ECONOMIC AND FINANCIAL COMMITTEE CONCLUDES RESUMED SESSION

19 March 1998

Press Release
GA/EF/2811

ECONOMIC AND FINANCIAL COMMITTEE CONCLUDES RESUMED SESSION

19980319 Speakers Stress Need to Address ODA Decline, External Debt Burden, Limited Concentration of FDI in Consideration on Financing for Development

The Second Committee (Economic and Financial) this afternoon concluded its resumed session to consider the convening of a high-level international intergovernmental meeting on financing for development, to be held before the year 2001.

During the resumed session, the Committee sought to narrow the scope of the agenda for the high-level review. Several speakers said the Committee should strive to include a broad spectrum of views from governments, international financial institutions, United Nations agencies and programmes, and the non-governmental sector. Among the key elements to be addressed on the consideration of financing for development, representatives cited the decline in official development assistance (ODA), net transfer of resources between developing and developed countries, the external debt burden and the limited concentration of foreign direct investment (FDI).

The representative of the Russian Federation said a consideration of financing for development should be based on previous consensus and geared to strengthening international economic cooperation. The agenda for the high- level review should include domestic aspects of development financing as well as external factors that affected internal efforts.

Any approach to the subject must reflect the increasing participation of developing countries in the global economic and financial markets, the representative of Brazil said. Developing countries accounted for nearly half of the world's output, and by the year 2010, they would comprise nearly 60 per cent of the global consumption. That raised the issue of whether developing countries should be granted greater and more effective participation in international economic decision making.

Cautioning against drafting hollow agreements, the representative of Guyana said that many international commitments had produced little results. Official development assistance to Guyana was at an all-time low, and private resource flows, despite their potential for contributing to development,

remained highly selective. "A culture of support for development" among all the actors in the development field should be established in order to effectively address the problems of poverty and underdevelopment.

The Chairman of the Committee, Oscar de Rojas (Venezuela), said that during the Assembly's fifty-second session the Committee had attempted to revitalize the discussion of fundamental economic themes and inscribe them on the agenda of the United Nations. As a result of the work it had accomplished during the past year, the Committee now had the tools to seize the momentum and make that concept a reality.

Statements were also made by the representatives of the Dominican Republic and Australia, as well as by the Observer for Switzerland.

Committee Work Programme

The Second Committee (Economic and Financial) this afternoon continued its resumed session on the issue of financing of development, including net transfer of resources between developing and developed countries. (For background information, see Press Release GA/EF/2810 issued today.)

Statements

SAMUEL R. INSANALLY (Guyana) associated himself with the statement made by the representative of Indonesia on behalf of the "Group of 77" developing countries and China. He said that financing for development was of paramount importance for countries like Guyana. It was a central theme of his Government's proposal for a "New Global Human Order", which held the view that an investment in development was an investment in global peace and security.

He said that while globalization and the increasing interdependence of countries had made cooperation imperative, international cooperation for development remained inadequate. Official development assistance was at an all-time low, registering a sharp drop of 14 per cent between 1992 and 1995. At the same time, private resource flows, despite their doubtless potential for contributing to development, remained highly selective. Clearly, something had to be done to seriously address the problems of poverty and underdevelopment. Agreements and commitments of the matter had for the most part produced very little by way of returns.

To be effective, such agreements required the continued support of ODA and other supplementary forms of financing, he said. The ODA remained pivotal to the development of most developing countries, particularly the least developed, which despite their own efforts remained economically stagnant. In that context, there was an urgent need for greater advocacy for the cause of development. Maximizing efforts required building "a culture of support for

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development" among all the actors in the development field. The importance that delegations attached to the current exchange, particularly the developed partners, augured well for future progress.

He said that in addition to preserving that political dynamic, experimentation with fresh approaches to age-old issues was also encouraged. Perhaps the South Centre and the Development Assistance Committee of the Organisation for Economic Cooperation and Development (OECD) could produce a joint analysis on new and innovative funding modalities which might serve to narrow the Committee's focus.

ENIO CORDEIRO (Brazil) expressed his Government's strong support and commitment to the Committee's constructive dialogue on financing for development. The adoption of resolution 52/179 was certainly one of the major achievements of the Committee during its last session. It must build on that momentum. An international conference, special session or other appropriate high-level forum should be held, not later than the year 2001, to approve a work programme and practical recommendations to further a broad-based partnership for development. Such a forum would also help to promote a better appreciation of the mutual benefits that effective channels of financing for development could bring to both developed and developing countries. States must now concentrate on defining a substantive agenda that integrated the main issues to be considered.

Brazil favoured a broad agenda that included traditional issues related to ODA and development cooperation, which remained central, he said. The agenda should also include an open consideration of the policy issues related to the maintenance of an enabling environment for development at the domestic and international levels. Other important elements to be discussed included: the role of trade, market access and trade liberalization; the need for better regulation of capital flows; and the strengthening of institutional capacity to prevent and deal with financial crises.

A broad approach to the subject must also recognize the increasing participation of developing countries in the global economic and financial markets, he said. Developing countries accounted for nearly half of the world's output. By the year 2010 those countries would account for nearly 60 per cent of the global consumption and also of global capital formation. Those statistics raised the issue of whether those countries should be granted greater and more effective participation in decision-making and standard- setting. That question must also become part of the Committee's discussion.

EMILIANO PEREZ (Dominican Republic) associated himself with the statement made by the representative of Indonesia on behalf of the Group of 77 and China. He said the philosophy of Benjamin Franklin, that it was preferable to go to bed without dinner rather than wake up in debt, applied to

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the situation in the Dominican Republic. In the last one-and-one-half years, the current Administration had succeeded in reducing the country's debt by some 10 per cent. However, a review of the allocations by the United Nations Development Programme (UNDP) arrived at the sad conclusion that for each poor Dominican, it was earmarking $1 per year. In addition, the Dominican Republic paid more for foreign debt in 1997 than the capital it received through loans and international cooperation, making it "a net capital exporter".

While great effort was being made by developing countries to "emerge from the endless tunnel of poverty", external debt remained an obstacle to their development, he said. Mechanisms should be established to create an awareness in the private sector of each country. In addition, greater participation was urged in the financing of development, including an increased flow of capital to rural areas, as well as a revision of the philosophies of the Bretton Woods institutions.

SAVOR TIANOV (Russian Federation) said a consideration of financing for development should be based on consensus and geared to giving a new impulse to strengthening international economic cooperation. The procedures chosen in such a consideration should be systemic and comprehensive in nature and take into account the interest of all countries. They should also include internal aspects of development financing, as well as external factors that affected internal efforts.

Among internal aspects, he stressed several issues, including the macroeconomic policy of States, fiscal and monetary policies, relevant legislation and the role of the private sector. In considering external support for development financing, attention should be paid to external debt, private financial flows and international trade. The last two issues were of particular importance to countries with transitional economies. Besides the active participation of all countries, discussions should include representatives from the relevant organizations of the United Nations, including the Bretton Woods institutions, development banks and academic institutions. Briefings and seminars held prior to the Assembly's fifty-third session might also play a useful role.

ALAN MARCH (Australia) said the Committee's consideration of financing for development should stress that key financial and human resources had their greatest value in the development impacts they produced. His Government's key concern was the priority development results such funding achieved, not the quantum of funding available. Any consideration of financing for development must include the output side of the equation and not be limited to the input or fund-raising side. The human and social dimension of development should also not be lost in an examination that was likely to be dominated by financial and economic considerations.

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Financing for development was considerably broader than just ODA, he said. While the figures varied depending on the source of the research, ODA accounted for 10 to 12 per cent of development investment. National domestic saving contributed 35 to 45 per cent and the private sector 50 to 60 per cent. In addition to traditional questions of ODA levels, any consideration of development financing should examine, for both domestic savings and private sector investment, the following: the source; conditions necessary to enhance flows; and effective utilization of those sources.

The Committee should examine the need for case studies of successful development, he said. The contemporary development context should also be assessed. On the income side of the equation, Australia also advocated consideration of ways to maximize the sources of development investment. Regarding the outcome side, there was a need to examine aid effectiveness, the efficiency of investments and the necessary policies to maximize development investments.

The Observer for Switzerland said that he intended to take active part in a constructive and imaginative way in the deliberations of the working group, in order to help put the exercise on track. In that regard, the working group might start up quickly next fall (in the northern hemisphere). He shared the view of several delegations that the working group should tackle the subject of financing of development in a much broader framework, and analyse the subject from the standpoint of its effect on development, including input and output.

He said that given the rapidly changing landscape against which the working group would deliberate, it was difficult to predict where the process would lead. However, that did not mean that the process should prevent adoption of even partial solutions. In view of the common challenges that lay ahead, the group was duty-bound to find common solutions to the problem. In that regard, he was prepared to help as much as possible.

OSCAR DE ROJAS (Venezuela), Chairman of the Committee, said the Committee's strong and meaningful debate had launched a process that would become part of the history of the consideration of international economic issues in the United Nations. Now it was the responsibility of governments to ensure that the momentum was maintained.

Summarizing the work of Committee during the Assembly's fifty-second session, he said that it had been an extremely successful period. While the process had often been intense, it had also been fruitful due to the cooperation of all delegations. The general debate had been useful and stimulated discussion on specific subjects. The Committee adopted 32 resolutions on a great variety of items. That total was 11 fewer than the

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total in 1996, and that demonstrated the Committee's continuing efforts to streamline its work and eliminate efforts that were not necessary.

He stressed the importance of two resolutions adopted by the Assembly on the Committee's recommendation. One was resolution 52/179, which had established the resumed session and put into motion the convening of the high- level international intergovernmental dialogue on financing for development. The other was resolution 52/186, on the renewal of the dialogue on strengthening international economic cooperation for development through partnership.

The Committee had been discussing the necessity of reactivating the discussion of the fundamental economic themes and inscribing them on the agenda of the United Nations, he said. Now, as a result of the work accomplished during the past year, the Committee had the tools to make that opportunity a reality. The Committee must respond to challenge and seize the momentum and not squander that rare opportunity.

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