H.E. Chief Joseph Sanusi
Governor of the Central Bank of Nigeria
and Chairman of the Intergovernmental G-24 for
International Monetary and Financial Affairs and Development

International Conference on Financing for Development 

Monterrey, Mexico
18 March 2002

Submission by Nigeria as the G-24 Chair

It is gratifying that this United Nation’s Conference on Financing for Development is finally holding here in Mexico after many years of discourse between developed and developing countries. This is an important occasion for the developing countries, and hopefully, a historical landmark. Twenty-five years have passed since the failure of the North-South dialogue in Paris on international economic cooperation and little o no significant discussion has taken place thereafter to engender comprehensive international cooperation for improving the development prospects of developing countries. Within those twenty-five years, we witness the end of the competition among the major super-powers to align developing countries behind them. There has been an impressive growth of international trade and unilateral liberalization of international trade in developing countries. Regional free trade arrangements have been established in both the North and the South. Private financial flows have become the main source of international financing. Several developing countries have emerged as significant economic international players. Impressive technical advances in communications and information technologies have been registered. A unified monetary system now covers most of Europe. More recently, persistent rally of civil society organizations in industrial countries has aroused the concern among the rich of the deteriorating conditions of poor countries; this has resulted in some modifications of their countries’ policies, giving birth to the HIPC Initiative that is an important, even if still limited step, towards reducing unsustainable debt burden, built-up to a large extent from irrational lending and some private sector arrears turned into sovereign debt.

But despite these positive developments, we have also seen the deterioration of living conditions in many parts of the world, specially in developing countries and countries in transition. There is a secular deterioration in the terms of trade of commodity exporters. Massive financial crises have affected come emerging countries with increased frequency, disrupting for a considerable period of time improved economic prospects. Much of the African continent has been marginalized from world trade and international investment. New incontrollable pandemics affect mostly the poor. Prolonged domestic and cross border conflicts disfigures some regions and countries and the rise in terrorism imperils security in both rich and poor nations.

This Conference provides an opportunity to devise mechanisms and agreements that could help to reduce the shortcomings of globalization and to build-up the benefits it can provide. We must congratulate ourselves that it was largely the initiative of the Group of Seventy-Seven, with broad support in the General Assembly of the United Nations that launched this conference almost five years ago. The proposal was endorsed by the Intergovernmental Group of Twenty-Four developing countries (G-24) as early as September 1997. Let us hope that this global initiative of the developing world, embraced by developed countries, will be successful too in terms of concrete results, effective international cooperation to reduce poverty worldwide, enhance human development in our countries and facilitate the positive integration of all countries into a sustainable international economic system that benefit all regions, all countries and all peoples.

The Group of Twenty Four developing countries has participated extensively in the preparatory work leading up to the International Conference on Financing for Development (ICFD). In addition to discussions during our Ministerial plenary meetings, Nigeria organized a Workshop last September to facilitate the drawing up of recommendations which might prove useful in articulating developing country positions at the Conference; and co-sponsored a Seminar with the Governments of Norway and Mexico and the Inter-American Development Bank to look into the role of regional development banks in financing for development. This statement draws on this preparatory work and while not claiming to unanimity, it reflects the broad thrust of thinking in the G-24.

The G-24 fully endorses the imperative of mobilizing domestic financial resources for development and providing enabling environments for the efficient use of capital, both domestic and foreign. While accepting that improving governance, reducing corruption, maintaining macroeconomic stability, introducing effective regulation and supervision of the financial sector are necessary conditions, they will not prove to be sufficient conditions for success without effective complementary support for developing countries from the international community. Moreover, it must be recognized that many of the things that developing countries are expected to do are the result of development itself, rather than being preconditions for it.

The G-24 similarly endorses the recommendations for mobilizing international resources, both foreign direct investment and other private flows. There is, however, several issues not touched upon in this area, viz., how such flows can effectively come to countries that do not provide big markets for the goods transnational companies produce. Also, how can these foreign direct investments be made more supportive of national development through a greater exercise of corporate responsibility. Attention must be drawn to the work done at the United Nations on establishing a “Code of Conduct” for transnational corporations that would serve to balance investor and host country protection arrangements.

The role of international trade as an engine for economic growth and development and the numerous recommendations for its enhancement are well presented in the Outcome document. These need to be operationalised. The movement of persons is also mentioned as one among a long list of the issues of particular concern to all. Yet, the severity of restrictions in the advanced countries on the movement of labor constitutes a glaring deficiency in the much lauded process of globalization and serves as a significant impediment to the ability of the developing world to expand its contribution to the growth of world output and international financial system. The connection between the gains from trade liberalization and how these gains are distributed must also be kept in mind. Growth of trade itself does not ensure, by far, proportional economic growth in developing countries, but the present slowdown of international trade affects primarily developing countries and their prospects for economic and employment growth. As primary producers, many commodity exporters have experienced a secular decline in their terms of trade along with the instability of commodity prices. In highlighting the commodity issue, special urgency must be accorded to the provision of low-conditionality compensatory financing mechanisms (through the IMF or otherwise), and for new commodity price management schemes (through the World Bank or other institutions).

In the area of increasing international financial and technical cooperation for development, the crucial role of ODA and the need for a substantial increase have been significantly buttressed by recent World Bank calculations quantifying the funds required for meeting the goals set by the Millennium Declaration and other internationally agreed development targets. There is also an imperative for separating finance for development from humanitarian assistance from finance for global and regional public goods and for providing adequate funding for each of these causes.

In respect of these last-mentioned causes, the possibility of using “innovative” sources has acquired significance. In particular, the proposal for small taxes on short-term currency conversions (“Tobin tax” and its variants) seems to have reached a degree of consensus among some major industrialized countries that suggests a possibility of early and widespread implementation without having to wait upon further rigorous studies and without having to reach collective agreements encompassing all advanced countries. Another proposal deserves as serious consideration namely the application of a small tax on the sale of pharmaceuticals that could be used to subsidize the provision of essential drugs to poor people, or on the exploitation of the global commons or the exploitation of the mineral resources of the sea-beds. 

To improve aid effectiveness, the “transaction costs” of aid delivery need to be reduced. It is essential in this context to encourage the harmonization of bilateral and multilateral donor policies and procedures, the coordination of disbursement and delivery mechanisms and the application of “common pooling” arrangements whereby donors would provide direct budgetary support on the basis of programs developed under the leadership of the recipient country instead of tying their aid to specific projects selected by donors without regard to the country’s own priorities. Also essential is the need to give substance to the concept of “ownership” by calling for an independent evaluation of donor performance at the level of the individual recipient country. This proposal need not have to wait for global agreement, since individual donors, or a “like-minded” group of them, could offer themselves for such evaluation.

The use of special drawing rights allocations for development purposes is mentioned but counterbalanced by reference to taking into account the global need for liquidity at the international level. No such need was vouchsafed when agreement was reached to make an “equity allocation” equal to the entire outstanding amount of SDR 21 billion and whose implementation now awaits approval by the legislature of only one country that exercises a veto on the decision. As this case illustrates, the Articles of Agreement of the IMF are not unalterable.  Nevertheless, the proposal for the SDR allocated to rich countries from the Special One-Time Allocation being donated to a development fund merits full support from the international community to jump start required funding to attain the Millennium Development Goals.

The external debt issue must be related to the application of the rule of law under which official creditors cannot decide on their own claims, judgments on debt workouts should be made by independent arbiters and the income earning capacity of the sovereign debtor is not compromised. In the case of private creditors, the exploration of “standstill” mechanisms, such as those proposed by the IMF, should be pursued as a first step towards evolving a rule-based framework that could eventuate into an international bankruptcy regime. We do not believe that final decision on standstills should reside with the IMF, who is also a creditor and whose Board and Management have a primary obligation to safeguard its patrimony.

Additional efforts are required to overcome shortcomings of the HIPC Initiative. A more realistic assessment should be made of the amount of debt reduction needed for most countries to stay on a sustainable path of growth and poverty reduction. Additionally, it should be recognized that debt relief is not enough to overcome the conditions that led to the debt overhang to start with. It must be complemented with extra resources and an improved performance in the recipient countries to induce development. The donation of SDRs by rich countries and additional sales of gold from the IMF reserves as well as active industrial country contributions to the World Bank Trust Fund could enhance a satisfactory implementation of realistic debt cancelation, which should not be considered as ODA.

In the global economic governance area, IMF quota formulas should be revised in order to raise the voice and vote of developing countries in decision-making. An oversight role for ECOSOC is proposed to bring the United Nations into a global governance role that is essential for promoting the coherence and consistency of the international monetary, financial and trading systems. 

Lastly, there would be need for a follow-up of decisions taken in this Conference. I thank you for your attention.

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