SOCIO-ECONOMIC COSTS OF CORRUPTION ENORMOUS, SPEAKERS TELL SECOND COMMITTEE, SAGGING COMMODITY MARKETS, INDUSTRIAL DEVELOPMENT ALSO DISCUSSED
Press Release
GA/EF/2823
SOCIO-ECONOMIC COSTS OF CORRUPTION ENORMOUS, SPEAKERS TELL SECOND COMMITTEE, SAGGING COMMODITY MARKETS, INDUSTRIAL DEVELOPMENT ALSO DISCUSSED
19981013 Corruption and bribery hindered national economies and impeded economic development, speakers told the Second Committee this afternoon as it discussed industrial development, corruption and other topics.The socio-economic costs of bribery were enormous, said the representative of Austria, speaking for the European Union and associated countries. Corruption raised transaction costs and uncertainty in an economy; it led to inefficient economic outcomes and undermined the State's legitimacy. The greatest victims of corruption, he added, were usually the poor.
The representative of the Russian Federation said corruption was one of the most serious impediments to economic development in his country. Corruption was extremely difficult to eradicate from some business sectors and a federal law on fighting corruption was currently being finalized. Fighting corruption was a priority for his Government and it was very interested in the positive experiences of other countries in that area.
The mushrooming of international trade and investment had again brought the issue of corruption to centre stage, said the representative of the United States. Regional initiatives had an impact in catalysing national legislation and motivating nations to amend legislation to reflect recent developments on the issue. States were now addressing such issues as bank secrecy provisions and mutual assistance legislation.
Also this afternoon, the Committee discussed industrial development questions with many speakers stressing the need for international cooperation in that area. The representative of Indonesia said industrial development cooperation was especially crucial given its continued urgency in promoting economic acceleration and social development. The industrialization process in the developing countries continued to face formidable challenges however, especially within the context of surging globalization.
On the topic of commodities, a number of delegations said that the sagging commodity market was especially damaging to the economies of developing countries. The representative of China said the current economic environment did not provide sufficient international support for commodity
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markets and trade protectionism had caused the price of commodity exports to remain low. The developed countries should help the least developed increase their production capacity and they should eliminate their trade tariff barriers.
Statements were also made by the representatives of Myanmar, Egypt, Norway, Ukraine and the Democratic People's Republic of Korea. A statement was also made by the observer for the Holy See.
Carlos Sersale di Cerisano, Assistant Director-General for United Nations Affairs and Special Representative to the United Nations System for the United Nations Industrial Development Organization (UNIDO), also spoke.
The Committee will meet again at 3 p.m. on Wednesday, 14 October, to consider the topic, operational activities for development.
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Committee Work Programme
The Second Committee (Economic and Financial) met this afternoon to continue its consideration of macroeconomic policy questions focusing on commodity issues. It will also take up sectoral policy questions concerning business and development and industrial development cooperation.
The Committee had before it a report of the Secretary-General to the General Assembly, prepared by the United Nations Conference on Trade and Development (UNCTAD) (document A/53/319), on world commodity trends and prospects. The report had been requested by the Assembly in resolution 51/169 of 16 December 1996.
The report noted that during the period 1985-1997 primary commodity prices experienced one of the least favourable trends in recent decades. With the onset of the Asian crisis in mid-1997, the prospects of many commodity markets became even more uncertain. However, they continued to be a major source of foreign exchange earnings for a large number of developing countries. Conscious efforts by those countries to improve the productivity of their commodity production and to identify emerging opportunities, particularly in non-traditional areas, the report said, were a prerequisite for many of them to escape from further marginalization.
The report then examined a number of policy measures that could be taken by the developing countries, and associated international cooperation and support. It identified the main features of recent developments in selected commodity markets, such as foodstuffs, agricultural raw materials, and minerals and metals, and described the effects of the phenomenon known as El Niño. The erosion of trade preferences, partly as a result of the Uruguay Round of negotiations, had negatively affected diversification programmes, particularly in the least developed countries. Also, the excessive instability in export earnings adversely affected domestic savings and government budgets, as well as the import supply of capital goods and hence investment and growth.
The report recommended that the international community provide a favourable international environment and the requisite assistance for successful actions by governments of commodity-dependent countries through: fostering an open trading system, in particular, further reductions in protectionist measures; expansion of financial cooperation to facilitate management of excessive fluctuations in commodity export earnings; technical cooperation, to include training; and actions by non-governmental organizations to help commodity-based development. To improve trade finance and risk management, the possible use of commodities as collateral for loans was mentioned, as were new risk insurance facilities, the promotion of enhanced South-South cooperation and further trade liberalization in major developed importing countries through multilateral trade negotiations.
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A report of the Secretary-General on business and development, entitled Promotion and maintenance of the rule of law: Action against corruption and bribery (document A/53/384) was also before the Committee.
The General Assembly, by resolution 51/191 of 16 December 1996, had adopted the United Nations Declaration against Corruption and Bribery in International Commercial Transactions, and had requested the Secretary-General to report on steps taken to implement the resolution. In 1997, the Assembly requested further reports and consideration by the Commission on Crime Prevention and Criminal Justice (resolution 52/87 of 12 December 1997). Two reports which were submitted to the sixth and seventh sessions of the Commission were being provided to the Assembly (documents E/CN.15/1997/3 and Add.1 and E/CN.15/1998/3). Those reports contained an analysis of the information provided by Member States on action taken against corruption and bribery and information on action by Secretariat entities, intergovernmental and non-governmental organizations and the Expert Group Meeting on Corruption.
The first of the two reports of the Secretary-General was entitled Promotion and Maintenance of the Rule of Law and Good Governance; Action Against Corruption (document E/CN.15/1997/Add.1). It detailed the recommendations of the expert group meeting on corruption held at Buenos Aires in March 1997.
In the second report, Promotion and Maintenance of the Rule of Law: Action Against Corruption and Bribery (document E/CN.15/1998/3), the Secretary-General concluded that corruption was a complex phenomenon and efforts to combat it required an integrated approach composed of different elements such as promotion of good governance and democracy, economic reform, awakening of civil society and strengthened and coordinated international cooperation.
The Secretary-General recommended, among other things, that the Commission identify ways of enabling the Centre for International Crime Prevention to act proactively by studying developments and regularly consulting with governments. The Commission was also asked to identify means of improving coordination in the relevant work of the United Nations bodies such as the World Bank, the International Monetary Fund (IMF) and others.
The Second Committee also had before it a report (document A/53/254) of the United Nations Industrial Development Organization (UNIDO) on industrial strategy and policy issues in developing countries and countries with economies in transition. The report, submitted in response to a General Assembly request of 16 December 1996 (resolution 51/170), analysed the implications of economic globalization for sustainable economic development, drew conclusions from experience in a number of countries and presented an agenda for future multilateral cooperation.
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The report noted that the integration of markets for capital, technology, goods and services on a worldwide scale, called for matching changes in domestic decision-making and regulatory and incentive systems, as well as in the institutions of global governance. At the same time, it continued, the need to relate economic growth to social equity and environmental sustainability had led to a new multidimensional approach to development. Important challenges continued to face developing countries, the report stated. Among them were questions pertaining to industrial governance, competitiveness, the establishment of effective market institutions and compliance with global mandatory and voluntary standards. Needed were new policy initiatives aimed at more accountable, transparent and effective systems for allocating resources to industrial development, while creating conditions conducive to compliance with global governance and regulation.
The report stated that new developments in multilateral cooperation for industrial development needed to be addressed effectively. They included the emergence of global regulation and governance, the looming marginalization of sub-Saharan African countries from the global economy, the East Asian crisis and the promotion of social development and environmental protection through sustainable industrial development. The report stressed that UNIDO was in the process of finalizing a new portfolio of integrated services to address those needs, thus translating into action the Business Plan on the Future Role and Functions of UNIDO, which was approved at the seventh session of the General Conference of UNIDO in December 1997. Currently, UNIDO was consulting with the African Development Bank to organize in early 1999 a donors conference, called for by the General Assembly (resolution 52/208), for the funding of industrial development projects in African countries. It was to implement the programme for the second Industrial Development Decade for Africa and the Plan of Action for the Alliance for Africa's Industrialization. The Alliance had been launched by UNIDO in 1996.
Noting the importance to development of the private sector, UNIDO established in 1998 a new branch on private sector development, to strengthen its role in supporting capacity-building in private sector organizations in the developing world.
Promotion of inter-agency cooperation was furthered by the conclusion of an agreement with UNCTAD in March 1998 in which the complementary roles of the two organizations in the field of investment promotion were spelled out.
The report noted that several generic lessons had been learned, including that high investment, particularly investment in people, was a necessary condition for rapid development; that markets had an important role to play in resource allocation provided that they were appropriately complemented by the State when they did not; that good public governance, including a stable policy regime, a focused public sector and an effective legal and judicial system were necessary conditions for an open and
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competitive economy to enjoy sustainable development; that openness and competition needed to be coupled with institutional capacity-building and investment in technological, organizational and managerial training; and that spreading the benefits of enhanced industrial efficiency was essential for the social sustainability of economic development.
Also, the report observed that global industrial growth had been an uneven process. Inequalities between countries within regions had widened, and the role of industrial development policy in open, market-driven and transition economies led by private investment had been subject to intense debate.
The current East Asian financial crisis has raised new questions regarding the economic and industrial development process as a group of developing countries suffered a sudden and severe setback. The problem was not just the sheer amount of itinerant global capital -- some $25 trillion to $30 trillion including bank lending, securities issues, and over the counter derivatives. The key concern was the composition of global capital movements. They had experienced a complete reversal over the past three decades. In the early 1970s, nine out of 10 dollars negotiated in world foreign exchange markets went to the financing of trade and long-term investment, and the remainder to short-term capital movements. By the 1990s the proportion was exactly the opposite.
Those market characteristics also combined with other factors, such as herd-like behaviour, proneness to panic and inadequate risk assessment. The combined effect was a high degree of volatility and economic crises with a highly-skewed impact. Developing countries and countries with economies in transition were particularly susceptible to sudden shifts in the markets. Short-term speculative capital flows, although essential for trade credits, brought none of the core benefits of foreign direct investment. As a result, developing countries and countries with economies in transition had become more, rather than less, vulnerable to the vagaries of international capital flows.
The report also called for major technological, economic and political changes in the international system to be accommodated in the structure of global economic governance. It also noted the need for developing countries to establish permanent consultative mechanisms, including with the private sector, and cited consensus among policy makers that environmental policy should shift its emphasis from a reactive approach to a more proactive sustainable development approach.
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Statements
PRIANTI DJATMIKO-SINGGIH (Indonesia), on behalf of the "Group of 77" developing countries and China, said the most notable feature of the commodity markets over the past few decades was the prolonged decline in price levels. Despite some recovery during the 1990s, commodity prices still remained at depressed levels in relation to past standards. Those prices were also weak when compared to prices of industrial goods. That adverse trend was compounded by the spreading recession and the turmoil arising from the ongoing Asian crisis. Natural disasters such as hurricanes and El Niño had greatly exacerbated commodity production and supply side factors for commodity- dependent countries.
She added that depressed prices, changes in demand and environmental factors were further aggravated by the lack of technology capacity. There was also a decline in the importance of primary commodities, particularly due to the increased use of manufactured products. The international community should continue to exert concerted efforts to intervene in long-term market trends if it was determined to find a lasting solution to the problem. It was therefore indispensable that a more favourable international environment supportive of commodities markets should be promoted.
YUAN SHAOFU (China) said the world financial crisis had reduced the demand for commodities worldwide. The unhealthy economic environment was the root cause of the commodity problem. That environment did not provide sufficient international support for the commodity markets and trade protectionism had caused the price of commodity exports to remain low. Developed countries had kept their tariffs high, particularly for products from developing countries. Green protectionism -- environmental regulations -- had also hurt commodity prices. It was important to establish a healthy environment for commodity trading. The developed countries should help others increase their production capacity and should eliminate their own trade tariff barriers. Also, UNCTAD should provide greater policy advice to developing countries.
U THANE MYINT (Myanmar) said that, as the financial crisis hit the Asian region, the economies of many countries contracted and there was a lower demand for commodities. The demand from many trading partners decreased as well, also reducing trading power. The economy of Myanmar, he noted, was based upon import substitution, but it was diversified enough to be immune from outside market forces. Other least developed countries were dependent on a single, or only a few primary products, which left them vulnerable. It was impractical to think countries could produce all they needed within their own boundaries. A rule-based and predictable multilateral trading system with special consideration for least developed countries was needed, he said.
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AMANY FAHMY (Egypt) said the steady economic growth of developing countries depended greatly on commodities. The deterioration of primary commodity prices was not necessarily due to the Asian financial crisis -- but the crisis would contribute to it. Africa was suffering the most in its commodity markets. It was the only continent where there had been a steady decline in commodity revenues. To improve that situation there should be an elimination of trading preferences. Commodity-based development was not realistic because economies could no longer rely on commodity revenues.
CARLOS SERSALE DI CERISANO, Assistant Director-General for United Nations Affairs and Special Representative to the United Nations System for UNIDO, said that over the years, successful industrialization had come to be associated with sound macroeconomic policies, market-friendly and outward- oriented economic policies, high savings and investment rates, effective governance and a well-developed physical infrastructure, among other things. The emerging international consensus considered the following elements as important: enhancing the effectiveness of industrial decision-making and industrial competitiveness; building capacity for benchmarking policy effectiveness; and promoting demand and network-oriented strategies for small and medium-sized enterprises.
He added that in line with the reform of the United Nations as part of its own transformation, UNIDO had reoriented its programmatic focus towards the promotion of sustainable industrial development aimed at strengthening industrial competitiveness, expanding employment, and preserving the environment in developing and transition economies. It had developed a set of specialized services designed to provide integrated and customized support to the industrialization of developing countries, particularly those in Africa, the least developed countries, and transition economies. As part of those services, UNIDO would continue to collect and analyse information and experiences on best practices and lessons learned in the field of industrial development.
Mrs. DJATMIKO-SINGGIH (Indonesia), on behalf of the "Group of 77" developing countries and China, said she attached great importance to the crucial role of industrial development cooperation. She cited the continued urgency of promoting industrialization as a dynamic instrument for economic acceleration and social development, as well as the eradication of poverty and the creation of productive employment in developing countries. The industrialization process in the developing countries continued to face formidable challenges, especially within the context of surging globalization. It was discouraging to note that overall economic conditions remained precarious and performance in industry remained weak.
She added that the overall poor economic performance of most developing countries, especially the least developed countries, was rooted in the lack of critical capacity for development. While the progress achieved in
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macroeconomic stability was a necessary precondition, it was not in itself sufficient to ensure the skills and technology so crucial to becoming an industrial economy today. That had been clearly demonstrated by the ongoing Asian crisis, which had proved that macroeconomic stability alone could not guarantee a sustained industrial strategy for development. The international community needed to find ways and means to restore the hard-won economic growth that was conducive to industrial development.
HANS-PETER GLANZER (Austria), on behalf of the European Union, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Cyprus and Iceland said that the European Union attached great importance to the fight against corruption and bribery. The socio- economic costs of bribery were enormous. Corruption raised transaction costs and uncertainty in an economy led to inefficient economic outcomes and undermined the State's legitimacy. The greatest victims of corruption, he added, were usually the poor.
He also said that industrial development policy and cooperation had undergone major changes since the mid-1980s. There was an increased policy convergence emphasizing the importance of investment in human resources and the responsibility of government to create a dynamic domestic framework in which the private sector could play its role as an engine of industrial development. Sustainable industrial policy was a crucial component of development. It encompassed a number of key objectives -- open competitive economics, progressive trade liberalization, secure and productive employment, social development and economic environmental protection.
SETH WINNICK (United States) said that the recent mushrooming of international trade and investment had brought the issue of corruption again to centre stage. Key developments in the fight against corruption and bribery included the adoption in 1996 by the General Assembly of the International Code of Conduct for Public Officials (resolution 51/59) and the United Nations Declaration against Corruption and Bribery in International Commercial Transactions (resolution 51/191). The International Code of Conduct clearly defined and prohibited conflicts of interest for public officials and the acceptance of gifts and favours. The Declaration against Corruption and Bribery committed Member States to criminalize bribery of public officials of other States in international commercial transactions.
The Commission on Crime Prevention and Criminal Justice's 1998 report demonstrated that regional initiatives did indeed have an impact in catalysing national legislation and motivating nations to amend legislation to reflect recent developments on the issue of corruption. Issues such as bank secrecy provisions, mutual assistance legislation, accounting standards and practices, as well as the tax deductibility of illicit payments were being addressed. The United States hoped that the many actions at the national, regional and international levels would yield additional positive results.
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OLE PETER KOLBY (Norway) said economic reforms and liberalization of the world economy had radically altered the general conditions for business and industry in many of his country's trading partners. Norway had recognized the need for a more coherent and comprehensive strategy for private sector development, with a clear emphasis on the needs of the developing countries. His country was currently developing such a policy that would take into account the changes in the global scene by supporting activities that stimulated production. Those activities would also aid government efforts to establish well-functioning market economies. In that context, the assistance of the United Nations and multilateral institutions in the area of trade and development should be emphasized.
JAMES REINERT, observer of the Holy See, said that Pope John Paul II had spoken out against indiscriminate coercive economic sanctions against a nation when they affected the basic human development of its people. The Holy See recognized that there were legitimate reasons that the international community might resort to sanctions, but starvation must not be a means of warfare or the consequence of a legal decision, and sanctions must always be accompanied by a dialogue between those involved.
The United Nations Security Council, he said, should be better informed about the negative effects on a humanitarian level, deriving from the application of sanctions imposed on a State in strict application of the Charter of the United Nations.
YURIY ISAKOV (Russian Federation) said the financial crisis that had broken out had taken a toll on small- and medium-sized businesses in his country. About 30 per cent of those companies had declared bankruptcy or had gone out of business. Corruption, he said, was one of the most serious impediments to economic development in his country. Fighting corruption was a priority for his Government and a federal law on the subject was currently being finalized. Corruption was extremely difficult to eradicate from some business sectors and his country had little experience in dealing with corporate corruption. It was very interested in the positive experiences of other countries in that area.
On the work of UNIDO, he said that it had become more flexible and efficient and it was better suited now to meet the needs of the international community. There was need for a thorough and comprehensive overhaul of economic development programmes, which should focus on social factors from the beginning. The UNIDO could become a driving force in changing development policy and saving the world from economic decline.
YURII ONISHCHENKO (Ukraine) said his country believed that business and the private sector were key players in the social and economic development of each country. A strong private sector, supported by sound State policy, helped to utilize the opportunities created by the liberalization and
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globalization of the world economy. In that context, small- and medium-sized enterprises promoted the creation of new jobs, served as an additional source of tax revenues and, finally, helped to maintain a favourable macroeconomic environment in the countries concerned.
He said that his country was confident that transformation of UNIDO into an organization with refocused objectives, offering clearly defined packages of integrated services, would make a real contribution to the industrialization of developing countries.
SIN SONG CHOL (Democratic People's Republic of Korea) said that many developing countries had been marginalized from the global economy, and that the continued reduction of official development assistance and weakening of the functions of UNIDO, threatened even greater marginalization.
It was important, he said, that financial institutions provide various technical development assistance to industry in developing countries, as well as official development assistance. The UNIDO should focus on encouraging South-South cooperation, as should the United Nations system and donor countries. His country had confidence that the United Nations would coordinate bilateral and multilateral support for sustainable development in developing countries.
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