STRUCTURAL ADJUSTMENT IS DEAD, SUPPORTIVE ENVIRONMENT FOR FOREIGN INVESTMENT IS ALIVE AND WELL, WORLD BANK REPRESENTATIVE TELLS ECONOMIC AND SOCIAL COUNCIL

28 June 1996

Press Release
ECOSOC/5650

STRUCTURAL ADJUSTMENT IS DEAD, SUPPORTIVE ENVIRONMENT FOR FOREIGN INVESTMENT IS ALIVE AND WELL, WORLD BANK REPRESENTATIVE TELLS ECONOMIC AND SOCIAL COUNCIL

19960628 Inter-agency development at the country level was the best example of a new "intellectual convergence" regarding the changing role of development assistance, a Vice-President of the World Bank told the Economic and Social Council this morning as it began the high-level meeting of its operational activities for development segment. Today's meeting is discussing strengthening collaboration between the United Nations development system and the Bretton Woods institutions.

Structural adjustment was dead, Mark Malloch Brown told the Council, but policy reform, sound macroeconomics, open trading systems, limited and efficient government, and a supportive environment for foreign investment were alive and well.

A Deputy Director of the International Monetary Fund (IMF), Joaquin Ferran, told the Council that surveillance of developing countries economic policies was a core aspect of the Fund's activities. Towards that end, the Fund was taking part in all three Inter-agency Task Forces established by the Administrative Committee on Coordination (ACC) as part of the follow-up to recent United Nations global conferences.

The Administrator of the United Nations Development Programme (UNDP), James Gustave Speth, said five areas of action to eradicate poverty had been identified for cooperation between the United Nations system and the Bretton Woods institutions, including the provision of basic social services for all, sustaining the natural resources base, employment and sustainable livelihoods for all, advancement and empowerment of women, and the creation of an overarching enabling environment.

The Deputy Executive Director of the United Nations Children's Fund (UNICEF), Stephen Lewis, said that over the last five years, governments in more than 10 countries had used $60 million in World Bank proceeds as contributions to UNICEF programmes.

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The representative of Italy, speaking on behalf of the European Union and associated States, told the Council that more consultations between development partners were needed to implement the plans and priorities of developing countries, to avoid overlapping efforts and to utilize common services.

Speaking on behalf of the "Group of 77" developing countries and China, the representative of Costa Rica said cooperation between the United Nations system and the Bretton Woods institutions had to be structured and spread throughout a variety of unrelated activities.

At the outset of the meeting the Under-Secretary General for Policy Coordination and Sustainable Development, Nitin Desai, introduced a note by the Secretariat on the theme before the Council for discussion.

Statements were also made by the representatives of Thailand, Russian Federation, Poland, Ireland and the United States.

When it meets again at 3 p.m. today, the Council will continue its discussion of strengthening collaboration between the United Nations development system and the Bretton Woods institutions.

Council Work Programme

The Economic and Social Council met this morning to begin its high-level meeting on operational activities for development, which is to address strengthening collaboration between the United Nations development system and the Bretton Woods institutions at all levels, including the field level.

As a basis for its discussions, the Council will have before it a note by the Secretariat on strengthening cooperation between the United Nations development system and the Bretton Woods institutions (document E/1996/72). The note focuses on the current state of cooperation in a number of specific areas and on practical issues that the Council may wish to discuss as a further contribution to the broader reform process. While finding that there has been much cooperation between the United Nations and the Bretton Woods institutions, the note concludes that greater collaboration around themes should be pursued. "What is needed is to transform the ad hoc and selective approach into a more structured provision of support, at the request of governments, based on mutual comparative advantages and expanded into new areas."

Cooperation between the Bretton Woods institutions and the United Nations funds and programmes has intensified in recent years, according to the note. For example, the United Nations Population Fund (UNFPA) and the Bretton Woods institutions have established a system of regular consultations to identify areas for collaboration at the country level. Several specialized agencies have undertaken long-standing collaborative activities with the Bretton Woods institutions within the framework of a joint memorandum.

According to the note, the executive heads of the specialized agencies report that significant scope still remains for strengthening cooperation. They suggest measures such as the holding of joint meetings between the Bretton Woods institutions and agencies on specific themes; enabling agencies to implement projects funded by the World Bank at the country level; and giving agencies the facility to participate in the design of bank loans in their respective fields of competence.

The note cites numerous examples of practical cooperation in such areas as the follow-up to global conferences, statistics and post-conflict peace- building. Research and training on tropical diseases is another area where the World Bank has worked with the United Nations Development Programme (UNDP) and the World Health Organization (WHO). Among the successes achieved has been control of river blindness, while malaria remains the biggest challenge.

Several areas where collaboration at the country level could potentially be strengthened are also described in the note, including poverty reduction, capacity-building, human development, mitigating the effects of structural adjustment and working to combat HIV/AIDS.

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"Perhaps the greatest potential and need is to strengthen cooperation at the country level", according to the note. Field-level cooperation should become a central focus of future collaboration under the guidance of the government concerned. The growing importance of sectoral investment programmes, especially in education and health, will also provide the framework for greater country-level collaboration.

Concerning poverty reduction, the note states that several mechanisms have been introduced to allow the United Nations and the Bretton Woods institutions to pool their resources. Joint programmes for poverty reduction are being formulated at the request of governments. The mass poverty issue is now at the top of the agenda of all external agencies, including the United Nations system, the Bretton Woods institutions and bilateral institutions.

"The need for greater sensitivity for social stability in the implementation of the adjustment programmes of the Bretton Woods institutions is now widely accepted, in particular by the Bank and the Fund", the note states. At the request of governments, many United Nations agencies are implementing programmes to offset the social consequences of structural adjustment. There is still room for greater collaboration between the United Nations and the Bretton Woods institutions in this area.

The note concludes that eradicating mass poverty, stimulating economic growth and capacity-building, promoting trade efficiency and generating employment are some of the areas for strengthened future cooperation. The need for cementing links between the Bretton Woods institutions and the United Nations system is greatest at the programme and project level in countries.

JAMES GUSTAVE SPETH, United Nations Special Coordinator for Economic and Social Development and Administrator of the United Nations Development Programme (UNDP): Prominent examples of collaboration between the United Nations system and the Bretton Woods institutions included the United Nations System-wide Special Initiative on Africa, the Joint and Co-sponsored United Nations Programme on HIV/AIDS, the Global Environment Facility (GEF) and the follow-up to the United Nations development-related conferences. Other collaborative initiatives included the United Nations High Commissioner for Refugees (UNHCR) and the World Bank's collaboration on income-generating projects for Afghan refugees, as well as the collaboration among the World Bank, the UNDP and the United Nations Environment Programme (UNEP) on the Aral and Dead Sea clean up.

One-and-a-half billion people lived in poverty in the United Nations programme countries. Five areas of action to eradicate poverty had been identified by United Nations system, including the Bretton Woods institutions. The Inter-agency Task Forces of the Administrative Committee on Coordination (ACC) were focusing on the provision of basic social services for all, on employment and sustainable livelihoods for all, on advancement and empowerment

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of women, and on the creation of an overarching enabling environment. Sustaining the natural resources base was another area that was being focused on.

The United Nations system was also committed to strengthening the resident coordinator system. On poverty eradication, among other things, a joint World Bank, United Nations Children's Fund (UNICEF), UNDP, International Fund for Agricultural Development (IFAD) and International Labour Organisation (ILO) initiative had the objective of strengthening capacity gathering and to analysing information and developing indicators on social development. A UNDP poverty strategies initiative had been established to assist country-level implementation of the commitments of the 1995 World Summit for Social Development. "We must not accept that the poor will always be with us." The world had the material and natural resources, the know-how and the people to make a poverty free world a reality. More than 160 years ago the world had launched a crusade against slavery. Most people had been sceptical but there was a will to change. Today, a similar crusade for a world without poverty was needed.

So far as the countries in special circumstances were concerned, the United Nations agencies and the World Bank were engaged in helping Liberia and Sierra Leone. Collective response to crises had to harmonize planning, programming and financing of sustainable national recoveries.

MARK MALLOCH BROWN, Vice-President, World Bank: Development today was being revolutionized by two major trends: a decline in official development assistance (ODA) and a dramatic increase in private capital flows. The amount of ODA had declined from $59.2 billion in 1994 to $58.8 billion in 1995. It was today at its lowest point since 1970 as a percentage of gross domestic product (GDP) among the countries of the "Group of Seven" most industrialized nations. Also, bilateral aid was increasingly focused on emergency assistance and food aid, which was important, but did nothing to support policy reforms and investments in the poorest countries.

Private investment was transforming parts of the developing world. Since 1990, those flows had quadrupled to $170 billion. In a number of countries, notably in east Asia and Latin America, domestic and foreign private capital was fostering development and creating wealth.

There was a new "intellectual convergence" taking place between the Bank, the United Nations and other bodies. Structural adjustment was dead, but policy reform -- sound macroeconomics, open trading systems, limited and efficient government, and a supportive environment for foreign investment -- was alive and well. Multilateral institutions today were playing a catalytic role; there were no longer development monopolists.

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That intellectual convergence had permitted a new intensity of inter- agency cooperation at the country level. Partnerships between United Nations agencies, the private sectors and non-governmental organizations was essential. But what worked best in one country may be inappropriate in another. The countries themselves -- through the Bank's assistance strategy or the United Nations' country strategy note -- should decide how projects were ultimately implemented.

JOAQUIN FERRAN, Deputy Director of the Department of Policy Development and Review, International Monetary Fund (IMF): Surveillance of national economic policies was a core aspect of the Fund's activities. Those efforts aimed at achieving broadly-based, non-inflationary growth and stable economic conditions. The Fund today was intensifying its efforts by strengthening surveillance, refining instruments at its disposal, and strengthening its resources. Towards that end, work was under way to substantially increase members' quotas. The Fund was aiming to put the Enhanced Structural Adjustment Facility (ESAF) on a self-sustaining basis.

The Fund was today taking part in all three Inter-agency Task Forces established by the ACC to follow up on recent United Nations global conferences. Pursuant to the 1995 Social Summit, the Fund was focusing attention on the efficiency of public expenditure, including social spending. Regarding the recommendations of the Beijing Fourth World Conference on Women, the Fund was helping protect public expenditures on primary health and education, population planning and legal rights for all. Regarding the 1992 United Nations Conference on Environment and Development (UNCED), it was promoting measures to strengthen economic growth in an environmentally sustainable fashion. The IMF follow-up to the outcome of the recently concluded second United Nations Conference on Human Settlements (Habitat II) would emphasize technical assistance and fiscal policy advice, and the use of inputs from trade union and employer representatives on economic policy options.

Cooperation with United Nations agencies at the country level and at Headquarters took place through exchanges of information and reports, provision of technical assistance, and policy dialogue. Since 1989, the UNDP had been funding IMF technical assistance in member countries. Over 70 technical assistance projects, costing $38 million, had been executed by the Fund.

OSCAR ACUNA (Costa Rica), on behalf of the "Group of 77" developing countries and China: Environmental pollution, crime, terrorism and infectious diseases knew no boundaries. Global solutions were therefore required. To that end, cooperation between the United Nations system and the Bretton Woods institutions had to be structured and spread throughout a variety of unrelated activities. Cooperation had to be strengthened at the intergovernmental decision-making level and at the inter-secretariat level. The Group of 77

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attached priority importance to poverty eradication, stimulating economic growth in developing countries, capacity-building and human resource development. The resident coordinator system and joint country missions were important as were policy dialogues and effective aid coordination.

ANGELO GIORGIANNI (Italy), speaking on behalf of the European Union and Bulgaria, Cyprus, Czech Republic, Estonia, Lithuania, Malta, Romania, Slovenia and Slovakia: More consultations should take place with development partners to implement the plans and priorities of developing countries, to avoid overlapping efforts and to utilize common services. Developing countries and countries in transition should better coordinate foreign aid in order to optimize its effects. The European Union supported the decision of the World Bank and the UNDP to reinforce their cooperation in human resource development, decentralized government and post-conflict reconstruction. The United Nations and the Bretton Woods institutions should participate more actively in joint policy dialogues with host countries, as stressed by General Assembly resolution 50/120, on the triennial policy review of United Nations operational activities for development. There was a need for specific cooperation in combating poverty, peace-building and post-conflict development, and capacity-building.

SURAPONG POSAYANOND (Thailand): The functioning of the Bretton Woods institutions as independent organizations should not prohibit greater collaboration between them and the United Nations system. Increased coordination among them should be in the form of partnership in the interest of developing countries, particularly the least developed countries. They should place emphasis on the study of the impact of the Uruguay Round of multilateral trade negotiations on developing countries and the new issues that might arise at the forthcoming Ministerial Conference of the World Trade Organization (WTO), in order to ensure that developing countries could be smoothly integrated into the world economy. The comparative advantages and resources of each agency could be fully utilized if all the relevant bodies, together with the recipient governments, closely coordinated their efforts in producing the country strategy note, the country assistance strategy and the policy framework paper. The United Nations and the Bretton Woods institutions should jointly conduct an assessment review on their relationship.

ALEXANDER GORELIK (Russian Federation): A considerable amount of work was being done by the United Nations and the Bretton Woods institutions in macroeconomic analysis and on thematic research on socio-economic issues, including that of financial flows, external debt and foreign investment. As repetitions in research themes were frequent, tighter links in research and analysis were needed. However, parallel research was not always undesirable since independent expert analysis by the United Nations agencies could prove useful to Member States. The useful experiences of the UNDP, UNICEF and the

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UNFPA in cooperation with the Bretton Woods institutions in field activities should be applied more energetically. Also, a system of regular consultation between filed offices and government representatives would be useful.

STEPHEN LEWIS, Deputy Executive Director, United Nations Children's Fund (UNICEF): There was a long list of cooperative undertakings between the UNICEF and the World Bank. The UNICEF had used government contributions of the Bank funds to support implementation of specific activities contained in approved country programmes. Over the last five years, governments in more than 10 countries had used $60 million in Bank proceeds as contributions to UNICEF programmes in their own countries. The Special Initiative on Africa gave an opportunity to show how the United Nations system and the agencies could work in tandem. So far as specific instances of collaboration were concerned, 20 representatives of UNICEF had met in April with 20 representatives of the World Bank in Abidjan to review programmes in health and educational sectors. It had been agreed that collaboration would proceed on a country-by-country basis. Also, the Economic Commission for Africa (ECA), the World Bank and the UNICEF were organizing an international meeting on financing of social services to achieve greater consensus on policy in health and education sectors. The UNICEF was determined to integrate poverty reduction into programme operations and socio-economic policy dialogue.

ZBIGNIEW M. WLOSOWICZ (Poland): Existing mechanisms and opportunities should be utilized to the maximum to further strengthen collaboration between the United Nations system and the Bretton Woods institutions. It was satisfying to note that those institutions had placed the priorities of the major United Nations conferences on their agenda. It created an opportunity for both the system and those institutions to work together on the follow-up activities to those conferences. Host countries had a responsibility to ensure that such cooperation had positive effects on them. External assistance could only supplement national efforts. Success of development activities depended on economic reform programmes. Cooperation among Poland, the United Nations system and the Bretton Woods institutions could be further strengthened within the process of implementing the results of international conferences as well as in Poland's preparation for accession to the European Union.

JOAN BURTON (Ireland): Over the years many development tasks had "migrated" from United Nations agencies to the Bretton Woods institutions because those institutions had played an increasingly important role in shaping poor countries' macroeconomic policies. For that reason it was essential that the all agencies properly coordinate their efforts. The Bretton Woods institutions should draw on the United Nations unrivalled experience in poverty reduction, human development and sustainability. It had been encouraging to note coordination between the World Bank and the United Nations Conference on Trade and Development (UNCTAD), UNDP, UNFPA and UNICEF to develop a common understanding of the 20/20 initiative announced at the

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Social Summit. Structural adjustment programmes had reshaped development cooperation. The United Nations development system should be involved -- not just informed -- of matters relating those programmes. Cooperation between the United Nations system and the Bretton Woods institutions at the country level should collaborate in the preparation of development strategies, consistent with the preference of the concerned governments.

MELINDA KIMBLE (United States): The United States had consistently supported increased collaboration between the United Nations system and the Bretton Woods institutions. Such collaboration had to be country driven and had to arise from the needs of each country. Moreover, it needed to be ad hoc and should not be put into a straight jacket. In 1995, the World Bank and UNDP had redefined the focus of their task forces of several years standing. In addition, the Bank had been an active participant in the AIDS Programme and the Special Initiative on Africa. The evolving relationship between the IMF and the UNDP was noteworthy. However, the meetings of the Council devoted to Bretton Woods activities this week had been disappointing. According to some estimates, the cost of a single three-hour United Nations meeting was $15,000. That cost only covered interpretation in six languages and the electricity. Had last Monday's meetings -- dedicated to the policy dialogue on important developments in the world economy with heads of multilateral financial and trade institutions -- been worth the probable $30,000 that had been spent on it? According to World Bank's estimates, homeless in developing countries could be housed at a cost of between $23 and $150. That meant that 200 people could have been housed with the $30,000 spent on the meeting. Additionally, no explanation had been given for lack of representation from WTO.

Exchange of Views

Mr. SPETH, UNDP Administrator: He shared the concern expressed regarding the diminution of the United Nations as a forum for discussing development policy and economic trends. Several speakers had stressed the important role of resident coordinators in ensuring United Nations/Bretton Woods institutions cooperation at the country level. In many countries there was a remarkable level of collaboration. National governments had a critical role to play in that regard. They had the primary responsibility for discerning the relative competitive advantages of individual agencies and programmes. Representatives of different ministries should cooperate in building national capacities and in telling international development partners what their needs and priorities were.

NITIN DESAI, Under-Secretary-General for Policy Coordination and Sustainable Development: The Bretton Woods institutions should matter to United Nations policy-makers, but the priorities of United Nations agencies should also be a priority for the Bretton Woods institutions.

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Mr. BROWN, World Bank: It was extremely important that common sets of approaches to development should keep abreast of what was happening in other forums notably in the area of debt reduction talks in the context of the Paris Club. The United States Senate yesterday had placed into jeopardy programmes of the International Development Association (IDA) -- the Bank's arm for concessional lending -- which threatened the whole Special Initiative on Africa. Coordination of resources should focus on common implementation at the country level. Some heads of United Nations agencies had complained that Bretton Woods institutions were encroaching on their traditional areas of work with little consultation. What had happened was not that Bretton Woods institutions were growing, but that ODA was shrinking. The World Bank was not funded by the "Group of Seven" most industrialized countries, but by the "Group of 77" developing countries, so its income stream reflected the economic health of its owners.

Mr. FERRAN, of the IMF: The Fund introduced changes in policy on the basis of judgements as to what worked and what did not work. The critical analysis of other individuals and institutions was a critical part of that process.

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