SECRETARY-GENERAL, IN SPEECH AT UPPSALA, OUTLINES NEW APPROACHES TO DEVELOPMENT IN CHANGING GLOBAL ECONOMIC SITUATION
Press Release
SG/SM/6300
DEV/2167
SECRETARY-GENERAL, IN SPEECH AT UPPSALA, OUTLINES NEW APPROACHES TO DEVELOPMENT IN CHANGING GLOBAL ECONOMIC SITUATION
19970811 University Audience Told of United Nations Role in Private-Public Partnership, with Need for Access to Affordable Credit in Poorer CountriesThis is the text of a statement today by Secretary-General Kofi Annan at Uppsala University in Sweden:
It is for me a pleasure to return to this beautiful city and to this distinguished university. I am also conscious that I am walking here in the footsteps of a great former Secretary-General, Dag Hammarskjöld. His inspired leadership covered all aspects of the Organization's work. But his contribution to development cooperation -- the subject of my address today -- was seminal. He helped set in motion many initiatives which benefited developing countries in the critical post-colonial period. So I begin by paying tribute to a great Swede, and a great international civil servant.
In choosing to talk about development, I am addressing a subject which is dear to Sweden's heart. Sweden has been notable for decades not only for its support for international development assistance, but also for its strong leadership in this field. It is an extraordinary fact that Sweden, Finland, Norway and Denmark together provided 20 per cent of the funds in 1995 for United Nations system operational activities for development.
The work of the United Nations in peace-keeping, or in peacemaking, is often in the public eye on television and in our newspapers. That is not true of development. It directly affects the lives of many more people than do our peace-keeping activities. Conceptual work by the United Nations in the development field has influenced government policies everywhere. Yet, the development work of the United Nations almost never gets into the headlines. Today, I hope to begin to rectify that misconception.
The world economy and the world political situation have changed radically in the past decade. There has been a revolution in the international economy. It is now global. The role of private capital in development, and of the organizations of civil society in political affairs, have transformed the overall picture. Between and within nations, inequality is increasing. During the past decade, gaps have widened -- between the rich
and the poor, the skilled and the unskilled, the powerful and the weak. All too often, a cycle of deprivation then sets in. Disadvantaged segments of the population may feel angry and hopeless. Sensing that they have so stake in society, they may turn to crime or other forms of social misbehaviour. Marginalization, social exclusion and alienation are major challenges of our time.
The immediate challenge is underdevelopment itself. Over 60 per cent of the world's population subsists on $2 or less per day. Nearly 1 billion people are illiterate. Well over a billion lack access to safe water. Everyday, some 840 million go hungry or face food insecurity. Nearly a third of the people in the least developed countries are not expected to survive beyond the age of 40.
Poverty and deprivation cause lack of access to education and housing, and unemployment. In many countries, unemployment among the young has become endemic. When men and women in their 20's or early 30's have no prospects for work, the results can be devastating. Chronic unemployment leads to unemployability because skills are lost, and once you've not been employed for a long time you can loose the habit of working.
Despite major gains in the last two decades, structural inequalities between women and men persist. They are reflected in the continuing female- male literacy gap -- women's literacy rates are two thirds those of men. Overall, therefore, women have less access to rights, to opportunities, and to resources.
These are the development challenges. But they are not insuperable. The latest Human Development Report produced by the United Nations Development Programme showed that, by sustained effort, extreme poverty could be banished in a decade. We need bold and concerted action on many fronts, in a spirit of global solidarity. And we need to target our efforts more than ever, to ensure that scarce funds are deployed to the best effect.
For the United Nations, in the age of the global economy, this means helping countries to take full advantage of the investment and opportunities globalization brings. It also means helping countries avoid marginalization -- the dark side of the global economy. To do this, the United Nations provides direct support to the least developed countries, particularly in Africa.
But although United Nations grant resources and other development assistance can be crucial for many countries, the engine of development now, without doubt, is private capital. Most developing countries, as well as former socialist bloc countries, have moved decisively away from centrally planned economies.
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Import-substitution policies and barriers to trade are being replaced by export-orientation policies. With them come the elimination of tariffs, subsidies, and other trade distortions. The result has been a dramatic increase in private capital flows to developing countries in the past five years. Until the early nineties, most of the financial flow to developing countries consisted of official development aid. Now, official development assistance is declining: private sector capital flows have increased enormously. It is estimated that in 1996 foreign direct investment in developing countries totalled $244 billion, while official flows totalled $42 billion.
Private investment does not, however, flow evenly to all developing countries. It tends to benefit some countries, and to leave others aside. In 1966, foreign direct investment in Asia amounted to $48 billion; in sub-Saharan Africa, it amounted to just $2.6 billion. Only 1 per cent of direct foreign investment goes to the 48 least developed countries.
This situation raises important issues for development policy. Donors are having to target official development assistance flows much more carefully. With less aid money to go around, much more attention is being given to make sure it is used well. Developing countries are making policy and institutional changes so as to attract private sector capital. They are having to give priority to the creation of an enabling environment. That means more than ensuring that the private sector can prosper, although that is a vital part of it. It means, in many cases, redefining the role of the State, moving from a controlling State to a State which acts as partner, catalyst and facilitator.
Development assistance can often be crucial in creating just such an enabling environment. In other words, careful targeting of official assistance can be instrumental in attracting investment capital. In terms of regional allocation, the largest proportion of United Nations grant resources goes to Africa -- $1.7 billion of the $4.8 billion total in 1995. The aim of this assistance is to strengthen the capacity of weaker countries to be effective participants in the global economy. That involves helping countries overcome the negative aspects of adjustment programmes and other economic reform measures; supporting their participation in international markets; improving their access to new technology; and building capacity generally in science and technology.
The United Nations and the international community are giving increasing attention to the question of governance. Governance means an effective, efficient State. It means giving attention to the delivery of services. It means ensuring that the State is responsive to its citizens. That means reinvigorating public institutions, improving the accountability of public officials, and eliminating corruption and clientilism.
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The redefinition of the role of the State should not be equated with reducing the State to a minimalist role. Part of the role of the State as catalyst and facilitator is to support the provision of good health services and educational opportunities for its citizens, either directly or by coordinating its provision by the private sector or by the institutions of civil society.
Education is vital. Knowledge and skills will be the driving force in development in the twenty-first century. It is becoming clear that, in today's world, knowledge and skills are the decisive factors in giving countries or corporations their competitive edge.
A recent World Bank study found that close to 65 per cent of growth can be attributed, not to natural resources, finance or infrastructure, but to human and social capital. Increasingly, major corporations are investing heavily in the human and social capital of their organizations. They are thinking in terms of structures and policies which can attract, retain, develop, motivate and make effective use of high-calibre staff. Top managers are discovering the importance of their organizations' knowledge base. Old- style centralized management styles are giving way to more collegial forms of management.
The revolution in information technology is part of this. It will have an enormous impact on development. But its benefits are not being distributed equitably. The information explosion is widening the gap between the haves and have-nots -- the gap between the technologically rich and poor. For example, in the whole of Africa, there are fewer telephones than in the city of Tokyo.
There remain great inequalities, and, therefore, great development challenges, in a world in which the principal source of production, jobs and sustainable development is in the private sector; and in which the role of the State is being redefined as that of facilitator and catalyst. But there is now a broad consensus on the preconditions for development. It is agreed that there is a paramount need for peace, political stability and mutual trust; for democratic government and a free market system. Other conditions include sound governance, good laws, decentralization, a competent, efficient, well- trained and dedicated public service; fiscal responsibility; an equitable and efficient tax system; and government capacity to steer and to sustain a friendly and enabling environment for business, for non-governmental organizations and for individuals -- an environment that will release the energies needed.
The promotion of development is one of the purposes of the United Nations. It remains so. But as economic and political conditions change, as new actors emerge, so our approach to development has to take those changes into account.
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One of my major priorities as Secretary-General has been to establish a new partnership for development between the United Nations and the private sector. I see such a partnership as involving a joint programme of cooperation with governmental and non-governmental organizations, in both he developing and the transitional economies. The aim will be to bring more of the world's poor into the expanding zone of opportunity, by increasing the conditions for domestic and international investment, job creation and people- driven and people-centred development.
I see the partnership as working in the following fields:
-- Twinning companies in developed and developing countries. (Twinning agreements would include matters of public concern such as training, technological development and environmental conservation).
-- Helping to develop financial markets, including appropriate regulatory frameworks.
-- Strengthening national and provincial chambers of commerce and industry, patent offices, technology parks, business incubators and other private-sector support institutions.
-- Developing market-based incentives for environmental management.
-- Support to international and regional institutions for promotion of business.
-- Support for non-governmental and other community-based non-profit organizations.
-- Provision of physical infrastructure.
Some will say that emphasizing the importance of the private sector means neglecting the millions in developing countries who lack capital. It is true that, for millions of people with meagre resources, obtaining credit is either fraught with danger or simply impossible -- the money lenders and his exorbitant charges are prohibitive.
But new ways are being devised for ordinary, poor people, to have access to credit on affordable terms. The micro-credit movement is a new way of empowering women, especially rural women. It is rising to the challenge of extending small loans to people without collateral and a credit history. the Grameen Bank of Bangladesh is an often cited example of what can be achieved, particularly, in that case, by making credit available to micro-enterprises run by women. There are many other examples.
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The recently held Micro-credit Summit in Washington, D.C., was attended by more than 2,000 persons from 137 countries. The Summit set a worthy target to expand the reach of micro-credit to 100 million of the world's poorest families, especially those headed by women, for self-employment and micro- business, by the year 2005. It is an aim that we at the United Nations support most enthusiastically.
I have outlined some of the new approaches to development we are working on at the United Nations and some of the ways we are responding to the new challenges. We need to rekindle the spirit of adventure, enterprise, optimism and solidarity which built the global partnerships -- and the United Nations -- some 50 years ago. Economic and social development is the surest foundation for peace, stability and security. The founders of the United Nations understood this. That is why the commitment to development is one of the guiding principles of the Charter of the United Nations. The peoples of the world demand no less.
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