|Department of Public Information • News and Media Division • New York|
PRESS CONFERENCE on world financial crisis conference
Senior advisers to the President of the General Assembly yesterday sounded a call to African nations to participate in next month’s high-level economic summit, as a way to make up for their absence at the creation of the Bretton Woods Agreement in 1944.
Nirupam Sen, one of two senior advisers addressing journalists in the run-up to the Conference on the World Financial and Economic Crisis, said African countries in particular had little capacity to mitigate the impacts of the economic crisis, because of “profound” inequalities in the current world order. But their ideas, concerns and legitimate positions could now be aired under the convening power of the United Nations.
Michael Clark, the other senior adviser, stressed the importance of inclusiveness in those talks, scheduled for early June, suggesting the possibility of a detailed overhaul of the world economic system. “Piece by piece, we have to look at the trade regime. We’ve got to look at regulation, and how much should be done at what level.”
Mr. Clark told one reporter that a “fair number” of international financial institutions had anticipated the current economic downturn as early as three years ago, but only sounded the alarm last year for fear of “making things worse”. According to figures from the World Bank and International Monetary Fund, the global flow of private investment had reversed substantially from more than $600 billion in 2007 to $100 billion currently, with no signs of picking up this year.
Mr. Sen stressed that, while entities such as the International Monetary Fund (IMF) were mandated to monitor the economic system for irregularities, such surveillance was not being carried out properly by those bodies. “Unless you really change the governing structure of these bodies and their composition, you’re not going to have a future in which they’ll do anything different,” he said.
He added that an enduring economic system could not be developed without the collective voice of the United Nations, which includes African countries. “Without their voice it would not be possible, really, to fashion something that would at least mitigate, if not prevent, a future crisis, and to fashion something that would have enduring power and the legitimacy to do this.”
In addition to better governance, Mr. Clark said countries were keen to discuss ideas for new vehicles to mobilize funds for infrastructure projects in Africa, using reserves accumulated by oil producers or the massive currency reserves of East Asia’s emerging economies. The Chiang Mai Initiative, set up by the Association of South-East Asian Nations (ASEAN) to overcome short-term liquidity problems in the wake of the 1997 East Asian financial crisis, offered one possible model.
He said the ideal mechanism would provide money at less than commercial terms and with favourable repayment plans, and would be coupled with a legal system that could handle disputes when countries failed to pay back loans.
“What normally gets wound up, cleaned up [...] in ordinary markets through bankruptcy courts and the like, we don’t have that at the international level,” Mr. Clark said. “Countries find that these things never get resolved.”
He added that one of the biggest changes in thinking over the last three months had centred on the idea that the IMF could participate in the creation of a new world currency. This would be done through its system of Special Drawing Rights (SDRs), which are credits allocated by the lending body to its members. However, it was uncertain whether sovereign nations were willing to allow the IMF such power.
He said discussions were also being held on how SDRs should be distributed ‑‑ whether on the basis of population, economic weight, or level of financial contributions to the institution. Today, most SDRs are allotted to the wealthiest nations. The IMF must develop mechanisms for spending SDRs, explaining that African debtor nations could, in theory, use SDRs to pay off debts.
But, he stressed that, should a move towards a new world currency take place, it would be a long-term process, as explained by China’s central bank when it broached the issue earlier this year. “If you read the Chinese central banker’s actual statement [...] he said this is at least a 20-year process, not something that’s going to happen overnight.”
In the short term, Mr. Sen said the world needed a stimulus package, and added that economists from both the developed and developing world agreed that the best economic stimulus was “the flow of resources to the developing world”.
He pointed out that money was flowing out of the developing world to wealthier nations to the tune of $650 billion last year, up from $500 billion the previous year, according to the World Economic Prospects report by the World Bank.
Mr. Clark said poorer nations, with little capacity to provide social safety nets for their populations, wanted a more dependable flow of official development assistance, where there is a gap between what was pledged and what was actually received.
Among other concerns raised by nations was that the principle of “special and differential treatment” be reaffirmed, he said. This would allow wealthier countries to give preferred access to developing countries with whom they shared a historical tie. Africa’s cotton producers, in particular, had pushed at the Doha development talks for that principle to be upheld. Others, such as the oil-rich countries of Africa, wanted stability in the price of oil, on which their wealth was based.
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