Dato Azmi Khalid
International Conference on Financing for Development
H.E. President Vicente Fox,
Let me first congratulate you Mr. President on your election as Chairman of this Summit Segment of the International Conference on Financing for Development. We are confident, Mr. President, that under your able chairmanship, the Conference would come to a successful outcome.
2. I also would like to take this opportunity, on behalf of the Government and people of Malaysia, to thank you Mr. President and the people of Mexico for the warm and generous hospitality that you have accorded to us during our stay in this beautiful city of Monterrey. My delegation also is grateful to you Mr. President for the arrangements that have been made to make our stay here comfortable and memorable.
3. This is a historic moment for all of us today as we stand on the threshold of a new partnership for the financing for development which ha,; been the most critical issue facing developing countries. The state of affairs on financial aid is lamentable. A recent World Bank publication pointed out that while rich countries' incomes have grown, their foreign aid as a proportion of their income has declined to a historically low level of 0.2 percent. Over the decades, many development models have been tried out. Lack of success is not for want of programmes or plans. It is the lack of financial resources that has stymied efforts of many developing countries towards attaining success in their development goals.
4. The road to Monterrey had been long and difficult but many obstacles had been overcome. This Conference holds the great promise of reinstating on the international agenda the importance of a genuine partnership between the developed and developing countries along with the universal recognition that sustainable development should be people-centered in its objective, scope and focus. The Conference also presents the greatest opportunity to adopt a new international framework to support the development efforts of both the poorer and more advanced developing countries. The Conference also provides an opportunity for the international community to strengthen cooperation for development by addressing international and systemic issues including the reforms of the international financial architecture, in a holistic manner in the context of globalization.
5. The subject of development cannot be discussed in isolation without reference to globalization. The globalization process has been a source of great concern for developing countries. The rapid phase of globalization and the increasing instability in the international economic environment has made the issue of financing for development ever more critical. For all the exaltations and salutations of globalization, the economic disparity between the North and the South has widened and the benefits disproportionately distributed. The income gap between the richest and poorest has significantly widened and the number of people living in absolute poverty has been increasing despite unprecedented prosperity in the developed world. Globalization even affects the notions of statehood and government as it weakens the basis for effective domestic government and the scope of economic policies at the international level. Globalization alone does not lead to growth and development nor does it solve the problem of poverty. Rapid or premature liberalization has, in many cases, damaged emerging economies in Asia and Latin America.
6. Asia's experience of globalization has not convinced us that this is the answer to economic ills for economic growth. Globalization need not be about free capital flows only. There can still be globalization but it should not be absolutely free, it should not be purely market driven. Regulated globalization which takes into account specific country circumstances can still be compatible with the idea of globalization.
7. One of the goals of the Conference is to eradicate poverty as we advance to a fully inclusive and equitable global economic system. For many developing countries, rural development is almost synonymous with poverty eradication. In Malaysia, planned and concerted efforts to develop the rural areas and eradicate poverty have started since our Independence in 1957. As a result of the government's efforts and high economic growth, the incidence of poverty has decreased substantially from 52.4 percent in 1970 to 6.1 percent in 1997. However, poverty eradication efforts were hampered to a certain extent, due to East Asian Financial Crisis in 1997. The incidence of poverty rose to 7.5 percent in 1999.
8. The East Asian financial crisis underscored the risks and challenges posed by globalization to developing countries. The crisis was perpetrated by the free exit of capital. It was clear that the bitter lessons of the Asian financial crisis showed that globalization was not the universal solution it was touted to be. The crisis had also shown that the present international financing system is badly equipped to deal effectively with the new complex challenges of globalization. Furthermore, part of the problem that brought the financial crisis was the inherent defect of the international financial architecture which was inadequate to cope with the effect of huge and volatile financial flows. It was seen that even countries regarded as success stories of development and those with sound economic fundamentals were vulnerable to shocks generated in the international financial markets.
9. In order for globalization to be better managed, a new global order to correct the effects of market failure and marginalization is required. Malaysia is pleased that the Conference has recognized the urgent need to enhance coherence, governance, and consistency of the international financial system. The reform needs to focus on international action and issues of governance of the international system including transparency and disclosure, capital flows, currency trading, highly leveraged institutions and reform of the international financial institutions.
10. The issues of financing are particularly relevant and vitally important in solving the challenges of development for many developing countries. We know that adequate and relevant infrastructure can facilitate the development of countries. The presence of basic physical infrastructure is vital and adequate resources should be channeled towards this purpose. As such, the need for dedicated pool of international financing for the development of infrastructure in developing countries must be given serious consideration. The mere construction of infrastructure can provide jobs and contracts for the local people. For example, the construction of roads and railroads will help land-locked countries to reduce the cost of transportations of raw materials and the imports of needed manufactured good. The cost of infrastructure is very high and the poor countries cannot themselves build the infrastructure so critically needed by them. The current official development aid is also inadequate. New and reliable sources of funds must be found to finance infrastructure projects in poor countries. Malaysia, therefore, welcomes the decision of the Conference to study in the appropriate fora, on possible innovative sources of finance.
11. The challenges facing developing countries, in integrating themselves into the international trading system, lies in their ability to fully and actively participate in the multilateral trading system. Regrettably, many developing countries have yet to fully benefit from global trade liberalization because of their inability to access meaningfully the markets of developed countries. Although the WTO carries with it the objective of freer trade, many developed countries maintain protectionist regimes and subsidies as basic instruments of economic policy, even as they insist on opening up the markets of the developing countries in the name of globalization and liberalization.
12. In this regard, we would like to see that the WTO adheres to trade-related issues, which have a legitimate place within a system of multilateral trade rules. These rules and the system must primarily be designed or re-designed to benefit developing countries, which form the majority of the WTO membership. Towards this end, it is imperative that the imbalances and asymmetries, which include the lack of implementation of existing obligations by developed countries in the area of textiles and agriculture; lack of market access for products of special interest to developing countries and the need to effectively operationalise the provisions for special and differential treatment, be given high priority.
13. The Monterrey Consensus, the document that is before us for adoption, is the beginning of the new partnership on the financing for development amongst the developed and developing countries together with the leading financial and trade institutions, the business sector, non-governmental organizations (NGOs) and interest groups to unlock and harness the financial resources, both domestic and international, so critically needed for development by the developing countries. National governments have undoubtedly a key role to play in the mobilization of domestic resources by displaying good governance, sound macroeconomic policies, fiscal discipline, rule of law and political stability. Political stability is vital in ensuring continuity of government policies as well as creates greater certainty and confidence in the economy. At the same time, a stable and predictable international environment must be able to support and promote sustained growth and development and provide greatest certainty by being able to avert excessive volatility. Towards this end, a combination of strengthened domestic resilience and a new international financial architecture are needed for developing countries to enjoy sustainable development.
14. Malaysia believes that mobilizing international private capital flows can generate rapid economic growth and prosperity. In this respect, judicious management of private flows is necessary to ensure that incipient domestic industries and businesses are given adequate time to mature and do not face unfair competition. In addition, foreign investors should also initiate and nurture the development of host countries producers to supply their inputs and components. In this way, the linkages with the host countries will be strengthened. We also note that countries must also provide a conducive environment to attract foreign direct investment (FDI).
15. In this information era, the role of the media in supporting development cannot be over emphasized. The media has tremendous control and influence in shaping the perception of people about a nation and its policies. We urge that the media continue to exercise greater responsibility in disseminating accurate, wellbalanced and timely information. They must be careful to avoid biases and imposing unfounded value judgements in their reporting. Inaccurate and unfair reporting has on many occasions adversely affected development efforts of national governments. In some instances, it has caused the loss of potential capital inflows as well as the outward flight of capital from the country.
16. The holding of this Conference has strengthened and renewed our resolve to eradicate poverty and bring sustainable development and prosperity to all mankind. If we commit ourselves to implement the proposals of the Monterrey Consensus, I am confident that we will achieve a more inclusive and equitable global economic system. The Monterrey Consensus has reflected some of Malaysia's concerns and views. However, we wish the document could have more concrete measures to implement the proposals and decisions. Furthermore, it will all come to naught if there is no proper follow-up mechanism to implement the proposals made in the Monterrey Consensus. We must therefore keep up the momentum that we have gathered and move on full gear to realize the Monterrey Consensus. Each and every one of us - nation states, multilateral institutions, business sector and NGOs and interest groups - has a role to play in this regard.
17. The implementation of the Monterrey Consensus and an effective institutional framework for this purpose within the United Nations is urgent. This document provides a new spirit of cooperation to reinvigorate our efforts in overcoming existing obstacles to development. Let us therefore take this august occasion to match words with deeds.
Mr. Chairman, I thank you.
Statements at the Conference