RESTRUCTURING INTERNATIONAL FINANCIAL SYSTEM, DEBT RELIEF RAISED IN SECOND COMMITTEE
Press Release
GA/EF/2817
RESTRUCTURING INTERNATIONAL FINANCIAL SYSTEM, DEBT RELIEF RAISED IN SECOND COMMITTEE
19981008 The international community must restructure the international financial system to meet the challenges of a changing economic environment, the Second Committee (Economic and Financial) was told this morning as it continued its general debate on the world economic situation.The current financial crisis was a temporary setback in the long-term process of globalization, said the representative of the Republic of Korea. To stem the contagious effect of the crisis and the prospect of a world recession, national efforts must aim to restructure the financial sector, and improve transparency and corporate accountability. Such efforts were a precondition for financial liberalization.
The representative of Venezuela said the time had come to rethink and redesign global financial architecture because the current system was not designed to deal with current financial crises. Such global institutions as the World Bank could play a crucial role in a redesigned system. Discussion of any new design, however, must carry with it the moral authority of the United Nations.
Several other representatives spoke on the importance of finding solutions to relieve the crushing debt burden suffered by developing countries. The representative of Zambia said debt sustainability was crucial. He supported an emergency moratorium for developing countries experiencing payment problems due to the current international financial and economic turmoil. The international community needed to face the reality that there was a need for deeper debt reduction and, in some cases, complete write-offs.
The representative of Mexico said there must be a return to sustained economic growth. The world could not allow the global financial crisis to burden vulnerable segments of society. International financial institutions must work to prevent, manage and resolve crises. An early warning system was needed to detect negative financial symptoms. She added that globalization carried with it responsibilities -- countries had to take steps to prevent their economies from sliding into stagnation.
Statements were also made by Ecuador, Libya, Yemen, Benin, Kazakhstan, Sudan, Croatia, Philippines, Papau New Guinea and Guatemala.
The Committee will meet again at 3 p.m. to continue its general debate.
Committee Work Programme
The Second Committee (Economic and Financial) met this morning to continue its general debate.
Statements
LUIS VALENCIA RODRIGUEZ (Ecuador) said that, given the impact of the global financial crisis, it was important that economic resources be channelled into productive areas, particularly in the developing countries. Governments must ensure that efforts at macroeconomic control and economic liberalization find their counterpart in adjustments at the international setting, including the opening of international markets and increased transparency. Some countries continued to pursue policies which restricted free trade, while the policies of others did not live up to a free trade philosophy and thus prevented developing countries from pursuing economic progress.
Ecuador's economic programme aimed to encourage financial and international cooperation, he continued. The United Nations Conference on Trade and Development (UNCTAD) must focus on promoting free trade and keep the effects of trade, the environment and trade protectionism on the international agenda. Latin American countries were tackling the impact of globalization -- an issue which should be considered at the United Nations. The need for a properly governed international financial system could be considered along with other issues, such as the need for a more equitable distribution of income. Efforts must be made to promote stable flows of capital and international cooperation in promoting harmonious development and sustained economic growth. The United Nations specialized agencies, particularly those involved in development, should be part of the effort. The debt-service burden of developing countries must be urgently addressed. The international community must promote an alternative viable payments system that did not undermine development.
The El Niño phenomenon had had serious, adverse consequences for people, the environment and the global economy, particularly in the developing countries, he said. His Government was grateful for the disaster relief work done by the United Nations in mitigating the effects of El Niño.
ALBERT M. MUCHANGA (Zambia) said the process of globalization would continue for a long time to come. However, there were legitimate calls for an orderly and cautious approach to capital account liberalization. The need for debt relief was urgent. It was crucial to achieve debt sustainability for all developing countries. He supported an emergency moratorium for developing countries experiencing payments problems because of the current international financial and economic turmoil. The international community needed to face the reality that the evolving international debt strategy must be radically
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set in a developmental context through deeper debt reduction and, in some cases, complete write-offs.
He said that conditionalities were becoming an increasing feature of development cooperation and needed to be reconsidered. Although world trade in goods and services had grown considerably in the past 30 years, that growth was not enjoyed in all regions of the world. Africa's share of world trade had dropped from 2 per cent to 6 per cent. There was a need to improve market access for developing countries by avoiding protectionism and competitive devaluations. Developing countries required support to diversify away from heavy dependence on the production and export of commodities.
ALI AUJAI (Libya) said that military conflicts, the drop in commodity prices, and hindrances to trade were unacceptable in a world working to eradicate poverty. The worsening condition of the economies of Africa, he noted, threatened the extinction of the human species. Development was our weapon against poverty, hunger and sickness. Today, more than at any other time, it was important to respect international commitments to official development assistance (ODA), and to provide additional financial resources. Developing countries have had some success, but the costs of debt servicing had made the provision of housing, health services, education and foodstuffs difficult. Urgent measures must be adopted to cancel debt.
He said restrictive policies on trade hindered the movement of people, as well as capital and technologies. Unilateral actions, such as sanctions, were legacies of the cold war, and restrictive laws adopted by the United States Administration were damaging to those outside the territory under the legislative authority of that State. Those laws undermined the United Nations Charter and were in flagrant contradiction to provisions of international law. They interfered with the sovereignty of States, and damaged economies. The international community must work to cancel such fascist kinds of legislation, he said, and his country was prepared to offer a draft resolution to put an end to such laws in order to foster a new international order, free of restrictive unilateral measures, and based on justice and respect.
We now lived in an era of great monopolies supported by globalization, and conditions were unfavourable to the South in its relationship with the North. Rebuilding the Bretton Woods institutions should be done according to new formulas. He said that the International Monetary Fund (IMF) and the World Bank had become usurious organizations, and their credit policies had become means of collecting interest. The winds of democratic change must reach them too, because the prosperity of the North could not last as long as poverty existed in the South.
CARMEN MORENO (Mexico) said the Committee should address the economic challenges in the world today. This was an especially difficult time marked by extremely volatile markets. Despite that, Mexico was committed to maintaining the strength of its economy through structural adjustment policies
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that would guarantee its stability and growth. The international community needed to find new ways to achieve economic stability and growth. It must be understood that globalization carried with it responsibilities -- countries had to take necessary steps to avoid having their economies slide into stagnation.
She added that there was a need to highlight the growing challenges of the global economy and bring education and imagination to bear on resolving the problems involved in achieving global financial security. International financial cooperation was also essential. There must be a return to sustained economic growth and the world could not allow the global financial crisis to unduly burden vulnerable segments of society. International financial institutions must work to prevent, manage and resolve crises. There was also a need to design an early warning system to detect negative financial symptoms early so as to avoid the most adverse impact.
LEE SEE-YOUNG (Republic of Korea) said the current financial crisis was a temporary setback in the long-term process of globalization. To stem the contagious effect of the crisis and the prospect of a world recession, efforts must be made at the national level to restructure the financial sector and improve transparency and corporate accountability. Such efforts were a precondition for financial liberalization. The international community must endeavour to restructure the international financial system to meet the challenges of a changing economic environment. An international financial architecture must be formulated to respond effectively to future financial crises. An improved collaboration between the United Nations and the Bretton Woods institutions would promote a common understanding and consensus on an international financial architecture.
He said the main industrialized countries needed to take immediate steps to spur economic growth to avoid a world recession. They must also keep their markets open and continue to absorb imports from crisis-affected countries. The international community must promote policies aimed at fostering consensus on developmental strategies for the next century based on liberalization and free-market mechanisms. The objective of future development cooperation should be to raise living standards for all and assure sustainable development by integrating developing countries into the global economy. The international community should develop policies through extensive discussions that included all actors in development cooperation. His Government would co-host a regional meeting for nations of Asia and the Pacific from 30 October to 1 November. The Republic of Korea was firmly committed to supporting the development of other developing countries, especially through South-South cooperation, despite its current economic difficulties.
OSCAR DE ROJAS (Venezuela) said the time had come to rethink and redesign global financial architecture. The current international financial system was not designed to deal with the financial situation and the crises that existed today. The meetings going on in Washington on the global
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financial situation were positive and he applauded any initiative to put those issues on the table. There was a need, however, to have such discussions reach the United Nations, which was the most appropriate organization to deal with such problems. Within the United Nations, the world community could take a fresh look at the global financial system.
He added that he was not calling for the abolition of the World Bank or other global financial institutions. Such institutions could play a crucial role in a redesigned system. Discussion of any new design must carry with it the moral authority that came with the United Nations. One very important job of the Second Committee was to put forth new solutions and ways to carry them out. Economic and social justice must be incorporated in the new architecture of financial relations.
AHMED AL-HADDAD (Yemen) said that anyone surprised about slow development among least developed countries should note that those countries invested too much of their financial resources paying debt service. Therefore, if one were interested in witnessing comprehensive and sustainable development, one must first address the problem of debt. His country believed that inattention to the problem of debt-service payments compounded difficulties caused by countries which had not lived up to their political commitments on ODA. Those problems, he noted, added up to a situation wherein, according to a United Nations document, one fifth of mankind lived on one dollar per day. Rather than allowing financial difficulties to marginalize least developed countries, access of the exports of those countries to world markets should be promoted.
The international community, he added, should exercise its political will and implement the programme of action for least developed countries and, at the same time, begin preparations for the United Nations conference on least developed countries which was planned for 2002.
He urged members of the international community, including the IMF, to promote technological assistance to least developed countries so that they might be able to avail themselves of the opportunities of globalization, and also to create momentum to revitalize the world economy through just partnerships and interdependence.
CHARLES TODJINOU (Benin) said that society was marked by economic interdependence, and the United Nations must change to adapt to that new world structure. There was a new awareness of the growing role of the United Nations in fostering cooperation among nations. Solidarity was a precondition in a world where economies were so closely linked. Such solidarity should be shown in ODA, which had dropped and was now at its lowest level. Steps must be taken to correct that downturn. Developed countries should meet completely their obligations in that regard and there should be a fairer burden-sharing among donor countries.
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He said the question of debt relief for developing countries must also be examined closely. Debt for the least developed countries was a very heavy burden which undermined growth and development. Only a show of solidarity could promote debt relief. Development was not a luxury, it was a necessity and the right of all peoples. Developing countries continued to be marginalized. For those countries to be effectively included in the world economy, greater technology transfer and free trade was a necessity.
AKMARAL KH. ARYSTANBEKOVA (Kazakhstan) said her country's priority task was the growth and development of its economy. It had established an economic policy council to monitor the world economy, analyse world capital, commodity and services markets and draw up the necessary measures for mitigating the consequences of the world financial crisis for Kazakhstan's economy. Its goal was to make the transition from a commodity-oriented economy to the manufacture of finished products that were competitive on world markets. To that end, work was under way to create a favourable investment climate. Kazakhstan attached great importance to the development and strengthening of national financial institutions.
As a landlocked country, she said, the issue of access to world trade routes was vitally important to Kazakhstan. It attached great importance to cooperation with the United Nations in the development of transit transport systems in the landlocked central Asian States. During the current session of the Assembly, her Government would coordinate a resolution on the transit environment in the landlocked States for submission to the Second Committee. She stressed the importance of regional cooperation and called attention to the Economic Cooperation Organization, a trade organization which brought together 10 States. Noting that a negative aspect of globalization was the exacerbation of environmental problems, she appealed to Member States to provide Kazakhstan with financial and technical assistance to overcome the environmental disasters in the Aral Sea and Semipalatinsk regions.
MUBARAK HUSSEIN RAHMTALLA (Sudan) said there was a need to find adequate solutions to the challenges and risks of globalization. That was especially crucial to developing countries such as the Sudan. Such countries suffered from a number of restrictions on development, including restrictions on foreign development funds. There was a need to activate and redouble ODA. Developed countries should take into account the special needs of African States. To improve its economy, his country had decided to undertake economic reforms despite the possibly dangerous social consequences of such steps. This session of the Second Committee should develop special solutions for the economic problems of Africa.
He added that the IMF had recognized the Sudan's seriousness in its economic and political reforms. There had been a drop in the Sudan's inflation rate last year and the economic growth rate had increased. In light of that, the Sudanese people were shocked by the destruction of one of their development projects -- a pharmaceutical factory that was bombed by the United
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States. That factory produced half the medications needed for the Sudan and, due to the blockade imposed on the Sudan, those medications could not be imported. Records confirmed that the factory was conforming to the proper regulations. With the factory's destruction, the Sudan lost its capacity to manufacture medicines and lost more than 300 jobs for people who worked in the factory.
IVAN NIMAC (Croatia) said that States must consider the desirability of a new international financial architecture and whether it could be achieved through new mandates for the Bretton Woods institutions, or be a new organization entirely. The issue required a detailed analysis. Close cooperation through multilateral institutions, foremost through the United Nations system but also through other international economic forums, was paramount. No State was beyond the effects of today's web of interdependence. Although Croatia was one of the more successful States undergoing economic transition, the cost of transition at the micro level had in many cases been substantial. The structure envisaged by the Assembly for the continuation of the dialogue on financing for development should result in the creation of an ad hoc working group this session. For the most part, the disparity between the undertakings of States to provide ODA and the amount actually being allocated remained sizeable.
Recalling the major United Nations conferences since the 1992 Rio summit on the environment, the Commission for Sustainable Development and other mechanisms within the United Nations, he said United Nations efforts to link the cornerstones of sustainable development -- environment, economy and society -- had been a major success. The process of reviewing the implementation of the outcomes of the major conferences, together with the dialogue to be carried out in future conferences remained a priority. Croatia continued to work on the consolidation of stability and the promotion of development and was grateful to those bilateral and institutional donors that had been its partners in the reconstruction process. It looked forward to their continued assistance in the coming pledging conference.
FELIPE MABILANGAN (Philippines) said that financial turbulence in East Asia had adversely affected practically everyone, even those in the margins of the global economy. Those, particularly the developed countries, who had benefited in the short run in the form of lower prices of imported goods and services, were fully aware that other economic aggregates that might result from those benefits, such as a lower volume of exports, could be worrisome.
He noted that the current financial turbulence which came just about three years after the Mexican crisis, had exposed the inadequacy of existing institutions within countries and at the international level. It now appeared that countries must have the right financial institutions properly in place to match the pace of their capital liberalization. There was a growing feeling that the global financial institutions must be equipped with the wherewithal
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to deal with a situation where the flow of short-term capital had a dominant role.
To stabilize the situation, countries seriously affected by the crisis must adjust their policies, while developed countries should adopt a more expansionary fiscal policy, keep markets open and enhance credit facilities. Sufficient stimulus to domestic demand within affected countries is important and more government outlays were necessary in the wake of the retreat of private sector expenditures. Such an outcome was possible if sufficient support from external sources was forthcoming, he said.
He supported greater transparency and reporting for better functioning of financial markets, comprehensive and timely disclosure of nations' international reserve positions and internationally accepted norms to assess domestic credit worthiness in order to better address an international situation where capital market held an important role.
ADAM DELANEY (Papua New Guinea) said that economic globalization was not yet global, especially with regard to the peace and prosperity that it had once promised. Economic globalization was global, however, in the marginalization and distortions it had caused to developing countries. The global financial crisis was the result of the official sector's inability to react to the problems of the private sector. It was now clear that it was the responsibility of States to protect their people from instability.
He said that every country and region had different circumstances which required different strategies to achieve stability and self-reliance. His country remained committed to the economic liberalization process. It was currently responding to external insistence to strengthen economic policies. The Government was initiating measures for sustainable growth and for bringing down public debt. One thing for international institutions to keep in mind was that financing for development must be country specific, tailored for the particular needs of a country.
SILVIA CORADO-CUEVAS (Guatemala), speaking on behalf of the seven countries of the System of integration of Central America (Costa Rica, Dominican Republic, El Salvador, Honduras, Nicaragua, Panama and Guatemala) noted that a united Central America was far more capable of managing globalization and turning it to advantage. However, the international community must strive to achieve more fairness in globalization's benefits and burdens. A joint position of the Central American States on environmental issues, such as protecting and conserving the coral reefs of the mid-American Caribbean was imperative, and she asked the international scientific community to put its assistance and knowledge at the disposal of the people in greatest need, in order to prevent, reduce and repair the effects of natural disasters.
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She saluted the creation of a working group to carry out substantive analyses and organize conferences on development financing. Such a group would provide an opportunity to address the ramifications of financial crises that the international community was currently enduring. She urged that development aid not be permitted to impact the democracy and governability of Central American countries. Endorsing the $1.1 billion funding target for United Nations core activities, she called for stable financial backing for operational activities.
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