EXTERNAL DEBT BURDEN AN OBSTACLE CRIPPLING ECONOMIC DEVELOPMENT OF LEAST DEVELOPED COUNTRIES, SECOND COMMITTEE HEARS

30 October 1998

Press Release
GA/EF/2842

EXTERNAL DEBT BURDEN AN OBSTACLE CRIPPLING ECONOMIC DEVELOPMENT OF LEAST DEVELOPED COUNTRIES, SECOND COMMITTEE HEARS

19981030 Equal Access to Markets Emphasized In Discussions of Trade And Development Issues

External debt burden represented one of the main obstacles to economic and social development of the least developed countries, the Second Committee was told this afternoon as it considered sustainable development and international economic cooperation.

The representative of Indonesia, on behalf of the "Group of 77" developing countries and China, said the burden of external debt on least developed countries was especially crippling since it diverted much of the resources needed for their development to debt servicing. There was, therefore, an urgent need to provide an effective and early exit from the debt overhang problem and to secure the necessary resources for the full implementation of the Heavily Indebted Poor Countries (HIPC) Debt Initiative.

The debt overhang was putting more pressure on least developed countries which had gone a long way in implementing economic reform programmes, said the representative of Zambia. Their growth and sustainable development had been constrained, while efforts to reduce poverty were being stifled. He added that, despite globalization and liberalization, the least developed countries continued to be marginalized. The international community had to do more to honour its commitments in the Programme of Action for least developed countries in 1990s.

The representative of China said that, even though least developed countries had made efforts to develop their national economies, they have had difficulty in achieving results. That could be attributed to the weakness of their foundations and the inadequacy of international assistance. Developed countries should strengthen their official development assistance (ODA) including technical and financial assistance, to assist least developed countries in capacity building and infrastructure development.

Statements were also made on that topic by the representatives of: Austria (on behalf of the European Union and associated countries), Norway and Nigeria.

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Also this afternoon, the Committee considered the topic of trade and development. On that topic, the representative of Ukraine said that, in light of the financial crisis, governments, international organizations, and financial institutions must take adequate measures to stimulate international trade and direct foreign investment. It was of particular importance to maintain transparency and equal access to markets as effective instruments for overcoming the present financial turmoil.

Statements on that topic were also made by the representatives of: Kenya, Democratic People's Republic of Korea, Turkey, Georgia, Singapore, Tunisia, Azerbaijan, Turkmenistan, Democratic Republic of the Congo, Viet Nam, Panama, Iran, Libya, Philippines, South Africa. The representative of the United Nations Industrial Development Organization (UNIDO) also spoke.

The Committee will meet again at 10 a.m. on Monday, 2 November to continue consideration of sustainable development and international economic cooperation. Under that heading, it will discuss the implementation of the programme of action for the least developed countries for the 1990s. It also planned to consider the topic: implementation of the United Nations Decade for the Eradication of Poverty (1997 to 2006).

Committee Work Programme

The Second Committee (Economic and Financial) met this afternoon to continue its consideration of macroeconomic policy questions. (For background information on that topic see Press Release GA/EF/2840 of 29 October.) The Committee will also consider sustainable development and international economic cooperation. (For background information on that topic see Press Release GA/EF/2828.)

Under that heading the Committee will discuss: implementation of the Programme of Action for the Least Developed Countries for the 1990s. A note by the Secretariat on that topic (document A/53/553) draws attention to the report of the Trade and Development Board for its forty-fifth session which was held in Geneva from 12 to 23 October. That report will be released as document A/53/15 Part IV.

ABDRAHMAN A. ISMAIL (Kenya) said developing countries, especially the African and the least developed countries, were faced with many development challenges including the eradication of poverty, human resources development, transformation of the productive structures of their economies and the horizontal and vertical diversification of the commodity sector. They must also concern themselves with the reduction of very high levels of unemployment and under-employment, and the provision of the basic necessities of life, such as clean water, health care and education. The terms of trade of these countries were not showing any significant improvements, while their share of world trade has been declining. Those problems, along with conditionalities accompanying adjustment measures, had exacerbated the problem even further.

The United Nations Conference on Trade and Development (UNCTAD) should continue to focus its work on the integrated and analytical treatment of policy issues related to development in the areas of finance, trade, technology and investment, as well as technical cooperation.

SIN SONG CHOL (Democratic People's Republic of Korea), said that today, when a number of developing countries were being marginalized due to the impacts of globalization and liberalization, it was important to address trade and development issues in a fair and timely manner. That should be done with a view to achieving the economic growth of developing countries, as well as the sound development of international economic and trading relations. Without promoting the economic development of the developing countries or without creating a favourable environment for international trade to that end, no one could expect the development of a secure and sound global economic system and trade between the developed and the developing world could not be put into effect, he added.

His country maintained that the necessary conditions and the environment should be created to enable developing countries to benefit from the global trading system. Efforts should aim to strengthen the Generalized System of

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Preferences and provide developing countries with market access opportunities through expanded preferential treatment. Developed countries should cooperate with developing countries to help them overcome the difficulties they faced in main markets and trade fields and to help them to make active use of new trade opportunities. There was also a need for measures to strengthen the roles of the developing countries in the international economic and trading system and to ensure their full participation in the decision-making process of the multilateral financial, economic and trade institutions.

FEZA OZTURK (Turkey) said improving the efficiency of transit routes and developing alternative pipeline systems would greatly contribute to trade expansion for the Central Asian countries. He expressed Turkey's support to the contribution of the European Union to the Transport Corridor-Europe-Caucasus-Asia Programme and welcomed the conclusion of the Basic Multilateral Agreement, which provided a legal and regulatory framework in the transport domain. The establishment of the intergovernmental commission and the permanent secretariat in Baku would contribute to further coordination of the policies of the countries involved.

Regarding the transportation of oil and natural gas pipelines, an urgent need for both producer and consumer countries, Turkey had presented the Caspian-Mediterranean Pipeline Project as an efficient and environmentally safe method of exporting the main output of the oil and natural gas resources from the Caspian Basin to international markets, he said. That project, also known as Baku-Ceyhan, could ensure energy security in the entire region. Also, while Turkey did not oppose the development of other itineraries from the Black Sea coast, there were imminent and inherent risks, which had proven to be costly, of transporting oil through the Turkish Straits. The Straits, and especially the Bosphorus, could not carry the additional burden of large amounts of oil shipments without jeopardizing the safety of life, property, environment and free navigation.

GEORGE VOLSKI (Georgia) said that the Baku Conference, held in Azerbaijan in September, had created the legal basis for the development of transit systems in the Europe-Caucasus-Asia transportation corridor. The Baku declaration made known to the world that the historic Silk Road was no longer a concept, but a working mechanism. It was not just the countries of his region that realized the magnitude of contributions that the speedy development of economic projects could make to strengthening international cooperation and peace. Attention had to be paid to the question raised during preliminary discussions, regarding the safeguarding of the transit system and existing agreements with the protective mechanism, which would create the so-called immunity to every misunderstanding. That question required due consideration, the study of opinions of the interested parties and a careful inference. It was inadmissible to create controversy among interested countries, and to raise that dispute on an international level.

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With the participation of the relevant United Nations organs, a considerable workload had to be accomplished to ensure the compatibility of legal instruments and technical standards along the transportation corridor, he said. Turkey expected the next UNCTAD report to be more comprehensive, and that the existing dimension of the development of the oil pipeline system would be given adequate attention.

SYED NOUREDDIN (Singapore) said the temptation to move away from openness was real and could jeopardize implementation of the Uruguay Round trade commitments. Developing countries needed to enhance market access in areas of their export interest, especially where tariffs in developed markets remained high, such as in processed goods, tropical products and textiles. The recent Second World Trade Organization (WTO) Ministerial Conference agreed on a balanced and forward-looking work programme for the organization. It would address the problems of implementation and provide scope for further broad-based trade liberalization. It was important that the international community adhere to all elements of that programme and develop a positive agenda that would address the interests of developing countries in future trade negotiations. If the global framework were damaged, regional efforts at trade liberalization would also falter.

It was necessary to guard against growing protectionist pressures that threatened to impede the momentum of trade liberalization, he said. The pertinent question was how the financial crisis impacted the liberalization of trade and investment flows among affected countries. While there might be tendencies to slow down the liberalization efforts, a widespread retreat from free markets would damage long-term growth prospects for everyone. Closing off export markets would choke off the recovery of the affected countries. Developed countries should therefore keep their markets open to exports from the developing world.

ABDERRAZAK AZAIEZ (Tunisia) said globalization was a powerful lever for economic growth, but it had also been a major cause for financial instability. Developing countries, especially, had been very vulnerable to financial fluctuations. Modern capital markets were organized less to create wealth and jobs than to derive profits from selling secondary market securities. Efforts should be made to strengthen the participation of developing countries in economic decision-making. The international community must cooperate to protect those nations from cyclical ups and downs. Also, major barriers to trade still existed and efforts should be taken to ensure free and equal trade among nations.

SERHIY REVA (Ukraine) said that, in light of the financial crisis, governments, international organizations, and financial institutions must take adequate measures to stimulate the international trade and direct foreign investments. It was of particular importance to maintain transparency and equal access to markets as effective instruments for overcoming the present financial turmoil. His country's strong steps towards economic openness and

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integration into the world economic space had been hampered by some external factors that had a negative impact on its economic development. During the last years, several countries undertook anti-trade measures against Ukraine with the intent to prohibit a particularly important item of its export -- rolled metal. The acuteness of such problems would be reduced if Ukraine was a WTO member.

ELDAR KOULIEV (Azerbaijan) said that due to global economic interrelationships and the global division of labour, no State could view itself as outside of the global system any more. Therefore, many of the newly independent states of Central Asia and the Caucuses, had found that in order to ensure development, their access to foreign markets had become the most important factor for modernization of their economies. As many of these Central Asian countries were landlocked, the development of new transit links was especially important. A lack of effective transit systems had allowed development to move too slowly. Roads which linked Central Asia to Europe, such as the Transcaspian Highway, were one of the most important means of developing energy resources of the Caspian and transporting them to world markets.

ENVER RAHMANOV (Turkmenistan) said his country faced a very challenging time as a newly independent developing State. His country had opened to the world tremendous economic potential due to its enormous natural wealth. Exploitation of its natural gas and oil resources was needed to help the country reach more sustainable economic and social development. New intrastate pipelines would provide better opportunities for governments in the region to improve development and cooperation efforts. Such a pipeline would also be an important contribution to the developing world by supplying an important source of energy. His country would submit a draft resolution on the issue for the Committee's consideration.

AGERICO LACANLALE (United Nations Industrial Development Organization) said that Africa was expected to suffer from reduced demand for its products in Asia due to domestic competition from low-priced Asian imports and increased competition on the world market. The slowdown in the world economy and the significant drop in the prices of non-fuel commodities were expected to reduce Africa's economic growth by 1 per cent this year. Moreover, substantial funds spent to support the Asian economies were expected to reduce both official development assistance and net capital flows to Africa.

The UNIDO considered it important that African countries, especially least developed countries, intensify their efforts to modernize and diversify their economies. It saw its role, in that regard, as helping developing countries, African countries and least developed countries in particular, to build and strengthen their productive capacities and export competitiveness. More specifically, UNIDO viewed its role as helping developing countries build a strong industrial base, developing their human and technological capacities and promoting foreign direct investment.

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ATOKI ILEKA (Democratic Republic of the Congo) said all peoples had the right to live decently in peace, and they should have guarantees of health and decent quality of life. Globalization of the world economy was an important factor. However, despite its efforts, his country might become marginalized because of globalization. What could the process of globalization do for his country when it had been ravaged by war for so many years? The Government had taken a number of steps to help its people develop and break the vicious cycle of poverty. However, there were restraints and challenges in that endeavour. His Government had taken measures to reduce inflation and open its tariff barriers and it had also intended to open the economy to free market mechanisms. There was a need to guarantee development of human capital to ensure that the country would be competitive in the future. Also, there was a need for greater support and commitment by the international community for his country's national reconstruction programme.

LAI XUAN CHIEU (Viet Nam) said that, for developing countries, market access for exports was a matter of vital concern. Reality had shown that it was still difficult for commodities from developing countries to access the markets of developed countries. However, some countries adopted such trade barriers as tariffs escalation, non-tariff barriers, quotas and anti-dumping measures. There were also disguised trade barriers in the form of quality criteria, environmental requirements and labour standards which continued to be misused. Those factors had greatly impaired trading opportunities for developing countries.

He added that international cooperation mechanisms and international economic systems should commit to creating a global, sound and fair economic environment for all participating countries. Negotiations and discussions at the multilateral trading forums like the WTO needed to take into account the conditions of developing countries and to refrain from creating invisible trade barriers.

JUDITH CARDOZE (Panama), on behalf of the Rio Group, said that she evaluated the success and the failure of the multilateral trading regime on the level of free trade which had been reached. Of greater importance than the financial assistance that countries needed was the application of procedures to ensure that a just, fair and transparent multilateral system to provide real access to markets and to maximize development was in place.

She said that her group was opposed to discriminatory trade practices and the imposition of obstacles to free and fair competition between products, especially obstacles which came about through the misuse of claims of environmental or labour rights. Also, she said, anti-dumping measures were necessary protection against abuses of multilateral trade.

ALI ZARIE ZARE (Iran) said there should be an equitable, secure, rule-based, non-discriminatory multilateral trading system. The trading system should also enhance the development possibilities of developing

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countries and allow an increased share for those countries in international trade. The current international trading system left much to be desired. Significant tariff barriers with tariff peaks and escalations all affected market access for a significant number of products exported by developing countries. Developing countries also faced difficulties in meeting some product standards which led to reduced export opportunities. Identifying existing barriers to market access for the developing countries was an integral step for their integration into the world trading system. The next step should be to remove such barriers. The world should endeavour to define a common goal and objective for the construction of a durable, growth-based international trading system.

ALI AUJALI (Libya) said economic unilateral coercive laws limited the capacity for developing countries to build their economies. The international community should take steps to address that problem. To make development sustainable, it must take into account environmental problems and demographic aspects. Such development required the assistance of developed countries, but that assistance had come with conditions. Trade was improperly balanced because developing countries exported raw materials and imported finished products. That fact created an improper advantage for developed countries. The traditional theory of trade espoused by developed countries would not create prosperity in the long term for developing countries.

LIBRAN N. CABACTULAN (Philippines) said that globalization had unlocked numerous possibilities, as well as risks. It would be of great interest if the international community could better understand the forces of globalization and take measures to manage these forces in the service of development. In that regard, it was critical to put on center stage the need to keep the multilateral trading system open and based on a clear set of rules, while seeing to it that the accepted principle of special and differential treatment for the developing countries was translated into concrete and practical application in all spheres of international trading.

MATHE DISEKO (South Africa) said that for his country, the implementation of the WTO In-Built Agenda and agreements regarding preferential treatment for developing countries was as vital for the multilateral trading system as identifying the work programme of the Third WTO Ministerial Meeting and the agenda of the next round of the multilateral trade negotiations. A balance of interests and benefits for developed and developing countries was important for the credibility of the multilateral trading system, especially its dispute settlement mechanism. He called for reform of the international financial architecture including the need to establish a multilateral and domestic surveillance mechanism. Also, developing countries, particularly least developed countries, needed special and differential support for their full integration into the world trading system. For least developed countries such measures should also include timely accession to WTO membership.

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South Africa called for the restoration of official development assistance (ODA) flows to United Nations target levels, he said. The external debt of least developed countries undermined and frustrated their efforts to generate income and savings. Africa's external debt, as a proportion of exports and gross domestic product (GDP), was the highest of any developing region. He underlined the need for the shortcomings of the Highly Indebted Poor Countries (HIPC) Initiative to be addressed, and called for a comprehensive assessment of Africa's debt to be conducted by an independent body, not unduly influenced by the interests of creditors.

Statements on Least Developed Countries

SUGENG WAHONO (Indonesia) on behalf of the "Group of 77" developing countries and China, said that, as the weakest trading partners of the global community, least developed countries faced the most difficult challenges in a multilateral trading system. There should be an immediate solution for that, particularly in view of the increasing realization of the evolving interrelation between trade issues and development objectives of the least developed countries. To address that, all exports from least developed countries should be accorded duty-free treatment. That supportive measure should be supplemented by efforts to enhance the capacity building and diversification programme for least developed countries.

He added that the burden of external debt on least developed countries was especially crippling since it diverted much of the resources needed for their development to debt servicing. So far, 29 of 41 countries identified as heavily indebted were least developed countries. Although those countries had qualified under the HIPC Debt Initiative, only three would complete the lengthy eligibility process by the year 2000. That initiative was grossly inadequate for providing the needed relief of least developed countries' debt burden. It was urgent to provide an effective and early exit from the debt overhang problem in support of policy reform efforts and to secure the necessary resources for the full implementation of the initiative. To fulfil that need, eligibility criteria should be flexible enough to take into account different debt situations and to include all least developed countries which were truly in need of debt reduction and were undertaking necessary reforms.

HANS PETER MANZ (Austria) on behalf of the European Union and Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Cyprus said that one of the main features of the 1990s was the globalization and liberalization of the world economy. However, many least developed countries were marginalized and were therefore not able to take advantage of those developments when they occurred. He said that his group hoped that least developed countries did not suffer lost ground over the course of the present decade.

The European Union was ready to support the integration of least developed countries into the global economy by sharing its experience in

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regional economic integration, and it had committed itself to duty-free treatment for all products of least developed countries by 2005. But preferential market access by itself would not bring about integration into the world market.

The objective of development cooperation, he said, as defined in the Maastrich Treaty, focused on the most disadvantaged countries. The European Union had given preferential treatment to least developed countries, which resulted in very substantial trade between the European Union and least developed countries. But, while the European Union remained committed to reducing poverty, he added, positive economic growth rates must be sustainable and must be integrated with environmental concerns.

OLE PETER KOLBY (Norway) said that more vigorous efforts were needed to create a better future for the least developed countries. There was a need for a partnership between least developed countries and the rest of the international community. Efforts by least developed countries themselves were paramount in the pursuit of sustainable development and growth. Sound macroeconomic policies, good governance, political stability, respect for human rights and transparency were indispensable in that respect.

The debt burden represented one of the main obstacles to economic and social development of least developed countries, he added. Norway had recently launched a comprehensive national debt-relief strategy. Its aim was to reduce the debt burden of the 22 poorest and most heavily indebted countries. A central feature of the present globalization process was the growing importance of the private sector. Without a dynamic business sector, there would be little funds for much-needed investments in least developed countries.

DONALD BLANKSON (Nigeria) said the prime goal for least developed countries was to arrest the decline in economies and erect sustainable development efforts. Despite vigorous efforts by least developed countries to implement economic reforms, their economies continued to be vulnerable to the fluctuations of market forces and instability of the commodity market. The economies of least developed countries had continued to worsen and deteriorate. That was not due to the lack of commitment of the part of least developed countries, most of which had embarked on the process of structural adjustments and wide-ranging reforms, often under the guidance of the International Monetary Fund (IMF) and within an internationally agreed framework. The serious challenge for the United Nations was how to reverse the decline and deteriorating socio-economic conditions in least developed countries. It was obvious that the international community had not done enough in the area of technical assistance.

SHAOFU YUAN (China) said that even though least developed countries had made unremitting efforts for the development of their national economies, including implementing economic reforms and structural adjustment measures, as

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well as encouraging and supporting foreign trade, they have had difficulty in achieving results. That could be attributed to the weakness of their foundations and the inadequacy of international assistance. Developed countries should strengthen their ODA, including both technical and financial assistance, so as to assist the least developed countries in capacity building and infrastructure development. Developed countries should also implement the trade agreements reached in the Uruguay Round, which had important bearings for the least developed countries. They should extend their tariff concessions and eliminate non-tariff barriers, so as to provide better access for the products of the least developed countries.

PETER L. KASANDA (Zambia) said that despite globalization and liberalization, the least developed countries continued to be marginalized. The international community had to do more to honour its commitments in the Programme of Action for least developed countries. The agreed targets of ODA of 0.7 per cent of GNP had not been met. Least developed countries did not have adequate capacity to develop human resources and to attract foreign investment for long-term competitiveness. His country believed that increased ODA would go a long way in helping least developed countries to fight poverty, as well as play a role in the international economic arena.

The debt overhang was putting more pressure on those least developed countries that had gone a long way in implementing economic reform programmes. Their growth and sustainable development had been constrained, while efforts to reduce poverty were being stifled. The HIPC Debt Initiative would substantially supplement the efforts and commitments of bilateral creditors in implementing the programme of Action for least developed countries. Zambia, however, joined many countries who had expressed concern over the eligibility for, and the adequacy of debt reduction, as well as the speed at which relief would be granted.

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