Top Officials Highlight Possibilities Provided by World Economic Crisis to Mobilize Resources for Anti-Poverty Goals, at Economic and Social Council Meeting
Top Officials Highlight Possibilities Provided by World Economic Crisis to Mobilize Resources for Anti-Poverty Goals, at Economic and Social Council Meeting
|Department of Public Information • News and Media Division • New York|
Economic and Social Council
Special High-Level Meeting
4th & 5th Meetings (AM & PM)
Top Officials Highlight Possibilities Provided by World Economic Crisis to Mobilize
Resources for Anti-Poverty Goals, at Economic and Social Council Meeting
Council Opens Two-Day Meeting with World Bank, IMF, Other Key Bodies;
Thematic Debate: Mobilizing Resources to Fund ‘MDG Implementation Gaps’
Gathered at Headquarters in New York for their annual meeting with the Economic and Social Council, top officials from the major international financial institutions today highlighted the new possibilities provided by the financial and economic crisis to intensify support for developing countries and mobilize action and resources within the United Nations-backed Financing for Development process to achieve the Millennium Development Goals by 2015.
With the target date fast approaching for the achievement of the Millennium Goals -- which range from halving extreme poverty to putting all children into primary school and stemming the spread of infectious diseases such as HIV/AIDS -- Council President Hamidon Ali, of Malaysia, said the 54-member body had expanded to two days its yearly meeting with the Bretton Woods Institutions, the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD).
The theme of the special high-level meeting -- “Building on Monterrey and Doha: Achieving the internationally agreed development goals, including the Millennium Development Goals” -- evokes the outcomes of the 2002 International Conference on Financing for Development, held in Monterrey, Mexico, and its review conference, held in Doha, Qatar, in 2008.
Today’s events included an interactive debate with officials from World Bank, International Monetary Fund (IMF) and United Nations agencies dealing with trade and development. In the afternoon, the Council held a thematic debate on “mobilizing domestic and international resources to fund existing and emerging MDG implementation gaps”, the first of three such discussions planned for the meeting.
Mr. Hamidon urged participants, including ministers of finance, economic and development cooperation and central bank governors, as well as senior officials from the World Bank and the International Monetary Fund (IMF) to work to ensure a strengthened and more effective multi-stakeholder intergovernmental process to implement worldwide follow-up on the global development financing agenda.
He said that the simplest hopes and expectations were all too often the most difficult to achieve. “Be that as it may, my hope and expectation for this meeting is that it would better promote closer relations between all of our organizations and institutions and in so doing, make a difference to those who are in urgent need of our collective help.”
“Now is the time”, Deputy Secretary-General Asha-Rose Migiro said in her opening remarks, as she noted that, together with next week’s High-level Dialogue of the General Assembly on Financing for Development, today’s meeting would provide crucial inputs to the high-level review of the Millennium Development Goals scheduled for September.
She said that the combination of sound national development strategies, investment in human capital and increased international support could lead to remarkable progress towards achieving those Goals, calling for increased focus on the needs of the poorest countries, which were reeling from multiple crises, natural disasters, and the challenges posed by climate change.
Experience had shown that targeted interventions for the poorest, such as access to vaccines and medicine, free school meals for children, or agricultural support, had powerful multiplier effects. “These measures will go farthest if they are accompanied by long-term national development strategies, international support measures and systemic changes,” she said, adding that would require the implementation of the global commitments enshrined in the Monterrey Consensus and the Doha Declaration on Financing for Development.
The global financial crisis had led to an intensification of efforts to reform the international financial system and architecture, Ms. Migiro said. Those efforts should be well-financed and coordinated, and should help the world move towards a more equitable, stable and development-oriented international financial system. “Together, let us make the most of your discussions and the September Summit. Let us seize the opportunity to build a brighter, more secure and more prosperous future for all people,” she said. (Issued separately as DSG/SM/494.)
Hany Kadry Dimian, International Monetary and Financial Committee, International Monetary Fund (IMF), said the recent financial and economic turmoil had sent four main messages: that the size and influence of the current global financial imbalance was risky and had put the world’s financial architecture under severe pressure, with the poor bearing a heavier burden; protection regulations were behind the curve; there was a great need for more empowered, more inclusive and more influential international financial bodies; and that symptoms should not be overlooked.
On that point, he stressed that long before last year’s financial meltdown, the effects of lax regulation and international price volatility had been sending a clear message that there were serious cracks in the system. Very few individuals or institutions paid any attention that those cracks were widening. Yet, he said, that was not the entire story. On the positive side, the crisis had managed to bring all institutions and countries to work together in an unprecedented financial framework to help bridge the gaps in the current system.
Those stakeholders had lined up the will, relevant polices and vision towards a more stable financial architecture. “So the critical lesson here is don’t let a good crisis go to waste”, he said, reminding participants that the crisis and its aftermath could and should provide a springboard for crafting the reforms needed to not only help all countries navigate the waters of economic anxiety, but to keep the focus on the poor and find ways to avoid similar crises in the future.
Picking up that thread, Jean Feyder, President, Trade and Development Board, United Nations Conference on Trade and Development (UNCTAD), agreed that it was important that, out of the multiple crises, the international community must be able to draw the necessary lessons and formulate responses also based on what the history of economic and social development could teach. It was from that perspective that UNCTAD was preparing its contribution to two major events -- the Summit on the Millennium Development Goals and the Fourth United Nations Conference on least developed countries.
He said it was also necessary to focus on developing productive capacity. The United Nations strategy for achieving the Millennium Development Goals must recognize the importance of increasing productive capacity in developing countries and the need to link that with creation of the maximum possible number of jobs. The development of the productive system and of employment created income for people and the State. Without such development, social advances that could be made in education, health and poverty indexes would not be sustainable -- the symptoms would be treated, rather than the root causes of poverty.
Also providing updates on the work of their financial institutions were Kiyoshi Kodera, Executive Secretary, Joint World Bank/IMF Development Committee, and Shishir Priyadarshi, Director of the Development Division, World Trade Organization.
During the ensuing interactive debate -- which featured representatives of the major regional groups, Member States, intergovernmental bodies and civil society -- several calls were made for an immediate review of the arrangements between the United Nations and what Venezuela’s representative described as “the now obsolete Bretton Woods Institutions”. Speaker after speaker emphasized that the world’s poorest continued to feel the impact of the global economic crisis, as hunger rates grew more acute, unemployment skyrocketed and world trade declined precipitously.
In the afternoon, the Council held a thematic debate on “Mobilizing domestic and international resources to fund existing and emerging MDG implementation gaps”, which featured presentations by Jeffrey Lewis, Senior Adviser and Head, International Policy and Partnership Group of the World Bank’s Poverty Reduction and Economic Management Network, and Robert Vos, Director, Development Policy and Analysis Division, Department of Economic and Social Affairs.
Mr. Lewis previewed the joint World Bank and IMF publication, “Global Monitoring Report 2010: Achieving the MDGs in the Aftermath of the Global Economic Crisis”, while Mr. Vos previewed the MDG Gap Task Force Report 2010.
In the subsequent discussion, speakers suggested international policy on development assistance should be updated in line with new realities. Among other things, the poorest countries should be given improved access to concessional lending, while innovative financing was encouraged. Several speakers reiterated the need to reaffirm commitments to a trading system that was open, equitable and based on clear rules, with some arguing that, under the current system, developing countries were trapped in situations that encouraged dependency.
The Economic and Social Council special high-level meeting with the Bretton Woods institutions will resume at 10 a.m. Friday, 19 March, with a thematic debate on “supporting rehabilitation, recovery and development efforts of developing countries with special needs and those facing humanitarian emergency situations”.
The Economic and Social Council convened this morning 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). This year, the meeting will, for the first time, be a two-day event, built around the theme “Building on Monterrey and Doha: Achieving the internationally agreed development goals, including the Millennium Development Goals”.
HAMIDON ALI (Malaysia), President of the Economic and Social Council, welcomed the participants, reminding them that the outcome of last year’s United Nations Conference on the World Financial and Economic Crisis and its Impact on Development had called on the Council to work towards a strengthened and more effective multi-stakeholder intergovernmental process to implement worldwide follow-up on the financing for development agenda.
“I am glad to report to you today that the Council has taken important action on this matter,” he said, noting that in a resolution adopted earlier this year, the Council had recommended a number of changes, including a longer, more effective and interactive high-level spring meeting, more consideration of development financing during the Council’s annual substantive session, and a recommendation to the General Assembly to give more prominence to the annual financing for development agenda item. Further, the Council had continued multi-stakeholder consultations to foster dialogue on relevant issues between Governments, intergovernmental organizations and experts from academia, civil society and the private sector.
He went on to draw participants’ attention to the key document before the special high-level meeting, a note by the Secretary-General on “Building on Monterrey and Doha: Achieving the internationally agreed development goals, including the Millennium Development Goals”, which would serve as the substantive background for the discussions over the next two days (document E/2010/11). “I especially encourage participants to consider the questions posed at the end of each chapter, which provide points for reflection to inform the discussion on the selected themes of our interactive dialogues,” he added.
Finally, he said that the simplest hopes and expectations were all too often the most difficult to achieve. “Be that as it may, my hope and expectation for this meeting is that it would better promote closer relations between all of our organizations and institutions and in so doing, make a difference to those who are in urgent need of our collective help.”
Deputy Secretary-General ASHA-ROSE MIGIRO underlined the meeting’s goal of mobilizing action and resources within the Financing for Development process to achieve the Millennium Development Goals.
“Now is the time,” she said, noting that, together with next week’s High-level Dialogue of the General Assembly on Financing for Development, today’s meeting would provide crucial inputs to the high-level review of the Millennium Development Goals scheduled for September. Earlier this week, the Secretary-General had released his report “Keeping the Promise”, which provided a comprehensive review of successes in achieving the Goals. Among other conclusions, it indicated progress was uneven, across both Goals and regions. Moreover, the global financial and economic crises had, along with the food crisis, compounded the challenge.
At the same time, however, it was clear that the world had the knowledge and resources to achieve the Goals, she said. The last decade showed that the combination of sound national development strategies, investment in human capital and increased international support could lead to remarkable progress, she said. “Today’s dialogue offers an important opportunity to generate greater momentum.”
Highlighting the particular situation of the poorest countries, including those that had been pushed by natural disasters and climate change into emergency situations not of their making, she stressed the need for coordinated, comprehensive support. The terrible toll in Haiti was a painful reminder that measures to reduce disaster risks were essential in achieving the Millennium Development Goals, as were other targeted interventions for the poorest that had critical multiplying effects, such as access to vaccines and medicines, free school meals for children and agricultural support.
The International community had, she said, recognized that developing countries had primary responsibility for their own development. Many -- including those with special needs -- had implemented their own reforms, through sound macroeconomic policies, improved governance and increased public expenditures, especially on infrastructure. However, their development efforts continued to be hampered by inequality, social exclusion and lack of participation.
Against that backdrop, she underscored how the Monterrey Consensus and the Doha Declaration reaffirmed the need for women's empowerment and gender equality. The promotion of gender-responsive management, as well as an increase in the voices of women at all levels of decision-making processes, remained essential. At the same time, donors must also redouble their commitments, while new and innovative sources of development financing must be explored and scaled up.
She further noted how hard developing countries had been hit by the decline in global trade, including, among other things, price volatility and depressed demand. Those developments underscored the urgency of completing the Doha Development Round in 2010, in order to deliver on its promises towards effective market access for the agricultural, manufacturing and service exports of developing countries, parallel elimination of all forms of export subsidies and substantial reductions in trade-distorting domestic support.
The Doha Declaration also called for greater provision of grants and concessional loans, she went on to say. Given the need to ensure debt sustainability and reach development goals, efforts to create an equitable and orderly international debt “workout” mechanism to prevent future crises needed to be expedited. Efforts to reform the international economic architecture should be well-supported and internationally coordinated to move towards a more equitable, stable and development-oriented financial system.
“Together, let us make the most of your discussions and the September summit,” she said. “Let us seize the opportunity to build a brighter, more secure and more prosperous future for all people.”
JEAN FEYDER (Luxembourg), President, Trade and Development Board, United Nations Conference on Trade and Development, said the world was facing multiple, serious crises: a financial and economic crisis coupled with a social crisis, a food crisis and an environmental crisis. It was important that from those, the international community was able to draw the necessary lessons and formulate responses also based on what the history of economic and social development could teach. It was from that perspective that UNCTAD was preparing its contribution to two major events -- the Summit on the Millennium Development Goals and the Fourth United Nations Conference on least developed countries.
A key message had emerged from several preparatory meetings related to the role of the State in development, he continued. UNCTAD believed that public policies should not limit themselves to countering the consequences of economic crises, as was currently the case in developed countries. The State should play an active role in the development of underdeveloped countries, and should also promote the formation of fixed capital, the emergence of economic networks and the development of productive capacity. Industrial policies could support private businesses by channelling investment towards economically promising and socially desirable activities, as had been done in successful development experiences, for example, in several Asian countries.
Another key idea of those discussions was that it was necessary to focus on developing productive capacity, he said. The United Nations strategy for achieving the Millennium Development Goals must recognize the importance of increasing productive capacity in developing countries, and the need to link that with creation of the maximum possible number of jobs. The development of the productive system and of employment created income for people and the State. Without such development, social advances that could be made in education, health and poverty indexes would not be sustainable -- the symptoms would be treated, rather than the root causes of poverty.
The effort to develop productive capacity must include not only industry, but also agriculture, which had been neglected during the past few years. The development of productive capacity also required financing and a favourable macroeconomic and trade environment. Furthermore, productive capacity -- which was often fragile to begin with -- could not develop if, from the start, it faced international competition. That would nip the capacity in the bud, especially in the poorest countries. Therefore, it was necessary to give such countries a higher level of special and differential treatment in order to protect budding capacity. Haiti, for example, needed assistance on a much greater scale than usual measures, but it should also be granted favourable trade conditions, so that it could access the markets of developed countries under good conditions.
HANY KADRY DIMIAN, Deputy Minister of Finance of Egypt and Deputy Chair, International Monetary and Financial Committee, International Monetary Fund (IMF), said the recent financial and economic turmoil had sent four main messages: that the size and influence of the current global financial imbalance was risky and putting the world’s financial architecture under severe pressure, with the poor bearing a heavier burden; protection regulations were behind the curve; there was a great need for more empowered, more inclusive and more influential international financial bodies; and that symptoms should not be overlooked.
On that point, he stressed that long before last year’s financial meltdown, the effects of lax regulation and international price volatility had been sending a clear message that there were serious cracks in the system. Very few individuals or institutions paid any attention that those cracks were widening. Yet, he said that was not the entire story. On the positive side, the crisis had managed to bring all institutions and countries to work together in an unprecedented financial framework to help bridge the gaps in the current system.
Those stakeholders, including the “Group of 20” (G-20) bloc of most developed and middle-income countries, had lined up the will, relevant polices and vision towards a more stable financial architecture. “So the critical lesson here is don’t let a good crisis go to waste,” he said, reminding participants that the crisis and its aftermath could and should provide a springboard for crafting the reforms needed to not only help all countries navigate the waters of economic anxiety, but to keep the focus on the poor and find ways to avoid similar crises in the future.
As for the IMF, he said the body’s recent communiqué, which would govern its work plan over the next two years, had, among other things, pledged to take further decisive and cooperative action necessary to ensure the soundness of systemically important institutions, and to restore the financial health of banks, domestic lending, and international capital flows. It had also pledged to help develop credible exit strategies from extensive Government action as the crisis subsides. The main theme of the Fund’s work in the aftermath of the crisis would be to ensure better voice and representation of developing countries, with a particular focus on the least developed.
Continuing, he said the Fund intended to examine its entire governance structure, including staff management and accountability. It would broaden its financial surveillance toolkits -- especially risk management -- towards structuring a “global risk map”. However, for its plans to reach full potential, the Fund needed to be backed with more timely, detailed and comprehensive data to improve its surveillance structures. It also needed more innovative tools to help countries face local, regional or global systemic risks.
Next, he turned to the Fund’s resources, both permanent and temporary, which would need to be examined not by the light of the current crisis and its aftermath, but with a wider view. The IMF would need to consider two key questions: how it could bolster its credibility in the aftermath of the crisis, and how it could strengthen the positions of its members. While that examination was unfolding, it was immediately clear that the Fund and its relevant mechanisms must be more flexible.
Finally, he said that there was no doubt that the recent financial turmoil had dealt a blow to efforts to achieve internationally agreed development goals for poverty reduction, closing the infrastructure gap, providing better health and education services. It had perhaps also slowed the flow of foreign direct investment and capital. But, the Millennium Development Goals would not be achieved by official development assistance (ODA) alone. Indeed, severe imbalances -- fiscal, trade, capital and investment -- did not only concern the Fund’s customers, but the entire financial architecture. The IMF had a major role to play in addressing those imbalances and moving the international development agenda forward, he said.
KIYOSHI KODERA, Executive Secretary, Joint World Bank/IMF Development Committee, on behalf of Chairman Ahmed bin Mohammed Al Khalifa, noted that every year, the World Bank and the IMF prepared a Global Monitoring Report on progress towards the Millennium Development Goals. Work now under way on the 2010 report suggested that many developing countries entered the present crisis in relatively strong economic condition, largely reflecting the policy reforms of recent years. As a result, many countries had been able, thus far, to maintain social spending levels to help mitigate the impact on vulnerable groups. There was no room for complacency, however. Although the post-crisis Millennium Development Goals scorecard was still being tallied, it was known that, from past crises, there would likely be significant negative impacts on health, education, employment and poverty for years to come. Both strong external funding and further efficiency gains in government spending and service delivery would be required for developing countries to ensure fiscal sustainability, while maintaining essential investments in social sectors and infrastructure.
The Bretton Woods institutions had made exceptional efforts to intensify their support to member countries, he said. The speed and scale of response had been unprecedented. The IMF had increased its resources and made changes to its lending policies that, among other things, should permit an increase in its concessional lending of up to $17 billion through 2004. The World Bank Group had provided more than $90 billion in support to member countries since July 2008. During the same period, the Fund had provided about $170 billion in new support, including precautionary financing.
Last October, in Istanbul, the Development Committee had outlined in its communiqué a work programme leading up to its 25 April 2010 Spring Meeting. In that communiqué, the Development Committee, among other things, committed to ensure that the World Bank Group had sufficient resources to meet future development challenges. The Development Committee also asked for an updated review, including on the World Bank Group’s general capital increase needs, to be completed by spring 2010 for a decision. He said it also committed to pursue governance and operational effectiveness reform in conjunction with voting reform, to ensure that the World Bank was “relevant, effective and legitimate”.
In Istanbul, shareholders had stressed the importance of moving towards equitable voting power in the World Bank over time through the adoption of a dynamic formula, which primarily reflected countries’ evolving economic weight and the World Bank’s development mission, and that generated in the next shareholding review a significant increase of at least 3 per cent of voting power for developing and transition countries, in addition to the 1.46 per cent increase achieved earlier under the first phase of voice reform. While recognizing that overrepresented countries would make a contribution, shareholders emphasized that it would be important to protect the voting power of the smallest poor countries. Shareholders also recommitted to reaching agreement by the 2010 spring meetings.
Since Istanbul, discussions with shareholders had made progress in a number of areas: economic weight; recognition of financial contributions, particularly International Development Association contribution; recognition of development contributions; and protection of the voting power of the smallest poor countries. Discussions were continuing on which contributions should be recognized and how that recognition should be structured. He added that there would be a significant and substantial package for shareholders. Urging shareholders to step up efforts to meet their goals of agreeing on wide-ranging reforms to the World Bank Group, he stressed that no one shareholder got everything, and each had to make some compromise, but that each shareholder gained.
SHISHIR PRIYADARSHI, Director of the Development Division, World Trade Organization, said today’s annual meeting, as it did every year, allowed the world to individually evaluate past efforts and collectively plan for the future. It was clear today’s meeting took place at a critical juncture. While the past year had seen some progress in responding to the multiple global crises, there were calls that vigilance continue, lest those gains be erased. The fact that world trade had felt a huge loss from the crises had not only severely affected the internal resources every country had to respond, but had also severely tested the global financial architecture itself. The different responses, whether they originated in the countries themselves or in collective institutions, had seen some success in the last year. Indeed, the crisis had been dampened and world trade was projected to expand by 4.3 per cent in 2010, and 6.2 per cent in 2011.
While the recovery was still in its infancy and many were worried about its stability, as well as the large deficits many countries were incurring in their wake, he said the multilateral trading system had passed a stress test in 2009. Moreover, a cascade of protectionist measures had been avoided. A recent World Trade Organization report focused on the trade actions by the Group of 20 showed that none of them had undertaken significant protectionist measures. As result, it could be said that the world trading system had withstood protectionist tendencies and proved its sturdiness against unbridled protectionism.
He stressed this success as good news, since countries needed trade for their economic growth. In that regard, completing the Doha Development round of negotiations represented the most stable way of ensuring growth in global trade. There was no doubt that a trading system with stronger rules was imperative. A Doha deal would not only provide new market opportunities by reducing trade-distorting subsidies, but it would reduce the costs of trading.
Experience indicated that growth in employment was invariably sluggish in the aftermath of the kind of crisis the world had just experienced, he said. Minimizing and avoiding that slow-down was essential in meeting the Millennium Development Goals. Moreover, significant and targeted trade-for-aid was needed. The aim of trade-for-aid was to assist developing countries in increasing their exports of goods and services, integrating into the global trading system and benefiting from a liberalized trading approach. Even more important than the 10 per cent increase in trade-for-aid flows was the fact that these benefits came in addition to other aid flows. Given all this, it was clear that nothing would help ensure growth in global trade, make global trade processes fairer, and assist developing countries in building their supply-side capacities better than successfully concluding the Doha Development Agenda.
Following opening statements by senior officials from the United Nations and the global financial community, representatives of the major regional groups, Member States, intergovernmental bodies and civil society took the floor. Most speakers generally agreed that, even though the global financial situation was beginning to stabilize, the ripple effects of Wall Street’s meltdown and the resulting credit crunch were still being felt. Indeed, with just five years to go until the 2015 deadline for achieving the Millennium Development Goals, the sluggish global economy and fickle development assistance environment could not have collided at a worse time for developing countries.
Frustrated that the promises made immediately following the financial upheaval in the West were being ignored, Venezuela’s speaker called for an immediate review of the arrangements between the United Nations and “the now obsolete Bretton Woods Institutions”. The World Bank and International Monetary Fund must be more transparent and they must answer the calls for equity from the developing world. The management structures of those bodies required “profound change”, not only to ensure better representation of and for poor countries, but to ensure clear regulation, in operating as well as hiring practices.
At the same time, efforts must be made to strengthen the regional and subregional financial structures, which were welcome alternatives to the status quo. Finally, he said that regardless of their situations, developing and middle-income countries did have financial power and innovative ideas, but their influence and input was being blocked by the will of a few powerful countries. Clearly, it was time that the global financial architecture was not just reformed, but completely overhauled, lest the developing world be consigned to further suffering.
Yemen’s representative, speaking on behalf of the Group of 77 and China, said analysts might be assuring the world that the global economy was showing signs of recovery, but unemployment and underemployment were on the rise. Indeed, as in past crises, the financial crisis would have a disproportionate adverse impact on the poor even after it was “over”. In that context, he too called for the international financial institutions to be reformed, stressing that it was not sufficient to merely say the current crisis underscored the need for reform. Rather, it must be enacted by expanding the policy space for developing countries and through the elimination of conditionalities.
Specifically, he said IMF balance-of-payment loans should not have policy conditionality that was contractionary and pro-cyclical and constrained development objectives. While the Group welcomed new financial facilities and the provision of additional resources, the same principle applied: access to them should not be tied to conditionalities. Further, alternative modalities of liquidity provisions to specific countries adversely affected by the crisis, including possible trust funds and new loan facilities, should also be explored.
One of a host of senior officials from the World Bank, ALEXEY KVASOV (Russian Federation), Dean of the agency’s Board of Directors, urged everyone to follow the Bank’s communiqués and its website, because “we are heeding the calls for reform”. Indeed, the agency was undergoing a series of deep, simultaneous reforms that would, among other things, ensure fair, equitable representation of developing countries, and promote merit-based management selection and increased transparency. It had also heeded calls to work towards the open selection of the Bank’s President.
The Bank’s representatives would be very receptive to ideas and suggestions over the next two days, and he promised that “not a single valuable idea would be lost or overlooked.” He was also among those that supported calls for focusing on developing productive capacity and bolstering its links to industry and agriculture. That would be critical to tackling the root causes of poverty and lagging economic growth. As the Board was becoming more and more sensitive to such things, he supported the call to have Mr. Ali, as President of the Economic and Social Council, attend the World Bank’s annual spring meeting on 24-25 April, “sitting right at the table with us as these matters are discussed.”
Speaking on behalf of the Caribbean Community (CARICOM), Saint Lucia’s representative cautioned against assuming the global economy was stabilizing. From his part of the world, at least, it seemed like only those that could afford to pump money into their economies or simply just print more money were seeing a recovery. Most countries faced real challenges, he said, and if the general view was that a recovery was under way, that opinion drove home the need for technical assistance to help provide more timely, credible and comprehensive data and statistics.
He urged the Bretton Woods institutions to re-examine polices dealing with lower- and middle-income countries to help those countries bolster their productive capacities and create more jobs. Those financial institutions should also take another look at ways they could work with developing countries to create innovative programmes to get their products into the international market place. “In all this, the goal for us remains achievement of the Millennium Development Goals,” he said.
Spain’s representative, speaking on behalf of the European Union, highlighted partnership cooperation and joint responsibility as the core of the Millennium Development Goals and the key to their successful achievement. In reviewing progress to date and identifying measures required to achieve them by 2015, an evidence-based approach was clearly needed. Further, the conclusion of the Doha Round as soon as possible with an ambitious, balanced and comprehensive outcome remained the first and best option to boost international trade -- and, thus, economic growth.
While official development assistance had proved to be the most resilient and reliable source of funding for developing countries in the context of the financial and economic crisis, it would not be sufficient in achieving the Goals, she said. She suggested innovative financing in a development framework could contribute to building up international solidarity through concrete actions and new mechanisms. Domestic development resources must also be mobilized through improved public financial management and effective tax and customs systems. The importance of remittance flows to development flows should not be forgotten, and the European Union was working towards enhancing the reduction of associated transaction costs.
Responding, Mr. DIMIAN said that development plans could not be built on aid or discretionary transfers. Their foundation had to come from “fundamentals” and, specifically, domestic resources. Given that, imbalances in the global trading system clearly had to be fixed. He stressed there was no short-term answer, but only a medium-term one in the best cases and a long-term one in the rest. At the domestic level, fiscal policies had to close gaps and promote growth in order for every economy to produce enough residuals for sufficient taxation.
Mr. FEYDER said that, while some progress had been made, it was clear that if the international community wanted to achieve development goals linked to health, a sustainable health system was needed. In that context, the central question was how to finance it. In reaching an answer, he suggested that the September summit consider the international community’s analysis of the food crisis, which concluded the entire system needed a reboot. He went on to say that a deeper investigation into the economic growth of countries in the Asian region indicated that the State had played a major role. Agricultural reform was also a critical driver of growth.
Mr. KODERA said that on the question of “voice”, he might have been timid in explaining what was actually happening in the World Bank. The five areas of reform were quite significant and the Bank was coming to the last 100-metre stretch. In that regard, he highlighted the agreement in Istanbul on the importance of moving towards equitable voting power, in time. Right now, the Bank was really striving to reach an increase of 3 per cent and he was sure there would be a significant package coming out of the spring meeting.
Mr. PRIYADARSHI said the issue of eliminating agricultural trade subsidies was a major part of the current round of negotiations. Countries had yet to sign off on the final terms, but what was currently on the table indicated there would be substantial reductions, in keeping with the intentions when the round was launched. He said the decision was taken in Hong Kong that enhanced market access would be achieved by 2008 or the conclusion of the round, whichever was later. This was one reason, among many others, why the World Trade Organization was calling for a quick conclusion of the round.
Also participating in the dialogue were representatives of: Nepal (on behalf of the least developed countries), Chile (on behalf of the Rio Group), China, Mexico, Indonesia, Brazil, Canada, United States, Libya, Egypt, Japan, Guatemala, Norway, Malaysia and Bangladesh.
A number of Executive Directors of the World Bank, as well as the Executive Director of the International Monetary Fund, also spoke.
Representatives of civil society and business also participated.
Thematic debate of the whole: Theme 1
In the afternoon, the Council heard two presentations on the theme “Mobilizing domestic and international resources to fund existing and emerging MDG implementation gaps”. Providing a preview of the joint World Bank and IMF publication, “Global Monitoring Report 2010: Achieving the MDGs in the Aftermath of the Global Economic Crisis” was Jeffrey Lewis, Senior Adviser and Head, International Policy and Partnership Group of the World Bank’s Poverty Reduction and Economic Management Network. Providing a preview of the MDG Gap Task Force Report 2010 was Robert Vos, Director, Development Policy and Analysis Division, Department of Economic and Social Affairs.
Mr. LEWIS said the joint World Bank and IMF report, prepared annually, would be finalized and circulated as a background document for meetings of the Development Committee towards the end of April. Containing six chapters, the report assessed progress on achieving the Millennium Goals against the backdrop of the crisis, described the current global economic situation and its impact on development, provided an evaluation of trade-and-aid in developing countries, and described the response of international financial institutions to the crisis. Two chapters were considered “innovative” in that they undertook a thorough analysis on the impact of past crises on the Millennium Goals, and examined trade-offs facing policymakers in low-income countries who were trying to achieve those goals under adverse economic and funding circumstances.
However bad the crisis had been on low-income countries, “it could have been worse”, he said. Many had undertaken substantial policy reforms and overhauled their economies in ways that made them less susceptible to crises. Moreover, the crisis had been due largely to events beyond their control. And yet, the crisis’ long-term impact remained worrisome in low-income countries whose fiscal situation had deteriorated to unsustainable levels, indicating that there was no room for complacency. The United Nations, international financial institutions and countries in question must act to minimize losses; that could be done through “re-engagement” with those countries. It was thus important to ensure that the United Nations and international financial institutions had resources that were adequate to meet that task.
He said progress had been strong on poverty-related goals, and poverty had dropped in all six regions of the world under World Bank study. Significant progress had also been made in certain non-poverty-related Goals, such as education, gender equality, and access to water. The crisis had placed progress most at risk on goals related to child maternal mortality, hunger, HIV/AIDS and gender. Most analysts agreed that recovery was “well under way” due to stimulus efforts in advanced nations and others. Though there had been a decline in global output, projections for 2010 were higher than in 2008. Emerging and developing economies were showing signs of returning to pre-crisis levels. While the economy in Africa continued to lag, growth was still stronger than originally predicted.
He said access to international capital by credit-worthy sovereign countries and prime corporations had been restored “quite quickly”. Market access had even improved for some sub-investment-grade borrowers. However, net inflows were less than one-third that expected for middle-income countries, with the decline a bit smaller in low-income countries. Remittances ‑‑ considered a dynamic source of foreign exchange ‑‑ were thought likely to resume an upward trend, which could be important for many low-income countries. Virtually all countries faced a juggling act on precisely when they could restore a normal set of policies in their domestic environments. Where private demand was weak, they could support economic activity with a stimulus; for those with financing constraints, it was up to donor countries to follow up on promises made.
Describing lessons learned from past crises, he said there was evidence that infant mortality and malnutrition tended to rise in such times, and school attendance and the gender balance of school enrolment tended to be damaged. Institutional and policy reforms seemed to have made a difference on social spending during and after the current crisis, which tend to be the first forms of spending to be cut during an emergency. In Africa, the poverty reduction papers had helped protect funding for social sectors. In Eastern Europe and the Baltic region, the crisis had resulted in a lesser slowdown and even a renewed momentum for reform. Those hit hard by the food crisis two years ago had established safety nets which placed them in a better position to respond. World Bank lending for safety nets had grown by a factor of five.
He said trade-and-aid flows mirrored the global economy’s precipitous decline around the world. Trade volumes were down over 20 to 30 per cent, which was the primary way in which the crisis had affected low-income countries. Strengthening trade was considered a main engine of recovery, which would require more credit, especially since credit had “dried up” during the crisis. The World Bank and others had weighed in with measures to re-inject liquidity into those markets to ensure that the downturn did not “turn into a disaster” for lack of trade finance.
He said there was some evidence of protectionism, despite the rhetoric against it. Some 350 restrictive measures had been put in place, although the overall impact was only felt on around 1 per cent of traded goods. In that light, concluding the Doha Round would have important benefits. The crisis had also made clear the need to address a broader range of cross-border issues, such as climate change, and food and energy security. The World Bank’s aid-for-trade program, relevant to low-income countries, underwent its second global review last summer, with the Bank looking to step up its efforts. The world’s aid volume had continued to rise, but not fast enough to help scale up development programmes, with an estimated $14 billion shortfall. Fortunately, the number of public and private donors was growing, especially bolstered by the rise of aid programmes offered by middle-income countries. Aid to Africa, however, remained problematic. The G-8 Gleneagles commitment had not come to fruition.
On the response of the international financial institutions to the crisis, he said the IMF had played a major role in injecting liquidity through the issuance of special drawing rights, by providing “stand-by packages” and obtaining additional funding to support concessional lending to low income countries. The World Bank and major regional banks had concluded more than $150 billion in commitments since the beginning of the crisis, with $91 billion coming from the World Bank alone. For its part, the Bank was seeking to strengthen its ability to play a back-up role should another crisis occur. Looking forward, it was trying to decide on possible topics for the 2011 Global Monitoring Report. Suggestions included poverty; communicable diseases; aid effectiveness; and “beyond the Millennium Development Goals”.
Turning to the MDG Gap Task Force Report 2010, Mr. VOS recalled that the Task Force was created in 2007 to track progress on the global development partnership called for in Goal 8. Chaired by the United Nations Development Programme (UNDP) and the Department of Economic and Social Affairs, it brought together more than 20 United Nations agencies, along with the International Monetary Fund, the World Bank, the World Trade Organization and the Organisation for Economic Co-operation and Development (OECD).
The Task Force provided a systematic information and analytical framework and monitored three implementation gaps: the delivery gap between global commitments and their actual delivery; the coverage gap between the delivered commitments and the equitable distribution of actual receipts across countries; and the “needs” gaps between delivered commitments and the estimated need for support by developing countries. In practice, Goal 8 should be the least challenging of all the Goals, since its targets comprised the means of achieving the other seven. But, the development resources devoted to it was only a fraction of what had been committed to the financial bailouts.
He stressed that 2010 was a crucial year. Not only was it five years before the MDG target date, but it was also the expiration year for Gleneagles commitments. Further, multiple global crises must be addressed. A five-year plan towards 2015 was needed and, to this end, the 2010 report focused on the needs gaps and how the actual needs of developing countries could be met in the most effective way, particularly given the enormous time and resource constraints.
Among the report’s conclusions was that more generous official development assistance should be directed to countries committed to poverty reduction, he said. In terms of trade, an open, rule-based, predictable, non-discriminatory trading and financial system should be further developed, with a particular focus on addressing the special needs of least developed countries, landlocked developing countries and small island developing States. The debt problems of developing countries should also be dealt with comprehensively. Better access to affordable essential drugs was also needed, and the benefits of new technology should be made more widely available in cooperation with the private sector.
Turning to specifics, he said official development delivery during 2010 was forecasted to be $27 billion less than what was promised at Gleneagles in 2005. Of that, only $5 billion could be explained by lower growth expectations resulting from the economic crisis. But, of the $35 billion promised to Africa by this year, only $19 billion was expected to be delivered. In the best-case scenario, official development assistance would amount to 0.33 per cent of gross national income of the Development Assistance Committee countries, far behind the 0.7 per cent target for 2015. In particular, official development assistance to the least developed countries remained stagnant. For its part, the Task Force was not asking for new commitments, but was merely urging all donors to stand by their commitments. Donors and recipient countries were also being urged to work together towards improving aid quality by reducing aid fragmentation and increasing predictability.
While the global economic crisis had caused major setbacks in providing market access, the failure to conclude a development-focused Doha Round of trade negotiations still represented the major delivery gap in terms of Goal 8, he said. After a marked decline in trade in 2008 and 2009, which especially affected the least developed countries, a strong recovery was initiated in 2009. Further, the trade and investment policy responses of countries had been relatively muted, with only isolated cases of protectionism. However, a large gap remained between the 2005 target of providing duty-free quota-free market access to at least 97 per cent of products from least developed countries. The proportion of exports from these countries that entered developed countries was less than one percentage point higher than for developing countries as a whole. With the exception of agricultural goods, no meaningful tariff reduction had been made by developed countries in 2008. Agricultural subsidies in the developed countries remained disproportionately high. Aid-for-trade had increased significantly in 2008, reaching $40.6 billion, but it needed to be integrated into overall development policy.
He said that, while significant debt relief had been provided to the poorest countries, middle-income countries were also vulnerable. The final report would further evaluate the criteria for classifying countries in the “debt distress” category and the debt indicators used to pinpoint vulnerability. This would provide a review of the framework for assessing debt sustainability and the effects of the crisis on debt servicing. Indeed, it was already clear that many countries in the midst of debt relief processes, and even some that had completed those processes, were in debt distress.
He said that in terms of access to medicines, the 2010 report would build on the 2009 report, which showed huge gaps in the availability of essential medicines in many developing countries; huge mark-ups over international reference prices for medicines for chronic diseases, which made them unaffordable for many; and the impact of the crisis in raising costs.
Also, he said that, despite the economic downturn, the usage of information and communications technology services continued to grow worldwide. Mobile telephony presented new opportunities to regions that used to be without access to such services. For example, sub-Saharan Africa’s mobile penetration today was well over 30 per cent, while fixed line penetration was stagnant at roughly 1 per cent. Internet usage was also expanding, but at a slower pace. Nevertheless, a huge divide persisted, with Internet penetration in developed countries reaching 64 per cent in 2008 compared to only 18 per cent in developing nations.
The ensuing discussion centred on ways to encourage innovative financing, how to modernize arrangements for assistance, and the need to pay closer attention to good governance to facilitate mobilization of funds within nations. Speakers noted the absence of a mechanism to coordinate financing for development, and that, as a result, States had no way to take stock of achievements to date and what still needed doing. They said international policy on development assistance must be updated in line with new realities, with improved access by poorest countries to concessional lending and better lending terms for them in general.
Others reiterated the need to reaffirm commitments to a trading system that was open, equitable and based on clear rules. Under the current system, some argued, developing countries were trapped in situations that encouraged dependency on others. Those speakers remarked on the harm done by trade restrictions, which encouraged the growth of grey markets that distorted the capital market and impeded the flow of resources for development. They voiced a need to create regulatory bodies to manage trade, with one speaker suggesting that the United Nations be seen as the main vehicle to address trade problems, led by the Economic and Social Council.
They also urged the conclusion of the Doha development talks. An official from the World Trade Organization explained that, beginning on 22 March, members of the Organization would begin a high-level stock-taking exercise and to plan the next steps. In that regard, there had been excellent collaboration with the United Nations, through its Department of Economic and Social Affairs.
A common theme raised by speakers was that resource mobilization required mutual commitment among States. “Debt2Health” and emissions-trading were some examples of innovative financing that, combined with official development assistance and debt relief programmes, could provide other sources of development finance. The international community must do more to encourage voluntary initiatives by the private sector, with the Financing for Development follow-up process providing the basis for future cooperation. So far, the international community had a piecemeal approach to innovative financing; on that issue, one executive director from the World Bank suggested that the Economic and Social Council might want to advocate a framework that would unify efforts on innovative financing.
Presenting the view of least developed countries, one speaker noted that hunger, maternal mortality and diseases such as malaria were still problematic for such countries. But, since their low-level economic activities made it difficult to mobilize domestic resources, a robust international partnership was needed to supplement their domestic efforts. Another speaker remarked that if least developed countries did not reach developed status before their population grew old, they would remain mired in poverty, underscoring the need to act quickly. Achieving Goal 8, on developing a global partnership for development, was very much needed; indeed, another executive director of the World Bank said that, during the crisis, the Bank played the role of lender of last resort, which had the effect of draining resources in certain areas. If the Bank was to provide additional resources, they would be forced to undergo “complex procedures” with each lendee to free up funds. Currently, the Bank’s funds stood below its pledged assistance.
A third World Bank executive highlighted what he saw as a success. According to studies conducted by IMF and the World Bank on Heavily Indebted Poor Countries (HIPC) Initiative countries, not a single post-completion HIPC country had entered debt distress, making it the first time during a major economic crisis where that had not happened. A possible explanation lay in the HIPC initiative itself; the allocation of revenue for debt repayment stood at 22 per cent before HIPC, while after HIPC, that level went down to 5 per cent. Addressing a question from a Member State on conditionality, a senior adviser from IMF said the Fund had reduced the number of conditionalities it imposed on lendees. The purpose of conditionalities was to ensure that underlying economic problems were truly addressed.
Asked to discuss which actions were most helpful, a fourth World Bank executive said the solution was the same for both developed and developing countries: to establish stable macroeconomic, fiscal and monetary policies; practice appropriate regulation; promote open-trade regimes within regions, if possible; and create room for the private sector to provide jobs and income. A representative of the International Labour Organization reiterated the importance of ensuring that employment issues were well-coordinated with broader macroeconomic policies.
Taking part in the interactive debate were the representatives of France, Germany, Uruguay, Russian Federation, Cuba, United States, Nepal (speaking on behalf of the least developed countries), Spain (speaking on behalf of the European Union), Yemen (speaking on behalf of the Group of 77 and China), Chile (on behalf of the Rio Group), Colombia, Australia, Mexico, Venezuela, Morocco, Indonesia, Malaysia, Republic of Korea, El Salvador, Belgium, Japan, Turkey, Mongolia, Brazil, and United Kingdom.
Also speaking were members of civil society and the business sector.
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