United Nations
General Assembly
Second Committee

Statement


STATEMENT TO THE SECOND COMMITTEE
by MR. NITIN DESAI
UNDER-SECRETARY-GENERAL
FOR ECONOMIC AND SOCIAL AFFAIRS

1 October 2001

Mr. Chairman,

 

Allow me to congratulate you and the Chairman of the Second Committee for this session of the G.A. and also convey my congratulations to all the members of the Bureau.  We look forward to working with the Bureau in ensuring that we have a successful session of the Second committee during this session of the General Assembly.

 

Mr. Chairman,

 

This meeting of the Second Committee in many ways marks the beginning of the work of the General Assembly.  This and the debate, which will take place in the Plenary, are the first substantive actions that we have taken in the General Assembly, other than the dialogue on globalization.

 

We are meeting in the shadow of the terrible events of 11 September.  Much has been said about these events in the General Assembly, in the Security Council and by the Secretary-General.  I do not wish to add more to what has been said there except to focus on one dimension which has come out very clearly, first in the Secretary-General’s speech and then in what Mayor Guiliani just said, which is that the best response that we can make right now is to get on with our work. And that is precisely what the Second Committee is doing.

 

We have of course been pre-occupied with these events, but I think the time has come to start focusing on our agenda because that is probably the best contribution that we can make in this Committee to the challenge that confronts the world community.

 

Mr. Chairman,

 

Let me begin in this general debate with an assessment of the state of the world economy.  Later this week we will be presenting you with an update on the forecasts that are contained in the World Economic and Social Survey.  I did say update but I would describe them more as a substantial correction.  Practically every forecast made towards the first half of this year has had to be modified in the later half of this year not just by the U.N. but by the IMF and other organizations.  We have also scheduled very important talks to the Second Committee.  On 11 October, Prof. Larry Klein will speak to you on the state of the world economy and on 23 October, Prof. Bhagwati will speak on the issues of the Doha meeting of the World Trade Organisation.  I hope that between the update and these lectures you will get a sense of what is the best professional assessment of the direction in which the world economy is moving.

 

The update we have prepared basically tried to take into account the assessments that were made in August/early September that suggested that the slowdown in the world economy was already much deeper than was expected in the beginning of the year.  For instance, even before the events of 11 September, industrial production, business and consumer confidence were falling in many developed countries and several commentators were already forecasting major declines on such high profile indicators as equity prices and the flow of private foreign investment to developing countries.  One of the questions that people ask is, “what is the impact or the further impact of the

11 September events”?  The precise impact will depend on what it does to business and consumer confidence, to investments, to the flow of capital between countries, to trade.  Of course certain industries are bound to be very directly affected – the travel and tourism industry for instance.  But I believe it is a bit premature to predict whether what was a slowdown in the world economy will become a recession.  Our assessments do suggest a very substantial decline in global growth.  Whereas in the World Economic and Social Survey we had originally 2.4% growth for the world economy we are now looking at numbers closer to 1.4% for 2001 and rising to maybe 2% in 2002.  Further details are available in the update.

 

Mr. Chairman,

 

With this assessment of the global economy as a backdrop, I now wish to draw your attention to four issues which connect with your agenda.

 

The first is that of globalization.  This has, of course, been an important part of past discussions in the Second Committee.  It is also an item on your agenda this year.  Following the high-level dialogue a little over a week ago, this will be a useful opportunity for the Second Committee to continue its discussions in this area.

 

Let me here focus on a few points.  Almost up to 1997 the general assumption was that globalization was improving the global growth rate through increased trade and financial flows.  Globalization was essentially seen as having an essentially beneficial impact on processes of growth and development, despite concerns about marginalisation, and the neglect of certain social and environmental dimensions.

 

In 1997-1998 we had the first doubts, arising out of the financial crisis.  At that time there were forecasts about the terrible impact this crisis would have on the world economy.  The effect on the countries that were directly affected by this crisis was, in fact, quite substantial.  But in some ways the world economy came out of the 1997-98 crisis reasonably well, with the processes of growth reviving by 1999 and 2000.  The reason for that was precisely globalization.

 

Because growth processes were strongly maintained in the United States, particularly, it was possible for many of the countries affected by the crisis of 1997-98 to recover quickly.  The globalization of finance contributed to the strong growth of the U.S. economy, while the globalization of production made international trade a more powerful mechanism for transmitting this stimulus from the U.S. to the rest of the world.  So one could say that its first major test, globalization accelerated the recovery from the crisis.

 

The situation now is substantially different.  The subsequent slowdown in the United States has been transmitted to the rest of the world economy, initially through increasingly globalized trade flows and subsequently through global financial markets.  Just as trade expanded unusually rapidly during the upturns, so it has suffered profoundly during the slowdown, with no growth in the volume of trade expected in 2001.

 

Because of their increased international trade flows, developing countries are more affected than previously by a slowdown in the developed world. Developing countries now account for roughly one third of international trade flows, compared with about one-quarter a decade ago.  As a result, a back-of-the-envelope calculation suggests that today a one per cent decline in the growth of the US economy will reduce the rate of growth in developing countries as a group by 0.4 per cent, compared to 0.3 per cent at the beginning of the 1990s.

 

One positive feature of the current situation , however, is the recognition amongst countries that this growing interaction between economies requires a coordinated response by the world system.  There is a far greater effort at macro-economic policy coordination in recent months than we have seen in the past.  For instance, there have been simultaneous reductions in interest rates by the leading industrial countries with similar ripple consequences in policy actions in developing countries.

 

I raise these important issues because you will have to look at them in the context of your discussions on the forthcoming conference on Finance for Development in Monterrey.  We must learn from the experience of contagion during the different crises which the world economy has been confronted with since 1997-98.

 

Mr. Chairman,

 

I have focused on the impact of globalization on reducing or amplifying the normal cycles of business activity in the industrialized and in the developing countries.  But our concerns about globalization have gone beyond that.  They have also focused attention on what can be described as the vulnerability of countries to globalization.  A vulnerability is not actually a product of the cyclical fluctuations that I spoke of earlier – it is essentially structural.  This year part II of the World Economic and Social Survey focuses precisely on the issue of vulnerability in the context of globalization.  I would urge you to look at this analysis as a basis for some of the discussions which you will have in this area. 

 

One set of vulnerabilities which it focuses on are those arising from the world of finance and investment.  It explores whether the way in which globalization shapes private capital flows allows these flows to take into account the circumstances and developmental needs of developing and transitional economies.  It also focuses on how international liquidity impinges on the options available to developing countries.

 

A second area of vulnerability dealt with is that of international trade.  It explores the vulnerabilities of countries which depend on a few primary commodities, the vulnerabilities that arise from protectionism (for instance, the inclusion of non-trade issues in trade negotiations).  It also looks at the vulnerabilities that arise from natural disasters and other such causes.  Finally, it looks at the vulnerabilities which arise when you have a very substantial change in the nature of the economic system, such as in the countries in transition.  Much of this analysis is based on specific country case studies


 

Mr. Chairman,

 

These concerns about globalization are behind the protests we have seen in major international meetings over the past year in Seattle, Washington, Prague, Genoa, Gothenburg and elsewhere.  In many ways the concerns of these protestors are very similar to the concerns which have driven discussions here.  Concerns about the social and environmental impact; about the marginalization of countries which cannot benefit from the processes of globalization, concerns about the nature of the governance processes of global trade and finance and the degree to which  poorer countries and civil society are able to influence these.  The protests have also been driven partially by the feeling that the capacity to lobby within the multilateral system is not adequate.  I believe when we look at issues of globalization we must also address these concerns about the process.  Do we have a way of managing globalization which gives enough of a voice to countries which feel left out, which feel marginalized, which feel that their structural concerns are not adequately reflected in global agreements on trade and finance?

 

You will have the occasion to consider some of these issues also when you discuss the forthcoming conference on Financial Development in Monterrey.

 

Mr. Chairman,

 

The overall focus of my remarks has been on the different dimensions of globalization:  the macro-economic dimension and its impact on the amplification or reduction of cyclical fluctuations, and the structural issues and the concerns that are emerging about the process of managing the interactions of trade and finance.

 

Now let me turn to some important items on your agenda, apart from globalization.  I have referred to the Finance for Development process several times.  You will be having a preparatory meeting on FfD from 15-19 October.  You have a text as a basis of discussion, prepared by the Facilitator.  I believe that this process has made a lot of progress, but the challenge now is to start focusing on the outcome rather than the inputs for discussion.

 

Another major conference on your agenda in the Second Committee is the Johannesburg Summit of 2002.  The preparatory process for this really only begins in January, and in many ways it is very important that the Second Committee discussions on the Johannesburg Summit 2002 start providing a sense of direction.  We have had a very rich preparatory process at the regional level and in civil society, but we have not yet had a strong process at the global level, and there is a sense that this conference is not yet a presence in the work in New York.  I hope that your discussions will start providing the sense of how at the global level we are focusing on the outcome of the Summit.  In this connection, we have organized a series of events during your three days of discussion on this item which will also bring in many of people who have been involved in the regional processes so that you can interact more directly with them.


 

The third major item on your agenda is the triennial comprehensive policy review of operational activities for development of the United Nations system.  This is a major responsibility of the General Assembly, and you provide the basic framework and guidance for official activities in this area.  You will see that this report is quite far reaching.  Most important, it is a case for a major shift of focus from internal coordination of development assistance to the integration in national efforts, from process oriented reforms of operational activities to substantive achievements in development terms, from nationally focused project execution to capacity-building and national ownership, from internal coherence to greater development impact.  What we are trying to explore is how the U.N. system can respond to what has become a major theme of development cooperation:  partnership.  We are looking at development cooperation as just one of the complex set of endeavours which has to be managed, designed and run by the programme country itself.  I invite you to review this carefully.

 

A fourth area is Africa.  Of course it will be discussed in plenary, but this is the year when we will have to start focusing on the preparations for the review of the UN-NADAF.  We also have the major development of the New African Initiative which took place in Lusaka.  One of the issues that we will have to look at when we consider our work here is to mainstream concerns about Africa into all of the work that we do in the Second Committee.  This seems to be the direction in which consideration of African development is moving.

 

In this context, let me also mention a major item that is before you, the follow-up of the Conference on Least Developed Countries, held in Brussels, which connects with the issue of African development.

 

Mr. Chairman,

 

I have set out a broad framework in terms of globalization, and highlighted a few items from your agenda which require your attention.  I hope this has been of some value and I look forward to working with you, your Bureau and all of the members of the Second Committee in ensuring that we have a successful session and the United Nations can move ahead despite the many uncertainties that confront us at this time.

 

Thank you very much.


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Date last posted: 05 October 2001
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