MINISTERIAL ROUND TABLE CONSIDERS NATIONAL RESPONSES TO ECONOMIC AND SOCIAL IMPACT OF GLOBALIZATION

Press Release
GA/9440

MINISTERIAL ROUND TABLE CONSIDERS NATIONAL RESPONSES TO ECONOMIC AND SOCIAL IMPACT OF GLOBALIZATION

The greatest problem confronting Ghana, and Africa as a whole, was the world's perception of a continent that could never be brought into the forefront of the global economy, Dan Abodakpi, Deputy Minister for Trade and Industry of Ghana, told the General Assembly this morning as it continued its high-level dialogue on the social and economic impact of globalization and interdependence and their policy implications.

Addressing a ministerial round table on the topic of the "social and economic impact of globalization: national responses", he stressed that it was difficult for African countries to attract foreign direct investment and move their economies forward. It was important for the world to focus on Africa's positive aspects and recognize that the crisis there was due to its marginalization in the global economy.

Liz O'Donnell, Minister for Development and Cooperation of Ireland, said the requirements to take advantage of globalization included appropriate macroeconomic policies; developing management and institutional capacity; and strengthening domestic levels of savings and investment. For developing countries, that was easier said than done. They required investment in human capital and modern technology, a reasonable stability of financial flows, fair commodity prices, and an easing of the debt crisis.

Ali Alatas, Minister for Foreign Affairs of Indonesia, said developing countries needed to liberalize in stages rather than all at once. A country's legal and financial infrastructure had to be imbued with the sophistication needed to cope with the growing complexities of world finance. Financial reform should be in terms of new regulations needed to anticipate and respond to fresh challenges since too liberal a banking policy might not be able to withstand various risks.

Nitin Desai, Under Secretary-General of Economic and Social Affairs, said the various panels over the past two days had discussed the pace of liberalization, which they felt was far ahead of institutional development.

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They had recognized there was a government deficit both at international and national levels. Identifying that deficit and addressing how it could be corrected were the questions that needed to be asked.

Also participating in the round table were: Brian Atwood, Director of the United States Agency for International Development; Dawlat Hassan, Assistant Foreign Minister for Economic Affairs and International Cooperation of Egypt; Koichi Haraguchi, Deputy Minister for Foreign Affairs of Japan; Montek Singh Ahluwalia, Minister of State of India; Huguette Labelle, President of the International Development Agency of Canada; and Rogelio Martinez Aguilar, Senior Adviser to the Vice-Minister for Foreign Affairs of Mexico. Helmut Schafer, Minister of State of Germany was the Chairman of the round table.

Also making statements were representatives of the Netherlands and Malaysia, as well as of the United Nations Population Fund (UNFPA),and the United Nations Children's Fund (UNICEF).

A second ministerial round table will be held at 3 p.m. today to consider the topic of "the social and economic impact of globalization: international responses".

Assembly Work Programme

The General Assembly this morning continued its high-level dialogue on the social and economic impact of globalization and interdependence and their policy implications by holding a ministerial round table on "the social and economic impact of globalization: national responses". (For background information on the dialogue, see Press Release GA/9437 of 17 September.)

Statements

HELMUT SCHAFER, Minister for State of Germany and Chairman of the ministerial round table on "the social and economic impact of globalization: national responses", said that the plenary and informal panel discussion that took place today and yesterday showed that globalization was no longer a question for countries, but a fact that was both beneficial and risky. There was consensus on strengthening banking systems and regulatory mechanisms, as well as a need for sound macroeconomic policies. One important aspect for consideration was the issue of the degree of liberalization for developing countries.

BRIAN ATWOOD, Director, United States Agency for International Development (USAID), said that some of the comments made yesterday during the plenary were highly constructive. Noting that it was impossible to go back to closed economies, he detected a sense of great frustration at the fact that governments had lost control. All governments, including those in the industrialized world, were feeling a sense of powerlessness in the wake of globalization. They should now focus on what could be controlled and where appropriate impact could be made. There was also need to address the factors that contributed to fear and to the flight of capital from countries.

He said trading mechanisms could be strengthened through assistance. Basic economic mechanisms had to be reinforced to inspire confidence in foreign investors as well. There was also a need to deal with the irrational moves of speculators and investors. More information should be made available to them rather than allowing them to react to what they thought was going on in the market place. The United States also needed to do more. He stressed that it was also important to think about the contribution that development assistance could make. In addition, it was essential for richer countries to help poorer countries put social safety nets in place, in order to protect those affected by capital flows. Ultimately, the key, however, was to not see globalization as an evil.

LIZ O'DONNELL, Minister for Development and Cooperation of Ireland, said her country had gained from globalization. That was due to the fact that it was a developed country with a highly educated workforce and also because it was a member of the European Union and highly attractive to foreign investors. The maintenance of partnership and consensus had played an important role in the management of the Irish economy by incorporating an income policy aimed at wage moderation. A series of social partnership agreements had permitted Ireland to pursue the continued development of an efficient modern economy

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capable of high and sustainable economic growth. It had also helped ensure that Irish society became more inclusive and that benefits of growth were more equally distributed.

For the 85 per cent of the world's population living in developing countries, the impact of globalization had been all too traumatic, she said. Traumatic because the requirements for participation in the global economy must at times have seemed impossible to meet given their development status. Also, because the impact of globalization internationally seemed to stifle, for many developing countries, even the possibility of nationally creating the very conditions for participation.

The requirements to take advantage of globalization included appropriate macroeconomic policies; developing management and institutional capacity; and strengthening domestic levels of savings and investment, she said. For developing countries, that was easier said than done. They required investment in human capital and modern technology, a reasonable stability of financial flows, fair commodity prices, and an easing of the debt crisis.

ALI ALATAS, Minister for Foreign Affairs of Indonesia, said the experience of the South-East Asian countries in financial turmoil showed that even the strongest countries were vulnerable. The development gains of several decades had crumbled within a few months. The market was driven by sentiments and not only financial and economic factors. The crisis also led to devastating social consequences, including massive unemployment, skyrocketing prices of commodities, significant increases in the number of school dropouts, and health problems. People living below the poverty level would increase to 80 million this year.

He asked what the proper national responses could be. First, developing countries need to liberalize in stages rather than all at once. Secondly, it had to be made sure that the country's legal and financial infrastructure was imbued with the sophistication needed to cope with the growing complexities of world finance. Thirdly, financial reform should be in terms of new regulations needed to anticipate and respond to new challenges. Too liberal a banking policy might not be able to withstand various challenges and risks. Fourthly, countries should have a social safety net.

DAWLAT HASSAN, Assistant Foreign Minister for Economic Affairs and International Cooperation of Egypt, said her country had put in place reform and structural adjustment programmes to restructure the economy and integrate it into the international market. While the programmes were intrinsically Egyptian, they had been supported by multilateral financial institutions. The most radical change in Egypt so far had been the shift from public sector domination to private sector leadership. The role of the state was now regulatory rather than operational and the private sector was now the engine of growth. The latter's scope had been widened and it was now given the lead in implementing all new mega projects.

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She said there were also major capital market reforms, and transparency had resulted in an increased investment base. Increasing the pace of liberalization was, however, not enough to attract investors to Egypt. A package of incentives and the removal of restrictions were therefore introduced making Egypt's investment climate one of the most liberal in the world. A social safety net was created and there was sustained improvement of overall living standards.

Dr. NAFIS SADIK, Executive Director of the United Nations Population Fund, said while globalization was a fact, and brought about changes and benefits, it had not been universally beneficial as a trend in relation to social sectors. The gap between rich and poor in countries was increasing. In many settings there was a reversal of positive social advances due to adverse macroeconomic trends, declining levels of official development assistance (ODA) and international financial crises. In the process of globalization, the role of the state needed to be more focused and clear.

KOICHI HARAGUCHI, Deputy Minister for Foreign Affairs of Japan, said globalization had been producing enormous risks and opportunities for the world. Some countries would get left behind in the process. If countries did not take the proper precautions, they would get drowned in the rough currents. Countries needed to make offensive and defensive responses in their policies and strike a proper balance between those two approaches. Some countries might put too much emphasis on the defensive responses but a balance was necessary for effectiveness.

Japan was taking a number of concrete steps to deal with the impact of globalization. First, deregulation was a major policy of the country. If too many cumbersome regulations were in place, globalization could actually suffer. Japan was promoting deregulation as a major step to enjoying the benefits of globalization. Secondly, Japan placed an emphasis on ODA as a measure to support the poor and vulnerable of the population. Official development assistance could be a means to defend them from the risks of globalization. It was also indispensable to develop certain sectors in which private capital was hard to come by, such as education and health care. Japan had been the largest ODA provider and despite being confronted with a severe fiscal situation, was still committed to providing ODA. MONTEK SINGH AHLUWALIA, Minister of State and member of the Planning Commission of India, said a great deal of discussion had focused on the difficult situation rising from the East Asian crisis. India perceived globalization as a process that was an inevitable reality. It was not just inevitable but potentially a positive development, holding out the possibility of significant gains. He asked how countries could manage that process.

It was not possible to say that it was an inevitable, positive process and then not opt into it, he said. If countries did not respond to it, they would lose out on the benefits to be gained by exploiting globalization. If a country opted in, then it had to decide on an optimal response, which involved the issue of pace and sequencing. That response did not have to be the same in all countries and depended on particular situations. Secondly, however a

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country decided to pace and sequence, there was an enormous advantage to conforming to international policies. Large capital flows and the ability to attract direct foreign investment were very important. The unhappiness in developing countries over rating agencies exemplified that problem. The international community could help by creating and supporting a more eclectic attitude towards countries globalizing.

Thirdly, even if a country got all of that right, it would still have domestic problems because some people would get left behind, he said. There was no way to ensure that every section would benefit equally. That would pose long-term domestic problems and people would get hurt in the process of restructuring. A more intrusive role of the State and social safety nets were also necessary for a strategy for effective globalization.

STEPHEN LEWIS, Deputy Executive Director of the United Nations Children's Fund (UNICEF), asked participants "why in an era of globalization, a so-called harbinger of prosperity, do we witness the wide-scale recrudescence of those described by Franz Fanon as the wretched of the earth -- the children and women who not only live under conditions of horrendous poverty, but who are also in danger of being written off by their nations and the world?" Why, if information was regarded as a currency more valuable than money itself, was there a lack of vital data about social indicators? That was crucial information that told a government where to intervene and how to plan the most economical and effective ways to combat poverty. Where globalization was concerned, far too much was left to abstraction with calamitous consequences. "These are human lives we are trying to protect, not currency movement", he added.

He said the international community could surely develop the pattern where no economic decision-making would lack the presence of qualified experts, armed with information needed to assess the impact of their decisions on children, on the poor, and on those at the periphery of national life. The final question to be asked was, "how do we get national planners and policy makers to integrate child and human rights into their work?" Would they accept the imperative that those rights include universal primary education and health care? What would be the result if national policy makers came to believe that there was simply no economic advantage in protecting the rights of the most marginalized?

JAAP RAMAKER (Netherlands) said his country had placed a lot of emphasis on modernizing its infrastructure. It was redirecting its education system and the market was under severe scrutiny. It also had a sound budgetary policy. The fact that "we are living in an uncertain world" was the point of departure for the international community. The Netherlands in the coming year would increase its contribution to multilateral cooperation. That type of cooperation was an enormously important element that had to find its place in the globalized world.

He said the question raised by the Secretary-General about the role that the United Nations system could play in the evolving world was a very

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important one. Official development assistance was critical and had to increase. He hoped that the World Bank and the International Monetary Fund (IMF) could be strengthened. Financial safety nets were extremely important, he said, expressing his hope that the IMF could play the role it was intended to play without closing its eyes to the social aspects.

DAN ABODAKPI, Deputy Minister for Trade and Industry of Ghana, said the processes of globalization, especially if it adopted a human face, could only bring about improvements in the world, particularly in sub-Saharan Africa. The greatest problem confronting Ghana, and Africa in general, was the perception of the world community of Africa as a continent that could never be brought into the forefront of the global economy. It was difficult for African countries to attract direct foreign investment and move their economies forward. Since 1983, Ghana had been committed to economic restructuring programmes that were well known globally. That resulted in a vibrant, emerging stock market and non-banking financial sector. Within 15 years, Ghana had kept up with changes and adopted pro-active telecommunications policies. It had put into place, various measures to derive full benefits from the globalization process.

There was a need for cross-border trade regulations to promote trade among neighbours, he said. His country had the Ghana Free Zone Acts, which contained well-defined incentive packages to ensure that the export sector developed. Ghana had also liberalized its skies to provide greater access for international airlines. There was also a need to develop the human potential of the economy. In conclusion, it was important for the world to erase the mindset that Africa was a continent of trouble and focus on its positive aspects. The crisis in Africa was due to its marginalization in the global economy.

HUGUETTE LABELLE, President of the International Development Agency of Canada, hoped that the results of the current deliberations would be brought to the General Assembly to enlighten its deliberations and to the meeting of the Bretton Woods institutions in November. If there was an enabling environment for investments, adequate infrastructure and a level of human capacity, then investment would come. However, it would come to those regions or countries that had natural resources or special people strength. Therefore, support from ODA and international multilateral systems was needed to build support for individualized safety nets for countries and regions. Many people had commented on the decline in ODA and she hoped there would be a new wave to see that decline reversed.

ROGELIO MARTINEZ AGUILAR, Senior Adviser to the Vice-Minister for Foreign Affairs of Mexico, said the only way to deal with the process of globalization in a sound way was through shared responsibility. Problems needed to be confronted together and at the national level. The measures his country had adopted to move forward and deal with globalization problems included sound financial domestic policy. He was convinced that internal savings were not enough, and it was urgent to have international financial markets that were not speculative. In the framework of promoting internal

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savings, Mexico had undertaken structural reforms. An orderly fiscal policy was also necessary to promote savings and investment, and generate public savings at a time when resources for investments were so needed.

There was also a need for human capital, which was the richest resource, he said. Reform in the domestic financial markets had made it possible for Mexico to resolve its crisis in 1995. He was convinced that a similar course was necessary for the current crisis. Also, shared responsibility at the international level was needed.

HASMY AGAM (Malaysia), said it was only in the recent months that so much attention had been given to globalization and liberalization. The various crises had made the world more sensitive to such processes. He noted that countries wanted to grow and once they had done that, they wanted to distribute. That was equity and social justice. Some countries had good infrastructure. Private capital would flow to profits and to where there was less risk. The world had no problem with the real investment that would enhance the development of a country.

He said he was struggling to come to grips with the situation where countries had grown and amassed great reserves, but where the movement of capital, particularly short-term, would basically dwarf the reserves held by a country and make a mockery of all the macroeconomic policy planning. A key question to be asked was, what kind of national response could a country put in place to handle a crisis situation that was basically beyond its available solutions.

NITIN DESAI, Under Secretary-General for Economic and Social Affairs, said the origins of the debate did not lie in the current crises. The high-level dialogue was proposed by Indonesia some four years ago when that country was really benefiting from the globalization process. The proposal came about when the South-East Asian crisis did not exist, he stressed. However, the timing of the present dialogue was such, that it took place when there was recognition that there was "something out there that needed to be addressed". Panels had discussed the pace of liberalization which they felt was far ahead of institutional development. They had recognized there was a government deficit both at international and national levels. Identifying that deficit and addressing how it could be corrected were the questions that needed to be asked.

He said that another concern of the panels was the social and equity dimensions of globalization. They also felt that there was a need to combine commitments on trade liberalization and development assistance. Panels also recognized that the social dimensions were an issue for both developing and industrialized countries. The purpose of the entire exercise was to link discussions on global financial issues to social issues.

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