PRESS BRIEFING BY PRESIDENT OF ECONOMIC AND SOCIAL COUNCIL

Press Briefing

PRESS BRIEFING BY PRESIDENT OF ECONOMIC AND SOCIAL COUNCIL

The type of crisis afflicting Asian economies could not be addressed in a stable manner by any single institution or country with its own view of the problem or its own policy prescriptions, Juan Somavia, President of the Economic and Social Council, told a Headquarters press briefing this afternoon. More than just sectorial measures were necessary to be able to tackle a complex systemic and multifaceted problem, he added.

Briefing correspondents on the ministerial communique on market access for developing countries issued by the High-level Segment of the Council's substantive session of 1998, Mr. Somavia said that some of the problems experienced in the past were the result of that sectoral approach, which tried to solve monetary issues exclusively through monetary or financial means while the problem was much more complex. The Council was trying to promote an integrated policy outlook, "so that we each work within our own mandate but have a common objective".

Another issue emerging from the high-level segment, held from 6 to 8 July, was the need for the international financial system to have a rapid global response capacity to that type of crisis, he said. The consciousness was growing that the capacity for global reaction could not come from one part of the policy instruments available; it was necessary to look at the whole.

He said that from the United Nations point of view the Council had a particular worry about the effects of the crisis on workers and on the need for a safety net and security while proceeding to the type of structural adjustments the crisis may need.

Mr. Somavia said that one aspect emerging clearly from the substantive talks was the need to beware of premature financial deregulation. Without doubt, short-term capital movements were partly the basis for the crisis afflicting Asian countries. The conclusion was that there had been a lot of emphasis on the theory of financial deregulation and much less on the practice of it.

He added that it was necessary to be careful because problems were inevitable if banking systems or legal frameworks were not strong enough. Certain deregulation criteria left room for cronyism and other abuses of the financial system. One also had to be cautious of the "herd mentality" of markets, which tended to stampede first in one direction and then the other. That was not a sound basis for the regulation of international financial flows.

Another question considered, particularly in the high-level segment of the ministerial meeting, was the whole issue of access to markets, he said. There was a generalized feeling that the continued expansion of international

Somavia Briefing - 2 - 9 July 1998

trade, which had been 14-fold since the end of the Second World War, was a key element of stability. There was also a generalized understanding of the need for that expansion to continue. However, there was very clear agreement that the products of developing countries, particularly the least developed ones and those of Asia, still faced enormous difficulties in reaching the developed economies. Those points were very strongly made.

A correspondent asked if the United Nations was in danger of being "squashed by the giants" -- the International Monetary Fund (IMF) and the World Bank -- when they came to discuss economic policy at Headquarters. What could the United Nations offer as a counterweight?

Nitin Desai, Under-Secretary-General for Economic and Social Affairs, said the 1990s had proved to be probably the most creative decade of the United Nations in the economic and social field. In retrospect, the Organization was the only place where the major economic and social issues were systematically addressed in a systemic way. It began with children, environment, human rights, population, social development, cities, food and women. The whole set of conferences demonstrated that the world body was "on the ball", and that it could make decisions and produce consensus on highly difficult issues. The contribution of the United Nations was the direction and the vision.

The same correspondent said that the Organization went through exactly the same process in the 1970s. All those conferences were follow-ups of conferences held in that decade, but the "big guys" did not listen and nothing happened. What would prevent the same thing occurring again? he asked

Mr. Somavia replied that there was a qualitative change involving a very clear evolution in the perception of people, civil society and the world beyond the governments. From one issue to the next, the level of organization in society today was incomparable to the 1970s.

He went on to say that the "policy certitude" thrust upon the world in the last 10 or 15 years was proving not to be as certain as it should be. Things were not turning out the way the world had been told they would. The market operators were supposed to understand the market six or eight months before the Asian crisis erupted, but the market itself obviously did not have the capacity to look ahead.

The international institutions with principal responsibility for that issue, although they were in direct dialogue with the countries concerned, were not putting up the necessary "yellow signals", he continued. People in business and in government, as well as ordinary people, all shared the same problem of uncertainty: nobody could predict what the situation would be five years from now.

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