REQUIREMENTS FOR FUNCTIONING MARKET ECONOMY AMONG ISSUES DISCUSSED AT UNCTAD IX

Press Release
TAD/1828

REQUIREMENTS FOR FUNCTIONING MARKET ECONOMY AMONG ISSUES DISCUSSED AT UNCTAD IX

MIDRAND, South Africa, 3 May -- Requirements for and attempts towards a functioning market economy were among the issues discussed by speakers this morning, as the ninth session of the United Nations Conference on Trade and Development (UNCTAD IX) continued its general debate.

Bjorn von Sydow, Minister for Trade of Sweden, stressed that governments had to create a political and legal framework, based on the rule of law and the legal recognition of property rights, transparency and good governance, as a necessary precondition for a functioning market economy. Democracy, respect for human rights, and equality between women and men were inseparable elements in such a domestic policy, he added.

The good functioning of the market depended on enshrining certain ethical principles within policies and within a legal framework, the representative of the Holy See said. Only an ethic of solidarity would produce a fully human form of globalization. The pursuit of economic security and social stability through isolationist policies was an illusion, he stressed, adding that in an interdependent world, economic marginalization and social tension were inevitably linked and knew no boundaries.

The representative of the Slovak Republic, speaking on behalf of the Central European Free Trade Agreement (CEFTA), said the Agreement (among the Czech Republic, Hungary, Poland, Slovak Republic and Slovenia) contained rules dealing with the gradual elimination of duties and other trade barriers, as well as those relating to the adjustment of State monopolies, economic competition, government procurement and intellectual property rights. "We are deeply convinced of the viability of the cooperation under the CEFTA umbrella that will accelerate the sustainable growth of these five central European `economic eagles'", he emphasized.

Also this morning, the Minister for Planning, Economy and Trade of Libya, Abdul-Hafiz Zlitni, stressed that peace and security was essential to achieving development goals. Some developing countries were still exposed to unjust measures and economic sanctions, which were contrary to the concepts of free trade and free movement of capital. He stressed that unilateral measures

taken by some States on the basis of political differences should be addressed diplomatically, jurisdictionally and on the basis of international law.

The representative of Israel said his country had embarked on a new path of cooperation with its Palestinian partners. Its purpose was not only to redefine a formal relationship with the Palestine Liberation Organization (PLO), based on the agreements reached so far in the peace process, but also to forge new and revolutionary ties between their peoples that would break the chain of hatred and prejudice, and put an end to the cycle of violence, he added.

Statements were also made by the Minister for Trade and Industry of Uganda, Richard Kaijuka; and by the representatives of Sudan, Bangladesh, El Salvador, Austria, Pakistan, Mali and Myanmar.

This morning's meeting was followed by the screening of three 10-minute documentaries illustrating the impact of UNCTAD's technical cooperation activities on people's lives. Those documentaries show that underdevelopment is not a vicious circle and that by joining forces, human ingenuity can produce successes.

Part of a series, the documentaries shown today were the following: "The Price of a Diamond" (South Africa), which demonstrates the use of UNCTAD's database for measuring the social and ecological impact of economic alternatives; "March to Modernity" (Sri Lanka), which shows how customs modernization through UNCTAD's ASYCUDA programme (a computerized customs system) boosts trade; and "Lilian: The Pith Helmet Queen" (Zimbabwe), which is an example of the application of UNCTAD's programme for promoting entrepreneurship, EMPRETEC.

Statements

The first speaker this morning, as the ninth session of the Conference (UNCTAD IX) continued its general debate, was RICHARD H. KAIJUKA, Minister for Trade and Industry of Uganda: In spite of qualitative improvements, the economic plight of many African countries has deepened. At the national level, a leadership culture with a vision of development in peace and stability with good governance should be evolved. Governments should embrace policies that create the enabling environment for enterprise and development. They must enhance their competitiveness through the transformation of productive and marketing structures, through vertical and horizontal diversification and through significant advances in technology and related information technology. At the international level, development partners should support the process of structural transformation, promote direct investment in developing economies and provide market access to the products of the least developed countries.

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The UNCTAD should continue to focus its work on the integrated and analytic treatment of policy issues relating to development in the areas of trade, finance, technology and investment. It should also focus on technical cooperation, especially for the least developed countries, aimed at boosting their capacity to exploit trade possibilities and participate effectively in a globalizing world. It should recommend measures that could be taken in favour of developing countries particularly the least developed. Finally, UNCTAD should focus on the dissemination of information on development experiences, especially success stories, and follow-up of the Programme of Action for the Least Developed Countries for the 1990s, and the United Nations New Agenda for the Development of Africa in the 1990s.

BJORN VON SYDOW, Minister for Trade of Sweden: International cooperation will have to move away from the traditional notion of development assistance towards a deepened concept of cooperation for development. The international community should seek ways for the developing countries to diminish their dependency on assistance through further liberalization of international trade, among other measures. The process of world trade liberalization must continue and multilateral rules must be developed and extended within the framework of the World Trade Organization (WTO). "We have now to look into the future and consider how this process of liberalization shall continue in areas of vital importance to developing countries, such as in agriculture and textiles." Above all, governments have to assume their responsibility in creating a political and legal framework, based on the rule of law and the legal recognition of property rights, transparency, and good governance. Democracy, respect for human rights and equality between women and men are inseparable elements in such a domestic policy.

The UNCTAD will have to adjust to the new division of labour between the organizations in the field of trade and development. The WTO and the UNCTAD/WTO International Trade Centre have clear roles when dealing with multilateral trade rules and operational trade promotion activities. A functional division of labour and cooperation on all levels between these organizations and UNCTAD is, however, necessary. The UNCTAD should make full use of the expertise available within other international organizations. Even if UNCTAD has a broad mandate, the work should focus on a few prioritized issues. Emphasis should be on analytical and normative work, and on the exchange of experiences.

DIARMUID MARTIN, Secretary of the Pontifical Council for Justice and Peace of the Holy See: Ethical reflection is not something extraneous to an economic order based on market principles. The good functioning of the market depends on ethical behaviour and on the enshrinement of certain ethical principles within policies and within a legal framework. Only an ethic of solidarity will produce a fully human form of globalization. "We must work towards a deeper reading of `globalization', one which will show that solidarity is a desirable driving principle in the relationship between

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States." Globalization should lead to the realization that there are certain "global public interests" to be fostered by all and which can only be achieved through the collaboration of all. The pursuit of economic security and social stability through isolationist policies is an illusion. In an interdependent world, economic marginalization and social tensions are inevitably linked and know no boundaries.

While stressing the importance of WTO, the Holy See reaffirms the need to give UNCTAD a complementary, but strong mandate to address the causes of the trade handicaps of the poorest countries. The task of UNCTAD is not simply that of filling the gaps which other organizations are not in a position to tackle.

The UNCTAD retains its own distinctive role. The vitality of the WTO and other multilateral economic institutions will benefit from the existence of an external forum, such as UNCTAD, able to exercise the function of constructive analysis and technical assistance from a development perspective. The UNCTAD must take into account the actors other than the governments who are today involved in the process of international economic life: the private sector, non-governmental institutions, private investors of varying size, workers organizations and the academic world. It must pay special attention to the essential contribution of women to development. Commitment to UNCTAD's mission and concerted effort to reform the institution must go hand in hand. "Working together, with God's help, we can achieve both aims."

JOZEF SESTAK, State Secretary of the Ministry of Foreign Affairs of the Slovak Republic, speaking on behalf of the Central European Free Trade Agreement (CEFTA): In 1992, CEFTA was concluded among the Czech Republic, Hungary, Poland and Slovak Republic to enhance the process of liberalization and globalization and to create favourable conditions for the intensification of trade among existing and newly established enterprises. Slovenia joined the grouping this year. The CEFTA Agreement contains not only traditional provisions dealing with gradual elimination of duties and other trade barriers but also additional rules, including those relating to adjustment of State monopolies, economic competition, government procurement and intellectual property rights.

"We are deeply convinced of the viability of the cooperation under the CEFTA umbrella that will accelerate the sustainable growth of these five central European `economic eagles'." Improvements in the economic performance of the CEFTA countries may provide new trade possibilities for developing countries, contribute to greater involvement of CEFTA entrepreneurs in the developing world, and lead to the setting up of joint ventures between firms in the region and those of developing countries.

MUSTAFA A. SOURIJ, Under-Secretary, Ministry of External Trade of Sudan: Donor countries are urged to increase their official development assistance

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(ODA). Concrete measures are required to alleviate the serious debt burden of African countries. Appropriate and sustained financial and technical assistance by the international community is crucial to the success of the efforts of these countries to increase their export earnings through increased production of tradable goods and services. An intensified policy commitment by the international community will be required to help African least developed countries to reverse the decline in economic and social conditions, promote sustainable development and avoid becoming further marginalized in the international economy.

An effective follow-up of the outcome of the Mid-Term Global Review as well as the conclusions and recommendations relating to least developed countries adopted by major global conferences should be ensured. Special efforts, in keeping with Agenda 21 and the Rio Declaration of the United Nations Conference on Environment and Development, should be made to include positive measures in multilateral environmental agreements. Positive measures should include incentives which encourage trade and use of environmentally friendly alternatives, facilitate mechanisms relating to the transfer of technology, and the relaxation of intellectual property rights. Measures at the national, and international levels are needed to enhance the competitiveness of domestic enterprises at the national, regional and interregional levels. The UNCTAD is the principle United Nations forum with a clear mandate for the integrated treatment of economic issues and the promotion of international economic relations conducive to development.

REAZ RAHMAN (Bangladesh): The UNCTAD remains the only body in the United nations system that deals with the totality of development issues. In a changing international economic environment the importance of UNCTAD could not be overemphasized. The need for a more conducive economic environment remains essential for the integration of poorer countries into the international economic system. The Conference offers a unique opportunity to address development in an integrated manner. Bangladesh has implemented economic reforms, which included measures concerning environmental protection. However, political unrest in the country has slowed down economic activities.

Bangladesh has incurred a sizeable external debt equal to about 63 per cent of its gross domestic product (GDP). Debt servicing was more than 22 per cent of its export earnings in 1985/1986 and has since declined to 14 per cent in 1994/1995. Government has assigned high priority to export development within the broad framework of a market economy. Despite a good measure of economic stability and continuing efforts at creating an enabling environment, the rate of investment and the response of the private sector are yet to reach a satisfactory level. Apart from ODA flows, Bangladesh needs to attract foreign investment both for employment creation and technology transfer without which rapid industrialization and sustained economic growth cannot be attained. Although countries have the primary responsibility for their development, we need an international community that provides an enabling

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external environment for growth and development, particularly for those who will not be able to survive and progress if abandoned to their limited resources.

ABDUL-HAFIZ ZLITNI, Minister for Planning, Economy and Trade of Libya: Peace and security is essential to achieving development goals. Some developing countries are still exposed to unjust measures and economic sanctions. Imposing such measures is contrary to the concept of free trade and free movement of capital and investment for development. Unilateral measures taken by some States on the basis of political differences should be addressed diplomatically, jurisdictionally and on the basis of international law. The imposition of sanctions will create isolated regions and areas on the world map; the negative impact will spread to encompass other neighbouring areas.

In the case of Libya, economic, commercial and financial sanctions have not only exposed the Libyan economy to serious damage but has also damaged economic interests of six neighbouring countries. Furthermore, these sanctions have deprived many developing countries, especially in Africa, of the contributions and grants that Libya could have provided. These methods are not limited to Libya only. Despite Libya's efforts to solve the problem that was the cause of the sanctions against it, the countries responsible for the sanctions have refused to solve the dispute by peaceful means. By adopting these policies, they are advocating dangerous principles and policies in contradiction of international conventions.

RENE ANTONIO LEON, Vice-Minister for the Economy of El Salvador, speaking on behalf of Central American ministers in charge of Central American integration: The requirements for change in the Central American economy are affected by the new situation of peace and democracy in the region. If the region is to progress in the new world economy it has to develop a culture of cooperation among all sectors of society, including the consolidation of a market economy model. The vision of the future in the region include peace, rule of law and the creation of optimal conditions for the creative capacity of Central Americans to prevail.

The protection of the environment is an essential component of sustainable development programmes in Central America. The UNCTAD in the past played a predominant role in the region which has enable it to participate in the negotiations of the Uruguay Round. With UNCTAD's technical support, a draft agreement for trade and services within Central America has been drafted. The UNCTAD will have to continue to play an essential role to build the future of Central American countries. The region requires committed assistance from the organization. Recently a Guatemalan minister said that it is impossible to learn to swim by taking a correspondence course. It illustrates that for UNCTAD to fully satisfy its developing member countries, "it must jump into the water with us".

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HARALD KREID (Austria): The growing demand for manufactured goods produced in developing countries have caused the loss of certain jobs in advanced countries, but foreign trade is not a major cause of unemployment in the North and protectionism is no answer to the problem. On the other hand, the poor trading record of least developed countries is not so much the result of inadequate market access, nor of competitions from more advanced producers, but the lack of supply capabilities. Before they can aspire to an export strategy based on diversification, domestic infrastructure and domestic institutions have to be strengthened.

The international community needs to concentrate its efforts on this group of countries. Austria is doing just this. Seven of the eight priority countries of Austrian development cooperation are least developed countries. Austria advocates a removal of the debt overhang -- particularly multilateral debt. It is unacceptable that a number of countries remain cut off from the mainstream of development. Measures to redress this situation required the foremost attention of the international community. The UNCTAD must concentrate existing resources on areas where it enjoys comparative advantage, and avoid duplication with other organizations. The Conference is about to assign to UNCTAD tasks which are already performed by the United Nations Industrial Development Organization (UNIDO). Austria supports reform, but there are limits to reform. It is necessary to give an organization adequate time to adjust its activities to meet mandated reforms.

SALMAN FARUQUI, Commerce Secretary of Pakistan: The Pakistan of today is a prime candidate for foreign investment. Necessary legislation for the protection of foreign investment has already been enacted. Iron-clad guarantees against nationalization are in place. There are no restrictions on the repatriation of resource capital and profits out of Pakistan. Ceilings on the share of foreign equity have been removed. Today, foreign investors can own 100 per cent equity and have total management control of the enterprises that they set up in Pakistan. But, for these initiatives to succeed, it is imperative that a favourable external environment is provided. Conditions required include transfer of technologies related to growth industries.

There is a need to address the issue of access to the markets of the industrial countries. The comparative advantage of developing countries should be accepted. The developed countries should implement the Agreement on Textiles and Clothing in letter and spirit. They should not defer the integration of "sensitive" items to the last phase for it will limit their ability to implement the Agreement on time and cause apprehension among developing countries. Also, developed countries should not use trade remedies, such as safeguards, anti-dumping and countervailing measures, in a protectionist manner and should refrain from resorting to unilateral and extraterritorial measures. Issues like environment and labour standards should not be used to overload the trade agenda before any multilateral agreement is reached on their trade linkages. Conditionalities, either

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positive or negative, should not be imposed to restrict the exports of developing countries to the developed countries' markets.

The UNCTAD must remain the focal point within the United Nations to deal with the interrelated issues of trade, finance, investment, services, technology, sustainable development, commodities and the environment in an integrated manner and from a developmental perspective. We recognize the need for reform to make UNCTAD more efficient and responsive to the needs of the developing countries, and support the efforts of the new Secretary-General of UNCTAD in this regard. However, the process of reform should not be at the cost of elimination or reduction in the substantive work programmes that are of interest to developing countries. YOSEF LAMDAN (Israel): As a direct outcome of the Middle East peace process, a basic framework for regional integration was created in January 1992, the Regional Economic Development Working Group. Seen as the nucleus of an "organisation for economic cooperation and development" for the Middle East, it involves not only the core parties to the multilateral peace process but also regional and non-regional actors. The Working Group is to help build the economic foundations for a new regional integration by promoting regional economic cooperation. To achieve this objective, it focuses on the need to pool common resources and expertise and to tackle common problems jointly. In Rabat, in June 1994, the core parties decided "to encourage the free flow of people, goods, services, capital and information within the region". Then, at the Amman Summit in October 1995, it was decided that of the Working Group would become a permanent regional economic institution to be based in Amman.

The time is ripe for a novel economic and conceptual approach in the Middle East which will encourage governments to show their strength by promoting social progress and individual excellence and well-being unfettered by ethnic, religious, economic or political barriers and restrictions. They will thus contribute not only to their own regional integration but also to world economic development and progress. This may, indeed, be an innovative concept of regionalization and be pertinent to many developing countries, members of UNCTAD in other parts of the globe. The profound regional changes have given new impetus and direction to an activity which has been Israel's trademark from its earliest days: international technical cooperation, an important UNCTAD function and a vital necessity for sustainable development in all areas. Israel has also embarked on a new path of cooperation with its Palestinian partners. Our purpose was not only to redefine a formal relationship with the Palestine Liberation Organization (PLO), based on the agreements reached so far in the peace process, but also "to forge new and revolutionary ties between our peoples that would break the chain of hatred and prejudice, and put an end to the cycle of violence". Technical cooperation programmes and projects were offered to the Palestinian Authority either directly or within the framework of the different multinational working groups established by the parties to the peace process. Particular efforts have recently been made by Israel, in conjunction with the major donor countries, to increase assistance to the Palestinian economy, fiscally and financially, after the latest spate of terrorist violence, which threatened to undermine the delicate relationship that had been so carefully nurtured.

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ALHASSANE AG HAMED MOUSSA, National Director for Economic Affairs of Mali: The imbalance in the sharing of opportunities created by the new world economy should not be solely a concern for those countries that are liable to be excluded from its benefits. International agencies and especially UNCTAD had a major role to play in this area. Mali's economy has undergone major reforms. The pricing of goods and services are totally free. Foreign trade has been liberalized. All export taxes have been abolished and flexible export procedures have been drawn up for the main exports. A single office has been established for industrial enterprises. The investment code provides an array of tax advantages. Significant efforts have been made to simplify domestic tax procedures. Despite its reforms and its potential, Mali's economic situation continues to be fragile.

Developing countries have the prime responsibility for their economic development, but a strengthened solidarity between the international community and the developing countries is necessary for the lasting well-being of mankind. The UNCTAD must work to bring about a fair distribution of the opportunities of globalized trade. It must help countries to promote human resources, modernize their means of production, develop their technological capacities, mobilize adequate financial resources and create efficient information systems through the establishment of trade points. Finally, UNCTAD must help the developing countries to adapt their economic and commercial policies to the international economic system.

U AYE (Myanmar): In view of the limited financial resources available, UNCTAD should focus its activities on selected issues of central importance to developing countries. As it is the focal point for the monitoring follow up and review of the implementation of the Programme of Action for the Least Developed Countries, it should be provided the means to continue to give high priority to issues concerning those countries. In addition to financial and technical assistance, appropriate measures should be available for those countries which are adversely affected by the implementation of the Uruguay Round Agreements, to enable them to overcome unfavourable consequences.

Myanmar also attaches importance to the encouragement of private investment and enterprise development, the main component of Myanmar's foreign direct investment policy. It would welcome UNCTAD's technical assistance for the possible formulation of a national enterprise development strategy that will be in consonance with its own development plans. It is hoped that the Conference will discuss the principles that should underpin enterprise development strategies, and adopt concrete measures and programmes of action essential for enterprise development in the developing countries. The introduction of political and economic reforms in Myanmar and the transformation to a market-oriented economy has created conditions for more dynamic cooperation with other countries. Myanmar attaches importance to economic cooperation among developing countries. The role of UNCTAD in this area should be strengthened, and improved methods and instruments of cooperation among members of the international community should be explored at this Conference. Myanmar supports the call for further vitalization of the generalized system of preferences (GSP) and expanding its reach.

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