SPEAKERS STRESS DISPROPORTIONATE IMPACT OF FINANCIAL CRISES, CITE PROJECTED GROWTH-RATE SHORTFALLS IN DEVELOPING COUNTRIES

Press Release
GA/EF/2861

SPEAKERS STRESS DISPROPORTIONATE IMPACT OF FINANCIAL CRISES, CITE PROJECTED GROWTH-RATE SHORTFALLS IN DEVELOPING COUNTRIES

Representative of Syria Warns That Shrinking Role of State, Triumph Of Market Economies Threaten Welfare of Population in Developing World

While developed countries had suffered little from the frequent financial crises, and had even derived some benefits from them, their devastating impact on the developing world would affect prospects for growth and development for years to come, the representative of Iran told the Second Committee (Economic and Financial) this afternoon as it continued its general debate.

In a majority of countries, growth for the foreseeable future would fall far short of what was necessary to effect a substantial improvement in living standards and a reduction in poverty, he said. A growth rate of three per cent, if sustained, would allow some progress to be made, if everything else went smoothly. In the most optimistic analysis, only 23 developing countries would meet that criterion in 1999. It would be most unfortunate if the international community continued to witness the sufferings of two billion people, deprived of the basic social services crucial to get them out of the vicious spiral of poverty and underdevelopment.

During the financial crisis in East Asia, the representative of the Philippines said, the industrial countries had profited from the unprecedented collapse in commodity prices and cheaper manufactured imports from countries that had suffered currency devaluation. The Trade and Development Report for 1999 had estimated those gains to be in the order of $60 billion -- exceeding total ODA for 1998. He wondered whether globalization was meant only to nurture the widening gap between rich and poor countries.

The representative of Syria said that the shrinking role of the State and the emergence of market economies were risky phenomena for the developing countries. Market economies ignored the role of the state as far as insuring the welfare of the people was concerned. The people were left to the whims of the international markets in search of immediate profits.

The International Labour Organization (ILO) was particularly concerned about the negative impacts of financial and trade liberalization on employment and earnings, its Director said. Economic and social systems must ensure basic

Second Committee - 1a - Press Release GA/EF/2861 6th Meeting (PM) 7 October 1999

security and employment, while retaining the capacity to adapt to rapidly changing circumstances. Economic and financial crises must be resolved without sacrificing economic growth and, consequently, increasing unemployment and poverty.

Statements were also made by the representatives of Oman, Yemen, Russian Federation, Jamaica, Viet Nam, Sudan, Belarus, Saint Lucia (on behalf of CARICOM), Ecuador, Kenya and Ukraine. The representative of the International Federation of the Red Cross and Red Crescent Societies also addressed the Committee.

The Committee will gather again at 10 a.m. tomorrow to continue its general debate.

Committee Work Programme

The Second Committee (Economic and Financial) met this afternoon to continue its general debate.

Statements

KHALID SULAIMAN BA’OMAR (Oman) said he hoped to see the United Nations play an important role in setting the rules governing intergovernmental dialogue, primarily in the economic and development spheres. Negotiations for the accession of some developing countries to membership in the World Trade Organization (WTO) had to be fair, equitable and based on the need to give opportunities for the growth of their economies. The large markets of advanced countries must get rid of the obstacles to freedom of trade and eliminate dumping on markets. However, trade freedom should not be a way of destroying the economies of developing countries. The WTO Ministerial Meeting in Seattle should aim to create a balance among member States. There was a need for a trading system that was equitable and designed to strengthen trade and development in developing countries. Oman had complied with most of the conditions for joining the WTO, and hoped to take part in it as a full-fledged member.

People could only realize conditions for sustainable development when they enjoyed complete sovereignty over their natural resources, he said. Accordingly, resolutions asserting the sovereignty of the Palestinian people in the occupied territories over their natural resources should be implemented. It was a necessary condition for the peoples of the occupied territories to enjoy the prosperity and stability to which they had aspired to for so long. He added that the growing debt burden for poor countries prevented their budgets from attaining overall and equitable growth. Economically developed countries must move boldly to cancel poor-country debt, and design new economic mechanisms to provide loans, regulate industry and reduce international inflation. The economic problems of the least developed countries were the result of the challenges posed by globalization. The developed countries must implement their commitments on international aid.

ALI AHMED MOHAMED AL-DAILMI (Yemen) said that the suffering of least developed countries was recognized in the Economic and Social Council report, which stated that per capita income during the last couple of years had been negative in 14 least developed countries. Sectoral development was threatened with failure. Developing countries had to orient all their resources to the service and payment of their debt for the next five years. The international community had to help those countries, financially and technically, integrate the world economy. Granting least developed countries access to international markets was the surest foundation for reform of the international economy. Elimination of barriers and tariffs would accomplish the same thing.

Commitment to pledges of official development assistance (ODA) should be kept, he continued. The current international financial markets, in which 24 hours of selling and buying might generate a sum of $21.3 billion, could destroy national currencies. Clear and firm controls were necessary to regulate the globalization and liberalization of trade. We also had to thank God, who gave the human mind the capacity to develop a spirit of justice and goodness. Those characteristics could rebuild the world, end poverty and allow us to live in harmony with our environment, and they would bring about peace and dignity for all humanity.

FELIPE MABILANGAN (Philippines) said that, during the financial crisis in East Asia, the industrial countries had profited from the unprecedented collapse in commodity prices and cheaper manufactured imports from countries that had suffered currency devaluation. The Trade and Development Report for 1999 estimated those gains to be in the order of $60 billion -- exceeding total ODA for 1998. He wondered whether globalization was meant only to nurture the widening gap between rich and poor countries. Liberalization of trade in fields where developing countries were more competitive, such as textiles, garments and footwear had proceeded more slowly.

There was a dependence of capital accumulation and economic growth on foreign capital and trade flows. The resources generated from those flows allowed countries to invest more than they could save. At the same time, since export expansion depended on investment, sustained economic growth would require a mutually reinforcing interaction between capital accumulation and exports. The opening of the capital account must be carried out in an orderly, gradual and well-sequenced manner, keeping pace with the strengthening of an effective framework for domestic finance.

With respect to trade flows, there was great concern that in recent years developing countries had incurred greater amounts of current account deficits, primarily due to the balance of trade. While no definitive linkage was suggested between trade liberalization and financial crises, it was clear that countries seriously affected by the recent crises had been running great amounts of current account deficits. Developed countries should pursue structural adjustments in order to free such sectors as textiles, clothing and agriculture from trade barriers and subsidies.

NIKOLAI TCHOULKOV (Russian Federation) said one of the most important lessons of the recent financial crisis was that it revealed weaknesses in the structure of the current global financial system and its national institutions, as well as the shortcomings of its management and regulatory mechanisms. Intensified efforts were needed to curb international financial and economic crime, and improve standards and norms regulating financial and economic activities. There must be durable safeguards against crimes related to money laundering, shadow business and the use of “tax havens” and offshore zones for tax evasion and illicit traffic of capital. Along with the international financial institutions, the economic bodies of the United Nations system could also make a useful contribution by analysing various aspects of such crimes in order to combat them.

The sustainability of the post-crisis recovery, he said, depended to a large extent on the degree to which external conditions would foster world trade, and the ability of global investors and national governments to draw lessons from the crisis. It was probably insufficient to rely solely on the driving motives of international business and the interplay of market forces. What was needed was minute-by-minute tracking of current changes, on the basis of an efficient system of financial and economic monitoring and the triggering of active regulation mechanisms as soon as the first signs of crisis appeared.

M. PATRICIA DURRANT (Jamaica) said that without understanding of the forces that shaped the world economy and gave content and direction to the globalization process, there was limited possibility for sustained economic growth among developing countries. Globalization was the constantly changing product of the interplay of a large number of forces and actors, not all operating in the economic realm. The management of globalization had to encompass and combine new markets, new tools, new actors and new rules, coupled with the very important human dimension.

It was of grave concern that some agreements reached by the WTO remained to be implemented, and that the benefits of a rule-based, secure and predictable multilateral trading system remained unrealized. As far as the United Nations Conference on Trade and Development (UNCTAD) was concerned, she said it should continue to examine the state of the world economy, evaluate the impact of globalization, and identify basic elements of a new consensus for development for the fair and sustained economic growth of developing countries. Knowledge and technology were two fundamental components of the globalizing world, but capacity was sadly lacking in many countries. Human skills and institutional capabilities needed to be improved in order to accelerate the pace of absorption and the diffusion of knowledge and technology in the information age.

MOHAMAD HASSAN FADAIFARD (Iran) noted the uneven impact of the financial crises and their aftermath in the developed and developing world. While developed countries had suffered little from the frequent crises, and had even derived some benefits from them, their devastating impact on the developing world would affect prospects for growth and development for years to come. In a majority of countries, growth for the foreseeable future would fall far short of what was necessary to effect a substantial improvement in living standards and a reduction in the number of people living in poverty. A growth rate of 3 per cent, if sustained, would allow some progress to be made in raising living standards and reducing poverty, if everything else went smoothly. In the most optimistic analysis, only 23 developing countries would meet that criterion in 1999.

It would be most unfortunate, he said, if the international community continued to witness the sufferings of 2 billion people living in poverty, being deprived of basic social needs, including food, health care and education, which were crucial for getting them out of the vicious spiral of poverty and underdevelopment. The only way out was an international effort to design a new development architecture. While the developing countries had devised and implemented necessary policies and made great strides to attract foreign capital flows, frequent financial crises, declining ODA, fragile domestic financial structures and overall decline in the resources needed for development had impeded their efforts and curtailed their endeavours.

LE HOAI TRUNG (Viet Nam) said that according to the latest report from the United Nations Development Programme (UNDP), the negative aspects of globalization could be seen in such areas as increased job and income insecurity, health insecurity, cultural insecurity and environmental insecurity. Developing countries were in the weakest and most vulnerable position in coping with those adverse phenomena.

After more than a decade of liberal reforms in developing countries, their payment disorders remained as acute as ever. To deal with that situation, as well as the challenges of globalization, developing countries would need to undertake further and painful adjustments. Those would naturally include the strengthening of the capacity of governments. For nearly a decade, the role of the market had been extolled as key to virtually any problem. Now people were recognizing that governments continued to play a vital role in development -- although there was no simple set of rules that told them what to do.

Viet Nam shared the view that, to promote sustainable development, the international community should jointly identify policies and take early action to tackle problems related to the international economic, financial and trading environment. Priority goals were to increase macroeconomic policy coordination and other forms of cooperation; build a strong, fairer international trading system and enhance market access for developing countries; inject greater efficiency and transparency into international capital flows and reverse the downward trend of ODA; develop more effective tools for handling the relationship between development and the environment; and strengthen the international institutions involved.

ABDULRAHIM KHALIL (Sudan) said that the bleak picture of the state of the world economy and of many developing countries, painted by many World Bank studies, made clear that poverty was still an incurable problem in the developing world, and that the development gap continued to widen. The Sudan supported the view that the United Nations was still the most qualified to tackle the issue of globalization, taking into account the economic and social aspects of the developmental process. It agreed that globalization was the only and most important challenge facing the international community today. He hoped that the Committee would attach enough importance to calls for the management of globalization. Global financial architecture must be reformed, and the developing countries had to be protected from marginalization. The best foundation for building lay in close cooperation between the United Nations and the international financial institutions. Those institutions had to be guided by the policies of the United Nations, since it represented all the people of the world

ALYAKSANDR SYCHOV (Belarus) said that several positive factors had emerged this past year, such as the gradual stabilization and restoration of financial markets after the financial crisis. But the developing world needed more support to help it recover. The severest slowdown in growth had occurred in developing countries, where economic growth had dropped to the level of 1.7 per cent. That fact bore witness to the vulnerability of the international economy.

The international community now realized that globalization was characterized by the vulnerability and marginalization to the least developed countries. Attention should now be focused on development of a universal, transparent and multilateral trading and financial system. In that connection, it was worth mentioning that 30 countries were still in the lengthy process of trying to join the WTO. Ongoing analysis of the reasons for surplus membership requirements was needed. Another problem was the limited effectiveness of developing countries in multilateral trade negotiations. Most developing countries lacked the necessary experience in that area.

On the question of reforming and renewing the international financial system, his delegation welcomed the gradual expansion of cooperation between the United Nations and the Bretton Woods institutions. The United Nations, however, could not continue solving problems without the necessary resources. Its survival was threatened by the lack of a stable inflow of resources.

SONIA LEONCE-CARRYL (Saint Lucia), speaking on behalf of the Caribbean Community (CARICOM), presented her views in the form of a resolution adopted by the 14 CARICOM members at their last meeting. He called on the Committee firstly to demonstrate that all issues allocated to it were related to and impacted development, and should not be considered separately but in a holistic or integrated manner. Secondly, another debate was not needed to confirm the serious situation of the world in terms of poverty, development disparities between

developed and developing countries, or the state of the environment. Thirdly, the urgency of the situation called for immediate, drastic action resulting in long-term sustainable development of all States, particularly developing ones.

The resolution called on the Committee to provide the framework for the integrated treatment of all social, financial, economic and environmental issues as they pertained to development and sustainability, with a view to promoting broad guidelines for the management of the global economy. It also called on the WTO to improve the market access of goods and services from developing countries by addressing systemic imbalances and biases, including tariff barriers and other protection measures of developed countries that discriminated against the exports of developing countries. In addition, it called on the Committee to support the sustainable development of small island developing States through special and differential treatment on a contractual basis, and concessional financing and promotion of vulnerabilities as a significant criteria, given the serious situation of those small States. It further called for the implementation of those and other measures before the next millennium.

FERNANDO YEPEZ (Ecuador) said that today’s world was marked by such phenomena as globalization, interdependence and the opening up of markets. Yet the gap between the developed and developing world was widening. Countries of the South had benefited little from globalization. The basic requirements of dignity, well-being and the right to development had not been met. Globalization was a reality that had to be faced for developing countries. Efforts had to be redirected to help them integrate themselves into the world economic order while preserving their own interests. Ecuador placed utmost importance on next year’s international conference on financing for development. It was crucial that the international community mobilize public and private resources for development, reverse the decline in ODA and reform the international financial architecture. Ecuador had signed a preferential trade agreement with Brazil and was playing a decisive role in the creation of a free-trade zone in the Americas. It had based its relationship with the European Union on four pillars -- political dialogue, preferential access to markets, cooperation for development and the fight against narcotics.

A multilateral trade system with fair and transparent rules was needed, he said. The Seattle Ministerial Meeting of the WTO should signal a major step forward in the implementation of the Uruguay Round agreements. Trade liberalization that ignored the vulnerabilities of developing countries would not be beneficial for the development of those countries. Ecuador firmly supported the holding of the upcoming South Summit, essential for the identification of priorities for further international cooperation. Debt continued to be an obstacle to development, and a more definitive solution must to be found. The total amount of Ecuador’s debt was equal to its gross domestic product (GDP), making it one of the most highly indebted countries in the world. The country was now ready to begin an overall restructuring at the national level to ensure that its debt servicing would be shared by all in the financial arena.

FARES M. KUINDWA (Kenya) said that in order for the developing countries to realize the benefits of globalization and increased inter-dependence, there was a clear need to establish effective governance that focused primarily on the following questions: democratization of international economic decision-making; integrated consideration of trade, finance and developmental issues by

international institutions, reform of the international financial architecture; and marginalization.

The new genuine global partnership supported by bilateral and multilateral development partners could play an important role in the success of the development process, especially in sub-Saharan countries. That new global partnership, he said, was urgently required in order to place financing for development in a sound and reliable framework and to facilitate the eradication of poverty, development of infrastructure and the strengthening of education and health systems in the developing countries. ODA was an important component of both bilateral and multilateral official flows of resources, comprising grants and low-interest loans, long grace periods and long periods for repayment.

The Heavily Indebted Poor Countries (HIPC) Debt Initiative was a welcome step, Mr. Kuindwa said. The crushing burden of external debt on the developing countries, especially those in sub-Saharan Africa, remained a major obstacle to development efforts. The coverage of HIPC should be broadened to include more of the indebted countries, with relief being offered on a graduated scale. Debt- relief measures could and should be structured in a holistic and comprehensive manner, without eroding Africa’s future capacity to attract investments, and should be linked to the long-term social and economic development of Africa.

ENCHO GOSPODINOV, from the Observer Mission of the International Federation of Red Cross and Red Crescent Societies, said that in ten years people might look back on the 1990s as the decade when the world finally realized that climate change was real, that its effects were pervasive, and that it was complicated by its interactions with changes in economic systems, demography and political attitudes. One of the most worrying phenomena associated with it was sea level rise. Moreover, the world health situation would be exacerbated by predicted demographic change. Half of all cities were unplanned. It was in those shantytowns, often built on marginal land, that many of tomorrow’s disaster victims were to be found.

The following key changes were necessary, he said. First, the reality of the disaster threat had to be accepted. Development planning must address disasters, not circumvent them. Second, national disaster preparedness systems must plot future disaster vulnerabilities and prepare for them, not simply look for guidance to the disasters of yesterday. Third, national preparedness and response must be linked to international preparedness and response. If systems were not put in place now to make that work, assistance would be chaotic, inefficient and ultimately ineffective. Finally, it was necessary to change the international disaster response system from a reactive to a proactive one. Major disasters needing international assistance still had to await international appeals for funding and the construction of ad hoc coordination systems each time disasters happened.

HUSSAM EDIN A’ALA (Syria) said that in spite of signs of stability in 1999, the growth registered was inadequate. Projections indicated that developing countries would witness a much lower growth rate than the required levels. The shrinking role of the State and the emergence of market economies were risky phenomena for the developing countries. Market economies ignored the role of the state as far as insuring the welfare of the people was concerned. The people were left to the whims of the international markets in search of instant profits.

The most important challenges were how to draw the lessons from economic crises, and how to give globalization a human dimension and minimize its economical risks. It was obvious that the solution was beyond one country or region. One important issue was the range and level of international cooperation necessary for enhancement of international trade. The share of developing countries had not exceeded 8 per cent of the gross international trade. Apart from trade barriers and tariffs, protectionism imposed other trade restrictions. International imposition of prices on commodities of developing countries -- prices that did not meet the needs of producers constituted another restriction.

SERHIY REVA (Ukraine) said that the international community should undertake further measures to improve international cooperation in preventing and disclosing financial crimes. It was obvious that countries with emergent market economies and insufficient working experience in world markets attracted speculation and direct fraud. Creation of an enabling international economic environment was a necessary precondition for sustaining economic growth and meeting basic social needs in the developing world. To cope with the challenges of globalization, further decisive steps were needed to adjust the multilateral trading system to new realities. The UNCTAD and the WTO had an important role to play in future trade negotiations.

International politics in 1999 had been dominated by the Kosovo conflict, he said. While the political and humanitarian aspects of the conflict were being gradually settled, its economic dimension was relegated to the background. Meanwhile the States of the region, the majority of which were economies in transition, suffered from its consequences. Ukraine welcomed both the idea and adoption of the Stability Pact for South East Europe, initiated by the European Union, and was striving to participate in its implementation.

Turning to the mitigation of the consequences of the Chernobyl disaster, he said that Ukraine was making every effort to ensure the safety of the shelter facility, built over 13 years ago and to provide necessary assistance to the affected population. As the victim of the world’s largest technological and ecological catastrophe, Ukraine attached great importance to environmental concerns. It fully understood its responsibility for the protection of the environment, both at the national and global levels, and was doing its best to live up to its commitments under Agenda 21.

FRANKLYN LISK, Director and Representative to the United Nations of the International Labour Organization (ILO), said that productive employment was unquestionably the major source of livelihood for most people worldwide, and an essential requirement for economic empowerment and social integration. Employment contributed to poverty reduction and promoted equality between men and women. Rapid globalization of the world economy had posed new challenges, which had made the goal of maintaining full employment and decent work for all a more complex undertaking.

The ILO was particularly concerned about the negative impacts of financial and trade liberalization on employment and earnings, he said. There was a need for economic and social systems that ensured basic security and employment, while retaining the capacity to adapt to rapidly changing circumstances. It was equally important to find ways to resolve economic and financial crises without sacrificing economic growth and, consequently, increasing unemployment and poverty. The ILO had established guidelines for assisting countries to cope with the challenges of globalization, including minimizing risks to working people and businesses.

Through its long established link with employers’ organizations and the private sector, the ILO was well equipped to assist Member States in the area of entrepreneurship and enterprise development, including micro-enterprises, as a means of reducing poverty and attaining sustainable development. The ILO’s “Declaration on Fundamental Principles and Rights at Work”, adopted last year, was an important step forward in achieving the universal implementation of core labour standards –- of great significance ensuring that globalization generated equitable and sustainable development.

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