ECONOMIC AND FINANCIAL COMMITTEE RESUMES SESSION TO CONSIDER FINANCING FOR DEVELOPMENT
Press Release
GA/EF/2810
ECONOMIC AND FINANCIAL COMMITTEE RESUMES SESSION TO CONSIDER FINANCING FOR DEVELOPMENT
19980319 Deputy Secretary-General Stresses Need to Adjust UN Work to Reality of Problems of Today and Challenges of FutureThe challenges of rebuilding the foundations of international cooperation in an increasingly market-driven world, and of motivating business to invest in economies where market signals are too weak to be heard, were highlighted by Deputy Secretary-General Louise Frechette this morning as she addressed a resumed session of the General Assembly's Second Committee (Economic and Financial) convened to consider financing for development.
She stressed that grounding the work of the United Nations in the reality of today's world was an essential condition of success. That reality included global financial markets, open trade and regional arrangements, vastly increased flows of investment, environmental threats and health hazards, and instant communications and revolutionary technologies. The United Nations could influence significantly the debate around those issues if its work was designed to ensure that it focused on the problems of today and the challenges of the future rather than on trying to recreate the past.
The issue of development financing was of central importance, she said, adding that the Secretary-General had proposed a number of reforms motivated by the desire to progress on that question. Those proposals included consideration of international financing for development as a theme for the Assembly, the creation of a development dividend, the establishment of an office for development finance, and work undertaken towards a more predictable financing for development cooperation.
The representative of Indonesia, speaking on behalf of the "Group of 77" developing countries and China, said the lack of financial resources was possibly the most constraining factor inhibiting development. The international community must answer the overall questions of development finance in order to achieve the goal of sustainable development for all. Solution must also be found to the complex problems facing developing countries as they attempted to integrate themselves in the mainstream of the international system.
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The needs of the least developed countries should dictate a broad-based and flexible approach to the financing of development, the representative of Norway said. Those countries would need official development assistance (ODA) for some time to come. Any new source or funding mechanism must be added to the ODA, and not replace it. It was high time that discussions on financing of development be set on a track more conducive to reaching concrete results.
The representative of the United States said countries should not try to accomplish what global markets were better qualified to do. Instead, they should ensure that global markets operated efficiently and maximize growth opportunities. The international community must determine how private financial flows could be enticed to an expanded number of countries and how the private sector could be integrated more strategically into a global development agenda.
The representative of the United Kingdom, speaking on behalf of the European Union and associated States, said that a comprehensive consideration of the development process must embrace a comprehensive consideration of financing for development that included the full range of potential sources. Furthering the process required information from all sources, primarily from developing countries, since their financing needs would be met largely through their own resources.
The Chairman of the Committee, Oscar de Rojas (Venezuela), said the Committee's meeting today was the first step in a preparatory process that would culminate in the convening of a high-level international intergovernmental meeting on financing for development. Governments should now submit their suggestions for that meeting's agenda and initiate a frank dialogue in the spirit of cooperation. Contributions should also be solicited from a broad range of interested parties, including institutions outside and inside the United Nations system, on what sources could be used in development financing.
Statements were also made by the representatives of Japan, Venezuela, Mexico, India, Canada, New Zealand, Pakistan, Republic of Korea, Croatia and Marshall Islands. A representative of the World Bank also addressed the Committee.
The Committee will meet again at 3 p.m. today to conclude its resumed session.
Committee Work Programme
The Second Committee (Economic and Financial) met this morning in a resumed session to continue its consideration of financing of development, including net transfer of resources between developing and developed countries. The General Assembly decided to convene the two-day session when it adopted resolution 52/179 on the recommendation of its Second Committee.
By that text, the Assembly noted the need to hold a systematic, comprehensive and integrated high-level international intergovernmental consideration on financing for development with a view to creating a broader- based partnership for development. In that context, the resumed session was convened in order to solicit governments' views on the inputs required from a broad range of stakeholders, and to identify potential sources of such inputs.
Statements
OSCAR DE ROJAS (Venezuela), Chairman of the Second Committee, said today's meeting was the first step in a preparatory process that would culminate at the Assembly's fifty-fourth session in the convening of a special session, or other high-level, international forum, on the subject of financing for development. The Assembly resolution calling for the Committee's resumed session was one of the most important resolutions adopted by the fifty-second session of the Assembly. Governments should now submit their suggestions on the agenda of the high-level international intergovernmental consideration of financing for development. Contributions should also be solicited from a broad range of interested parties, including institutions outside and inside the United Nations system, on development financing and what sources could be used to obtain those contributions. It was vital to start a process of dialogue in the spirit of frank and fruitful cooperation.
Informal consultations held earlier this week had been productive, and delegations' comments would be included in the report that would be prepared by the Committee's Rapporteur, he continued. Time and efforts should also be dedicated to attracting attention to the subjects related to financing for development. To help to carry out that process, the Committee would establish a working group. Efforts should also be made to invite experts from outside institutions to brief the working group. He asked delegates to submit suggestions on what specific subjects would be best for those briefings.
Deputy Secretary-General LOUISE FRECHETTE said that she was convinced of the necessity to enhance the profile and leadership of the United Nations in the economic and social spheres in order to strengthen the Organization as a leading centre for development policy and development business.
The effort to enhance United Nations leadership and influence should be guided by three basic principles: clarity about the ultimate goal; grounding its work in reality rather than in theory and ensuring that it was able to
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deal with the problems of today and the challenges of the future; and aligning its activities to the identified goals and priorities.
Elaborating the ultimate goal of the Organization's work in the economic and social fields, she said that the work of the United Nations was essentially about making life better for individual men, women and children around the world. It was all too easy to forget that ultimate goal and become consumed by issues which had more to do with the protection of empires or individual pride than their impact on the life of people who needed help. The leadership and credibility of the United Nations would be enriched if it was clearly geared towards the pursuit of that overriding goal.
Grounding the work of the United Nations in the reality of today's world was an essential condition of success, she said. Nowadays that reality includes global financial markets, open trade and regional arrangements, vastly increased flows of investment, environmental threats and health hazards and instant communications and revolutionary technologies. The work of the Organization, in line with efforts by governments worldwide, must be redefined to adjust to those new realities. Many new developments had contributed undeniable benefits and could contribute powerfully to the achievement of the ultimate goal. However, they had also created new vulnerabilities, as the crisis rocking Asian markets and the spread of the AIDS epidemic had so painfully illustrated.
She said some of the questions that needed to be addressed included the following: "How do we reconcile the creative forces of entrepreneurship with the needs of the disadvantaged? How do we rebuild the foundations of international cooperation in a world that is increasingly market-driven? How do we influence decision-making in a direction that spreads more widely the benefits of globalization? How can we motivate business to invest in economies where market signals are too weak to be heard? How do we integrate the least developed countries into the global economy?"
She stressed that the United Nations could influence significantly the debate around those issues if its work was designed to ensure that it focused on the problems of today and the challenges of the future rather than on trying to recreate the past.
Aligning activities, structures and resources to goals and priorities did not require much elaboration, she said. The impact of the United Nations would be more effective if its energies were focused on the most important issues of the times. Although it was not easy to evolve consensus on those priorities, the United Nations could not afford to fritter away its energies or allow itself to go off in all directions at once. It was the duty of the Organization to provide Member States with the best possible support towards the development of a meaningful consensus on complex, yet often interrelated issues.
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She said that the issue of development financing was of central importance. In that regard, the Secretary-General had proposed a number of reforms motivated by the desire to progress on that question. Those proposals included consideration of international financing for development as a theme for the Assembly, the creation of a development dividend, the establishment of an office for development finance, and work undertaken towards a more predictable financing for development cooperation.
The Second Committee had launched a new process which held the promise of breathing new life into the work of the Organization, she said, adding that continued efforts in that regard had her full support.
MAKARIM WIBISONO (Indonesia), speaking on behalf of the "Group of 77" developing countries and China, said the lack of financial resources for development was possibly the most constraining factor inhibiting development. The monumental changes in the 1990s -- driven largely by globalization, the liberalization of trade and investment, technical innovation and the erosion of multilateralism -- presented the international community with opportunities and challenges. In that context, the overall questions of development finance must be answered by the international community so the goal of sustainable development for all could be achieved. Therefore, discussions during the Committee's resumed session should be confined to choosing the major themes to be included on the agenda of the high-level international intergovernmental consideration of financing for development.
In pursuing that goal, the Committee should seek a broad spectrum of inputs on the key elements and topics to be included in the discussion leading up to the high-level intergovernmental forum, he said. While the convening of an international conference on financing for development had not been agreed upon after seven years of negotiations, the Group was currently more encouraged in continuing with the process. It was important to emphasize the multi-dimensional problems facing developing countries in their efforts to integrate themselves in the mainstream of the international system. The Committee should also indicate the possible sources that could contribute to that process.
The revitalization of official development assistance (ODA) should be a top priority for the forthcoming preparations, he said. ODA was an early casualty of globalization and had sharply declined in real terms. Aid fatigue and fiscal stringency in the developed countries had also contributed to that downturn. As a consequence of declining levels of ODA, an enormous toll had been exacted on the social and economic development of the least developed countries.
Many of the countries that had successfully integrated into the world economy and had attracted private financial flows had seen their development achievements scuttled overnight, he said. That phenomenon was largely a result of volatile investor confidence and the assumptions made by private and
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corporate money managers. Therefore, understanding the nature of private capital flows and how they could be harnessed to meet the development needs of developing countries should constitute a major theme in the Committee's deliberations in the coming years. Sources of information for the intergovernmental negotiations on that topic should be inclusive and represent the broad array of interests and needs of all countries.
The adequacy of the Bretton Woods institutions to effectively manage the world economy had become increasingly strained, he said. The global financial institutions were not able to predict the scope of the Asian crisis nor were they able to prevent it. The International Monetary Fund (IMF), which was designed to maintain a system of fixed but adjustable exchange rates, was now facing enormous challenges in effectively managing the current international financial and monetary system. Therefore, the international community must review the capabilities and modalities of those institutions to respond effectively and timely to financial crises induced by large-scale capital movements. In such a process, the decision-making structures of the Bretton Woods institutions needed to be reviewed and made more democratic.
The Committee should also explore the conditions that were required at both the domestic and international levels to ensure a supportive environment, he said. Macroeconomic policies should be coordinated. The IMF's role could also be strengthened to ensure that economic policies of the more powerful economies would not be detrimental to the growth and development of the developing countries.
STEPHEN GOMERSALL (United Kingdom) spoke on behalf of the European Union and Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia. He said that the European Union believed that the consideration of the development process and its broad objectives must embrace a comprehensive consideration of financing for development. That must include the role of the full range of potential sources of financing, in particular domestic resources, while recognizing the function of external sources, such as ODA, foreign direct investment, and official and private sector loans.
He suggested that the primary source of information on financing needed were the governments of developing countries. Such material should show the steps those governments were taking to develop coherent and comprehensive strategies, in particular for the implementation of "pro-poor" policies in line with agreements reached at United Nations conferences. Income distribution and income concentration in developing countries should also be addressed. It would be useful to seek the views of recipient and donor countries on how to achieve maximum efficiency and effectiveness in the use of resources for development, including ODA.
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He said that the views of developing countries could be sought through a number of mechanisms, including through pilot programmes and dialogue with governments within the United Nations Development Assistance Framework (UNDAF). He noted that developing country governments were also actively engaged in policy dialogue with a number of other players, including the World Bank, the IMF, and regional development banks. The sustainable development strategies of governments should also be disseminated, as well as information on how those countries were pursuing policies on South-South cooperation and trade on regional and global levels with other developing countries.
Information should also be sought from the industrialized countries, most of them aid donors, and from the newly industrialized emerging donor countries, he said. They should provide not only details of ODA flows, but also on the ways and means by which they were attempting to pursue a coherent approach to development, bilaterally and multilaterally. Included should be a description of their efforts towards international financial stabilization, better market access for developing countries and measures to alleviate the debt burden of developing countries. Information on private financial flows from industrialized countries would also be essential. A range of institutions in those countries should also be consulted, including export credit and export guarantee agencies and private sector financial institutions such as banks, and firms concerned with portfolio and direct investment.
He said that donor countries should supply information concerning efforts to improve consistency and coordination in their policies towards developing countries and maximize the effectiveness of financial flows. Multilateral institutions, including United Nations bodies and subsidiaries, should contribute a range of issues. For example, the IMF and the World Bank should be able to offer guidance based on specific country situations and on a wider analysis of economic trends.
BILL RICHARDSON (United States) said while nations were individually responsible for their own economic and social development, the United Nations had a unique obligation to achieve international cooperation in solving economic, social, cultural and humanitarian problems and in promoting human rights. Today, the Committee was taking the first step in a multi-year process which, if successful, would result in a new global partnership for development. The United States was deeply committed to that goal. As delegations worked together during the coming year, they should repeatedly ask themselves what had been effective and what had not and why.
Looking at one aspect of the issue -- ODA -- States could exult in the gains over the last 20 years in life expectancy and declines in infant and child mortality, he said. But the unmet agendas must also be acknowledged and the steady decline of ODA in recent years must also be noted. In that context, the international community must determine how bilateral and multilateral assistance could be improved to help attain global development goals in the future.
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Private financial flows to developing countries had increased by a factor of more than five since the beginning of the current decade, he said. Yet, 80 per cent of those flows were currently concentrated in 12 developing countries, to the virtual exclusion of Africa. The international community must determine how private financial flows could be enticed to an expanded number of countries and how the private sector could be integrated more strategically into a global development agenda. It must also look for ways to help governments to mobilize domestic resources and make use of innovative financing mechanisms.
He went on to say that the Committee's deliberations should also seek to engage a broad range of stakeholders to clarify the roles of governments, the private sector, non-governmental organizations and civil society in promoting and sustaining global development partnership. Countries should not try to accomplish what global markets were better qualified to do. But States could and should take steps to ensure that global markets operated efficiently and maximized opportunities for people-centred growth.
OLE PETER KOLBY (Norway) said that Norway had frequently underlined that it was high time that discussions on financing of development be set on a track more conducive to reaching concrete results. In that regard, the discussions initiated by the executive boards of the United Nations Development Programme (UNDP) and the United Nations Children's Fund (UNICEF) on strengthening the financing of their activities was welcomed.
A broad-based and flexible approach to the issue of financing of development should start with the needs of the least developed countries, he said. For those countries, foreign private investment presently played a minor role. They therefore needed ODA for some time to come. In that context, the leveraging and catalytic role of ODA should be emphasized. Any new or innovative source of funding mechanism must be added to ODA and not replace it, and the recipient countries should set the required priorities and use the corresponding instruments in their national policies.
Part of the development financing problem was the gap between ambitions and resources stemming largely from the global agenda agreed at recent world summits, he said. That new agenda had generated many new and important United Nations activities that lacked a corresponding political will on the part of Member States to finance them. New initiatives should therefore generate parallel agreement on financing. Moreover, the need for a fairer burden sharing should be underlined, given the fact that the traditional small group of donors was already contributing beyond any reasonable expectation. Additional funds should derive first and foremost from the countries which were not contributing according to their capacity to pay. If the donor group did not expand, the financing shortfall would most likely worsen. It was therefore essential to consider other possible methods of financing, including private sector funding.
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MASAKI KONISHI (Japan) said the Committee's success in strengthening global partnership depended on how all States engaged in the deliberations. Delegations should address issues in a collaborative, constructive manner and avoid negotiating in a confrontational manner. A comprehensive consideration of financing for development must include a comprehensive consideration of the development process. The Committee should consider not only the issue of resource mobilization but also the qualitative aspects of development cooperation.
He went on to say that consideration of resource mobilization should cover the full range of possibilities, including foreign direct investment and ODA, as well as other innovative ideas. Improving the quality of development cooperation was also extremely important, and there was room for improvement in that area. In order to address those problems, the international community should study how to further improve the national execution of development projects and programmes. The ownership of developing countries and enhanced donor cooperation should also be stressed. For development to succeed, each national government must take the initiative in formulating its own strategy. Meanwhile, the donor community should be in a dialogue with that State and provide fully coordinated support in a spirit of genuine partnership.
An output-oriented approach needed to be addressed as one of the qualitative aspects of development cooperation, he said. In such an approach, a limited number of indicators of success would be selected by which the joint development effort could be judged. Those indicators should also help to channel resources, in a coordinated manner, to achieve specific targets. By setting a clearer focus on development efforts, those efforts would have a maximum impact. Improving efficiency would help to boost domestic support for ODA in donor countries. Attention should also be given to how to utilize the private sector in achieving development objectives. Negative aspects of the private capital flow, such as its volatility and concentration in a small number of countries, should be also addressed.
RAMON ESCOVAR-SALOM (Venezuela) supported the statement made by the representative of Indonesia on behalf of Group of 77 and China. One of the biggest challenges of globalization was the creation of a stable and secure global economy that would ensure the active participation of developing countries. In addition to regulatory measures, that challenge called for the creation of an international financial structure in order to guarantee the flows of official and private capital to those countries.
He said that the meeting this year of the Group of 24 developing countries -- involved in issues related to the Bretton Woods institutions -- had underscored the urgent need to create a working group with participation of both developing and developed countries to analyse in-depth the ability of international financial institutions to respond to the financial globalization challenge. Modalities protecting the most vulnerable countries must also be created, as well as effective monitoring of key international economic
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variables. That discussion should take place within the United Nations, which was the most appropriate and indispensable forum for such debate. In addition, governmental and intergovernmental representatives, as well as civil and academic institutions should contribute the fundamental elements for such consideration.
Discriminatory technical considerations should not be allowed to sidetrack the process, he said. Serious consideration of the issue within the United Nations must have a broad agenda that would embrace the most relevant aspects of financing for development. Those included foreign and private debt, mechanisms for the creation of a favourable international environment, and an in-depth consideration of other sources of development financing. The reform of the international financial monetary system was key to the current discussion, given that the financial world today was totally changed from the environment in which the Bretton Woods institutions had emerged in 1944. Indeed, those institutions had failed to reform internally in a way that assimilated and reflected the great changes produced by economic globalization, he added.
ULISES CANCHOLA (Mexico) said it was important for the Committee to identify the questions that should be considered and discussed in order to clarify concepts and overcome differences in the area of cooperation and action for development. Those questions covered a broad range of interrelated issues, including investment, debt, savings, trade, commodities and ODA. The documents prepared by the Secretariat for the high-level intergovernmental meeting should address those questions comprehensively and should include governments' contributions on those questions.
To that end, Mexico believed that the Secretariat should elaborate a study on the present sources for the financing of development, he said. The study would take inventory of the sources of resources, which would allow the Committee to determine which were successful and necessary. There should also be an institutional review of international organizations relating to the issues of financing for development, in particular the Bretton Woods institutions and the present mechanisms for decision-making in those organizations. There should also be an analysis, at institutional level, of United Nations organizations that participated in the financing for development.
KAMALESH SHARMA (India) said that the process launched by the adoption of resolution 52/179 provided a historic opportunity to bring to centre stage the crucial issue of financing of development and re-equipping the United Nations to perform its Charter responsibilities in the area of development. The solutions forged would have a great bearing on the continuing relevance of the United Nations in the next millennium, in effectively addressing issues of the highest importance to the international community by equipping it with the ability to effectively tackle poverty and underdevelopment.
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Thorough preparation was the key, as well as the emergence of a new paradigm of partnership, he said. It would also be useful to receive inputs from a broad range of sources, including, from among others, governments, the United Nations Conference on Trade and Development (UNCTAD), the Department of Economic and Social Affairs, the IMF and World Bank, regional commissions, regional development banks, and think tanks. The areas requiring more study included ODA, private capital, short-term flows, macro-systemic aspects of the international financial and monetary systems, trade, and the interface between the United Nations and the private sector.
He said that concerning ODA, the trend to divert an increasing proportion to countries in transition and to immediate humanitarian needs should be analysed, and measures to stem that diversion should be created. Regarding the dramatic increase in the international movement of private capital, it was important to analyse the trend in order to ensure that private flows were consistent with the evolving international consensus on development and appropriate to the needs and priorities of developing countries. The volatility of short-term capital flows and measures to contain that phenomenon required further study and the elaboration of coherent macroeconomic policies, particularly among the world's leading economies.
Continuing, he said that the turmoil in East Asia had brought into focus the issues relating to designing an international financial and monetary system able to cope with the challenges of globalization and liberalization. In the area of trade, the argument that developing countries must themselves generate the resources for development ignored the reality that they had mainly relied upon domestically generated savings to finance their development investment. It also ignored the distortion in resource availability that arose within the international trade system, particularly through the implementation of commitments under the Uruguay Round of multilateral trade negotiations. Furthermore, additional work was needed under the broad rubric of systemic or institutional issues focusing on the interface between the United Nations and private-sector funding.
MICHEL DUVAL (Canada) said recent developments in the international economy had demonstrated the need to consider positive and negative aspects of the mechanisms for financing development. While countries were concerned about the short-term adjustment costs of opening their markets further, integration into the global economy continued to be a powerful strategy for development. It was also the best way of ensuring sustainability of financing.
He said his Government acknowledged that there was a need to discuss ways of enhancing the domestic enabling environment for investment, including financial sector reform. The pace and nature of liberalization should also be discussed. In addition, the Committee should examine the strategies to promote internationally competitive domestic enterprises and micro- enterprises. Yet, development was more than just increasing physical capital.
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It also entailed the closing of the knowledge gap between the rich and the poor, both within and between countries. In addition, the Committee must develop a clear idea of the options for financing social progress as well as promoting economic growth, an idea of quality and impact as well as the quantity of financing.
The Committee's discussions should conclude recommending ways in which countries and people might meet the basic human needs, goals and objectives established by previous United Nations conferences, he said. Canada believed those discussions should incorporate the following three-tiered approach: an enabling international environment; an open and transparent domestic environment; and options for financing social progress. Discussions should also focus on those countries that had the most difficulty attracting capital, in particular the least developed countries and sub-Saharan Africa.
TREVOR HUGHES (New Zealand) said that ODA was an important part of the development equation, particularly for the least developed countries. Against current trends, New Zealand had increased its ODA expenditure by 26 per cent in the last three years. Its role was to provide an enabling environment and to support the development of infrastructure and capacity development in areas which were unable to attract the private sector, and New Zealand's ODA efforts in the South Pacific were placing greater emphasis on those two areas. However, ODA, overall, was increasingly being overshadowed by other players.
He said that foreign direct investment, as the largest source of private financial flows to developing countries, must play a major role in development. A key question was to find ways for the international community to assist developing countries in attracting more foreign investment and ensure that the role it played in their economies was a beneficial and sustainable one. Good governance in the creation of an enabling environment to attract private financial flows was essential, and required the involvement of the wider community, including civil society. It was also essential that social and gender issues be addressed. Taking those factors into account paved the way for overcoming some of the constraints of earlier international efforts at structural adjustment.
There was an increasing need to look for innovative mechanisms to fund development, including the greater mobilization of private resources, he said. The development community, including United Nations aid agencies, must be ready to take advantage of the emergence of many new modalities for development financing. Notwithstanding the funding problems of various United Nations agencies as they competed for aid dollars, the key to attracting support from donor governments was the ability to demonstrate an effective programme that was well-targeted and capable of producing the desired results. New Zealand was committed to transferring a significant portion of its development assistance via multilateral institutions. However, that was
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predicated on the ability of the multilateral system to improve its cost effectiveness and to demonstrate better coordination and cooperation with other players.
ALFREDO SFEIR-YOUNS, of the World Bank, said a vision regarding the role and scope of development cooperation should be the basis for a debate on financing for development. Development financing must be inserted in the context of a number of documents already endorsed by the international community, such as the Agenda for Development and An Agenda for Peace. Criteria should also be set to enable countries to set priorities among different themes. Currently, the agenda was large and diverse, and a selection process was needed in order to ensure that progress was made.
A net increase in financial resources, in itself, could not engineer major changes in domestic, regional and global policies, he said. Throwing more money at structural problems might be an unproductive way to pursue fundamental development objectives. Human, natural, institutional and cultural capital development were profound determinants of development performance. More money, without regard for the quantity and quality of those forms of capital, would not be successful. An example of a non-financial determinant of performance was institutional capacity. That included the effectiveness of the banking system, efficacy of the legal framework, level of development of financial intermediation and the capacity and effectiveness of capital markets.
He went on to say that the debate should centre on at least three broad dimensions: policy, institutional and operational. The policy dimension addressed those issues of development financing that were central to the definition of objective and instruments. The institutional dimension would focus on organizational arrangements, incentive structures, management, the role of civil society and public sector and grass-roots participation. The operational dimension would focus on the practice of financing, on the development process, on development effectiveness and sustainability of projects and programmes. Those dimensions took unique characteristics at the regional and global levels which should also be considered.
AHMAD KAMAL (Pakistan) said the world's failure to effectively address the socio-economic factors that lead to strife was the root cause of its inability to realize the goal of universal peace. Universal prosperity would remain a mirage as long as countries did not have the vehicles to cross the desert of poverty and deprivation. The international community should respond to the urgent demands for international cooperation for development. The question of adequate funding for ensuring economic growth in developing countries deserved serious consideration.
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If the current rate of decline persisted, ODA would vanish by the year 2012, he said. For the poorest countries, to which commercial flows were negligible, ODA remained a vital resource. Therefore, there was an urgent need to reverse the continuing decline in ODA. While private investment flows had increased dramatically in recent years, those flows were accompanied by serious problems related to the character and the direction of private investment. The recent crisis in East Asia had shown that the economic growth achieved through private capital flows was fragile.
There was a genuine sense of system malfunction in the existing international financial institutions, he said. There was also a need for reform. The close interaction between the Bretton Woods institutions and the United Nations should be a cornerstone of the financial system. The forthcoming meeting of the Economic and Social Council with representatives of the Bretton Woods institutions might set the pace for future interaction. The United Nations should also be enabled to move beyond its normative role, and Pakistan was encouraged by the Secretary-General's promised "development dividend". In addition, the Organization's funds and programmes needed adequate financing to fulfil their mandates. While their role had grown in scope, the core resources had declined, and that trend needed to be reversed.
CHO CHANG BEOM (Republic of Korea) said that while financing and resource mobilization for development had always been at the core of development cooperation, the scope of the United Nations debate so far had been limited. The absence of financial officials had also limited the discussion. He was optimistic, however, that the process being launched today would lead to a comprehensive and operative strategy for the future course of development financing that would faithfully reflect the rapidly changing economic and financial realities of the globalization process. The key elements proposed by the Group of 77 and the European Union provided a comprehensive list of issues.
He said that the resolution of the financial crisis in East Asia would have far-reaching policy implications for private capital flows to the developing world. An important step, especially for private capital flows, would be to identify the necessary conditions for an enabling environment that could sustain capital flows to the developing world. At the same time, such conditions could safeguard against the volatility and risk of another crisis. The current financial crisis in Asia was simply an indication of the onset of a new stage of development -- moving from labour- and resource-intensive development into a capital-intensive development stage.
Continuing, he said that those lessons would be an important and timely topic to be discussed in the ad hoc working group. Furthermore, the working group should include the participation of financial officials that represented governments, as well as financial institutions, including the IMF, the World
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Bank and private institutions such as those on Wall Street. The proximity of the United Nations to Wall Street could prove to be a useful asset in discussing financing of development in a realistic and down-to-earth way.
Regional cooperation and South-South cooperation could also factor importantly into the consideration of the topic, he said. Furthermore, regional arrangements to strengthen regional development banks, and the adoption of a regional joint strategy for coping with financial crises would improve the "creditworthiness" of the developing world. Triangular South- South cooperation backed by developed countries could also provide a useful mechanism for mobilizing resources.
IVAN SIMONOVIC (Croatia) said international cooperation was crucial to the future growth and development of less developed countries, countries in transition and post-conflict countries. Lasting development could only be achieved through financially viable programmes that had built sustainability. Development also required a partnership between public and private sectors. Policy makers should possess balance and flexibility because private capital was motivated by quick returns. And that motivation was not necessarily compatible with the longer-term objectives of sustainable development.
A high-level dialogue on financing for development should be directed at reversing some of the negative social and economic trends affecting countries in the international economic environment, he said. The symbiotic link between peace and development should also hold an important place in that dialogue. The international community's responsibility in post-conflict countries did not end immediately upon the establishment of peace. Its interests extended to economic reintegration of the affected areas because such action reinforced the sustainability of stability.
He said the "peace dividend" was eagerly awaited by the parties who had suffered from armed conflict and the international community, which had used political and other influence to end it. That was the case in Croatia where significant challenge related to mine clearance rehabilitation, reconstruction and development remained. The economic and social situations in the war affected regions remained difficult, hindering the return of displaced persons and overall development. There were also shortages of capital for new investment and job creation. His Government had sought to attract finance for development both within and outside the United Nations system, and its experience proved that development issues could not be separated from issues of peace and stability.
JACKEO A. RELANG (Marshall Islands) said that he supported the statement made by the Chairman of the Group of 77 and China. Although financing the development efforts of the developing countries had long been a problem of the international community, there did not appear to be a light at the end of the tunnel. In addition, the picture in his country remained "rather gloomy", and official development assistance was rapidly declining.
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Continuing, he said that while the United Nations was willing to render greater assistance, its resources were simply stretched too thin. Although the level of expertise in the sustainable development field had been strengthened considerably, the requisite funding to operationalize that expertise had not materialized. Furthermore, while foreign direct investment had been hailed as the potential saviour of economic development, it was quite clear that the largest portion of the benefits from that new wave of investment was limited to just a few developing countries. Rectifying the situation and enabling smaller island developing countries to attract private financial flows was among the difficult remaining questions.
His Government had sought to devise a development plan, and had recently finalized its public sector investment programme, he said. It had also begun to seek views on different projects that could lead to funding. Such efforts complemented the initiatives being prepared internationally under the Barbados Programme of Action, which remained a very important guide for regional and international projects. In that regard, he looked forward to the proposed meeting between the small island developing countries and donor governments and agencies to be held later this year.
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