade, finance and development policies has
intensified.  Moreover, the opportunities and risks associated with
globalization are unevenly distributed among countries and various
segments of the population within countries.  Looking at the problem
simply in terms of ODA flows at the international level and safety-nets
at the national level is not enough.  A more equitable distribution of
benefits and mitigation of risks require careful management of public
policies and better coordination of national and global policies dealing
with markets.  In the current economic environment, the question of
policy coherence has thus emerged as a critical one for all participants
in the global economy but for developing countries in particular.  ECOSOC
debated this issue.  But important questions remain on how to enhance the
influence of all countries on the operations of global markets, a matter
which is of particular importance for those countries which are most
disadvantaged in this regard i.e. the developing countries.  What we need
is a mechanism that enhances the impact and influence of the broad-based
policy development processes we have, particularly in the United Nations,
on the functioning of other decision making fora.  This is the context
in which you need to debate the issue of UN-Bretton Woods relations and
the role of ECOSOC in providing a forum for a high-level dialogue and for
a measure of coordination.  The recent statement of the President of the
World Bank at the Annual Fund-Bank Meeting in Hong Kong which focuses
attention on the concerns about global inequalities, poverty eradication
and social development, about making development inclusive and
sustainable, which have animated the work of the United Nations on
development, suggests that the prospects for a constructive partnership
are very good.

2.3    Maintaining the commitment to sustainable development

       The concept of sustainable development is perhaps the most important
contribution that the United Nations has made to the global consensus on
development.  Despite the disappointments about the pace of
implementation of the commitments made at Rio one cannot but be impressed
by the impact of Agenda 21 at the local and national level.  Five years
after Rio there is a continued interest in translating its vision into
action in hundreds of local authorities, in professional associations,
in national policy making apparatuses and in many global institutions.

       The Nineteenth special session of the General Assembly demonstrated
a continued strong political interest and commitment on the part of the
international community to the goals of achieving sustainable development
worldwide.  Although the Earth Summit+5 failed to meet expectations of
many particularly regarding the adoption of specific targets and concrete
time-frames for action - the honesty with which it assessed the present
situation and a strong re-commitment to urgent action should be seen as
positive political results.  Specific results of the special session
include:

-      a re-energized commitment of Agenda 21, to the goal of sustainable
development which calls for the full integration of economic, social and
environmental policies, action at all levels, and to global partnerships
aimed at its achievement, thereby meeting equitably the needs of present
and future generations;

-      a broad range of decisions and recommendations aimed at fostering
progress in various sectoral and cross-sectoral areas of Agenda 21, and,
in particular, in the area of the means of implementation, notably
financial and technological cooperation and capacity-building;

-      agreement on actions needed in a number of relatively new areas for
international cooperation, such as sustainable transportation and
sustainable tourism;

-      decisions aimed at strengthening global and regional institutional
arrangements for achieving sustainable development;

-      a new Programme of work for the CSD in the 1998-2002 period.

       The new programme of work of the Commission on Sustainable
Development for the first time provides for a policy discussion,
exchanges of experiences and elaboration of common approaches within
specific economic sectors having strong linkages to environmental and
natural resource issues.  This approach, together with the active
participation of all key actors both within and outside government,
offers a promising opportunity to foster such an integrated approach and
to find most practical solutions.

       One important outcome of the Special session was the decision to
constitute the Intergovernmental Forum on Forests of the CSD.  At its
recently concluded first meeting, governments reconfirmed their political
will to advance action and global consensus in this area, building on the
positive results achieved by the Intergovernmental Panel on Forests.

       The outcome of the special session, together with the work which
will be done by CSD in the next few years could also lead to strengthened
cooperation between governments in areas such as sustainable freshwater
use and energy management.

       A crucial test of the resolve of governments lies ahead in Kyoto
when the Conference of Parties of the UN Framework Convention on Climate
Change meet to fulfil the Berlin Mandate.  The developed countries, who
have the highest rates of per capita emission and the economic and
technological means for addressing the problem, are expected to agree on
legally-binding targets for a significant reduction in greenhouse gas
emissions within specific time frames.  The differences are still quite
substantial but at least the need for action is generally accepted.  In
many ways Kyoto is a test of our commitment to future generations, our
capacity to reconcile the interests of the rich and the powerful with the
concerns of the poor and the weak and our sense of responsibility to cope
with the consequences of our actions.

2.4    The Struggle against Poverty, Exclusion and Unemployment

       The Copenhagen Summit was a landmark event in shifting the direction
of the struggle against poverty, exclusion and unemployment from an
approach based on subsidies and safety-nets to one which emphasized
structural factors and the importance of empowerment.  I clearly recall
that in the Secretary-General■s report to the high level segment of
ECOSOC in 1993, the theme of ending exclusion had been central for
preparing for the Social Summit.  It is heartening that recently in Mr.
Wolfensohn■s statement in Hong Kong, the theme of ending social exclusion
recurs as one of the important operational guidelines of the World Bank. 
This is a reflection of the catalytic work of the ECOSOC and the General
Assembly, a role which should not be underestimated.


       Eradicating absolute poverty, providing work for all who want it and
ensuring the inclusion of all persons, without any irrelevant
discrimination, in social and political processes is something which has
to be done principally at the national level.  The central task of global
policies is to enable this through a supportive economic and political
environment and to support national efforts through advocacy and the
provision of assistance.  The task is huge and it is important that we
in the United Nations have a clear idea of what we can do most
effectively.  Advocacy and analysis, the articulation of a rights based
approach to poverty eradication and social inclusion, support for the
formulation of national strategies or action plans, assistance in the
provision of basic social services and the promotion of new approaches
and exchange of experiences are some of the things that have been done
by the UN departments, funds and programmes.  Your decision to launch a
decade for poverty eradication provides us with an opportunity to develop
a coherent partnership between the many global organizations that have
a capacity to help national governments.  The challenge is to identify
where, in the face of this huge task, we can make a difference.

3.     The Reform Process

       Today I speak to you, for the first time, in my capacity as the head
of a merged economic and social department.

       Even though the new department encompassing DESIPA, DDSMS and DPCSD
did not come into being until June of this year and its full operation
under a unified budget will only take effect on 1 January of next year,
consolidation was already taking place well before those dates mainly
through the establishment of the Executive Committee of Economic and
Social Affairs (EC-ESA) of which the then three separate departments were
members.

       The EC-ESA, together with three other Executive Committees (on Peace
and Security, Humanitarian Affairs and Development Operations), was
established by the Secretary-General earlier this year not only to
improve coordination among the various entities of the United Nations
Secretariat in the economic and social area but, more importantly, to
institute cooperative arrangements among themselves in policy analysis,
norm setting, and technical assistance as well as in management.  The
Committee meets regularly, about once a month, and reaches decisions by
consensus which primarily aim to rationalize and streamline the work of
the Organization in the economic and social area.  Avoiding duplication
and overlap, achieving a better division of labour and ensuring a greater
coherence of views within the Organization are particularly important
objectives of the Committee.

       The Committee■s overriding interest lies in providing the Member
States with higher quality and more focussed documentation as well as in
forging a stronger and more immediate link between the
analytical/normative and operational sides of the Organization. 
Concerning the latter, the EC-ESA is establishing closer collaboration
with the UN Development Group with the view, among other things, to
strengthen the links between the intergovernmental processes and the
policy guidelines for operational activities as well as to better link
and utilize the technical advisory capacities within various
organizational entities to support UN activities.

       The new Department of Economic and Social Affairs has brought
together the largely analytical and normative capacities of DESIPA and
DPCSD within the predominantly technical advisory capacity of DDSMS.  In
this sense it is a microcosm of the larger collaboration of the EC-ESA
and the UNDG.  

       The Secretary-General■s aim through this merger is promoting and
strengthening of the United Nations development activities.  Better
coordination through integration; richer analysis by bringing field level
activities closer to the policy process; a deeper intertwining of the
analytical, normative and the operational; and most important, one strong
Secretariat for the ECOSOC, its subsidiary machinery, for the Second
Committee and relevant items of the Third Committee -- these are some of
the potential benefits.  We need to work closely together to ensure the
realisation of this potential.

       Let me briefly describe the department the Secretary-General hopes
to create at the end of the consolidation process.  Firstly, the new
Department must be sensitive to your needs -- respecting all previous
mandates, conscious of the special needs of the more vulnerable states
in Africa, the Least Developing Countries and the small island developing
states and be in a position to bolster support for South-South
Cooperation.  Secondly, DESA should be capable of mobilizing capacities
flexibly around issues and be able to provide multifaceted and
multidisciplinary analysis to the relevant intergovernmental machinery. 
Thirdly, the Department must integrate economic, social, environmental
and gender mainstreaming concerns in the work of the United Nations in
Development.  Fourthly, we hope to create a Department and a milieu
responsive to the needs of Civil Society, helping them integrate more
fully in the work of the United Nations, particularly in the
implementation of the programmes established by the United Nations
Conferences.  In realizing these goals, we need your understanding, your
active support, your ideas and your initiatives.

       The consolidation represents only a part of the total picture.  The
broader canvas includes the larger management reform measures, including
the establishment of the Executive Committee on sectoral issues, the
promise of a development dividend, a reinvigoration of the United Nations
operational activities and a commitment to pursue the mobilization of new
financial resources for development.  We need to work together to
strengthen the work of the General Assembly and beyond.  I look forward
to your deliberations and conclusions.

Thank you.

 


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Date last posted: 27 September 2000
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