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Financing for development
4 November 1999
IMPORTANCE OF PREPATORY PROCESS, PARTICIPATION BY ALL PLAYERS, STRESSED AS COMMITTEE CONSIDERS 2001 HIGH-LEVEL EVENT
1 November 1999
India Urges Examination and Review Of Institutional, Systemic Framework of Global Market Operations
The real challenge in attempting to address financing for development was not to stop the inexorable march of global markets but to examine and review the institutional and systemic frameworks within which they functioned, the representative of India told the Second Committee (Economic and Financial) this morning as it began its survey of high-level international intergovernmental consideration of financing for development.
She said that mechanisms must be devised whereby all governments, particularly in the vulnerable developing countries, participated in shaping approaches, rules, institutions and understanding at all levels, whether to address the international financial architecture in a manner that would better manage and possibly even prevent such financial crises, or to address other aspects pertaining to the larger question of resources. Another crucial raison d'Ítre of the exercise was to address the urgent need for coherence between the international trade, finance and monetary systems, she said. It was increasingly apparent that in a globalized economy, a rule-based multilateral trading system could no longer coexist with features tending towards anarchy and instability in the international financial system.
The representative of Guyana, speaking on behalf of the "Group of 77" developing countries and China, said that while a consideration of ways and means for financing development represented an opportunity to build a new global partnership in support of development, a number of questions needed to be answered. What would be the precise nature of the preparatory process? How would it be structured? Who would participate in the preparatory process? What would be the modalities for the participation of all actors? What would be the scope, format, and level of intergovernmental participation of the final event itself?
Mexico's representative, speaking on behalf of the Rio Group of Latin American countries, said that quality and strength of the preparatory process were just as important as the final event itself. There must be a wide-ranging consultation process, which included other international organizations, regional development banks, the Bretton Woods institutions and the private sector. The regional dimension of efforts was particularly relevant, and the holding of high- level regional meetings in preparation for the event would be useful.
Speaking on behalf of the European Union and associated States, the representative of Finland said that in view of the changing pattern of partnerships, it was important to pursue innovative sources of financing and innovative mechanisms to enhance the private sector's involvement in sustainable development processes. The Bretton Woods institutions, notably the World Bank, were needed to work with the United Nations and governments on that matter from early on. Not only because the World Bank dealt directly with both development and financing, but also because it worked hand in hand in a policy dialogue framework with governments, which in turn worked with the various national and international aspects of financing for development.
The Libyan representative said that financing for development assumed particular significance in the current context of the inadequacy and extreme volatility of external financial flows to developing countries. The major challenge facing international financial restructuring was how to make the system adequately responsive to the requirements of development. The event should not be an end in itself, he said, but should launch a process of high-level dialogue within the United Nations on issues relating to financing for development.
The report of the Ad Hoc Open-ended Working Group of the General Assembly on Financing for Development was introduced by the representative of India, in his capacity as Co-chairman of the Group. In addition, the Under-Secretary-General for Economic and Social Affairs, Nitin Desai, made introductory remarks.
Statements were also made by the representatives of Ghana, United States, Russian Federation, Guatemala, Peru, Pakistan, Belarus, Republic of Korea and Egypt. The observer for Switzerland and the representative of the International Labour Organization (ILO) also spoke.
The Committee will meet again at 3 p.m. today to continue its discussion of high-level international intergovernmental consideration of financing for development.
Committee Work Programme
The Second Committee (Economical and Financial) met today to begin its consideration of high-level international intergovernmental consideration of financing for development.
The Committee had before it a report from the Ad Hoc Open-ended Working Group of the General Assembly on financing for development (document A/54/28), containing recommendations on the form, scope and agenda of a high-level international intergovernmental forum on financing for development, to be convened not later than 2001..
The Working Group held four sessions and eight informal meetings. It had before it a note by the Secretary-General on the high-level international intergovernmental consideration of financing for development: recurring themes and key elements (the Index Report) (document A/53/470) and a report of the Secretary-General on the high-level international intergovernmental consideration of financing for development: work of the United Nations system (document A/53/479). The Second Committee hosted two panels which both focused on the key elements.
The working Group recommends that the scope of the event should be as follows: a. domestic financial resources; b. international resources (trade, foreign direct investments and other private flows); c. international financial cooperation for development, including official development assistance (ODA) and debt relief; d. enhancing coherence and consistency of the international monetary, financial and trading systems in support of development and avoidance of international financial crisis and excessive financial volatility, and enhancing effective participation and integration of developing countries and countries with economies in transition in the global economic system, including through capacity- building; e. special needs of Africa, least developed countries, small island developing States (SIDS), landlocked developing countries and other developing countries with special difficulties in attracting financing for development.
The Working Group undertook an in-depth examination of inputs concerning financing for development, with a view to formulating recommendations on the agenda of the prospective high-level international event, which are listed in the annex to the report. The report states that an inclusive and continuing preparatory process will increase awareness and build international support and participation while it deepens the substance of the final event. There was consensus that the preparatory process and the final event should be a high-level intergovernmental meeting of political decision makers, at least at the ministerial level, and that the final event needs to have a comprehensive agenda that would attract the attention of diverse national departments and ministries.
Still on the form of the planned event, the Working Group recommends that both the final event and the preparatory process should involve participation by all relevant stakeholders, and should involve as active partners the International Monetary Fund (IMF) and the World Bank, as well as participation by all other relevant parts of the United Nations system. The final event could be a self- standing event linked with the General Assembly, including a high-level segment of three to four days' duration, and the high-level segment itself should be preceded by an effective and participatory preparatory stage. Both the final event and preparatory process should have a high level of public and media visibility and public awareness.
To establish a substantive preparatory process, it should be open to all States Members of the United Nations, members of specialized agencies, participation of observers and so forth, and should report to the General Assembly at its fifty-fifth session on the progress of work. The Ad Hoc Open-ended Working Group adopted a draft decision to transmit its report, including the recommendations contained therein, to the General Assembly, at its fifty-fourth session, for its consideration and appropriate action.
The annex lists ideas, issues and experiences that provide the basis for further discussion on an agenda for the event, grouped around eight items:
5. financing for development and trade;
6. innovative sources of financing;
7. governance of the international monetary, financial and trade systems;
8. interrelationship between major elements and other special topics.
KAMALESH SHARMA (India) introduced the report of the Working Group on financing for development, which he co-chaired with the Permanent Representative of Austria. The Working Group was the culmination of more than two decades of efforts by the international community to address the issue of financing for development. The Group's mandate was to undertake an in-depth examination of inputs and to make recommendations on the scope, agenda and format of the final event. The bureau of the Second Committee had held two panel discussions in support of the Group's work. The Group indicated that the event for the year 2001 would address national, international and systemic issues relating to globalization and interdependence. It would also address development through the perspective of finance. With regard to the scope of the event, the Group suggested the consideration of issues ranging from domestic financial resources to trade to international financial cooperation for development.
With regard to the event's agenda, he said that the annex of the report provided the basis for further discussion. To be successful, the momentum building at the United Nations would have to be nurtured and include all partners. He also elaborated on the characteristics of the final event, such as having a comprehensive agenda and involving the participation of all relevant stockholders. The Group had recommended that it would be desirable to establish a preparatory process to forge ahead with the convening of the final event. Financing for development was an issue that could only move forward based on collective commitment. In the coming weeks, it would be necessary to fashion a preparatory process that would carry forward the work done so far.
NITIN DESAI, Under-Secretary-General for Economic and Social Affairs, said that what was sought was a high level event and a preparatory process leading up to that event, which had the capacity to draw in national capacities to address the issue of financing for development. Much of the outcome of the processes undertaken in the 1990s had depended on what had to be done at the national level. Therefore, it was necessary to include the players at that level. Secondly, another characteristic of the processes of the 1990s had been a focus, not only on securing agreement between Governments, but also to on engaging those elements in civil society that had a significant amount to contribute to the issue. That aspect contributed greatly to the credibility of the outcome of the processes. Thirdly, all experience showed that for a final event to be successful, a constructive preparatory process was crucial.
S.R.INSANALLY (Guyana), speaking on behalf of the Group of 77 developing countries and China, said that in the absence of international economic cooperation for development, the much-vaunted promise of globalization was likely to become no more than a mirage for the vast majority of countries. A consideration of ways and means for financing development represented an opportunity to build a new global partnership in support of development. The Group of 77 and China were satisfied that the Ad-Hoc Working Group had provided a useful blueprint, and were ready to endorse the recommendations of the form, scope and agenda, as contained in the Working Group's report.
A number of questions needed an answer, however. What would be the precise nature of the preparatory process? How would it be structured? Who would participate in the preparatory process? What would be the modalities for the participation of all actors? What would be the form, format, the level of intergovernmental participation of the final event itself? The Assembly should take steps to bring the process on financing to the attention of the various institutions within the United Nations system, so that they might begin to seriously consider their own involvement.
He said that it would be important to give more focused attention to the practical implications and modalities of the participation of non-governmental stakeholders. In that regard, the Committee might benefit from briefings from the Non-governmental Organization Liaison Office and possibly from the organizers of the World Economic Forum in Davos. The Secretary-General should be requested to consult with them and to make proposals for the meaningful participation of those who could make a contribution to the process.
MARJATTA RASI (Finland), spoke on behalf of the European Union, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Cyprus and Malta. She said that for the 2001 event to bring about real value added to the global understanding of the complex issues related to financing for development, and for an opportunity to bring about concrete results, a shared view of the priorities with other stakeholders would be of crucial importance. The final event should look at a broad set of relevant questions related to the issue, as expressed in international development targets emanating from United Nations conferences and finding expression in the development strategies, plans and programmes of each country. The selection of priorities of the process should take into account the following: where greater understanding of the complex issues related to the issue seemed to be achievable; where substantial results might be achieved which either led to or facilitated concrete implementation; and where the search for effective and efficient solutions could lead to maximizing the impact of given measures or minimizing the costs for desired impact.
In view of the changing pattern of partnerships, the European Union found it important to pursue innovative sources of financing and innovative mechanisms to enhance the private sector's involvement in sustainable development processes, she said. The Bretton Woods institutions, notably the World Bank, were needed to work with the United Nations and Governments on that matter from early on. Not only because the World Bank dealt directly with both development and financing, but also because it worked hand in hand in a policy dialogue framework with Governments which in turn worked with the various national and international aspects of financing for development. The World Bank should bring in their views and strengthen their commitment to the success of the process from the earliest possible stage, from now until 2001, and beyond.
With regard to the final event itself and its preparatory process, she said the that the Union was convinced that a truly extensive partnership would contribute considerably to the success of the process. Therefore, participants should include a wide range of international organizations dealing with different aspects of the financing-for-development themes.
KWABENA OSEI-DANQUAH (Ghana) said that the event should be comprehensive, and should not be a repeat of processes which had already taken place in other forms. The interest must lie in the inter-linkages between finance, monetary and trade policy-making, and their impact on development. Above all, it must lie in the vacuum of responsibility for ensuring complementarily, coordination and an integrated and comprehensive approach to global governance.
He supported a flexible approach with regards to the preparatory process, to ensure that all decisions reached on the way towards holding the event had the support of the Bretton Woods Institutions in particular, and that those decisions enable the outcome to be comprehensive and capable of implementation. He wished to commend the proposal, as subsequently amended to include the IMF as a modality for the facilitation of the further involvement of the Bretton Woods institutions in the lead-up to the event on financing for development. He recommended, however, that United Nations Conference on Trade and Development (UNCTAD) participate in the Task Force as part of the United Nations involvement.
MICHAEL CALLAGHER (United States), said that his Government had taken a step-by-step approach to the Financing for Development process; that the next step should be agreement on a procedural resolution laying out many of the concrete actions in order to move the process forward. Apart from the Bretton Woods institutions, there was a need to reach out to other international and regional organizations engaged in financing for development. It was essential to include the regional development banks.
A way had to be found to bring in the private sector, he said, because the private sector provided the greatest amount of funding internationally for economic growth. The question whether to continue with a co-chair system in the Ad Hoc Working Group, using a traditional bureau, or whether to move to another framework altogether, should be considered. Also, it would be useful to establish some type of consultative group -- whether a joint task force as referenced in the recent Economic and Social Council decision, or a steering group, or some other form.
NIKOLAI V. TCHOULKOV (Russian Federation) said that he noted with satisfaction the work of the Open Ended Working Group on financing for development. The Group's report was evidence that it was fully implementing its prescribed mandate. With regard to the preparatory process, he expected the participation of a large number of international organizations, the Bretton Woods institutions, regional development banks, as well as Member States of the United Nations. In order to make the process simpler and more dynamic, it could be divided into two stages. During the first stage, the agenda for the event could be formulated, based on the proposals made by the Working Group, with the participation of other international organizations. In the second stage, the issue of the format could be resolved, based on the agenda and participation of representatives of Member States.
MAURICIO ESCANERO (Mexico), speaking on behalf of the Rio Group of Latin American countries, said that the consideration of macroeconomic policy issues by the Committee had been of particular importance to the Working Group. The economies of the countries of the Rio Group had been severely affected by financial volatility and international financial crises, which had caused a drop in exports and created current account deficits. Given that scenario, the Group reiterated that the United Nations remained the ideal forum for discussion of global economic issues. The recent financial crises should serve to encourage the United Nations to examine solutions to international economic and financial crises.
The work done by the Working Group had demonstrated the urgent need to give further and more in-depth consideration to the subject, he said. As a next step, it was vital to begin a substantive preparatory process leading to the international meeting on financing for development, in which Member States would be participating at the very highest level. Topics for discussion at the event included the design of a new financial structure and consideration of new and innovative sources of development finance. The quality and strength of the preparatory process was just as important as the final event itself. There must be a wide-ranging consultation process which included other international organizations, regional development banks, the Bretton Woods institutions and the private sector.
The regional dimension of efforts was particularly relevant, and the holding of high-level regional meetings in preparation for the event would be useful. In Mexico last September, the Rio Group, with the support of the Economic Commission for Latin America and the Caribbean (ECLAC), held a regional meeting for Latin America and the Caribbean on financing for development. That meeting determined that it was urgent and necessary to form a new international order, and that United Nations must play a key role in development.
GERT ROSENTHAL (Guatemala) said that the report did not fully capture the richness and extent of the debate of the Ad Hoc Working Group. Headway had been made in establishing the scope of the event. The second result, barely hinted at, was that delegates were discovering the initiative's great potential for exercising a real impact on development. There was a need to clarify a unifying theme for the event so as to give it a sound framework. Mobilization of savings was one of the main requirements to be met, if sustainable growth was to be established.
He said that in all discussion of financing for development, the emphasis should be squarely on development. What was essential, however, was the need to seek broad participation in that process by institutions that participated in financing, in particular the Bretton Woods institutions. That participation should still be qualified. Instead of the word "event", he had a preference for an international conference which would bring together high officials from foreign ministries, finance and economic ministries and organs for international cooperation. A preparatory committee should be established, possibly with two co- chairs.
FRANCISCO TUDELA (Peru) said that development must occur within a system of stability and predictability. States must take appropriate domestic measures to avoid crises, and to ensure that the Bretton Woods institutions could take the relevant measures for restructuring that would allow them to act in a precise manner in such cases. Peru relied on the United Nations, as the international agency with the power to forge a consensus and merge the ideas and lines of action to be pursued on the subject of development. Financing for development must be approached in accordance with the commitments assumed by the international community at the major international summits and conferences. The document delivered by the Working Group had an interesting background, since it dealt with national and international problems related to financing for development within the context of globalization and interdependence.
Nevertheless, in order to place greater emphasis on the subject of financing for development, focus should be directed at five basic pillars. First, international resources that included direct foreign investment, trade and other private flows. Second, internal financing resources. Third international financial cooperation for development and debt-alleviation measures. Fourth, problems related to the monetary, financial and commercial systems and the role of the IMF, the World Bank and the World Trade Organization (WTO). Finally, specific needs and topics of the countries, under specific items and programmes in which those countries could count on a solid political commitment level in development areas. With regard to the format, the event could be a high-level intergovernmental meeting to deal with all topics, working in a coordinated manner with the World Bank, the IMF and the WTO.
ALI S. AL-AUJALI (Libya) said that financing for development assumed particular significance in the current context of the inadequacy and extreme volatility of external financial flows to developing countries. That situation in turn was seriously affecting the efforts of developing countries to accelerate development and achieve integration into the globalized economies. The major challenge facing international financial restructuring was how to make the system adequately responsive to the requirements of development.
The event should not be an end in itself, he said, but should launch a process of high-level dialogue within the United Nations on issues relating to financing for development. The agenda a balanced one, with development dimensions prominently included. In the arrangement for the preparatory process, the primacy of the United Nations Secretariat should be ensured, especially the entities dealing with ODA, external debt, investment and trade, including in particular UNCTAD and the United Nations Regional Economic Commissions.
NANDHINI IYER KRISHNA (India) said that the real challenge in attempting to address financing for development was not to stop the inexorable march of global markets but to examine and review the institutional and systemic frameworks within which they functioned. Mechanisms needed to be devised whereby all Governments, particularly in the vulnerable developing countries, participated in shaping approaches, rules, institutions and understanding at all levels, whether to address the international financial architecture in a manner that would better manage and possibly even prevent such financial crises, or to address other aspects pertaining to the larger question of resources.
Another crucial raison d'etre of the exercise was to address the urgent need for coherence between the international trade, finance and monetary systems, she said. The exercise on finance for development took place against the backdrop of a thorough ongoing review of the multilateral trade frameworks, particularly the Uruguay Round Agreements. In an era when capital markets had been growing exponentially, it was becoming more and more difficult to sustain distinction between trade in goods and services and capital markets. It was increasingly apparent that in a globalized economy, a rule-based multilateral trading system could no longer co-exist with features tending towards anarchy and instability in the international financial system. It was increasingly clear that far more coordination and coherence were necessary between the financial and trading systems. A preparatory process needed to be fashioned that would rise to the challenge facing the United Nations. ULADZIMIR GERUS (Belarus) noted with regret the lack of a clear position in the format for the high-level event. The Member States still had before them a wide choice of formats. During the negotiation process it was important to ensure the highest level participation, including participation by other organizations, such as non-governmental organizations (NGOs) and the Bretton Woods institutions. Considerable work still had to be carried out by the Ad-Hoc Working Group on the framework and the agenda.
He noted that the agenda addressed a broad range of topics. It should include mobilizing internal resources for development, achieving predictability in the area of finance, and studying the problems of economies in transition. Not all the final documents from the conferences of the 1990s had been noted for their clarity. The coming event was too important to let that happen again.
NAVID HANIF (Pakistan) said that his country agreed with the view that development without financing was inconceivable. A substantive preparatory process for the high-level intergovernmental event should be launched next year, and all relevant stakeholders should be involved in that process. With regard to the question of format, the final event should be a high-level intergovernmental event convened by the United Nations without any co-sponsors. He strongly recommended that the elements suggested for the agenda in the report of the Working Group be adopted as the basic elements of the agenda for the event. He stressed how crucial it was to have a process that was transparent. The modalities for the preparatory process and the success of the event itself would be defined by the objectives set now. The outcome of the event itself should see the launching of a process that released resources for development from all sources and fulfilled all development targets agreed to in the major United Nations conferences of the 1990s. In an age of globalization and interdependence, the principle of equity was more necessary than ever before.
SUH DAE-WON (Republic of Korea) said that the focus of discussion for the event had to be narrowed, while making sure to touch upon broader and cross- cutting issues in a holistic manner. In order to garner political momentum and foster partnership, it was also essential to enlist the participation of decision- makers and relevant stakeholders at the national and international levels, both at the event itself and during the preparatory process. Cooperation with organizations like the WTO and the Bretton Woods institutions needed to be further strengthened.
He said that Information and Communication Technologies (ICTs) had been the driving force behind liberalization and globalization, and offered a vast array of possibilities. As a result, the discussions should address ways to assist developing countries in generating and applying ICTs in support of their development objectives. The importance of a strong partnership between North and South, the public and the private sector, and among States, corporations, international institutions and individuals could not be overemphasized.
FRANKLYN LISK, Director and representative to the United Nations of the International Labour Organization (ILO), said the ILO was committed to participating in the event and the participatory process, since its core mandate concerned both the social dimension and the employment implication of financing for development. The most pressing issue impinging on financing for development was undoubtedly the reform of the international financial system. The increasing frequency and intensity of financial crises had exposed the fragility of the existing system. Countries which had undergone rapid financial liberalization had been the most vulnerable to financial crises. Those crises had resulted in substantial economic contractions and huge social costs, which had constituted a severe setback to development.
From the standpoint of employment and social concerns, he said it was extremely important to find ways of resolving financial crises without having to go through severe economic contractions and a consequent sharp rise in unemployment and poverty. That called for urgent progress on reform of the financial systems. There was still a divergence of views on specific measures required and on their potential effects. Reform at the international level would need to be complemented by changes in domestic policy, aimed at reducing vulnerability to crisis. Developing countries must establish and sustain sound, transparent and well-regulated financial systems, including mechanisms for monitoring and controlling short-term capital flows. Further, the financial system must be complemented by a strong social dimension, as a means of strengthening social protection against crises.
AMANY M. FAHMY (Egypt) said that the issue of financing for development was one of the most important items on the agenda of the Second Committee. It was closely linked with all the Committee's activities. The topic should therefore receive due and serious attention during the preparation of the high-level event. Developmental thinking within the United Nations organizations was geared towards coordinationg efforts to push forward sustainable development.
However, in all considerations two main factors had been neglected, she said. Those factors were: the availability of financing and the structural imbalances in the working mechanisms of the world economy. It was to be hoped that those two issues would get priority. Confining the agenda to implementation of the outcomes of conferences held during the 1990s was an oversimplification of matters, and an attempt to evade the core problems. Without the participation of developing countries, no results could be achieved. She stressed the pivotal role of the United Nations as the foundation of the international system. Its mechanisms were characterized by transparency and democracy.
OLIVIER CHAVE, observer for Switzerland, said that the international community had passed through a decade that witnessed a significant drop in the total volume of ODA. Switzerland supported the organizing of a high-level intergovernmental event for the year 2001 to look into the various
aspects of financing for development. It was essential that the programme of work for the event be outlined in an appropriate manner. The event must address direct financing for development in a broad context, and include issues such as the management of public affairs and social protection. It should succeed in drawing up recommendations for multilateral institutions, bilateral institutions and all stakeholders in development. Switzerland saw the meeting as an event of high public visibility for which it was vital to mobilize public opinion, especially in the developed countries. It was
essential that the event as well as its preparatory process involve all important partners in the issue, including Governments, relevant bodies of the
United Nations system, the Bretton Woods institutions, regional development banks and the WTO. It was equally essential that the meeting serve to pinpoint viable solutions. The organization of the event could commence as early as next year, and his country was ready to cooperate in a spirit of openness and dialogue.