|Department of Public Information • News and Media Division • New York|
Sixty-fourth General Assembly
78th Meeting (AM & PM)
As Two-Day Dialogue Concludes, General Assembly President Says ‘Wealth of Ideas’
Put Forward Will Be Important Input for September Summit on Anti-Poverty Goals
Round Tables Address Financial System Reform; Impact of Financial Crisis
On Foreign Direct Investment; Role of Development Cooperation in Leveraging Resources
With the global economy beginning a slow and uneven recovery from a period of immense turmoil, the United Nations had an important role to play in ensuring a robust and inclusive intergovernmental process to realize commitments on financing for development, especially with the 2015 deadline for attaining the Millennium Development Goals rapidly approaching, the President of the General Assembly said in a message wrapping up two days of high-level talks in New York.
“The wealth of ideas put forward during these two days will serve as important substantive input to the preparations for the September [summit on the Millennium Development Goals], in order to make its outcome more meaningful and actionable,” Assembly President Ali Abdussalam Treki said in concluding remarks, delivered by the 192-member body’s Vice-President, Lesli Kojo Christian of Ghana.
He said the proceedings of the Fourth High-level Dialogue on Financing for Development, which opened yesterday, took on added importance in the run-up to the September summit. That event is set to examine the state of implementation 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, all by 2015 ‑‑ especially in developing countries.
Chaired by Mr. Treki, this was the fourth such dialogue held by the Assembly since the landmark International Conference on Financing for Development in Monterrey, Mexico, in 2002. The Outcome of the meeting, the Monterrey Consensus, has since become the major reference point for global development cooperation. A review conference was convened in 2008 in Doha, Qatar. In that spirit, the dialogue’s theme was “The Monterrey Consensus and Doha Declaration on Financing for Development: status of implementation and tasks ahead”.
Highlighting key points that had emerged from the general debate, he said many speakers stressed domestic mobilization of resources as the key source of financing for development, while others emphasized that more efforts were needed to create an enabling environment for private investment, including through Government policies to encourage long-term investment. The need for national efforts to be supported by a favourable international environment was also emphasized, notably in bringing about a successful conclusion to the Doha Round of multilateral trade negotiations.
Many speakers called for fulfilling official development commitments, he said, and there was a widespread call for strengthening global cooperation, including through North-South, South-South and triangular cooperation, which should be mutually supportive. The least developed countries faced serious challenges stemming from the financial crisis and more effective official development assistance, greater market access and debt relief were needed to help them.
In his opening remarks to the dialogue yesterday, United Nations Secretary-General Ban Ki-moon said that a true partnership for development could only be achieved through a combination of investment, trade, aid debt relief and global economic governance reforms. In those efforts, the Monterrey Consensus and Doha Declaration on Financing for Development were central.
He also said that the fundamental rethinking triggered by the economic and financial crisis provided the international community with a rare opportunity for reform that could ensure more stable growth, job creation and sustainable development. Adequate policy space was required for developing countries, so they could take primary responsibility for their own development. “These reforms should be ambitious and timely”, he said, adding: “and they should significantly enhance the voice and participation of developing countries.”
During the closing plenary session, at which some 33 delegations took the floor and bringing the two-day total to nearly 80 speakers, most interventions highlighted the crippling effect of the financial and economic crisis. And while some said their countries were beginning to see glimmers of improved financial health on the horizon, others said they were girding for what looked to them like a longer struggle back to the path of sustained socio-economic growth.
For better or worse, 2010 would be a “turning point on poverty”, the United Kingdom’s delegate said. The summit in September would either result in an historic action plan to deliver on the Millennium Goals, or “we will stand by and watch” as the credibility of collective international action was irreparably undermined. States must find the courage to go beyond business as usual and achieve a comprehensive plan on the Goals that would emphasize such areas as trade, climate change, conflict and fragility, aid effectiveness, and women’s empowerment. The need for an evidence-based approach was clear, he added.
Calling for less talk and more decisive action, Nicaragua’s representative said: “It is time we turned from endless speechifying and undertook specific acts.” While a few rich countries had upheld their development financing commitments, most remained far from living up to their agreed inputs. Indeed, those countries had wasted no time in throwing life rafts to the very institutions that had sparked the financial crisis in the first place. So, while developing countries suffered, their northern counterparts had pumped more resources, money and energy into a system that was unstable and inequitable at its core.
“What a sorry twist of fate we are witnessing when the empowered are rescued and the neediest were served only empty rhetoric,” she said, urging delegations to press for an international financial and monetary system that was based on inclusion, social solidarity, stability and ethics. That was the only way to achieve the goals set at Monterrey and Doha.
Apart from Government presentations in the plenary, the Assembly’s work today was framed by three round-table panel discussions whose themes echoed concerns heard throughout the event. In the first, on reforming the international monetary and financial system, several participants stressed that earlier reforms following debt and financial crises in Asia and Latin America had not gone far enough in regulating cross-border financial flows or speculative activity. Returning the International Monetary Fund (IMF) to its former role as the world’s leading reserve system and coordinator of macroeconomic policy would go a long way in preventing future financial mayhem and meltdowns on a global scale, they said.
That round table was chaired by Gert Rosenthal, Permanent Representative of Guatemala to the United Nations, and featured panellists José Antonio Ocampo, Professor in the Professional Practice of International and Public Affairs, Columbia University, Ranjit Teja, Deputy Director, Strategy, Policy and Review Department, International Monetary Fund, and Martin Khor, Executive Director, South Centre.
During the second panel, on the impact of the financial crisis on foreign investment, external debt and international trade, a panellist warned that the main challenge in the post-crisis era would be avoiding past mistakes. So, the required “deep reform” of finance mechanisms must, ultimately, promote broader global, regional and subregional coordination to develop early warning systems, to establish new regulation and supervision schemes, and to coordinate policies to increase the level and efficiency of official development assistance.
That discussion was chaired by Olga Algayerova, State Secretary, Ministry of Foreign Affairs, Slovakia, and included Heiner Flassbeck, Director, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD), and Daniel Titelman, Director, Development Studies Division, Economic Commission for Latin America and the Caribbean (ECLAC) as panellists.
In the third round table, on the role of financial and technical development cooperation, including innovative sources of development finance, participants suggested a range of measures that might benefit from, or be undercut by, new tax schemes. The idea of a financial transaction tax for development received a mixed response, with one speaker saying his Government was likely to find it difficult to support new taxes. A few speakers commented on what they perceived as the negative effect on tourism caused by the air ticket tax, questioning the wisdom of expanding that tax more widely. Others admitted they needed to learn more about the carbon transaction tax being talked about in relation to climate change, and the idea of a levy on foreign exchange transactions.
João Gomes Cravinho, Secretary of State for Foreign Affairs and Cooperation, Portugal, moderated that discussion, and the panellists were Princess Máxima of the Netherlands, Secretary-General’s Special Advocate for Inclusive Finance for Development, Philippe Douste-Blazy, Special Adviser to the Secretary-General on Innovative Financing for Development, and Simon Scott, Head, Statistics and Monitoring Division, Organisation for Economic Cooperation and Development (OECD).
The day’s events culminated with a forward-looking interactive dialogue on the link between development financing and achieving the Millennium Development Goals in the run-up to September’s high-level event. In that discussion, many speakers emphasized the joint nature of development cooperation to meet the Goals, while agreeing that national ownership of development strategies was crucial. Another topic that came to the fore was the need for better cooperation between the United Nations and the world financial institutions. The panellists were Zia Qureshi, Senior Adviser of the Office of the Chief Economist of the World Bank and Jomo Kwame Sundaram, Assistant Secretary-General for Economic and Social Affairs.
Speaking in the plenary today were the representatives of Kuwait, El Salvador, Cuba, Colombia, San Marino, Costa Rica, United Arab Emirates, Morocco, Bolivia, Lebanon, Argentina, Qatar, Nigeria, Pakistan, Norway, Botswana, Belarus, Maldives, Mongolia, Ethiopia, Liechtenstein, Singapore, India, Kenya, Monaco, Sri Lanka, Bangladesh and Zambia.
The observer for the Holy See also spoke, as did the representative of the Eurasian Development Bank.
The General Assembly will reconvene at 3 p.m. Thursday, 25 March, for a special commemorative meeting on the occasion of the International Day of Remembrance of the Victims of Slavery and the Transatlantic Slave Trade.
The General Assembly today met to continue its fourth High-level Dialogue on Financing for Development. Held in accordance with General Assembly decision 64/551 of 23 February 2010, the overall theme of the two-day Dialogue is “The Monterrey Consensus and Doha Declaration on Financing for Development: status of implementation and tasks ahead”. The day was to be devoted to three interactive multi-stakeholder round tables followed by an informal interactive dialogue with the participation of all relevant stakeholders. (For more information, please see press release GA/10927.)
Mr. AL-HUNAIF (Kuwait) said the global economy’s slowdown was having severe negative impacts on developing countries, particularly vis-à-vis trade, financial transfers and employment. Indeed, the global financial and economic crisis had cast a heavy shadow on efforts to attain the Millennium Development Goals and the situation would worsen for developing countries if they were not provided with resources. That was especially true for the poorest and least capable of addressing the economic downturn. Economic and social indicators showed that the crisis, as well as negative climate change impacts, had affected the premise on which the Monterrey Consensus was made and, in that context, he called for establishing more partnerships for development and making good on pledges.
Today’s new reality meant that achieving the Monterrey and Doha agreements needed more resources to fund infrastructure investments, and other economic investments, notably for ensuring food security, he said. The need for funding for development had increased in light of the crises. While Kuwait recognized the creation of innovative financing sources, the Monterrey accord also offered the option of allocating 0.7 per cent of gross domestic product to official development assistance (ODA). As such, donors must redouble their efforts to provide financial resources that would meet development needs.
For its part, the Kuwaiti Fund for Arab Development continued its work, he said. Some 104 developing countries had benefited from $15 billion in aid, as well as direct grants. The Fund also had rescheduled debts for poor countries suffering under the debt burden, offered discounts for States and contributed to a multilateral initiative to alleviate the debt burden for various countries. Moreover, the Emir had established a “fund for dignified life”, allocating $100 million for that purpose. He also had allocated $300 million to an Islamic solidarity fund. Achieving the Millennium Development Goals required that all partners cooperate in all aspects of development. Thus, providing more ODA was of the utmost importance.
MARÍA GALLARDO HERNÁNDEZ (El Salvador), aligning herself with the “Group of 77” developing countries and China, and the Rio Group, said developing countries’ responses to the financial crisis had differed. For El Salvador, the Government was helping vulnerable groups through public investments to create employment and improve physical infrastructure. The Doha Declaration had reaffirmed the importance of gender equality and women’s empowerment, as that was a prerequisite to achieving the Millennium Development Goals, a goal that El Salvador supported. The crisis had negatively impacted the flow of remittances of those living abroad, especially in the United States. El Salvador had registered an 8.5 per cent drop in remittances, which impacted the poorest households most. The crisis had also affected the financial sector, with reduced demand for credit in the private sector impacting El Salvador’s productivity.
States must do more to guarantee the full participation of developing countries in creating a new global financial architecture, she explained, noting the importance of counter-cyclical policies to assuage the impacts of the crisis. The mobilization of national resources must be flanked by improved State capacities to meet new challenges and create opportunities. Her Government launched a fiscal reform proposal, which increased taxes on tobacco, among other items, in part to combat tax avoidance and smuggling. Foreign direct investment had dropped 82 per cent in 2008-2009. On other issues, she called for concluding the Doha Round of trade talks on a fair, sustainable basis. Also, external public debt was to hit 52 per cent of gross domestic product, which, with reduced remittances, had created a serious concern for her country. El Salvador was also concerned at the situation of middle-income countries, like Iran, and welcomed that the Bretton Woods institutions had included them in its focus.
RODOLFO BENITEZ VERSÓN (Cuba) said it was unfortunate that the financing for development that both the Monterrey and Doha conferences had promised had in fact not turned out with the expected results: meeting the needs of the developing countries of the world. He said the reason was that both conferences had not been ambitious enough. Now, the current global financial and economic crisis continued to impose a strain on developing countries, especially, and the crisis continued to hamper their capacity to meet the development goals and strained their efforts further.
Citing Africa, a continent where the challenges of development were of an especially significant dimension, as an example, he said it was unfortunate that the continent would only receive a small percentage of the funding resources it needed. He said, in order to help countries of the South to meet all their development challenges, it was necessary that developed countries attach no conditionalities to their aid, in addition to respecting national strategies. Unless such funding was backed by coherent policies at the international level, there could not be equality in the efforts to mobilize resources for financing for development. He further reaffirmed that there was no organization better equipped than the United Nations to address those issues. The new economic paradigm should place the human being at its centre and the United Nations was the only democratic forum capable of addressing and hosting international conferences and forums to address these issues. Now was the time to responds to that challenge.
CLAUDIA BLUM (Colombia) said the economic and financial crisis had underlined the need for greater cooperation between the United Nations and the international financial institutions. It also highlighted the need to modernize the global financial system to ensure inclusiveness and greater coherence of macroeconomic policies, as well as prevent a repeat of the 2008 crisis. Discussions on such changes must include all States and take into consideration the concerns of low- and middle-income countries. The international community must also establish some guidelines that protected the most vulnerable countries from economic shocks.
She went on to say that, while Colombia had registered steady growth until the outbreak of the crisis, like other middle-income countries, its woes had been exacerbated by a sharp drop in foreign direct investment. She stressed that the recovery of developing countries would largely depend on a resurgence of investment and opening of international markets to their products. Colombia was leading the effective exchange of ideas on development financing in the region, as part of its contribution to South-South cooperation and the broader push to achieve the Millennium Development Goals. A high-level meeting under way in Bogotá this week would provide practical solutions to that end. Finally, she said that only committed multilateral action would allow the international community to achieve the important goals set at Monterrey and Doha.
DANIELE D. BODINI ( San Marino) said the 2008 global financial crisis, followed by the 2009 economic debacle, showed the dark side of globalization. Despite the many warnings of an economic upheaval, the Bretton Woods institutions and many regulatory agencies worldwide failed to provide appropriate tools to prevent such a catastrophe. Two years later, there were $600 trillion of derivative financial instruments “floating around” and trillions of dollars in high-risk assets, without transparent monitoring. A more comprehensive supervisory system should be put in place as soon as possible.
He said the most striking impact of the economic crisis had been the rapid increase of unemployment, with International Labour Organization (ILO) estimates of the number of unemployed well above 200 million people, and forecasts of another 200 million at risk of under-employment, with wages of less than $2 per day. Young people were most affected, and if the employment picture did not dramatically improve soon, many countries would be vulnerable to social instability in 2010-2011. Such vulnerability would be made worse by income inequality, ethnic and religious strife and weak governance. Given that, he urged uniting efforts to reverse the tsunami that was washing away every individual’s right to decent work. The United Nations was at the centre of the debate and the General Assembly should be the place where a steady stewardship was maintained.
JAIRO HERNÁNDEZ-MILIAN (Costa Rica), aligning himself with the statements of the Rio Group and the Group of 77 and China respectively, said all middle-income countries, such as Costa Rica, were exposed to the effects of the global economic and financial crisis and, therefore, were in urgent need of assistance. In that regard, the importance of the implementation of a new international economic architecture was of paramount importance. He stressed the importance of international assistance to middle-income countries of the South, which were especially vulnerable to the challenges of the current economic and financial crisis, and for whom international aid remained essential for their economic survival. He expressed further concern that the distribution of ODA had remained inequitable.
He said Costa Rica supported calls requesting the developed countries, particularly the Group of 20 (G-20), to be more equitable and transparent in their distribution of aid. The recent financial and economic crisis had made it clear that measures adopted by a number of countries were unacceptable, as many of them were exercising policies that were only to their benefit. He said the international community needed to create a greater impetus for the creation of a more equitable international financial mechanism.
Continuing, he said that in order to meet all their social needs, including those identified in the Millennium Development Goals, developing countries could do more by reducing their military expenditures and re-directing resources saved from military spending to national development. He said there could be nothing more important than investing in health, education and other social sectors. In conclusion, he stated that the current global situation of climate change also required increased financial resources and that common agenda of climate change was one of utmost urgency.
AHMAD AL-JARMAN (United Arab Emirates) said his country had been able to contain the impact of the global economic downturn through effective policies and taking quick actions, such as enacting precautionary financial measures that had enabled it to continue to mobilize national resources and implement development strategies, while focusing on developing its human resources. The United Arab Emirates had also been able to continue economic diversification, expand its production base and exploit oil revenue to establish and maintain the infrastructure necessary to develop other sectors. More globally, he said his country would continue its cooperation with the international community to combat the effects of the crisis, while it continued to fulfil its national commitments.
He went on to reaffirm that the outcomes of the Monterrey conferences and its follow-up meeting comprised the basis of the integrated international mechanism for development financing and poverty eradication. They also provided a comprehensive framework to address a number of challenges, including the current global economic difficulties. “We stress the need for international cooperation in this area in all forms, including the cooperation between developed and developing countries, South-South cooperation and trilateral cooperation,” he said, also underlining the need to overcome the political and financial barriers that impeded the full implementation of the Monterrey and Doha outcomes. Finally, the financial crisis should not lead to a decrease in or cancellation of development assistance.
MOHAMED LOULICHKI (Morocco), aligning himself with the Group of 77 developing countries and China, and the African Group, said financing for development was critical to achieving the internationally agreed development goals. Five years from the deadline for reaching the Millennium Development Goals, economic instability and a lack of financing had compromised their achievement. The global crisis had also deprived developing countries of their main sources of financing, notably foreign direct investment. While national development strategies to attain the Goals had been put in place, the funding of projects remained an open question. The grim economic picture in developing countries had forced them to “relaunch” their economies and Morocco supported the implementation of all development assistance commitments.
He said the Monterrey and Doha instruments, which enshrined Goal 8 (global partnership), should be built upon at the September summit, so that the Goals could be achieved by 2015. World Trade Organization talks were proceeding slowly, notably against the backdrop of a more than 12 per cent drop in trade in 2009. National measures in developed countries had not taken into account their impact on poor nations, and in many cases it had affected their ability to trade. He supported differentiated treatment for developing countries. It was also important to recognize that governance had an impact on economic development. Morocco, in 2005, launched a programme to achieve the internationally agreed development objectives, notably to reduce poverty and social marginalization ‑‑ an effort that had funding in the national budget. Morocco had reached the Millennium Development Goal targets on reducing poverty.
MARÍA RUBIALES DE CHAMORRO (Nicaragua) said that, while the aims of the high-level dialogue were all well and good, Member States must seriously evaluate the current challenges facing the world and how closely those concerns related to the well-being and livelihoods of all people. Everyone knew that the current economic and financial system was based on a model created solely for the purpose of consolidating the wealth of a few over the real needs of many. That system was rife with structural deficiencies and built-in inequities that must be addressed. If it was not, delegations would not still be making the same pleas and hearing the same empty promises they had been since 1972, when the “infamous” target of 0.7 per cent of gross domestic product (GDP) of official development assistance had first been mentioned.
“It is time we turned from endless speechifying and undertook specific acts,” she said, noting that, despite the actions of a few developed countries, most such nations remained far from living up to their obligations. Indeed, those countries had wasted no time in providing life rafts for the very institutions that had sparked the financial crisis in the first place. While developing countries suffered, they had pumped more resources, money and energy into a system that was unstable and inequitable at its core. “What a sorry twist of fate we are witnessing when the already-empowered are rescued and the neediest were served only empty rhetoric,” she said, urging delegations to press for an international financial and monetary system that was based on inclusion, social solidarity, stability and ethics. That was the only way to achieve the goals set at Monterrey and Doha.
PABLO SOLÓN-ROMERO (Bolivia) said delegations must consider three key issues: the abiding inequalities in development assistance; the fact that now more than ever, finances flowed from South to North; and how the South could begin to use its own resources to finance its own development. He said it was clear that current levels of ODA were not only far below internationally agreed targets, but far below what was needed to address current economic and financial challenges. However, United Nations studies revealed that, while the South had received a mere $121 billion in development assistance, developing countries were providing some $864 billion in capital flows to the industrialized world.
Continuing, he said the developed world was also benefiting from repayment of high debts by developing countries. With all that in mind, he said the Assembly should convene a conference on ways to help developing countries bolster South-South cooperation, including identifying mechanisms for levying taxes on the huge sums that flowed from South to North, and “that will make it possible for us to keep our finances in the South for our own development”. The international community must devise ways for southern nations to make better use of the resources they were losing to the North.
PHILIP PARHAM (United Kingdom), aligning himself with the European Union, said the 2009 Economic and Social Council decision to strengthen financing for development follow-up, among other events, had ensured that financing for development was high on the global agenda. For better or worse, 2010 would represent a “turning point on poverty”. The summit in September would provide an opportunity: it would either result in an historic action plan to deliver on the Millennium Development Goals, or “we will stand by and watch” as the credibility of collective international action was irreparably undermined. Given that, he urged States to find the courage to go beyond business as usual and achieve a comprehensive plan on the Goals that would emphasize such areas as trade, climate change, conflict and fragility, economic growth, aid effectiveness, and women’s empowerment. The need for an evidence-based approach was clear, and his Government was confident that the Secretary-General’s report would provide a sound evidence base for an action plan.
He said foreign direct investment, private flows, trade and debt relief were all essential to achieving the Goals. In the area of health, the United Kingdom had contributed $485 million to a $1.5 billion initiative to encourage companies to create affordable vaccines. It also had committed £1.38 billion to an initiative that raised money for immunizations, and looked to provide another £250 million. By year-end, funds from that initiative would have prevented 400 million deaths. The private sector would have an important role to play, notably in challenging Governments to think about working together to maximize companies’ impacts in developing countries.
Moreover, meeting commitments for ODA was a key pillar in the United Kingdom’s efforts, he said. Globally, there had been historic rises since the pledges made at Gleneagles, and while that was an achievement, much more had to be done. The Organisation for Economic Cooperation and Development (OECD) predicted a $21 billion shortfall between 2005 promises and projected 2010 results. All donors must live up to their commitments. The United Kingdom was doing so and had published a draft bill outlining plans for contributing 0.7 per cent of gross domestic product to official development assistance. If passed, it would give partners further assurance that the United Kingdom would deliver on its commitments. Such assistance was a reliable form of financing, at a time when remittances, among other sources, had slowed. In the scaling-up of efforts, States must also ensure they were delivering better aid. To drive better results, transparency and accountability must be improved in the ways aid was managed and delivered. His Government looked forward to the 2010 United Nations Development Cooperation Forum as a means to achieving better cooperation on aid effectiveness.
CAROLINE ZIADE (Lebanon) began by noting that the Monterrey Consensus had further emphasised that achieving the Millennium Development Goals required a new “global partnership for sustainable development” between developed and developing countries. And, while it was true that developing countries had the primary responsibility for mobilizing domestic financial resources for their own economic, social and environmental development, it was also true that sustained and equitable economic growth was a prerequisite for poverty reduction and that international investment and trade could be important sources of sustaining that development.
However, the development achievements and years of hard work by the developing and least developed countries had been negated by the financial crisis, which they had neither caused nor instigated, she said. Their economies had suffered from drops in exports, capital outflows, scant fulfilment of ODA commitments by the developed countries, increased costs of external financing, and growing rates of unemployment, thus causing major setbacks in meeting their Millennium Development Goals. Against that backdrop, developing countries were also in dire need of assistance from the international community, before their economies became even weaker.
She said, while trade was an essential engine driving the recovery of the global economy, the collapse in import demand by developed countries, following the outbreak of the financial crisis, had triggered a decline of almost 13 per cent in world trade volume in 2009. The crisis and its aftermath had highlighted the long-standing systemic flaws and imbalances in the international financial system supervision and architecture. Therefore, rebalancing the world economy and ensuring that the responses to the international crisis was commensurate with the respective scale, depth and urgency required, at the outset, reforming global economic governance to reflect the realties of the new century. In her view, that needed to be complemented with international financial system reform that strengthened the representation and participation of the developing countries in the international financial institutions, with a view to restoring the legitimacy and effectiveness of the global economic governance institutions.
JORGE ARGÜELLO (Argentina), aligning himself with the Group of 77 developing countries and China, and the Rio Group, said it would be difficult to meet the Millennium Development Goals, especially to halve poverty, without making more effort. Many policymakers were focusing on other priorities. Nonetheless, there was some hope, especially as the shake-up of global financial centres had forced a re-examination of the global financial architecture. Indeed, the absence of regulation was more dangerous than an excess of it. Global imbalances were damaging to all and, in that regard, economic policy coordination with greater systemic impact, within the G-20, had produced a rapid response, in line with the magnitude of risk. That allowed for hope that a more democratic financial architecture would be established. In that context, he said returning to the path of sustainable growth could impact the flow of development aid. Estimates showed that a decline of 1 percentage point in developed country GDP growth led to an 8 per cent decline in the aid budget five years later. Regardless of past performance, it was urgent that donors translate into action their Monterrey commitments and those made at Gleneagles.
As for achieving the Goals, he urged developed countries to refrain from taking restrictive measures that impacted foreign residents through discriminatory treatment, saying that the amount of income from remittances was triple that of development aid ‑‑ and was more stable in times of crisis. Also, the trend repeated by the Bretton Woods institutions must be reversed. He went on to say that Argentina had received strong positive net flows during the 1990s, while in the four years following its greatest crisis, the country had had to deal with negative net flows from its institutions. That situation could be reversed through stronger participation in international credit organizations. On financial institution reform, he urged ensuring a stronger voice for developing countries, notably through more voting power. It was not positive that more voting power be given to some countries to the detriment of others. Any progress made was clearly insufficient. Finally, to achieve the Goals, the world must agree on fair, balanced trade rules that took into account developing country needs. They were subject to distortions that resulted in adverse trade terms compared to developed countries.
SALEM MUBARAK AL-SHAFI (Qatar) observed that, five years away from the deadline set for the achievement of the Millennium Development Goals, the record of achievement was uneven, and it was regrettable that, although some developing countries had made good achievements, many of them, especially in sub-Saharan Africa, were not on track, particularly in conflict-torn countries. That should be a concern for all, as the achievement of those goals was not only essential for the attainment of a better, healthier and more comfortable life for millions of people around the world, but it was also the basis for peace and security.
Referring to the 2003 World Summit in New York, at which world leaders reaffirmed their commitment to the principles of international partnership as set out in Monterrey three years earlier, he observed that, if sufficiently implemented, the existing commitments to financing for development were likely to help all developing countries, including Africa, achieve the Millennium Development Goals. However, it was essential that developing countries adopt comprehensive national strategies, and prepared long-term and credible investment plans. Similarly, donors needed to accelerate their plans to increase assistance and set timetables for the implementation of their commitments towards developing countries, which was likely to enable those countries to develop their macroeconomic frameworks. In the area of international trade, the failure to reach agreement on the Doha Round had been a major disappointment for developing countries, particularly least developed countries that had placed great hopes on that Round.
He said there were still significant challenges in following-up on the Doha Round on trade negotiations. He called on all countries involved in the negotiations to aim to establish an open, non-discriminatory and fair multilateral trade system.
RAFF BUKUN-OLU WOLE ONEMOLA (Nigeria) said that, at its inception, the Monterrey Consensus had held great promise for global economic growth and development, especially for the developing countries. The hope for success had not been misplaced, as the Consensus had been based on the collective desire and a perceptive understanding of the goals to be achieved. Yet, while the intentions had been genuine and the expectations had been justified, the modest growth experienced by developing countries in the wake of Monterrey soon virtually evaporated in the face of unforeseen challenges. He said similar enthusiasm had presaged the convening of the Doha Review Conference, which had aimed not only to redress obvious setbacks and give impetus to the goals set at Monterrey, but to chart the way forward in generating financing for development. However, the outcome of that Conference, too, was undercut by extenuating circumstances, including the convergence of global food, energy and financial crises and the pervasive impacts of climate change.
He said Nigeria, like many other developing countries, continued to struggle to close gaps in its efforts and actions aimed at achieving the Millennium Development Goals. It was having an especially tough time generating the resources to that end. Yet, the Government had implemented a seven-point development agenda that targeted infrastructure improvements, promotion of food security, and capacity-building. Moreover, that agenda was being strengthened by a serious effort to diversify Nigeria’s economy. He said that for Nigeria’s initiatives to take hold, however, the international community would have to work towards creating a complementary external environment in which additional resources could be derived on the basis of genuine partnerships. Further, the speedy conclusion of the Doha Development Round of World Trade Organization talks would be essential to, among other things, eliminate trade distorting practices and agricultural subsidies and extend concessions to goods from developing countries.
AMJAD HUSSAIN B. SIAL (Pakistan) said that, in reviewing the status of implementation of the Monterrey and Doha accords, the questions before States were simple: what had happened thus far on the path decided at Monterrey and reviewed in Doha? Had anything changed and, if so, was the trajectory positive or negative? What should be done to improve implementation of the goals approved at Monterrey and Doha? As the world inched out of the worst financial crisis since the Great Depression, the global scenario on financing remained bleak. The good news was that the world economy was on the mend and positive signs had to be nurtured.
The outcome of the 2009 United Nations Conference on the World Economic and Financial Crisis and Its Impact on Development provided a framework, direction and timelines for action. However, despite the urgency surrounding the Conference, and importance of the decisions taken, almost a year down the road, work on the follow-up and implementation of those decisions, including making the Ad Hoc Open-Ended Working Group functional, had not started. The redesign of the global economic and financial architecture should be underpinned by various principles, including an approach that was United Nations inclusive, which would signal global participation and legitimacy. Moreover, globally acceptable, legitimate institutions and responses should be built around the imperatives of need and equity. The new global compact for development, growth and prosperity should be premised on a people-centric approach and policies, to ensure well-being and welfare. Finally, it should be based on a carefully crafted balance among the role of Governments, markets and civil society.
MORTEN WETLAND (Norway) recalled that, shortly after the fall of Lehman Brothers in 2008, his country had announced an increase in its aid for 2009 beyond the 1 per cent mark. It had increased that aid further in the course of 2009 to help cushion the burden of countries less fortunate than itself. Unfortunately, many were suffering from substantial illicit outward financial flows. Assessments of the magnitudes of those flows differed. They were assumed to amount to several times ‑‑ assessments spanned from 3 times to 10 times ‑‑ the total annual ODA. That included revenues lost due to mispricing among international trade partners or between international corporations, combating of which required a wide range of global and national measures. Nationally, steps must be taken to combat corruption and enhance effectiveness of tax authorities and police branches focusing on white-collar crime. At the national level, good global governance required transparency. Norway, therefore, welcomed the current work to curtail the harmful and non-transparent practices in tax havens; increase the exchange of tax information; and require financial institutions to “know their customer”.
Also essential, he said, was to uphold health and education policies as the world struggled to recover from the crisis. Scaling down or holding back on critical investment in human capital came at extremely high cost in all societies, and none could afford to squander the human resources upon which the future would be built. It was more crucial than ever to empower women and invest in their health and education. Indeed, the most competitive countries, and those that yielded the best economic performance, were those that offered women the most equal opportunities. And those countries that managed to overcome existing cultural impediments to such policies were going to prosper. Women must be included on equal terms in processes where the future and the financial needs of their country were being decided. Women must have access to financial resources, and budgets must address their needs. There was a demand for “women only” funds. In dealing with the economic recession, it was important that a gender perspective was kept in mind in all policy and decision-making, to ensure that both sexes benefited equally from measures to stimulate growth and strengthen the economy.
Associating himself with the statement made on behalf of the African Group, CHARLES T. NTWAAGAE (Botswana) emphasized, on the one hand, the Secretary-General’s reminder, in his report on progress made in achieving the Millennium Development Goals, of the importance of “keeping the promise”, and, on the other hand, the finding in the annual report from the Department of Economic and Social Affairs that poverty rates in sub-Saharan Africa remained “stubbornly high”. Moving forward to 2015, stronger donor commitment and support through the fulfilment of the pledges already made to developing countries was needed. Botswana also joined the call for an action plan to drive the Goals’ delivery process in the next five years. Moreover, it was confident that the steps taken by developing countries to enhance governance structures and to create investment conditions that were appropriate for business and economic growth would be met in the next five years, with corresponding measures to make aid-for-trade operational.
Continuing, he said donors should adopt more flexible eligibility criteria in the financing for development process with respect to the special needs of landlocked developing countries, small island developing States and middle-income countries. His delegation welcomed the insight of the recent 2010 report from the United Nations Development Programme “Beyond the Midpoint”, which analysed Botswana’s transformation from one of the world’s poorest countries in 1966 to a middle-income country in 1994. Still, its “borderline” classification as middle-income made financing costly, and the vulnerabilities of its economy made it less resilient to external shocks like the food, energy and financial crises. A picture of Botswana after those crises, showed a country that had successfully pulled itself from abject poverty, had developed a functioning economic framework and infrastructure, was not lacking political will and foresight, but had still suffered from a devastating impact. Among other things, this scenario provided compelling testimony that the international monetary and financial system should be reformed. Priority should be given to identifying and preventing a potential crisis.
ZOYA KOLONTAI (Belarus) said her delegation agreed with the Secretary-General that setting new obligations for achieving internationally agreed development goals would not improve the situation or close existing implementation gaps. Indeed, the time that would be lost in identifying and implementing such new frameworks would compromise what had been achieved. Instead, what was needed was a recommitment to agreed objectives and the political will to identify and carry out innovative measures to achieve them. Among other suggestions, she said that devoting particular attention to middle-income countries that had reserves, after a decade or more of steady growth, could help them contribute to furthering their own development and create a whole new segment of donor countries.
She said that Belarus supported continuing the meetings between the Economic and Social Council, the Bretton Woods Institutions, the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD). Such meetings should prompt those organizations to respond more quickly and comprehensively to the needs of developing countries. Belarus also noted calls to reform the international financial institutions. Such changes should take into account the views of prominent economists from developing and middle-income countries, who were currently sidelined when those institutions carried out their norm-setting activities. Instability in the current financial and economic system was a threat to developing countries, and there was a need to create mechanisms to monitor capital flows in times of crisis through market and non-market means. It was also necessary to strengthen reserve funds and regional mechanisms for providing development assistance.
ABDUL GHAFOOR MOHAMED (Maldives), declaring that his country had faced the worst macroeconomic situation of any country undergoing a democratic transition since 1956, expressed fear that the country would not be able to deliver on its development plan without significant donor support. “We simply cannot afford to have people lose faith in the democratic process,” he said, describing as “formidable” the challenges the Maldives faced in delivering the pledges to its people in the midst of what he called a difficult global environment.
Hasty fiscal expansion since the 2004 Indian Ocean tsunami had resulted in a runaway budget deficit, with public debt now standing at approximately 28 per cent of the gross domestic product. The situation was further exacerbated by the severe impact of the global financial, fuel and food crises, which had caused the tourism industry and exports to plunge and debt to soar, he stated. The economic forecast for 2009-2011 had been revised downward. That dire situation had compelled the Government to seek an International Monetary Fund (IMF) resources package aimed at a complete overhaul of economic and fiscal policies.
He noted that the Maldives, being a fragile, low-lying small island ecosystem, was extremely vulnerable to the impacts of climate change, especially the predicted sea-level rise. And, although the country contributed minimally to global greenhouse gas emissions, it was among the most susceptible to impacts of that change. He said the country, thus, took the High-level Dialogue as an opportunity to explore further avenues of cooperation with the international community, as well as to collectively find solutions to challenges and issues. He believed those to be compelling reasons to seek an intensive engagement with the international community to ensure that the next three years resulted in the consolidation of democracy, significant economic restructuring, and a successful transition to middle-income country status.
ENKHTSETSEG OCHIR (Mongolia) said attaining the Millennium Development Goals required identifying the shortfalls in policy and implementation, as well as in areas where Governments and donors could mobilize resources to ensure that the Goals, were, in fact, met. Mongolia had been hard hit by the global financial crisis, mainly through decreases in global commodity prices and demand. In response, the Government had taken various policy measures, including the passage of a fiscal stability law and reform of the banking sector. As the 2015 deadline approached, poverty reduction remained a challenging task for Mongolia, one that had been compounded by weather-related natural disasters. To deal with poverty in disaster-prone countries, individual countries’ structural economic vulnerability should be a factor in development assistance planning.
She said enhancing developing country access to regional and global markets was also of paramount importance, noting that landlocked developing countries, in particular, had yet to fully benefit from trade. The Centre for Land-Locked Developing Country Studies, created last year in Ulaanbaatar, could catalyse innovative thinking on issues like innovative financing sources. On other matters, she said climate change was an area where financing would need to increase, and Mongolia looked forward to the recommendations of the High-level Advisory Group on Climate Change Financing, due ahead of the Conference of Parties meeting in Mexico. Pursuing the Secretary-General’s seven priorities for 2010 in a holistic way should be a focus for the international community, with gender equality and women’s empowerment at the forefront of efforts.
RETA ALEMU NEGA (Ethiopia) said that, when discussing the current financial and economic crisis and assessing its impact, it was imperative to look at how Africa, the most marginalized continent in the world, was doing in such global turmoil. It was true that Africa had done well in terms of economic growth in recent years, particularly since the beginning of this century. It had the highest growth rates in decades, given the significant variations among countries, and there was sustained and relatively fast economic growth.
He said what was striking was, prior to the current global crisis, the continent was affected by an accelerating increase in commodity prices in 2008, particularly that of oil and agricultural commodities. While higher commodity prices had been associated with the positive economic outlook in Africa in previous years, that had turned into its exact opposite. Massive inflation thus ruptured and created extreme pressure on the balance of payments of most African countries, followed by high transport costs and fertilizer prices leading to sky-rocketing food prices, he said.
He said it was time for reform of the international financial architecture, to make it a more democratic and inclusive in how it made decisions, so that it was responsive to the needs of developing countries. Ethiopia also believed that the choice of African countries to make their own economic policies needed to be respected, and that they should no longer be subjected to conditionalities of being deprived of external assistance simply because they charted their own course of pursuing development different from the policy orthodoxy promoted by donors.
STEFAN BARRIGA (Liechtenstein) said the negative impact of the crisis on his country’s economy had not affected its commitment to achieving the agreed ODA target. In fact, it had been able to increase its ODA percentage in 2009. On the matter of international cooperation in tax matters, his Government was committed to implementing internationally recognized standards of transparency and exchange of information and had concluded numerous tax information exchange agreements and double taxation agreements. It was also determined to engage with its European partners, among others. Moreover, his Government had prepared the legal basis for implementation of recent and future agreements, in that regard. It had also long ago taken effective measures to combat the problem of illicit financial flows, especially money-laundering, and to protect its financial centre from criminal activities in that respect, including by ratifying the relevant international conventions and actively engaging in efforts to secure recovery of stolen assets. Liechtenstein had also become increasingly active in the field of microfinance, believing that that could play a very important role in times of limited credit.
He said the current crisis had underscored the need for more effective global governance mechanisms for economic policy coordination. Rules must apply to everyone equally, based on a level playing field. There were times when concerted action by groups, such as the G-20 could lead to solutions for all. But, for the G-20’s deliberations to be translated into effective actions on a global scale, they needed to be more consultative, inclusive and transparent. The informal “Global Governance Group”, or so-called 3G, of which Liechtenstein was a member, last week had proposed an approach to strengthen the framework of engagement between the G-20 members and non-members. Looking forward, he said one of the main tasks ahead was achievement of the Millennium Development Goals, among the most ambitious and most important ever set by and for the international community. He welcomed the upcoming summit in September, and believed that only a global approach would lead to more predictable and sustainable development for all and achievement of the Goals. Transforming them from targets into achievements required a “massive collective effort”, of which the work on development financing was an indispensable part.
VANU GOPALA MENON (Singapore) said it appeared that “the eye of the storm” had passed. The global economy was expanding again and financial conditions had markedly improved. Major economies were beginning to study how and when to wind down their emergency stimulus measures. The challenge now was to ensure that the recovery could be sustained and that developing countries were equipped with the necessary tools, funds and resources to promote development. A key element of financing for development was international trade, and it was vital that concrete steps be taken towards concluding the Doha Round of talks. Numerous studies had shown that would bring income benefits and enhance the development prospects of both developing and developed countries. Also important was to guard against protectionist sentiments and measures, which would ultimately slow the pace of recovery. In that regard, he welcomed the declaration by the G-20 leaders in April 2009 not to raise new trade barriers and to extend that commitment to 2010. That had been reiterated by the Asia-Pacific Economic Cooperation (APEC) Ministers Responsible for Trade at their meeting in Singapore in July 2009. Rhetoric must be matched with action to ensure that no one erected new protectionist barriers.
Like several previous speakers, he said that the global financial crisis had also underscored the need for more effective global governance mechanisms for economic policy coordination. The G-20 leaders’ designation of the Group as the “premier forum for international economic cooperation” represented a significant step in that regard. On the one hand, the formation of the G-20 recognized the reality that key decisions concerning the global economic order could no longer be the preserve of a small elite group of developed countries. At the same time, for the Group’s deliberations to be translated into effective actions on a global scale, they needed to be more consultative, inclusive and transparent. That required the G-20 to reach out and engage the rest of the United Nations membership. He reiterated the need for countries to work together to promote open trade and investment regimes, which was a vital component of financing for development. It was also critical that actions be taken to reform the international monetary and financial system, taking into account the need for transparency, inclusiveness and effectiveness.
MANJEEV SINGH PURI (India), associating himself with the Group of 77 developing countries and China, said that the core of the Monterrey Consensus ‑‑ ensuring enhanced, predictable financial resources for developing countries ‑‑ was all the more relevant today, as multiple global crises had impacted their financing abilities. Most poor countries continued to deal with the consequences of a reversal in capital flows, with official development assistance far below commitments, access to capital markets limited and a worsened balance of payment situation. It was imperative that the global community made good on that loss of capital. Besides fulfilling ODA pledges, there was an urgent need to provide additional funding to implement counter-cyclical policies. Multilateral development banks should invest in green and clean technologies, which were an ideal form of counter-cyclical activity.
Also in need of attention were systemic issues, he said, including comprehensive reform of the international financial and monetary architecture. For its part, India was working with other nations, and the Group of 20, to ensure that such institutions reflected current realities in their structure, composition and mandates. Bretton Woods bodies must include a greater voice and role for developing countries. Membership of norm-setting bodies must be broad-based and regulatory mechanisms improved. Despite changes in the follow-up mechanism instituted at Monterrey, it was clear that a more structured and periodic mechanism would be of immense benefit.
ZACHARY MUBURI MUITA (Kenya) said that, though some countries had made some progress towards meeting the Millennium Goals, many, like most sub-Saharan nations, had recorded “dismal” results. While it had been projected that most developing countries would need to register consistent annual growth rates of at least 7 per cent to achieve the Goals by 2015, most had been forced to re-direct their priorities to deal with, among others, humanitarian emergencies, climate change, and other unforeseen exigencies such as fallout from the global financial and economic crisis and rising prices in food and other commodities. “It is apparent that we need to change the strategy to formulate an accelerated action plan that identifies quick wins that will trigger the requisite multiplier effects of the other Millennium Development Goals,” he said.
Continuing, he said such a strategy should recognize the unique economic circumstances of each country and region. For example, in sub-Saharan Africa, 70 per cent of those targeted by the Goals lived in rural areas and were dependant on agriculture for their livelihoods. It was, therefore, clear that scaling up budgetary allocations and investments in the agricultural sector would have a major multiplying effect in the effort to attain other development targets, especially as food security could improve maternal health, boost school enrolment and complement efforts to combat diseases. He said that perhaps the most difficult Millennium target to implement has been the “global partnership for development”, as evidenced by the stalemated Doha Round of trade negotiations, stagnating official development assistance, little movement on debt relief initiatives, and the challenges in negotiating a post-Kyoto Protocol climate change regime.
VALÉRIE S. BRUELL-MELCHIOR ( Monaco) said that remaining engaged with the most vulnerable meant honouring commitments made at Monterrey. Today, it also meant accounting for the effects of the global financial crisis on the poorest, and ensuring that official development assistance did not suffer under budgetary pressure. For its part, Monaco would work in 2010 to achieve international development goals. Since 2003, the Government had increased the amount allocated to such assistance, the bulk of which was provided in the form of grants, which would chiefly benefit the least developed countries in Africa.
That assistance was channelled to projects implemented in partnership with States, local organizations and international organizations, like the United Nations Development Programme (UNDP) and World Health Organization, she continued. Areas of intervention included health, education and training, and, in a cross-cutting manner, gender equality and women’s empowerment, as drivers for development. They also included the “valorization” of natural resources and improvement of energy efficiency. The Government also had launched a carbon compensation mechanism. The fourth dialogue confirmed the need to pursue a global and integrated approach to development and to put in place partnerships that included all civil society actors and the private sector.
M.R. KEEGEL (Sri Lanka) said that the international community’s common endeavour to achieve sustainable development was hampered by various challenges, including numerous global crises that ranged from food, energy, and climate to finance and the economy. As developing countries were extremely vulnerable to the negative effects of the multiple global crises, he noted with satisfaction the increase of official development assistance and other forms of traditional development assistance in real terms to help developing countries since Monterrey, although a significant part of that flow was allocated for debt relief and humanitarian assistance and, thus, it had a minimum qualitative impact on development. The full realization of the ODA commitment of 0.7 per cent GNP by donor countries was, therefore, necessary to further enhance the capacity of the recipients.
He observed that developing countries were extremely vulnerable to the negative effects of the multiple global crises, which meant that their exposure to international financial institutions was tied to harsh, pro-cyclical conditionality, accompanied by non-economic political bargains. Against such a backdrop, the aspirations echoed in Monterrey to strengthen the United Nations leadership in promoting development and enhancing coordination, coherence and effectiveness among the World Bank, IMF and World Trade Organization did not need to be re-emphasized.
Saying the Monterrey Consensus was complementary to the Millennium Development Goals, he said Sri Lanka, as a lower middle-income country, had dedicated its scarce resources in pursuit of the internationally agreed development goals, including the Millennium Development Goals. While successful results were achieved in the fields of health, education and gender by some countries, despite many odds, the much delayed progress in Goal 8 to develop a global partnership for development had been unsupportive of those positive trends.
SHABBIR AHMAD CHOWDHURY (Bangladesh), aligning himself with the Group of 77 developing countries and China, and the least developed countries, said the central focus of the Monterrey Consensus was on the means to implement internationally agreed development goals. Six major sources of development funds were central to the Consensus, namely: domestic resource mobilization; foreign direct investment; global trade; official development assistance; debt relief; and system reform. At Monterrey, developed countries committed to providing 0.7 per cent of their gross domestic product as ODA to developing countries and 0.15 to 0.2 per cent to least developed countries, among other things. However, little progress had been made.
He said the impact of the financial crisis was especially alarming in sub-Saharan Africa, where the poverty rate was projected to hit 38 per cent in 2015; that would have been 36 per cent without the crisis. Persisting global imbalances, continued volatility in the exchange rate of major currencies and deadlock in trade talks, among other issues, posed grave risks to achieving sustained economic growth. Such a scenario warranted more global action in all areas of partnership. States must agree on an ambitious action plan for the full implementation of the Monterrey Consensus and for addressing new and emerging issues through additional resources.
IRENE TEMBO (Zambia) said that, at the 2008 Doha Review Conference, most delegations had agreed that the objectives set six years earlier in Monterrey had not been honoured. In addition, the international scene had changed dramatically in the meantime, with the onset of multiple crises that began with price spikes in food and commodities and culminated with global financial turmoil. Zambia had been severely affected by those crises, as it was by the impact of lower tax revenues from its key mining sector due to lower copper prices on world markets. It had also been hit with lower rates of official development assistance. In order to improve its prospects, Zambia had taken active measures to broaden its tax base and spread the resources generated to critical areas, such as infrastructure enhancement.
Still, she said Zambia was faced with challenges in attaining the Millennium Development Goals and other agreed targets. She called on the international community to honour its development commitments in line with the Paris Declaration and the outcomes of the Monterrey and Doha conferences. She also called on all stakeholders to press ahead with negotiations in the Doha Round, as well as the immediate and broad implementation of aid-for–trade initiatives. She welcomed the recent meeting between the Economic and Social Council and the Bretton Woods institutions, but urged more coherence and cooperation between those bodies. Finally, she said that, as one of the co-facilitators of the United Nations Conference on the Economic and Financial Crisis and its Impact on Development, held last June, Zambia would continue to ensure the implementation of its outcomes, including, beginning next month, the holding of four panel discussions in the run-up to the Millennium Development Goals review conference in September.
EUGENE MCCARTHY, observer for the Holy See, said that, while the dark shadow of the global crisis would likely frustrate efforts to reduce poverty, it also had given rise to “unprecedented” international cooperation, as seen in the three high-level “Group of 20” meetings in 2009, in Washington, London and Pittsburgh. Those meetings were able to reach agreement on emergency measures to reignite the world economy, including fiscal and monetary stimulus packages. However, the stabilization of some economies did not mean the crisis was over. The global economy, where countries were highly interdependent, would never function smoothly if the conditions that generated the crisis persisted.
“We cannot wait for a definitive and permanent recovery of the global economy to take action”, he stressed, most importantly, because a whole generation ‑‑ nearly one fifth of the world’ population ‑‑ could not be left in extreme poverty. There was an urgent need to reform the funding system for developing countries, as well as United Nations programmes. Institutions that emerged from the Bretton Woods conference had to ensure the launch of a process of equitable economic development. The current crisis offered a similar opportunity, requiring a comprehensive approach based on resources, knowledge transfer and institutions. As such, countries had to commit to a renewed multilateralism.
IGOR FINOGENOV, speaking in his status as an observer on behalf of the Eurasian Development Bank, said since the Bank was granted that status in 2007, it had since been granted similar status with the Food and Agriculture Organization (FAO); and its cooperation with the United Nations Development Programme (UNDP) was growing.
He said it was the Bank’s aim to work within the Monterrey Consensus to achieve its set goals; and in that regard, its first priority was to ensure an integrated approach to the resolution of financial and economic issues confronting its member countries. It intended to do so by adopting actions and policies that impacted and increased manufacturing cooperation among member States. Already, and as a result of that, trade had increased by around 6 per cent between its members.
He added that enhancing its members’ export potential, particularly among landlocked countries, was especially indispensable; and most of the members were landlocked. The method of selecting projects that the Bank promoted and supported was that they met the criteria set by the Bank. So far, the Bank’s activities had resulted in positive cooperation, as it had played an important role in the activities of member States in how they managed their economies. Also, international cooperation was vital, as the world moved on the path to full international economic integration and recovery, he added.
Round Table 1
The round table entitled “The reform of the international monetary and financial system and its implications for development” was chaired by Gert Rosenthal (Guatemala) and featured José Antonio Ocampo, Professor in the Professional Practice of International and Public Affairs, Columbia University; Ranjit Teja, Deputy Director, Strategy, Policy and Review Department, International Monetary Fund; and Martin Khor, Executive Director, South Centre.
Opening the discussion, Mr. OCAMPO said returning the International Monetary Fund to its former role as the world’s leading reserve system and coordinator of macroeconomic policy would go a long way in preventing future financial mayhem and meltdowns on a global scale. Earlier reforms of the international financial architecture following debt and financial crises in Asia and Latin America did not go far enough in regulating cross-border financial flows or speculative activity. The informal coordination role of the G-20 that emerged in the wake of the 2008 crisis was a good start, but it was not enough.
“We should go back to an IMF that has two functions that have been weak or nonexistent in the post-World War period,” he said. The IMF, not the G-20, should coordinate global macroeconomic policy, and Special Drawing Rights (SDRs) ‑‑ international reserve assets created by the Fund to supplement member countries' official reserves -- should be turned into the world’s core reserve currency, as called for in the Fund’s mandate during the 1960s.
The IMF of the future, he said, should be seen more as a network of reserve funds than as a single institution, in order to give more stability to the global economy. The problem with the current global reserve system was that it was based on the fiduciary dollar, which was too volatile on international markets, he said. A system based on SDRs would provide better, more stable macroeconomic management during crises or periods of slack world demand.
He said the IMF had taken steps to prudently manage capital accounts, but he lamented that the G-20’s agenda failed to address cross-border capital flows -- an important concern of developing countries, which were not able to absorb the massive amounts of private capital returning to them since the second quarter of 2009. Instead, the money was sent back to the United States Treasury, in effect turning developing countries into intermediaries of that Treasury. Stopping the influx of the capital in the first place made more sense, but better regulation of capital accounts was needed to do that. Moreover, the IMF must further improve lending practices to developing countries, in particular by making lending automatic and less subject to conditions, he said, and suggested that the Fund set up an overdraft facility for all countries.
Speaking next, Mr. TEJA said the IMF was looking at ways to improve its role and sense of accountability. Better governance was crucial. Without a proper voice for all its members, the IMF could not be effective. G-20 leaders had endorsed a shift in country representation at the Fund of at least 5 per cent towards dynamic emerging market and developing countries. The IMF’s Board must also be reformed to give greater representation to those countries. Further, the financial crisis had shown that, in the end, important decisions were not made in Washington, but in nations’ capitals. Better coordination of high-level policy decisions was needed, he said, noting that support at the IMF for a proposal to create a council for that purpose had been mixed.
Global financial surveillance in economic peacetime must be strengthened to improve global stability, with a greater focus on how problems transmitted across countries and on detailed analysis on advanced economies, he said. The IMF still had a long way to go to build a credible global financial surveillance system. He stopped short, however, of saying the IMF aimed to become a global regulator, noting that Governments had their own national regulations for that purpose. What the IMF should have was more controls, but support for that within the Fund’s membership was mixed, with some viewing it as a hidden agenda of capital account liberalization.
An important proposal had been put forward to institute a multinational procedure for advanced and systemic countries whereby the IMF would not only survey a nation’s policy, on such things as interest rates, but also discuss its repercussions on the rest of the world, he said. But, for the IMF to do more surveillance, it would need greater access to data. Other entities, such as the Bank for International Settlements and the Financial Stability Board, should also be involved in such country-sector analysis, and that should be done in partnership with the IMF.
In the current financial crisis, the first responder was the United States Federal Reserve, not the IMF, he said. But the credit lines of both the United States and the IMF were temporary. There should be a multilateral agency that could provide standing credit. The Fund was putting on the table the idea of a multi-country swap line that could make available short-term credit lines after systemic shocks occurred. It would not be a broad facility, but narrowly targeted at systemic countries.
Speaking last, Mr. KHOR said the Bretton Woods institutions needed more profound change to better serve the needs of the real economy and development, particularly in developing countries. He agreed with Mr. Ocampo’s call for putting cross-border flows on the agenda of major international financial institutions and learning from past debt crises. New systems were needed to provide liquidity, such as one based on SDRs issued according to countries’ liquidity needs and development goals, not quotas.
Today’s discussion on reform of financing for development was timely because at present, for many developing countries, economic recovery had yet to begin. Finance was not going to places that needed it, particularly the developing world; it was too speculative with too many bubbles and busts. There had been an over-financialization of the economy, an overleveraging of finance and an under-leveraging of institutions.
“We have a big job ahead in restoring finance to its proper role nationally and internationally. This does not mean we have to reinvest the wheel,” he said.
During the World War era, finance was seen as a “beast to tame” and the Bretton Woods institutions strictly controlled cross-border flows. Because the exchange rate system was fixed, rates were more predictable than at present and could better facilitate trade. Financial regulation nationally and internationally was the rule, rather than the exception. It was time to go back to that system.
He lauded the efforts of the United States Senate, which today was considering a bill that would regulate finance and protect consumers from dangerous financial products. Banks in the United States and elsewhere should not do proprietary trading and focus on so-called innovative financial instruments like collateralized bond obligations or naked credit default swaps; they should focus on lending and spurring consumer spending. “Banks should be banks and they should not either be casinos or facilitators of casinos,” he said.
Further, he called for mandate reform of the Bretton Woods institutions. The World Bank should return to its former role of serving as a development bank. Trade policy should best be left to the World Trade Organization and the United Nations. The Organization was the only place that could consider the broad interests of all countries and not just a select few. It was to time to revitalize its role in finance.
During the ensuing discussion period, several delegates lamented that the IMF’s board comprised few members from developing countries, and that developing nations seeking loans were subjected to conditionalities and interference. In some regions, such as Latin America, Governments had formed regional bodies and initiatives that functioned better than the Bretton Woods institutions. Other delegates noted that the current financial crisis had made it clear that the neo-liberal paradigm no longer worked, and poor countries should have the necessary policy space to implement development strategies. Some delegates challenged the notion that the United Nations was better equipped and more effective at coordinating macroeconomic policy than the G-20 and wondered whether the two could assist each other.
In response, Mr. OCAMPO said the Monterrey Consensus was much better equipped at consensus building than the G-20 and it continued to be the only agreed framework for cooperation concerning finance for development. But, it lacked the proper follow up, because some Member States and the Organization itself had not given it the proper space. The Bretton Woods institutions did not want the United Nations too fully involved in their business and they did not really participate as full members of the United Nations family. In the modern world, no country in the United Nations, the Bretton Woods institutions or any other international organization should have a veto on any issue, he said.
He also refuted a delegate’s claim that redistribution of voting shares in the IMF would harm reform. On the contrary, he said there was no conflict between legitimacy and representation, and a democratic system was needed for legitimacy. The G-20 was a step forward, but it was not the way to lead the world economy.
Regarding regional financial institutions, he said a United Nations study was conducted in 2006 on various regional mechanisms for financial cooperation. Latin America and the Caribbean had the best such mechanisms in the developing world. They should not supplant international institutions, but complement them.
Mr. TEJA said there were trade offs in effectiveness and representation between the United Nations and the G-20. The latter had been highly effective in a time of crisis in a way that larger organizations found it difficult to be. Its lack of a secretariat was not necessarily a problem.
He said the main tension in the world was the huge demand for reserves, largely by the developing world, and the fact that there were only one and one half suppliers: the United States dollar and the euro. In order to resolve that, a mechanism was needed to share risk. There must be more co-equal reserve policies circulating at the same time. Use of a single world currency, such as the SDR, was possible. But the SDR was not yet its own currency, and there was much legwork to do in that regard.
Mr. KHOR said, because IMF lending to countries in crisis came with conditions, Asian Governments had built up large financial reserves to shield themselves and initiatives, such as the Shanghai initiative, to help countries affected by short-term speculation or balance-of-payment problems. Many countries worldwide were reluctant to go to the IMF because they felt it did not serve their needs.
In that context, he said the General Assembly’s Ad Hoc Open-ended Working Group to follow up on issues in the outcome of the Conference on the World Financial and Economic Crisis and Its Impact on Development must be productive and come up with recommendations. The question was how to transit from global economic crisis into a global recovery that served developing countries’ needs. That required observing advanced and other countries with surpluses and seeing how to balance their macroeconomic policies, while considering the liquidity needs of developing countries facing balance-of-payment constraints that hindered their ability to carry out similar macroeconomic policies.
The United Nations, not the G-20, Mr. Khor said, was an important institution that should carry out that coordination. The outcome of last year’s World Conference was a building block. But, the financing for development conference only took place every two years for a few days. A mechanism within the United Nations to regularly discuss development and global economic issues was needed. Its outcomes could be transferred to the Bretton Woods institutions and followed by substantive follow up in the United Nations.
Also making statements were the representatives of Cuba, Ethiopia, Botswana, Egypt, Brazil, Venezuela, Russian Federation, Thailand, Switzerland, Bolivia, Indonesia, Turkey, Australia, Mexico, United States and the Republic of Korea.
Also speaking on behalf of civil society were representatives of the Africa Development Interchange Network and the Third World Network.
Round Table 2
In the morning, the Assembly also held a second round table, on “the impact of the current financial and economic crisis on foreign direct investment and other private flows, external debt and international trade”.
That round table was chaired by Olga Algayerova, State Secretary, Ministry of Foreign Affairs, Slovakia, and included Heiner Flassbeck, Director, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development, and Daniel Titelman, Director, Development Studies Division, Economic Commission for Latin America and the Caribbean (ECLAC) as panellists.
Opening the round table, Ms. ALGAYEROVA said that the past two years had seen a succession of global crises, which had affected advanced, emerging and developing countries alike. Depending on the degree of vulnerability to external economic shocks, the crisis had the potential to seriously affect development and the achievement of the Millennium Development Goals. In addition, the challenges remained formidable. The round table showed the determination of each country to tackle the crises faced by all, as well as the value of the United Nations in collective endeavours.
Speaking first, Mr. TITELMAN said that the current crisis, which was starting to pick up a little, had an impact on financial markets that had not been seen for many years. The impact of the crisis on global economic activity was quite strong, and was much stronger in developed economies. It was also necessary to look at foreign direct investment, which had dropped about 35 per cent, as well as remittances, which had also experienced a significant decline and were a very important source of financing. Not all developing economies were affected by the same intensity or factors, however, and that should be taken into account when discussing challenges and possibilities of recovery. Heterogeneity among developing countries was a significant issue, because all developing economies did not have the financial and fiscal capacity to mitigate the economic and social effects of the crisis, and to stimulate aggregate demand. Moreover, developing economies did not have the same capacity and production specialization to take advantage of recovery in international trade.
In terms of recovery, he said that developing economies would grow faster than developed economies, and it was expected that some developing economies would become the engine of global growth. The main challenge of the post-crisis era was to avoid the mistakes of the past. Efforts had to be made to avoid the concentration of international financial resources in a small group of developing countries and a small group of productive sectors. That required a deep reform of the international financial architecture to promote a revision of the global development agenda; the adoption of counter-cyclical policies to avoid the erratic behaviour of international financial markets; and greater global, regional and subregional coordination to develop early warning systems to avoid future crisis episodes, to establish new regulation and supervision schemes, and to coordinate policies to increase the level and efficiency of official development assistance.
Additionally, international cooperation was needed so that the social and economic effects of the crisis would not be deep and protracted. Traditionally, the negative effects of crises on social variables such as employment, real wages and income distribution tended to last longer than the negative effects on economic variables. The current crisis was not an exception, and it might significantly reduce the possibility for many developing economies to achieve the objectives of the development agenda, i.e., the Millennium Development Goals. He added that the international community, particularly developed countries, needed to take measures to implement the recommendations of the Monterrey Consensus and ensure adequate in-flows of foreign direct investment and other private flows to developing countries.
Speaking next, Mr. FLASSBECK said it was necessary to evaluate the whole of the crisis, and analyse what could be done in terms of economic policy, as well as what should be done. In terms of what could be done to get out of the crisis, he said that with official development assistance, some pro-cyclical patterns had been seen. Some countries reacted by decreasing financial development directly, but overall, this occurred less than expected. There was, nonetheless, still a big danger that when Governments attempted to exit from the high deficits they had, cuts in official development assistance would occur more frequently, and that would be a negative signal for development. Overall, he said that the crisis had some good effects, but it would be a good effect for development and international politics only if the reform agenda that had been discussed in the early phase of the crisis was implemented.
It was also necessary to discuss much more seriously the new international financial architecture, he said. An important component of that should be a discussion on the global monetary system. The only way out, in the long term, was for currencies to be taken out of the hands of speculators, because floating had not worked out well. In addition, it was necessary to think hard about a new regime for dealing with commodity prices. In the United States, for example, there were some very encouraging signs that the Government was dealing with that question.
Turning to trade, he stressed that it would be “surely good” to finalize the Doha Round, but it would be necessary to take into the account the fact that the crisis had changed the relative prices of the world so dramatically that all of the calculations and ideas about the benefits of a certain set of arrangements -- such as the Doha agreement -- were very questionable today. It was not known whether the same effect would take place, as had been thought before the crisis. The international community had to step back for a moment and rethink the whole strategy, and look at all the aspects together, instead of just concentrating on trade or capital flows. It was also necessary to look at the coherence of the trading system, because that was the most important impediment to providing what was needed for development and growth everywhere.
During the ensuing discussion, speakers noted the incapacity of many countries to withstand external shocks, lags in recovery in many countries, and the need to diversify responses to the crisis in order to properly address issues in different developing countries. Some asked how speculative investment could be regulated, while others asked about the possibility of establishing an early warning system for future crises and whether there was a likelihood of a second global crisis.
In response, Mr. FLASSBECK said that it should have been learned that, particularly for developing countries, the ratings from ratings agencies were not reliable at all. Some thought should be given whether there was a way to bring more objective views into the ratings of countries, as those ratings did not have in mind the long-term perspective of a country, or the full overall economic view of a country. The international community should not allow that to be an important factor in the access to capital markets. In terms of regulation, he said that it was not a bad idea to have something like an international transaction tax, though it would have to be tackled market by market, as the currency market had different needs from the commodities market. In response to the probability of a second crisis, he said that bubbles were being seen over hundreds of markets, which were highly correlated. That meant that cross-market correlation was much worse, and could lead to a collapse of all those markets at the same time, once it became clear that the global recovery was not as strong as expected, which in turn would lead to a second dip in the global recession.
For his part, Mr. TITELMAN said it was impossible to stop speculation. Speculation was not bad in itself, if done in a reasonable manner. Perhaps there could be a way to start looking for some indicators, in order to try to detect bubbles. Regarding a comment on stability and development, he said the two elements were not contradictory, but that while stability was necessary, it was not a sufficient condition for development.
Answering a second round of questions, Mr. FLASSBECK said that the crisis should provide an opportunity to analyse the issues of debt, debt sustainability and debt cancellation, because what had been seen in the past was that, very often, the fundamental situation of a country was much less important to financial investors than very short-term gains. That had led to unsustainable debt. The political will to drive economies in a certain direction and to give clear incentives for companies and private households to change their behaviours was not being seen, and Governments had to play an extremely important role in that. For the future, the clear establishment of private investment-driven growth was needed, and that did not exist anywhere in the world at the moment. Government programmes were quite successful in stabilizing the economy and even igniting recovery, but that kind of recovery should not be relied on, he said.
Mr. TITELMAN said that developing countries and emerging countries showed large productivity gaps, and that more inclusive policies, to include additional sectors, were necessary. In addition, the involvement of the Government should be expected and welcome, in order to start pushing the development agenda.
In concluding remarks, Mr. FLASSBECK said that, when analysing the current crisis, it was necessary to look at not just international conditions, but the domestic conditions of finance in many countries. Mr. TITELMAN expressed hope that, in the future, the early warnings would be listened to. In addition, he said that the United Nations should be a very important player, because it had legitimacy and also incorporated the wide variety of countries that belonged to the global system.
Participating in the interactive discussion were the representatives of Jamaica, Japan, Canada, Benin, and Zimbabwe. A representative of the European Union also spoke, as did members of civil society and the business sector.
Round Table 3
João Gomes Cravinho, Secretary of State for Foreign Affairs and Cooperation, Portugal, moderated the morning’s third parallel round table, on “the role of financial and technical development cooperation, including innovative sources of development finance, in leveraging the mobilization of domestic and international financial resources for development”. Members of the panel were Princess Máxima of the Netherlands, Secretary-General’s Special Advocate for Inclusive Finance for Development; Philippe Douste-Blazy, Special Adviser to the Secretary-General on Innovative Financing for Development; and Simon Scott, Head, Statistics and Monitoring Division, Organisation for Economic Co-operation and Development.
Introducing the subject, Mr. CRAVINHO said that development financing was being offered amid a more complex aid architecture, which was no longer operating on a North-South axis, but was increasingly being filled by civil society organizations and the private sector working in triangular arrangements, South-South partnerships, public-private partnerships and other formations. In addition, new and innovative sources of financing were being applied alongside traditional arrangements, and were being directed at specific development objectives, particularly health. He said the discussion should focus on ways to increase both the quality and quantity of development financing, and on how to make the flow of aid more predictable and consistent. The international community must focus on pro-poor growth, through policies aimed at reducing inequalities and integrating the poor into the formal economy.
Princess MÁXIMA stressed the importance of giving voice to the “un-banked” and “under-banked”, by providing them with access to an array of financial products that went beyond simply credit. For example, insurance could help people gain access to healthcare; other financial products could help provide access to housing, energy, food, education, and so on. With nearly half the world’s population being un-banked, there was a steep climb before the world could achieve universal financial inclusion. To provide those financial services as envisioned, the international community needed sound and sustainable institutions, not only for individuals, but for small and medium-sized enterprises, as well. Such services could include savings accounts, insurance, payment services, pension plans and remittance facilities.
She remarked that people with lower or irregular incomes required more, not less, active financial management. Money earned by the poor often arrived at the wrong time, could be hard to hold on to, and was difficult to build into something larger. The challenge was to provide services that matched the flexibility and accessibility of financial tools currently being provided to the poor by the informal sector. And, making financial services more inclusive had repercussions for the entire economy, by helping lower income inequality and bringing shadow economies under control. Among the best practices she had come across was a Dutch public-private partnership between FMO, a development bank, and the Government, which created a $400 million Government-financed fund, “Massif”. Active in 50 countries, Massif offered financing to participating financial intermediaries that, in turn, offered savings, cash, credit, guarantees, mortgages, leasing and insurance to millions of people. Massif was unique, in that it took on the kinds of risks that were too high for development banks or commercial banks to take on.
Mr. DOUSTE-BLAZY, who talked about existing innovative financing mechanisms, recalled the environment in which the Millennium Development Goals had been created: trade had been at its zenith; emerging countries were catching up at great speed; and growth was robust in OECD countries. There was a desire at the time to bring fragile countries into the mainstream global economy, so they could take part in global trade and strengthen their social infrastructure in 15 years. Very quickly, however, global imbalances caused an unprecedented economic and financial crisis, rendering those goals hard to achieve. Against that backdrop, innovating financing for development ‑‑ once thought to be too idealistic to work ‑‑ found practical application in 2005 when a handful of countries created a “solidarity contribution” mechanism, through which participating countries earmarked a small portion of the cost of airline tickets to a health fund. With $1.5 million already collected so far, negotiators were able to use the fund as leverage to reduce the price of medicines by half, so that three out of four children today were being treated for HIV.
He said innovative financing needed to be taken further, given that tuberculosis was still one of the world’s biggest killers, malnutrition was still a problem, and child mortality still needed tackling, among other issues. Development also needed its own dedicated source of financing to protect development investments against the ups and downs of global politics and the world economy. The time was right for a financial transaction tax for development, and many players -- the heads of Government of the United Kingdom, France, Germany, various United States economic authorities, Nobel laureates and others ‑‑ were on public record supporting such a tax. The Governments of several countries, including Austria, Belgium, Brazil, Chile, France, Germany, and Japan, among others, had launched a task force to implement the tax, which he said was creating “a lot” of momentum for the tax to be in place by 2010. A Government official from Belgium had stated an intention to place the tax on the European Union agenda once that country assumes the presidency. Moreover, global public opinion was demanding payback from financial speculators for losses that others were now bearing.
Mr. SCOTT described the general trends in development aid, explaining that the main bilateral aid donors were the United States, Germany, United Kingdom, France and Japan. Multilateral donors included the European Union, the World Bank and United Nations programmes, such as the United Nations Development Programme and the World Food Programme. Since 2001, aid as a share of national income had risen, but not fast enough to meet 2010 targets. Commitments made in 2005 would have led to $124 billion in 2010, but the likely outcome was closer to $107 billion, meaning there would be a $17 billion shortfall, of which $13 billion was to Africa. Six Development Assistance Committee members from the European Union were operating at a lower level than the targeted 0.7 per cent commitment, with Greece and Italy at 0.2 per cent. The United States was aiming to double its development aid by 2015, although as a portion of its gross national income it was lower than that of other countries. Japan had promised to double development aid to Africa specifically. If those promises were met, aid would double compared to 2010.
But, judging from past performance, with one third of donor countries not meeting their 2010 target, and due to the large budget deficits they were incurring, he said those targets would likely be hard to meet. Innovative financing would go some way towards boosting resources for development, as could aid from new entrants in the donor community, such as China. It could grow, as well, through the introduction of non-concessional official flows from the World Bank, IMF and other regional development banks at typical market rates, although it would benefit middle income countries more than the poorest. Other means of boosting development aid could come from bonds, private investments and remittances. He noted that there were new demands on aid to consider: crisis-related interventions and Haiti; commitment to increase food aid to the tune of $20 billion over three years; and climate-related aid and other financial flows, thought to amount to $30 billion from 2010-2012 and $100 billion a year by 2020. Developing countries needed clear planning and donors needed to establish clear medium-term spending targets for aid and to meet them with year-by-year increases. He noted that countries that had met their 2005 targets had worked towards meeting their commitments immediately upon making their pledges, while the ones that did not had “just sat around”. Targets needed to be realistic, because if aspirations were too high, they lost their force and credibility.
Joining the discussion, various speakers urged that development aid commitments be met, but also agreed that official aid flows were not sufficient. Some suggested tightening the slack caused by tax evasion, with one speaker noting that for every dollar of aid, $8 dollars “left the country” through tax evasion and money laundering. They said multinational corporations should conduct an ongoing dialogue with civil society to discuss how to improve the quality of existing aid. A representative from civil society noted that conditionalities placed on projects did not necessarily contribute to their effectiveness, but were administrative in nature ‑‑ for example, requiring that services be bought from the donor countries when perfectly good alternatives existed in recipient countries. Another civil society representative commented that no country should have the right to require that their donations be “returned” to their taxpayers in that way.
The idea of a financial transaction tax for development received mixed response, with one speaker saying his Government was likely to find it difficult to support new taxes. A few speakers commented on what they perceived as the negative effect on tourism caused by the air ticket tax brought up by Mr. Douste-Blazy, questioning the wisdom of expanding that tax more widely. Others admitted they needed to learn more about the carbon transaction tax being talked about in relation to climate change, and the idea of a levy on foreign exchange transactions. A representative from civil society, representing a trade association, said his group would certainly call on States to oppose regressive taxes that could decrease wages and increase inequality. However, it would encourage support for a tax for development, and urged all parties to make their views known to the IMF, which was due to present a report on the subject next month.
A few speakers asked to hear the panellists’ opinions on what role the United Nations could play. Mr. Scott said the Monterrey Consensus had helped rally support for development financing. Similarly, United Nations targets, such as reaching the 0.7 per cent target for official development assistance by 2015, had been a “strong” mobilizing force, although he urged that the deadline for that target be reconsidered, especially with 2015 appearing too unrealistic. A representative from the business sector affirmed the usefulness of Monterrey, saying that there were “huge holes” in the development finance world, with currency risk and regulatory risk being major impediments to investment. Having partial risk guarantees in place had been shown to produce four times the number of successful business deals. Investment promotion agencies responsible for creating the right environment needed to shore up their capacity to create such guarantees. In 2002, the Ford Foundation, with the backing of a few Governments, had created a global clearinghouse for development financing, providing tools to local governments and investor networks, and supporting laboratories for peer-to-peer exchanges.
Speakers also spoke of the need for financial regulatory reform as the world’s development financing architecture matured, and a few speakers cautioned against a proliferation of mechanisms whose effectiveness was questionable. Funds directed at climate change were bound to affect the flow of aid for development, they said. Several speakers said they looked forward to participating in an informal meeting on innovating financing -- which the General Assembly had requested the Secretary-General to arrange -- adding that they hoped it could be organized before the Millennium Development Goals Summit in September.
Participants in the discussion today included the representatives of Spain, Republic of Korea, France, Grenada, Brazil, Japan, Netherlands, United States, Nepal, Russian Federation, Belgium, and Cameroon. Officials from civil society, business and trade, and United Nations agencies also spoke.
Informal Interactive Dialogue
The theme of the afternoon’s informal interactive dialogue was “The link between financing for development and achieving the Millennium Development Goals: the road to the 2010 high-level event”.
Panellists were Zia Qureshi, Senior Adviser of the Office of the Chief Economist of the World Bank and Jomo Kwame Sundaram, Assistant Secretary-General for Economic and Social Affairs.
Opening the dialogue, Mr. QURESHI said that the restoration of conditions for strong and sustainable growth would require cooperation across all categories of countries. The acute phase of the crisis seemed to be over, but many challenges remained to secure the recovery and restore solid growth. The outlook for the achievement of the Millennium Development Goals had worsened. Growth needed to be restored to improve that outlook.
All developing countries faced increased deficits and scarcer and more expensive capital availability, he said. Such scarcity could reduce growth in those countries by 0.7 per cent in the next years. Supporting an adequate flow of external financing would help to remediate this situation and would lift incomes in developing countries, as many such countries had refocused their use of external funding towards that purpose.
He said that such financing would also help the recovery of developed countries, because investment in developing countries could generate additional demand and provide opportunities for high-return investments. He, therefore, recommended stepped up financing for development, over a wide range of modalities, as well as continuing reform in developing countries themselves.
In his opening presentation, Mr. Jomo, reviewing the Monterrey Consensus and the Doha Declaration, said that, among other misconceptions, development could foster good governance, rather than the other way around. In addition, he maintained that foreign direct investment usually followed domestic investment, and most direct investment did not lift countries’ economies as a whole unless it was redirected towards that purpose.
He said that it was true that there was no direct positive statistical relationship between aid and development, unless politically motivated aid was not involved. The official development assistance system should, therefore, be reformed to take better account of national ownership and leadership. He said that the time might also have come to revisit the Sovereign Debt Initiative in favour of a more robust debt-management initiative, perhaps including an arbitration instrument.
The world financial system, he said, must become much more supportive of development and much more coherent. A range of monetary issues must also be addressed to assist emerging markets. Other issues that were becoming more important included innovative sources of financing, domestic tax transparency, a financial transactions tax, aid-for-trade and climate change finance issues.
The financial crisis had increased communication between world organizations on all such issues, he said, and in that way had presented an important opportunity. That opportunity must be seized. In the run-up to the September summit, he maintained, the United Nations should focus on enhancing international partnerships.
In the discussion that followed, many speakers emphasized the joint nature of development cooperation to meet the Millennium Development Goals, while agreeing that national ownership of development strategies was crucial. In that light, Yemen’s representative, speaking on behalf of the Group of 77 and China, stressed the importance of removing conditionalities from aid, while the representative of Spain, speaking for the European Union, highlighted the need for good governance.
Other topics that came to the fore were the need for better cooperation between the United Nations and the world financial institutions, the need for quality statistics, the specific problems of Small Island Developing States in the Pacific (introduced by Micronesia’s representative, speaking on behalf of them) and the importance of focusing development aid and other financial flows on achieving the Millennium Development Goals, while also focussing on long-term development.
Policy coherence, debt relief, aid-for-trade, and greater capital flows were seen by many speakers as being critical in all areas of development. Guatemala’s representative asked how the follow-up mechanisms developed in Monterrey could be better used in the interest of meeting the Millennium Development Goals. The representatives of Japan and Brazil spoke of the continuing importance of good governance measures for development, in reaction to Mr. Jomo’s remarks, although Brazil’s representative stressed that the notion had changed from the previous ideal that prioritized a hands-off approach to the business sector on the part of government officials.
During the discussion, representatives of civil society groups stressed the urgency of relieving poverty following the financial crisis and asked that civil society be allowed to participate in the process. A representative of the International Chamber of Commerce highlighted the importance of the private sector in achieving the Millennium Development Goals, supporting the completion of the Doha trade talks, resistance against protectionism and the creation of an enabling environment for business investment.
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