DESA News Vol. 11, No. 7 July 2007

Features

ECOSOC charges forward

ECOSOC charges ahead

The Council connects the national and international to advance on the internationally agreed development goals

A renewed Economic and Social Council meets this month in Geneva. A Council that is more visible and relevant, with strengthened machinery to monitor implementation of internationally agreed development goals. Achievement of development goals hinges of course on political will at the country level, but the presence of senior government officials at the Council’s new Annual Ministerial Review is expected to lend important weight to the UN development agenda. Policy-makers will gather for an open assessment of progress at the national level, and an exchange of views on how best to overcome obstacles. This first Ministerial Review will take place in Geneva on 3 and 4 July with a focus on eradication of poverty and hunger.

The equally new Development Cooperation Forum has been established with the complementary goal of improving aid effectiveness and coherence at the global level. The biennial Forum will be launched this year in Geneva, with the first formal meeting taking place in New York in 2008. Participants will include representatives from developing and developed countries, including bilateral development agencies, UN system organizations, World Bank, IMF, OECD, regional development banks, civil society, and the private sector.

The Ministerial Review and the Forum were added to the Council’s mandate at the 2005 World Summit, as elements of a broader UN reform initiative. Delegates at the World Summit made it resoundingly clear that they expected the Council to continue playing a pivotal role in advancing the outcomes of all major UN conferences and summits. “To make sustained advances we must constantly monitor our progress, evaluate obstacles and, when necessary, realign our efforts,” said Secretary-General Ban Ki-moon.

Accent on implementation

The report of the Secretary-General prepared for the Annual Ministerial Review on strengthening efforts to eradicate poverty and hunger will guide the discussions. The report reveals a glass at once half-full and half-empty. On the whole, the results of the last two decades are encouraging. On current trends, it appears likely that the goal of reducing poverty by half by 2015 will be met in all regions except sub-Saharan Africa. Even there, the earlier relentless increase in the number of poor appears to have been halted and the proportion of poor has begun to decline, albeit not rapidly enough.

Progress in reducing hunger is less easy to quantify, according to the report, as no recent comprehensive data exists. But hunger remains a scourge, especially in those areas where there is unrest. Data on the non-income dimensions of poverty, such as access to education and health, suggest that progress has been uneven across and within countries and, in many cases, insufficient to achieve agreed goals. The report calls for an effective operationlization of the global partnership for development, which many see as key to ensuring timely realization of international commitments.

According to the report of the Secretary-General, the overall strategy to achieve the internationally agreed development goals, including the Millennium Development Goals, seems to be working, although not on the scale required. Implementation efforts should be scaled up, and all social groups included in gains.

Connecting the national to the international

Once the implementation map has been traced, the Ministerial Review “should concentrate on actions,” underlines Sha Zukang, Under-Secretary General for Economic and Social Affairs. “We need to focus on what works and what does not.” The idea is for policymakers, practitioners and academics to identify successes, failures and lessons learned from past development efforts; to single out strategies that have had a significant effect on poverty reduction, and in overcoming obstacles to the pursuit of national development goals.

The experiences of six countries in implementing national strategies will be discussed. Bangladesh, Barbados, Ethiopia, Ghana, Cambodia and Cape Verde have all volunteered to make a presentation, to be followed in each case by an open dialogue with the assembled delegates. The voluntary presentations will connect the Council directly to practitioners at the national level for the first time. The shift “from the ivory tower to the ground, to the operational side of development” marks a turning point in the way the Council operates, explains Navid Hanif, Chief of the Policy Coordination Branch in the Office of Economic and Social Council Support and Coordination.

Regional preparations in the run-up to the Review constitute another innovation in the way the Council functions. To enrich the regional perspective, the Secretary-General has suggested in his report that countries consider holding similar regional ministerial reviews, as building blocks of a broader process leading to the annual global event.

Fewer speeches, more dialogue

Another major change in the way the Council will function from now on is the use of interactive dialogue in place of speeches, which will be scaled back dramatically. On 4 July, for example, two high-level roundtables will take place, in addition to the general debate, as part of the Ministerial Review. The first will deal with ways to end the cycle of food crises by cultivating a home-grown green revolution in Africa. The second, on poverty eradication, will cover issues such as meeting international commitments to the global partnership for development, and bottlenecks that countries experience in formulating and implementing national development strategies.

The Review, in sum, should seek to identify practical measures that can contribute directly to development. This first session is set to conclude with specific commitments to action. In particular, each minister might announce a new initiative that her or his country will undertake to reduce poverty and hunger. In the end, delivering on the UN development agenda requires all countries to implement policies and actions that they have already agreed upon, according to Under-Secretary-General Sha. For example, each donor country should ensure that it fulfils its commitment to raise the level of official development assistance to a specific amount by an announced target date. Each developing country might also be given year-by-year projections of the amount of external assistance that will be made available.

Overall, development partners have made some breakthroughs in fulfilling their agreed responsibilities for reducing poverty, says the Secretary-General in his report on strengthening efforts to eradicate poverty and hunger. The burden of external debt on developing countries has declined considerably. But, still, total ODA has not increased to the extent promised by G8 countries in the Gleneagles summit of 2005, and much remains to be done to meet commitments in full and on time.

Civil society brought to the table

The biennial Development Cooperation Forum, which will be launched on 5 July, will review trends and progress in international development cooperation, including strategies, policies and financing, promote greater coherence among the development activities of different development partners and strengthen the links between the UN normative and operational work. The Forum aims to have the voices of people at different levels – governments, NGOs, academia and the private sector, among others – heard in discussions on international development and aid cooperation. Today, “no UN development effort, whether advocacy for a broad cause or support for specific goals, can make real headway without support from civil society,” the Secretary-General stresses.

The international development cooperation landscape has expanded substantially in recent years.  For example, there are many new actors engaged with the UN at the country level. But “we need to involve all of them at the policy level as well…to engage in a broad-based dialogue on the policy issues affecting development cooperation, whether multilateral, North-South or South-South,” says Secretary-General Ban. The new Forum provides a “unique global platform” to achieve that.  “It can bring the discussion on aid and aid effectiveness to a truly multilateral arena,” adds the Secretary-General, involving the private sector and academia in its work and by coordinating the many actors engaged in the development agenda. In addition, the Forum can also strengthen partnerships between donor and developing countries.

A need for aid coordination

The Forum will be launched during the high-level segment of ECOSOC in Geneva, although the first biennial forum will not kick off until 2008. The official event on 5 July will open with the President of ECOSOC, Ambassador Dalius Čekuolis, and Secretary-General Ban Ki-moon, and two high-level roundtable discussions will be held. The first discussion will deal with the role of national aid coordination and management in promoting greater coherence of development cooperation in countries. For the fragmentation of the international aid system is a hurdle to improve effectiveness of development cooperation.

According to the Secretary-General report on strengthening efforts to eradicate poverty and hunger, the average number of donors per country nearly tripled over the last half century, rising from about 12 in the 1960s to 33 in the period 2001-2005. This proliferation of donors is further exacerbated by the limited capacity of several countries in absorbing development assistance.

South-South cooperation will be the focus of the second roundtable discussion. This form of cooperation has become, over the last years, an important driver of international cooperation for development. In areas such as trade, investment, capital flows and financial and technical cooperation, South-South cooperation has grown considerably. It has coordinated responses to transnational security threats and national disasters such as the avian flu, HIV/AIDS and the 2004 Indian Ocean Tsunami.

Those discussions will lay the groundwork for next year’s first biennial Forum in New York, which will spotlight trends in international development cooperation. The Forum process will feed into the follow-up to the Monterrey Conference on Financing for Development unfolding next year in Doha, as well as into the Third High-level Forum on Aid Effectiveness that will take place also in 2008 in Ghana.

The peace-development nexus

The new functions undertaken by the Council – the Development Cooperation Forum and the Ministerial Review – will be complemented by a new capacity to respond to humanitarian emergencies when and where they occur. The Council will convene ad hoc meetings on specific humanitarian emergencies at the request of affected Member States, as spelled out in Resolution 61/16 on the strengthening of the Economic and Social Council. These ad hoc meetings are intended to raise awareness and promote the engagement of all stakeholders in support of international relief efforts. This is of course at a strategic, rather than operational, level.

The Council reform process also includes stronger linkages between the Peacebuilding Commission and the Council’s ad hoc advisory groups on countries emerging from conflict. As the Council already plays an important role in promoting long-term sustainable development in post-conflict societies, the Assembly – through the resolution on strengthening the Council – called last year on the Peacebuilding Commission to “benefit from the Council’s experiences in the area of post-conflict peace building and the success of its ad-hoc advisory groups.” It also reaffirmed “the need to address the special needs of countries emerging from conflict” and assist them in laying the foundations for durable recovery, reintegration and reconstruction. After all, peace and security, as the Secretary-General often reminds us, remain inseparable from the UN Development Agenda.

The new authority vested in the Council by the international community should enable it to serve as a bridge between policy-making and implementation. The Annual Ministerial Review and the Development Cooperation Forum will inject a necessary dose of accountability, outreach and engagement to the work of the Council. The new functions will also help the Council fulfill its Charter mandate to review policy, coordinate global development efforts, and advance the UN development agenda.

For complete coverage of the Council’s 2007 session, including a live webcast, please visit http://www.un.org/ecosoc/ .

 

Alternative thinking on national development strategies

Alternative thinking on national development strategies

DESA policy notes help countries evaluate a range of options when formulating national plans

Shaping national development strategies is a particular challenge for policy-makers around the world at a time when prevailing economic and financial rules and the liberalization of trade and capital movements have greatly constrained the room for maneuver countries enjoy for designing and setting policies. A series of policy notes recently launched by DESA is intended to assist decision makers in developing countries to expand their policy space for setting and integrating economic, social and environmental policies. The notes are inspired by a common vision of development that has emerged from the UN conferences and summits of the past two decades: the UN development agenda which aims at sustained and equitable growth, with social inclusion and environmental protection.

So far the notes cover macroeconomic and growth policy, trade policy, investment and technology policy, financing development, social policy, and state-owned enterprise reform. Subsequent policy notes are forthcoming in sustainable development and public finance. The notes seek to provide a range of possible alternatives to the standard policy solutions that have prevailed over the past two decades, rather than to prescribe any single course of action.

Price stability is not a panacea

The policy note on macroeconomics and growth by Shari Spiegel, and the complementary background note by Jayati Ghosh highlight the importance for economic policy-makers of focusing not only on intermediate goals such as price stability and the balance of payments but on long term goals of maximizing societal well-being in an equitable and sustainable manner. Spiegel’s note points out that the goal of economic policy is to maximize long-term societal well-being in an equitable and sustainable manner. Ghosh’s note explains that successful macroeconomic management in open developing economies requires pragmatism, within a growth-enhancing framework, and flexibility to deal with the specific requirements of each country’s context, and cautions against a dogmatic “one size fits all” approach.

Macroeconomic policy needs to be concerned with real variables such as aggregate growth, productive investment, employment generation and poverty reduction rather than exclusively on financial or monetary variables, such as a target rate of inflation. What is truly important to an economy is the stability of real variables such as output and employment in addition to the stability of financial variables such as the inflation rate.

Both writers point out that while price stability is important for encouraging investment and growth, it is not a sufficient condition for it. There are many cases where low inflation has also been associated with low growth and moderate inflation associated with high growth (Argentina, Brazil, Chile, Israel and Poland). Inflation, however, often called the cruellest tax of all, does weigh heavily on the poorest segments of the population and can lead, over time, to increased inequality of income and wealth. Governments have tended at times, as part of stabilization programmes, to focus on reducing inflation while allowing real variables such as employment and output to decline as well. Both notes advocate countercyclical macroeconomic policies and automatic stabilizers and sound a note of caution about the macroeconomic effects of sudden aid inflows – now often in the form of direct budgetary support. They recommend to both donors and recipients that aid disbursements be judiciously timed and spaced so as to avoid shocks to the recipient economy.

The case for public enterprises

The note on state-owned enterprise reform, by Ha-Joon Chang, argues that market failure and externalities do justify significant public ownership of productive assets, particularly those which provide goods and services to regions and segments of the population which the private sector would not normally address. He explains that there is no theoretical argument for or against state-owned enterprises and that privatization, often promoted by international financial institutions in the past as the preferable solution in most cases, should be seen as one out of many approaches to managing state-owned enterprises. The note enumerates measures, such as organizational reform and increasing competition, which can increase the efficiency of public enterprises where privatization is not chosen as a solution.

The note provides numerous examples of successful and profitable public enterprises in both developing and industrial countries and clarifies that unprofitable public enterprises are hard to privatize, because investors are not usually interested in them. Private investors are often interested only in profitable public enterprises. The note pleads for a case-by-case approach to public enterprises rather than a dogmatic approach of seeking privatization wherever possible. Where societies decide that privatization is the best solution, the note recommends safeguards to prevent the appropriation by self-seeking interest groups of the proceeds from the sale of shares.

Promoting inclusive finance

Developing countries need policies that can help transform financial agents and markets into instruments of inclusive growth, argues C.P. Chandrasekhar in the policy note on financial policies. At the same time, ensuring that their operations do not render the financial system fragile and crisis-prone in the long run. The note discusses the concepts of inclusive banking and finance, social banking, and directed lending as beacons to guide the policy maker in setting financial policies, rules and regulations so that more of the population now excluded from financial services can be provided the credit and other services they need to participate in the productive economy.

Overcoming the challenge of providing finance where client densities are low and transaction costs – as well as needs for finance -- are high, such as remote rural areas, requires some element of subsidy to market interest rates so that lending institutions would have an incentive to provide services in such areas. At the same time, to ensure stability of the financial system, governments must implement strict regulations with regard to accounting standards, disclosure norms and governance structures.

Social policies: More than an afterthought

Isabel Ortiz recommends ways to overcome the political legacy of the 1980s and 1990s in the policy note on social policies. During those decades, the scope of social policy, forged often at the behest of international financial institutions, focused on the delivery of limited services and safety nets, and proved insufficient to achieve balanced social and economic development. Social policy was considered residual, of secondary importance, deserving less funding, and often centred on mitigating the unintended consequences of economic change, rather than on seeking to make social inclusion and protection an integral part of the growth strategy.

In contrast, the note calls for national development strategies that accurately diagnose social issues and that are based on a thorough review the effectiveness of current policies. Strategies should propose a set of short, medium and long-term policies to optimize developmental impacts. They should provide for adequate budgetary allocations within the country’s fiscal space and own socio-economic priorities. Finally, national development strategies need to provide for effective implementation arrangements and for monitoring mechanisms to ensure that the policies reach the people.

A wide range of instruments may be used to achieve social goals: employment-sensitive macroeconomic and sectoral policies, labour market policies, social pacts, social dialogue, tripartite consultations, social insurance, social assistance for vulnerable groups, schemes to assist vulnerable communities, and well-governed public pension systems. There are no best solutions or ‘one-size-fits-all’ formulas. The social needs, as well as institutional and fiscal capacities of countries vary over time and they much choose policies appropriate to each instance to achieve their development objectives.

The note addresses the challenges of redistribution of income, employment and decent work, social services, social protection, social inclusion and warns that the roots of conflict and violence lie in social inequities. The goal of policy makers needs to be to integrate macroeconomic and social policy rather than treating social policy as an afterthought.

Caution on premature liberalization

The note on trade policies by Murray Gibbs shows policy-makers how they can seek space within the existing trade regime to ensure the achievement of human development objectives and the Millennium Development Goals. The note describes the WTO Multilateral Trade Agreements as both intrusive -penetrating deeper into what were previously considered the domain of domestic policy and extensive - covering a range of policy issues extending beyond the previous frontiers of trade policy.

The note warns that unstructured and premature tariff liberalization can result in deindustrialization, increased unemployment, declining economic prospects and opportunities, and aggravated inequalities. It also cautions governments about focusing exclusively on export growth, which in itself may not necessarily enhance human development and, in fact, may actually exacerbate inequalities, disempower small producers and contribute to environmental unsustainably.

To avoid the deindustrialization that occurred in many countries in the 1990s, the note argues in favour of industrial policy with sequenced and well-timed liberalization, which aims at providing opportunities for people to become more productive, and to eventually compete in world markets. Adequate flexibility in national tariff regimes of poor developing countries, relying on provisions within the existing WTO trade regime, can permit them to emulate the success of more advanced countries through industrial and investment strategies aimed at setting in motion an upward spiral toward economic growth and industrialization.

Finally, the note recommends that developing countries should approach free-trade agreement negotiations with a pro-poor, pro-human development template ensuring that the developed partner respects and provides direct assistance to support the developing partner in achieving human development goals.

Upgrading technology to raise productivity

The theme of industrial policy is further developed in the policy note on investment and technology policies by Mushtaq Khan. The note makes a strong case in favour of such policies. Market failures such as imperfections in credit, equity and insurance markets as well as externalities explain why markets alone cannot ensure that developing countries will catch up with advanced countries. Following the conventional advice of international financial institutions of the past two decades, it is often assumed that general reforms to improve good governance and the investment climate will indirectly improve the quantity and quality of investment and help to attract better and more productive technologies. The note recognizes that such reforms have merit and are needed in such areas as stability of property rights, but argues that a dedicated investment and technology policy needs be followed to ensure economic development and growth.

Policy-makers should start by investigating how existing technologies and sectors in their countries can be upgraded to improve productivity, create higher wage jobs and create greater employment, they are likely to identify a number of feasible steps they can follow to achieve relatively quick results. The first step is to identify national priorities for investment and technology policy and the critical constraints and bottlenecks that may be preventing their achievement through a consultative exercise that interacts with other components of the National Development Strategy. The second step in the policy-making process is to identify instruments and policy measures to address the most important constraints and bottlenecks that are preventing the achievement of the investment and technology upgrading goals identified in step one. The third step is to ensure that the policies and instruments discussed in step two can actually be implemented, given the governance and enforcement capacities available.

An important component of investment and technology policies in all high-growth developing countries has been government strategies to make finance available to critical sectors. Successful industrial and technology policies in countries like South Korea and Malaysia have also involved governments sharing some of the risk and uncertainty of learning new technologies.

WTO rules do not prohibit many forms of assistance for technological catching up. The note recommends, therefore, using this policy space through such instruments as fiscal and other incentives for setting up in-firm training schemes, bridging loans to finance learning and supporting targeted infrastructure for sectors involved in learning. One reason why China continues to attract more foreign investment than any other developing country is that infrastructure development can be prioritized in China so as to facilitate rapid investments in critical areas.

The note concludes that success in investment and technology policy has been based on a pragmatic identification of bottlenecks and constraints hindering progress in critical economic sectors, combined with the institutional and political capability to respond to continuing poor performance by changing policies or changing the focus of policies towards other priority sectors.

Together, these policy notes comprise a toolkit for those who shape and decide on policies at the country level. More important than individual policies in the various areas discussed in these notes is the policy mosaic created by all of them together. The ultimate challenge for countries is to put together national development strategies that are integrated and coherent, where macroeconomic, financial, social, investment, trade and public enterprise policies are truly complementary and mutually-reinforcing in practice. This set of notes for the national development strategies addresses that challenge and offers practical instruments for realizing the United Nations development agenda at the national level.

To download the policy notes: http://esa.un.org/techcoop/policyNotes.asp

For more information on the United Nations Development Agenda: http://www.un.org/esa/devagenda /


Mr. Sha Zukang High-level dialogue on the state of the world economy

Sha Zukang, Under-Secretary-General of Economic and Social Affairs, moderates a discussion on international economic cooperation at the opening of the Economic and Social Council’s 2007 session in Geneva.

 

Webcast: http://webcast.un.org/ramgen/conferences/ecosoc/2007/ecosoc070702am1-eng.rm
?start=00:05:02&end=00:19:18
(14 minutes)

Live from Geneva: http://www.un.org/webcast/ecosoc/