ECONOMIC AND SOCIAL COUNCIL FOCUSES ON CURRENT GLOBAL CHALLENGES IN ANNUAL MEETING WITH BRETTON WOODS INSTITUTIONS, WORLD TRADE ORGANIZATION

14 April 2008
ECOSOC/6328

ECONOMIC AND SOCIAL COUNCIL FOCUSES ON CURRENT GLOBAL CHALLENGES IN ANNUAL MEETING WITH BRETTON WOODS INSTITUTIONS, WORLD TRADE ORGANIZATION

14 April 2008
Economic and Social Council
ECOSOC/6328
Department of Public Information • News and Media Division • New York

Economic and Social Council

Special High-Level Meeting

4th & 5th Meetings (AM & PM)

Economic and Social Council focuses on current global challenges in annual meeting

with bretton Woods institutions, World Trade Organization

 

Delegates at Day-Long Event Discuss Integrated

Solutions to Credit Crisis, Commodity Costs, Development Financing, Climate Change

In light of new global challenges such as the credit crisis, soaring commodity costs and global warming, the Economic and Social Council focused today on new strategies in the areas of trade and financing for development as it held its eleventh annual high-level meeting with the Bretton Woods institutions, the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD).

It was important to build new momentum on the 2002 Monterrey Consensus on financing for development, to work towards the Doha Review Conference in November and to keep equitable trade and mitigation of climate change firmly in mind, United Nations Secretary-General Ban Ki-moon urged in his opening address to the assembled delegates.  “Let us make 2008 a truly great year in the field of development,” he added.

He said it was particularly important for middle-income countries to be integrated into the world trade system.  As for the least developed countries, trade could best benefit development if they diversified their exports, particularly given the high volatility of prices for primary products.  Diversification and capacity-building required increased investment and technology transfer from donors and, for that reason, support for aid-for-trade schemes should be bolstered.  In addition, innovative and robust regulation was needed to keep up with and sustain the enormous economic growth of recent years.

In his welcoming remarks, Léo Mérorès ( Haiti), President of the Economic and Social Council, said new initiatives on financing for development could play a crucial role in increasing and complementing existing official development assistance.  “In a true partnership for development, developed and developing countries have come together to explore further innovative ways of financing for development,” he said, adding that the Council could play an important role in strengthening that international cooperation.

Despite the progress already achieved, many middle-income countries continued to face challenges to the alleviation of poverty and inequality, the improvement of trade competitiveness and the building of solid infrastructures.  Greater international cooperation could help resolve some of those issues in the future.

Describing trade as one of the most important factors in the development process, Petko Draganov (Bulgaria), President of the Trade and Development Board of the United Nations Conference on Trade and Development, said that in order to make trade work to finance development, countries needed to put the right policies in place at they built their productive capacities and competitiveness.  The upcoming UNCTAD XII meeting, to be held in Accra, Ghana, would address those issues.

The views of other major international stakeholders were presented by Richard Ochoa (Mexico) on behalf of the Chair of the Development Committee; Murilo Portugal, Deputy Managing Director of the International Monetary Fund (IMF); Willy Alfaro, Director of the World Trade Organization’s External Relations Division; and Zia Qureshi, Senior Adviser to the World Bank’s Chief Economist.

Following the opening remarks, the Economic and Social Council held round tables on three main subjects:  “New initiatives on financing for development”; “Supporting development efforts and enhancing the role of middle-income countries, including in the area of trade”; and “Supporting development efforts in the least developed countries, including through trade capacity-building”.

In the afternoon, the delegates participated in a thematic debate focusing on “Building and sustaining solid financial markets:  challenges for international cooperation”.  They heard presentations by the following panellists:  Joaquin Almunia, European Commissioner for Economic and Monetary Affairs; Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development in the United Nations Department of Economic and Social Affairs; and Christopher Towe, Deputy Director of the IMF’s Monetary and Capital Markets Department.

The presentations concentrated on the current international financial crisis and how the development challenges arising from it could be mitigated in the least developed countries.  Many speakers in the ensuing interactive discussion called for a more coherent, transparent and equitable international financial structure to deal with those problems.

A special event titled “Financing of climate change mitigation and adaptation followed that discussion.  Panellists included:  Olav Kjorven, Assistant Administrator and Director of the Bureau for Development Policy at the United Nations Development Programme (UNDP); Tariq Banuri, Senior Fellow and Director of the Future Sustainability Programme at the Stockholm Environment Institute; and Lucio Monari, Senior Manager of the World Bank’s Sustainable Development Vice-Presidency.  In the subsequent interactive discussion, speakers focused on ways to deal with climate change while furthering sustainable development.

Summarizing the salient aspects of the dialogues at the meeting’s end, Mr. Merores, President of the Economic and Social Council, encouraged the General Assembly, the Bretton Woods institutions, and all other stakeholders to build on the day’s discussions and suggestions in developing new strategies in the area of financing for development that would be effective in the current economic and environmental climate.

The Economic and Social Council will meet again at a date and time to be announced.

Background

The Economic and Social Council today held its annual special high-level meeting with the Bretton Woods institutions, the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD), under the theme “Coherence, coordination and cooperation in the context of the implementation of the Monterrey Consensus, including new challenges and emerging issues”.

Opening Remarks

LÉO MÉRORÈS ( Haiti), President of the Economic and Social Council, said the high-level debate was expected to make an important substantive contribution to the Follow-up International Conference on Financing for Development to be held in Doha, Qatar, later this year.  The discussion would revolve around five substantive topics:  new initiatives for financing for development; supporting development efforts and enhancing the role of middle-income countries, including in the area of trade; supporting development efforts of the least developed countries, including through trade capacity-building; building and sustaining solid financial markets; and financing of climate change adaptation and mitigation.

New initiatives on financing for development could play a crucial role in increasing and complementing existing official development assistance, he continued.  “In a true partnership for development, developed and developing countries have come together to explore further innovative ways of financing for development,” he said, adding that the Council could play an important role in strengthening that international cooperation in the future.  Despite the progress already achieved, many middle-income countries continued to face challenges to the alleviation of poverty and inequality, the improvement of trade competitiveness and the building of solid infrastructures.  Greater international cooperation would help resolve some of those issues in the future.

The need for innovative and prudent regulation of new financial instruments and mechanisms to help build and sustain solid financial markets had already been proven, he said.  All stakeholders needed to work together to create an international financial architecture that would work in support of development.  “Today’s dialogue provides a unique opportunity for a fruitful debate on the role ECOSOC and the major institutional stakeholders can play to shore up both national and international oversight of financial markets.”

He noted that developing countries were faced with additional financial and technical challenges due to the negative impacts of climate change.  The international community must help those countries to secure predictable and sufficient finances to adapt to the climate change imperative and to mitigate its negative impact on their economies.  Achieving tangible progress on financing for development required significant improvement in the coherence and consistency of international policies.  By increasing commitments to mutual responsibility and accountability, the international community could ensure a successful outcome to the current high-level meeting, as well as a joint step forward on the road to Doha.

Secretary-General’s Address

BAN KI-MOON, Secretary-General of the United Nations, said the rise of food prices had reached crisis proportions and there was a need for emergency measures, as well as augmented production.  The international community would also need to take concerted action to counter the possible political and security effects of that crisis.

At the current meeting, it was important to build new momentum to follow up on the Monterrey Consensus, working towards the Doha conference in November, he said.  It was particularly important to create new proposals on development financing and to integrate middle-income countries into the world trade system.  Trade could be the engine for development in the least developed countries as well, if such countries diversified their exports, which was particularly important in light of the high volatility of prices for primary products.  Such diversification, as well as capacity-building, required increased investment and technology transfer from donors.  For that reason, aid-for-trade support should be bolstered.  In addition, innovative and robust regulation to keep up with the enormous economic growth of recent years was needed to ensure continued growth and expansion.

Developing countries also needed assistance to combat the effects of climate change, he said.  The run-up to Copenhagen must be marked by effective mitigation schemes, hopefully building on previous strategies for sustainable development.  In addition, the run-up to the Doha conference must help deliver on the promises of financing for development, he stressed, describing the activities that the Secretariat was pursuing towards that end and towards the attainment of the Millennium Development Goals.  “Let us make 2008 a truly great year in the field of development.”

Statements

PETKO DRAGANOV ( Bulgaria), President of the Trade and Development Board of the United Nations Conference on Trade and Development (UNCTAD), described trade as one of the important factors in the development process, saying that realizing gains from it for the benefit of developing countries continued to be a significant development challenge.  In order to make trade work as a vector for financing development, countries needed to implement adequate policies, while building their productive capacities and competitiveness.  The upcoming UNCTAD XII meeting, to be held in Accra, Ghana, would help to address those issues.

Foreign direct investment remained the key source of financing for developing countries, he said, adding that every effort should be made to encourage flows of such money to developing countries.  Changes in global trade and financial markets could also create opportunities for finding new sources of financing for development.  For example, South-South investment, sovereign wealth funds, and the Aid for Trade initiative had already proven beneficial in financing development.  Middle-income countries had an important role to play since they had a “development-transmitting impact” on other countries, through trade and investment.  Their efforts to improve and strengthen their role should be supported.

The international community should also focus support on the efforts of the least developed countries to face the challenges of development, he continued.  Official development assistance should be scaled up and other enabling instruments, specifically the Enhanced Integrated Framework of the World Trade Organization, should be implemented.  The recent improved economic performances of the least developed countries needed to be translated into increased private and public investment aimed at diversifying those economies and overcoming commodity dependence.  Their integration into the multilateral trading system should also be improved.

The international financial architecture should better adapt to the realities of the new century, he said.  It should ensure greater exchange-rate stability and avoid misalignments that distorted international economic relations.  Strengthened multilateral rules and institutions could help reduce uncertainty and instability in international financial markets and induce greater compatibility of national macroeconomic policies.

In conclusion, he said climate change was a crucial factor of globalization that posed one of the greatest risks to environmental, social and economic development in both developed and developing countries.  As such, the impacts that global trade and the production system had on climate change and development must be examined closely.

RICARDO OCHOA, speaking on behalf of Augustine Carstens, Chairman of the Development Committee, said the world overall was on course to meet the poverty Millennium Development Goal, thanks to strong and sustained growth.  Donors should increase their support for the development priorities of the poorest countries in 2008, a year that was crucial for the achievement of the Millennium targets.  While there had been a downturn in the global economic outlook, emerging and developing economies had so far been less affected by financial market developments.

The impact of higher commodity prices was mixed, depending on whether countries were net importers or exporters, he said.  The Development Committee had asked the World Bank and the International Monetary Fund (IMF) to be ready to provide timely policy and financial support to vulnerable countries dealing with the negative shocks resulting from rising energy and food prices.  It had also urged donors to provide more assistance to the World Food Programme (WFP) and encouraged the World Bank to strengthen its engagement in agricultural development.

In the current climate, increased and more effective aid remained critical and the Committee strongly supported intensified and decisive efforts to agree on an ambitious pro-development Doha Round, he said.  The Development Committee endorsed the overall World Bank Group objective of an inclusive and sustainable globalization, and the steady implementation of its governance and anti-corruption strategy.  It also welcomed a report by the IMF Managing Director on recent changes at the Fund, and encouraged the Bank to advance work on enhancing the participation of all developing and transition countries.

He said the Development Committee acknowledged that the World Bank had an important role to play in terms of the financial architecture for addressing climate change and had asked that institution to do more work on additional financing needs for addressing the effects of that phenomenon.  Aid for that agenda must be in addition to present levels of official development assistance and access to clean energy must remain a key factor of development.

MURILO PORTUGAL, Deputy Managing Director of the International Monetary Fund, noted the global rise in financial instability and the deterioration in growth prospects for the coming year.  To overcome the challenges ahead, coherent action was needed, with due regard being given to cross-border interactions.  Advanced economies should focus their monetary policies on medium-term price stability, while responding flexibly to a more pronounced and prolonged economic downturn.  The actions taken by their central banks to provide liquidity support to ease strains in inter-bank markets were particularly welcome.  However, further actions by large financial institutions to disclose losses and repair balances were still necessary.

Noting the sharp rise in food and energy prices that many developing countries were facing, and the significant impact they were having on the poorest segments of the world’s population, he said they should work more closely with the World Bank and other partners to ensure an integrated response that would include policy advice and financial support.  A “prompt and ambitious conclusion” to the Doha Development Round of trade negotiations, as well as greater support for sovereign wealth funds would also help emerging markets and developing countries to cope with the current financial crisis.

The Fund’s credibility and legitimacy had been significantly enhanced thanks to the recent agreement by the Executive Board on the package of quota and voice reforms, he said.  The reform package would require further realignment of the quota shares of members in the context of future general quota reviews, which would ensure that quota shares adequately reflected the relative positions of members in the world economy.  The Executive Board’s proposed new income model and new medium-term budgetary envelope would also help enhance the Fund’s credibility and give it a sustainable financial footing.  Bilateral surveillance would remain at the core of the Fund’s work and would continue to be an essential input into multilateral and regional surveillance.  In terms of emerging market economies, the Fund would focus on the specific challenges they faced from global financial integration, cross-border linkages, and volatile capital flows.

In recognition that emerging markets and developing countries were not immune to a broadening of the problems in financial markets, he encouraged the Executive Board to consider increasing the level of normal access to Fund resources and continue its work on an appropriate crisis-prevention financial line.  IMF technical assistance and training should continue to play a key role in supporting the capacity-building efforts of members in the areas of the Fund’s core mandate.

WILLY ALFARO, Director, External Relations Division, World Trade Organization, said the Doha Round negotiations were at a delicate moment and the organization’s members needed to find the flexibility within the next weeks to make the necessary compromises.  “A deal is doable, even within this short time frame,” he said, if all members were ready to “walk the last mile”.  Much had been accomplished amid intensive negotiations and most technical issues had been dealt with.  Political will was now needed to conclude the Round by the end of this year, a conclusion that was even more important now, given the current world economic outlook.  Without a conclusion, all countries would suffer due to the loss of an opportunity for a more equitable trade system.

Better market access and more equitable rules, removing restrictions and encouraging South-South trade, were also important for all, he said.  In addition to Doha, Aid for Trade was a valuable strategy that could serve as a catalyst for leveraging investment and reform.  Donors should clarify their participation in that programme.  The goal was not to create a new mechanism but to improve and coordinate existing mechanisms.  The Doha agenda was the greatest challenge in the history of the World Trade Organization and concluding the talks required full and active support from all States in order to unlock the potential of trade for development and make the lives of millions of people easier.

ZIA QURESHI, Senior Adviser to the Chief Economist, World Bank, presented the Global Monitoring Report 2008, jointly prepared by the World Bank and IMF, saying it provided a comprehensive and integrated assessment of the Millennium Development Goals and issues relating to the changing environment.  In general, the world was on track to meet Millennium targets on gender parity in schools but there were serious shortfalls with regard to nutrition, education, health and sanitation.  There were considerable regional variations, however, and many fragile countries were falling behind on most, if not all, the Millennium Goals.

The report showed that, with stronger efforts by countries and development partners, the majority of the targets could still be achieved by most countries, he said.  The international community needed to agree on priority actions and milestones for monitoring progress, and the report offered a six-point agenda, which included:  sustaining and broadening the global growth momentum; achieving better results in human development; scaling up aid in a changing aid architecture; harnessing trade for inclusive and sustainable growth; leveraging through international financial institutions; and ensuring environmental sustainability at the national and international levels.

Thematic Debate

The Economic and Social Council resumed its high-level meeting in the afternoon with a thematic debate titled “Building and sustaining solid financial markets:  challenges for international cooperation”.

Statements by Panellists

JOAQUIN ALMUNIA, European Commissioner for Economic and Monetary Affairs, said global financial stability was a global responsibility and international cooperation was tantamount to success.  After many years of unconstrained leverage -- the process whereby the market created its own liquidity by reinvesting initial borrowings several times over -- the global financial system was now experiencing extensive losses due to the ongoing “de-leveraging” process.  The loss of investor confidence in the financial system reflected uncertainty about the ultimate size and location of losses.  To overcome the current financial crisis, investor uncertainty must be removed.

Financial innovation had brought major benefits to the global economy and to both developed and developing countries, he continued.  The European Union’s response to the financial turmoil should find the appropriate balance between restoring investor confidence and retaining adequate incentives for entrepreneurship and innovation in the financial system.  European Union Finance Ministers had adopted a road map for action and identified four key objectives:  improving financial transparency in the market; upgrading valuation standards; strengthening the European Union’s prudential framework for the banking sector; and investigating structural market issues.  That road map favoured self-regulation and industry-led initiatives, though regulatory action would still be necessary when industry failed to deliver substantive responses.

He noted that, to date, there had been “remarkable international consensus” on the underlying causes of the financial turmoil and on the broad policy response.  The recommendations made in the final report of the Financial Stability Forum were in line with the European Union road map and showed the urgent need for the financial industry to deliver substantial improvements on their market practices.  Though each country had the right to tailor its own policy responses, they should not “go it alone” without due regard to the international dimension.  Policymakers should work together to upgrade the functioning of the global financial system and forge a new common approach.  Emerging economies would play an increasingly important role in safeguarding financial stability and should thus be included in an international collaborative approach.  It was important to tackle the underlying causes of the existing problem, as well as the scarcity of primary resources due to the inadequate energy and food policies of some countries.

JOMO KWAME SUNDARAM, Assistant Secretary-General for Economic Development, Department of Economic and Social Affairs, said that in the past quarter of a century, financial interests had gained greater influence through market liberalization, resulting in slower economic growth compared to the preceding period.  Liberalization had limited the ability to make market growth relate to development, exacerbating financial cycles.  Capital flows had been directed from the capital-poor to the capital-rich.

Far from strengthening financing for development, market growth had weakened the relevant financial institutions, he said, pointing out that, to strengthen such financing in the near future, it was important to bolster crisis management institutions and mechanisms, as well as mechanisms for development financing.  The governance mechanisms of the financial institutions must become more equitable, and regional investment must be strengthened.  Despite its disadvantages, the IMF was the only inclusive, multilateral institution of its kind and it must take a leadership position in those efforts.

In recent months, the understanding of managing financial problems had changed, he said.  More would be learned about the supervision and regulation of financial tools and counter-cyclical stabilizers.  It was important to be open-minded about the use of the varied instruments that would be available to the global financial system.  In the run-up to Doha, it was also essential to re-examine the experience not only of the past 25 years, but also of the period before that.

CHRISTOPHER TOWE, Deputy Director, Monetary and Capital Markets Department, International Monetary Fund, said threats to systemic stability remained highly worrisome.  Though markets had stabilized somewhat in recent weeks, stabilization had only been in response to a massive policy response; a significant risk of self-sustained debt spiral remained, as did significant credit, macroeconomic, market, liquidity and emerging-market risks.  There had already been significant declines in the United States housing sector, moving beyond sub-prime and prime markets, and that decline was now extending into non-United States real estate markets.

Inter-bank liquidity problems were increasingly reflecting solvency concerns and bank losses originating with sub-prime losses in the United States were now spreading beyond its borders, he continued.  Though emerging markets had seen recent growth, they, too, were now feeling the pressure of the global financial crisis.  Overall, the spreading of the United States sub-prime crisis was threatening the macroeconomies of both mature and developing countries.  To face those challenges, the short-term focus should be on avoiding a self-sustained credit crunch by supporting inter-bank markets, enhancing bank disclosure, encouraging bank recapitalization, dealing with stressed institutions in a timely manner, and developing contingency plans for dealing with potentially large stocks of impaired assets.

The policy response over the medium-term should be multifaceted, to match the multifaceted causes of the crisis, he stressed.  Such a response should include tighter credit regulations and oversight, stricter applications of consolidated supervision, greater care when applying fair-value accounting, improved liquidity-risk management and an enhanced system of crisis management by all stakeholders.  The IMF’s International Monetary and Financial Committee and the Group of Seven had recently endorsed those conclusions and the Fund would be actively engaged with key standard-setters and key private industry actors to ensure a coherent and effective response.

Interactive Discussion

The representative of Slovenia, speaking as a financial representative of the European Union, said it was in the common interest to take lessons from the current economic turmoil in which the existing architecture’s weaknesses had been exposed.  Arrangements for market stability needed to stay ahead of crises, institutions must be made more capable of translating analysis into policy, and regulatory mechanisms must become more effective.  For those purposes, reform of the international financial architecture was essential.  The independence of the IMF and its role in developing countries must be preserved and become more efficient, focusing on that institution’s core competencies, including debt sustainability, and it must improve its collaboration with the World Bank.

A representative of the European Network for Financing for Development said the current financial crisis was spreading to developing countries and would undermine efforts to achieve the Millennium Development Goals.  Systemic issues that contributed to the current crisis, such as hedge funds, must be examined very closely in that light.  It was also essential to reduce capital flight and tax evasion from developing countries and to create a better economic regulatory framework.  For those purposes, the European Union agreed that a more structural plan was needed.

The representative of Antigua and Barbuda said weakness in the global financial structure was not a new problem, and had been discussed extensively at the 2002 Monterrey Conference.  There was still too much dependence on national, uncoordinated action.  “Where is the global arrangement?” he asked, stressing that it was still sorely needed.

The representative of the United States said much national action was being undertaken in his country.  It included the establishment of a stimulus package, the lowering of interest rates and actions to boost liquidity and assist institutions, in addition to work on longer-term regulatory reform.  The spill-over of the crisis to developing countries was limited at present, but more details on policy considerations for those countries would be requested in the period ahead.

The representative of Guinea said the road ahead was full of uncertainties and difficulties owing to the decline of official development assistance, the food-price crisis, climate change and other problems.  Preparations for the Doha conference should focus on mobilizing aid more effectively for the development of multi-year programmes.  Guinea would follow policies that emphasized innovative forms of financing.

The representative of Norway raised the issue of illicit financial flows and the need to better understand their impact on development, noting that they currently amounted to between $1 trillion and $1.6 trillion a year, with more than half coming from developing countries.  They were a systemic issue and “plugging the leak” would result in significant amounts of money that would then be available for development.

The representative of China, following up on comments made earlier on the policy implications for developing countries and countries with economies in transition, said new financial innovations held great potential to improve the financial situations of those countries.  However, financial innovations must be accompanied by proper regulations, the development of which took a considerable amount of time.  The international community should give developing countries the necessary time and resources to build their capacities to take on such a large task.  Emerging economies had been asked to play a more important coordination role in response to the financial situation, yet there continued to be instances where those countries were not included in the attendant international debate.

The Executive Director of the International Monetary Fund, responding to criticism of international financial bodies raised throughout the high-level meeting, stressed the positive impact that the internationalization of capital movements had made on the alleviation of poverty, saying that a more qualitative and quantitative analysis of capital flows illustrated that point very clearly.  Oversight of capital markets should be transparent, ensuring a level playing field for the consumer and for prudential regulation.

Warning against focusing exclusively on central banks, he said doing so would result in failure to address adequately issues relating to the “shadow banking system” that ran parallel to the central banks.  As for the work of the IMF itself, international financial governance structures needed to balance the need to be representative against the need for effectiveness.  The Financial Stability Forum was both representative and effective, though further improvements, reviews and adjustments in international governance would be made in the future.

A representative of the United Nations Office on Drugs and Crime (UNODC) took up the question of corruption, noting that the siphoning of assets from developing countries greatly hampered financing for development.  UNODC had begun a programme to help effect the implementation of the Convention against Corruption and further international cooperation for the recovery of assets so they could be used to fund development.

A representative of the New Rules for Global Finance Coalition stressed the crucial importance of transparency and governance in the international architecture, and expressed disappointment to hear from the representative of the IMF that it had no role in regulation or analysis.  With no one to represent vulnerable developing countries in that area, when would they get a chance to enter the room and speak for themselves?  An equitable, transparent and just financial architecture was still needed.

The representative of Brazil, pointing out that reports had been warning about the current crisis for the past several years, raised questions about that, and whether members of the Economic and Social Council could participate in related committees.

Mr. TOWE, responding to questions, said the challenge for developing countries was that money flows would become much more contracted and the policy premium must be on sound macroeconomic policies.  Regional authorities would become important in building up networks to improve regulatory and supervisory frameworks.  It was important to be careful in moving toward Basel II; countries must have the necessary infrastructure in place before they moved down that road.

Mr. JOMO, in response to questions raised by the representatives of Brazil and the United States, said an alarm about problems in the latter country had been sounded quite early by some institutions, and it was naïve to think that developing countries could be decoupled from the financial crisis, in light of the current financial architecture.

Special Event

The Economic and Social Council then began a special event, titled “Financing of climate change mitigation and adaptation”.

Statements by Panellists

OLAV KJORVEN, Assistant Administrator and Director, Bureau for Development Policy, United Nations Development Programme (UNDP), said climate change presented a daunting challenge requiring both developed and developing countries to re-examine their approach to development to ensure sustainability and attainment of the Millennium Development Goals.  The world was moving towards “climate change tipping points” that could have disastrous effects, consigning 40 per cent of the global population to significantly diminished future opportunities.  Investment in financial flows to address climate change needed to be scaled up immediately and the pattern of investment and financial flows altered to focus more on climate-friendly alternative resources and to optimize public and private partnerships, among other things.

“The cost of inaction far outweighs the cost of action,” he said, adding that developing countries needed to identify the priorities for additional support and align them with the design of new financial funding mechanisms to ensure ownership.  A coherent and integrated response to climate change benefited both donor and recipient countries, and the former should, therefore, make the effort to provide the necessary resources for climate-change-related funding initiatives.  The expansion of access to energy should be greatly accelerated while overall capacity-development for developing countries should be improved to help them attract and manage outside investments.  A number of funds and initiatives were already being developed to address climate change but it was essential that those funds be properly integrated into the Climate Change Convention process.

He stressed the positive impact that the United Nations and the Bretton Woods institutions could have in addressing climate change if they worked together in an effective and coherent manner.  “At the end of the day, all of our development efforts must be about helping achieve sustainable results.”  Official development assistance was only a small part of a forward-looking financial development architecture, in which climate change was a top priority.  Innovative climate-funding initiatives were equally necessary to complement already existing forms of assistance and ensure an appropriate and adequate response to climate change.

TARIQ BANURI, Senior Fellow and Director, Future Sustainability Programme, Stockholm Environment Institute, said different communities had different perspectives on climate change.  The “climate community” started with emission goals and worked backwards, a calculus that left out the possibility that developing countries could improve their energy supply.  The development community started with development goals then identified options for the reduction of greenhouse gasses.  Maintaining a 5 per cent growth rate, while essential for reducing economic inequality, could lead to a climate catastrophe.

There was a need for policy coherence to ensure that climate policies and development policies worked together, he said.  A key area was energy, which was a basic human need.  Developing countries must increase their supply three or four times to enable a tolerable lifestyle for their populations.  In that light, the carbon market would only become effective on a large scale and the carbon tax would have a regressive effect on poor countries.

Describing various mitigation scenarios, he said the possibility of cooperation would be greater if serious work started earlier, proposing for that purpose the development of climate development goals with defined financing mechanisms that followed the model of the Millennium Development Goals.  An example was providing universal coverage with stable pricing, while fixing the share of renewable energy and national efficiency targets.  That strategy could make climate mitigation efforts more concrete and manageable.

LUCIO MONARI, Senior Manager, Sustainable Development Vice-Presidency, World Bank, reminded the international community of the urgent need to address climate change immediately and effectively and the overall need to scale up the global response.  World Bank efforts to combat climate change prioritized economic growth, poverty alleviation and attainment of the Millennium Development Goals.  Effective action, including adaptation and mitigation strategies, required innovative financing instruments that properly addressed the resource gap.  The development of innovative market mechanisms should help build an enabling environment for private-sector financing.  In addition, the deployment of existing and new climate-friendly technologies should be accelerated and access to them ensured.

The World Bank Group used a wide range of instruments to facilitate investment and progress on sustainable development, he explained.  Much of the Bank’s lending was to sectors that had shown the largest potential for adaptation, which would help to optimize the potential for positive change.  The portfolio of funds and programmes dedicated to strategic climate-funding initiatives would help countries undertake transformative projects to reduce carbon emissions and learn how to build climate resilience into development.  The Clean Investment Funds would scale up action on climate change by promoting cooperation and support among stakeholders towards a post-2012 agreement.  Those funds and programmes would also support investment based on country-led strategies, maximizing co-benefits, and ensuring as much flexibility and efficiency as possible.

Interactive Discussion

The representative of the United Kingdom agreed with comments made by panellists on the need to address climate change while, at the same time, working towards attaining the Millennium Development Goals.  Without immediate action, progress towards achieving the targets would be reversed or, at the very least, permanently stalled.  The United Kingdom had already pledged more than $2 billion for tackling climate change and was ready to pledge even more in the future.  However, money alone was not enough and a new model for development was now necessary to ensure that countries could move towards a cleaner and more prosperous future.  Future financing needs for climate change should be discussed under the auspices of the Climate Change Convention but not relegated to environmental sectors alone.  Finance and Development Ministers should also prioritize climate change and incorporate related matters into their work.

The Dean of the World Bank Board of Directors followed up those comments by urging the international community not to lose sight of the basic development agenda.  Poverty reduction was of the highest priority and a longer-term view of development would help ensure that progress already made towards development goals would not be lost.  Equitable and sustainable growth could help the global community address emerging and pressing challenges while examining environmental, financial and developmental factors together in order to ensure that growth.

The representative of Belarus touched on the need for developing countries to have early and equal access to new technologies, as well as new and renewable sources of energy, noting that, to date, his country had not been able fully to access those technologies and make full use of the Clean Development Mechanism.  To do so would require support from the entire international community.  It was time now for the global community to turn words into action and prove it was up to the task of combating climate change.

The representative of Barbados said his country had used its coastline as an asset to move its people out of poverty and into middle-income status.  However, they were losing that coastline due to the actions of other countries.  Middle-income countries should be considered, then, when it came to mitigating the damage caused by of climate change.  Rebuilding the assets of small island States would take a long time and assistance should, therefore, be maintained over the long haul.  It was to be hoped that countries like Barbados would receive technical assistance to acquire low-carbon technology.

The representative of Japan said people suffering the effects of climate change should be helped immediately while agreements to reduce emissions were negotiated.  Japan would immediately set aside $10 billion for adaptation and mitigation.  The country was an example of economic growth without corresponding growth in energy consumption and it had set aside more billions for the development of sustainable energy technologies.  In addition, the effects of biofuels on food prices must be considered, as must the place of nuclear energy in light of climate change.

The representative of Australia said a variety of funding mechanisms, as well as the carbon market, were important in dealing with both adaptation and mitigation.  The private sector was a large source of financing for technological change, while official development assistance would remain the primary source for adaptation funds.

The representative of Antigua and Barbuda said funds for adaptation must augment official development assistance, and adaptation must be cognizant of development.  Those funds, making up for problems that were not caused by developing countries, must be in the form of grants and not loans.  In addition, technology for climate change mitigation must stay in the public domain.

A representative of the civil society organization Stamp Out Poverty agreed that additional financing for adaptation was essential and adaptation initiatives must be developed in a framework that included developing countries in decision-making positions.

Closing Remarks

Mr. MÉRORÈS ( Haiti), President of the Economic and Social Council, in closing remarks, encouraged the General Assembly, the Bretton Woods institutions and all other stakeholders to work towards building on the day’s high-level discussions and suggestions.  There had been unanimous agreement on the daunting challenges facing developing and developed countries alike.  Substantial increases in food and energy prices threatened to reverse the development gains made by many countries.  Many countries had been deeply affected by the current food crisis and members of the Economic and Social Council needed to act immediately to reverse that trend.  To that end, a special meeting of the Council, with the Secretary-General’s participation, would be scheduled in the very near future to consider a global response to the crisis.

It was necessary properly to evaluate past experiences to ensure greater progress in the future, he continued.  Over the course of the day, participants had highlighted the need to pay due attention to developing countries in multilateral trade negotiations, including the Doha Round and other multilateral forums.  The challenges faced by developing countries were becoming increasingly complex as they became more integrated into global financial markets.  A successful end to the Doha negotiations would boost the world economy overall but, in order to ensure a successful outcome for developing countries in particular, it was essential to enhance Aid for Trade.

Finally, he turned to the current problems of world financial markets and summarized comments made by participants who felt there was an immediate need for concerted, joint efforts to enhance the global regulatory framework in order to protect the international financial system from crisis.  The international community also needed to work cooperatively to create innovative initiatives to finance development, while ensuring proper financing for climate change mitigation and adaptation efforts.  Only through such action would concrete progress on development and climate change be realized.

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For information media • not an official record
For information media. Not an official record.