PRIVATE SECTOR INDISPENSABLE ENGINE OF ECONOMIC, SOCIAL DEVELOPMENT SPEAKERS TOLD AS COMMITTEE FOCUSES ON AFRICAN MARGINALIZATION

Press Release
GA/EF/2888

PRIVATE SECTOR INDISPENSABLE ENGINE OF ECONOMIC, SOCIAL DEVELOPMENT SPEAKERS TOLD AS COMMITTEE FOCUSES ON AFRICAN MARGINALIZATION

Small, Medium-Sized Enterprises Among Most Reliable Players’ in Market Economy, Says Turkey

An important prerequisite for economic and social development was the existence of a competitive private sector, the representative of Norway told the Second Committee (Economic and Financial) this morning, as it considered industrial development cooperation and business and development.

The private sector’s active participation was necessary to achieve poverty reduction targets, he said. Economic reforms and the liberalization of the world economy had radically altered conditions for business and industry in most partner countries. A more coherent and broader-based strategy for private-sector development was therefore needed, with a clear emphasis on the needs and priorities of the developing countries. Improvement of legal, institutional and political conditions for private-sector development was crucial, and foreign as well as domestic investment must be encouraged.

Turkey’s representative said that a new business philosophy, aimed at creating an enabling national environment in which the private sector could operate most efficiently, would likely be one in which State involvement in industrial and commercial activities would be minimal. Policies that sought to enhance the organizational and monitoring functions of governments in economic activity should include special emphasis on ensuring fair competition, securing intellectual and industrial property and labour rights, consumer protection and free flow of information.

Small- and medium-sized enterprises (SMEs) were among the most reliable players in a market economy, he added. They often yielded greater and more varied output with less investment, and adapted to changes in demand and consumption patterns with relative ease. Support services to SMEs, in the form of training, technical, management and marketing advice and financial help could result in more effective public-private cooperation.

Second Committee - 1a - Press Release GA/EF/2888 32nd Meeting (AM) 4 November 1999

The representative of Ethiopia said that the integration of Africa into the globalization process through effective industrial-sector development required decisive action in improvement of the human resource base, diversification of the industrial sector and the provision of adequate and effective financial services. The international community had to embark on genuine cooperation, based on the principles of partnership, ownership and the promotion of national capacities. That cooperation should be based on the understanding that efficient utilization of Africa’s significant mineral, agricultural and human resources could promote the overall welfare of the global economy as well.

Speaking on behalf of the Organization of African Unity (OAU) and the African Group, the Algerian representative said that the Second Industrial Development Decade for Africa could fail because of broken promises. With all the will in the world -– and Africa’s will was considerable -- the mobilization of internal resources would not suffice. Aware of the stakes involved in industrialization, African leaders were committed to redoubling efforts to reverse the downward trend of official development assistance (ODA) and to limiting obstacles hampering foreign investment.

While the role of the private sector was crucial, it was not a panacea for Africa’s problems, since it was mostly guided by its quest for profits, he continued. The private sector debate should not be allowed to cloud the responsibility of the international community, since Africa, in the not-too-distant past, had been considered as a reservoir of natural and human resources, to be plundered and exploited.

Statements were also made by the representatives of Guyana (on behalf of the Group of 77 developing countries and China), Finland (on behalf of the European Union and associated States), United States, Russian Federation, China, Ecuador, Thailand, Côte d’Ivoire, Ghana, Ukraine, Papua New Guinea, Nigeria and Sudan. The representative of the International Labour Organization (ILO) also spoke.

The Committee will meet again at 10 a.m. on Monday, 8 November, to discuss the International Decade for Natural Disaster Reduction.

Committee Work Programme

The Second Committee (Economic and Financial) met this morning to begin its discussion of industrial development cooperation and business and development. For background information, see Press Release GA/EF/2887 of 3 November.

Statements

GEORGE WILFRED TALBOT (Guyana), speaking on behalf of the Group of 77 developing countries and China, said that the question of industrial development and cooperation in an interdependent world could not adequately be addressed without considering that Africa had largely been left out of the globalization process. African economies would reap the inherent benefits of that remarkable phenomenon, if only those economies were integrated into the process. However, Africa still lacked the base requirements for development and effective participation in the world economy.

Closing the income and technological gap between the region and the rest of the world would involve effective public and private investments in industrial infrastructure, strengthening of technological capabilities through human resource development, institution building and effective economic governance, he said. Greater donor support in furthering those aims was needed. Another vital requirement was an upgrading of capacity-building and skills, so that Africa could market itself as an attractive business partner in the globalized international economy.

After expressing the Group’s dissatisfaction over the inordinate delay in the issuance of the report on business and development, he said that private capital flows now accounted for more than 70 per cent of global resource movements. However, private flows could not be regarded as a substitute for official development assistance. The enormous potential of the private sector for contributing to development could not be ignored. Promoting an enabling environment for private sector development was appropriate, but changes on the part of the private sector itself would also be required if it was to become a reliable partner in development.

MATTI KAARIAINEN (Finland), speaking on behalf of the European Union, Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Cyprus and Malta, said that despite some positive signals in growth rates earlier in the decade, African economies, especially those in Sub-Saharan Africa, faced only modest growth prospects in the years to come. In light of the problems they faced, the Union stressed the importance of applying science and technology to accelerate productivity. Strengthening or establishing, where appropriate, national, regional and subregional centres for training, research and services could be a useful tool in promoting enhanced productivity and quality standards. Modern information and communication technologies should make networking a part of any business plan, and open channels to new partnerships much more easily than before. In addition, capacity-building and good governance at all levels were essential.

“We should not however be blinded by new technologies, but also keep in mind more traditional means of development, to be applied when appropriate”, he said. The establishment of small enterprises through the provision of micro- finance generated employment and contributed to the empowerment of those living in poverty, particularly women. Achieving the sustainability of those businesses was a continuing challenge in the process of industrialization in Africa. The European Union supported Africa’s development through bilateral programmes of its member States, and through programmes, projects and operations in such fields as mining, energy and infrastructure, through the European Development Fund and the European Investment Bank. The European Community’s favourable trade regime for African industrial exports was also intended to assist African industrial development.

Turning to business and development, he said that the Union saw the private sector as the main engine of economic growth and the principal source of employment creation, which contributed to improved living conditions. Last year, the European Commission introduced a new strategy for private sector development in the African, Caribbean and Pacific countries, which focused on improving the business and investment environment, strengthening financial and non-financial activities and advancing the competitiveness of enterprises. For its implementation, a number of supporting facilities should be provided. They included analysis of the business climate, help in designing country or regional level strategies and a demand-driven cost-sharing facility, aimed at increasing the competitiveness of African, Caribbean and Pacific enterprises and capacity-building.

MICHAEL GALLAGHER (United States) said that private business, whether domestic or international, was the primary generator of employment, contributing significantly not only to a country’s economic development, but its social and educational gains as well. With a properly functioning system of administration of justice being a requisite catalyst for business operations, the private sector could play a key role in infrastructure building. United Nations agencies were engaged in building frameworks based on good-governance practices in accounting, law, finance and a host of other areas, and should be encouraged to continue, if not expand, their work.

The private sector must live up to its public responsibilities, he said. Business should respect labour rights and protect core labour standards. Small- and medium-sized enterprises (SMEs) played a pivotal role in all economies. The vast majority of new jobs worldwide were created in the past ten years by SMEs. In that area, he commended the work of the United Nations Conference on Trade and Development (UNCTAD) in its technical assistance programmes and the Special Unit for Micro-finance of the United Nations Development Programme (UNDP), which was doing exciting work in financing in the poorest countries.

NIKOLAI V. TCHOULKOV (Russian Federation) said that strengthening the potential of the industrial sector, especially SMEs, and successfully adapting it to market conditions, were among the decisive factors in the creation of sustainable economic growth and in the creation of favourable conditions for solving the most urgent social challenges, including poverty eradication. The most serious problem SMEs faced today was access to financial resources. International efforts to find new financial mechanisms to meet their needs, both within the UNCTAD framework and through the involvement of international financial institutions, needed to be intensified.

The UNCTAD’s assistance to international inter-corporate cooperation was quite promising, he said. Such cooperation brought obvious benefits: it enabled businesses to bypass official bureaucratic structures and establish a mutually beneficial partnership between interested enterprises, thus fostering investment activities, exchange of technologies and advanced management. Training of business management personnel capable of operating in market conditions was another issue of importance in the sphere of entrepreneurship development. The present scope of the work carried out within UNCTAD, United Nations Industrial Development Organization (UNIDO) and UNDP still did not meet the virtual demand of developing countries and economies in transition for highly-skilled personnel.

OLE PETER KOLBY (Norway) said that an important prerequisite for economic and social development was the existence of a competitive private sector. To achieve the targets for poverty reduction, its active participation was needed. Economic reforms and the liberalization of the world economy had radically altered overall conditions for business and industry in most partner countries. A more coherent and broader-based strategy for private-sector development was therefore needed, with a clear emphasis on the needs and priorities of the developing countries.

Improvement of legal, institutional and political conditions for private sector development were of central importance, he continued. Foreign as well as domestic investment must be encouraged. A vital component of Norway’s policy was a broad dialogue with recipient countries on private sector development and on how support could be integrated with existing planning instruments. Great emphasis must be put on close donor coordination of private sector assistance to developing countries and among the various agencies involved in promoting trade and development. Donors could assist in that process by strengthening their support for capacity-building and institutions in recipient countries, focusing more on the needs of the developing countries than on those of its own enterprises.

HUANG XUEQI (China) said that State-owned enterprises played the dominant role in China’s national economic development. The Chinese Communist Party had set forth objectives and guidelines for reform and development of State-owned enterprises until the year 2010, which included five main points. Among them were: enhancement of the controlling influence of State-owned enterprises in the national economy while promoting co-development of the public and private sectors; strategic reform of those enterprises; and promotion of the mobility and reorganization of State-owned assets. The Government had also formulated and implemented corresponding strategies for the private sector. They included strengthening the codification and development of laws, and protection of the legal rights and interests of private and self-employed enterprises. They also involved the formulation and implementation of concrete policies to encourage the development of the private sector, as well as the creation of a policy and market environment, which allowed fair competition among enterprises of all ownership types.

Industrial development was a major means of poverty alleviation and employment generation in developing countries, he said. However, what was worrying was that the gap between North and South in industrialization and industrial technology continued to widen. It was imperative that developed countries fulfil their commitments to the developing ones by providing financial resources and transferring technologies to assist the latter’s industrial development. Moreover, it was necessary to strengthen industrial technical cooperation. As for Africa, which was poor and far from being industrialized, he appealed to the international community to come together and make greater efforts to assure the effective implementation of the Second Decade for African Industrialization Development.

FERNANDO YEPEZ LASSO (Ecuador) said that developing countries had tried their best to integrate themselves into the global economy by, among other things, moving forward with modernizing their economies. However, profound differences existed between developed and developing countries, and the gap between the rich and the poor continued to widen. He was alarmed at the lack of sensitivity to the serious social difficulties faced by the people of the developing world. It was up to the United Nations, the highest democratic authority, to contribute in a positive way to achieving a juster and more equitable world order. Ecuador believed in an international trading system with clear-cut, transparent and predictable rules. The latest round of trade talks would have to mark a step forward to fully comply with the Uruguay Round agreements.

Ecuador promoted foreign investment as a tool for development, he said. The private sector was the main driving force for production at the national level. His country’s experience with the European Union had proven particularly positive in that regard. Ecuador, steadfast in its commitment to integration, was active in the Andean community’s activities to meet the challenges of globalization. He highlighted the important role played by bodies such as the Andean Business Council, which was an active player in the subregion. Ecuador had expanded its economic and trade ties to promote greater openness with the outside world. It had expanded trade with the European Union, and was actively involved in regional and subregional activities. Trade and economic cooperation would contribute to increasing the well-being of his people.

CHUCHAI KASEMSARN (Thailand) said that sustainable development, particularly in the industrial sector, could not be achieved without unleashing the creative force of private enterprise. In his country, the private sector had become the prime engine of economic growth. For many decades, Thailand had pursued its development strategy by adopting private sector-friendly policies. Private sector-led recovery was essential to bringing Thailand back to its path of sustainable development. To achieve that objective, it had adopted various policies to enhance the competitiveness of its economy. They included reform of the tax and tariff structure, promotion of equity investment, incentives to promote the recovery of the real estate sector, and financing SMEs. Such policies were carried out in tandem with social safety net measures, good governance and democracy, and sound environmental management, so as to build a solid foundation for the country.

The keys to strengthening the country’s competitiveness included the following measures, he said: improvement of research and development capabilities, upgrading of the skilled workforce, and encouragement of investment in areas that would enhance productivity and efficiency. More importantly, the Thai corporate sector was also encouraged to work towards achieving international standards of governance and transparency. In that connection, the Government had enacted the anti-money-laundering law in August, which should promote higher standards of business practice, which in turn should enhance greater economic competitiveness. Rationalizing State-owned enterprises through privatization was another important element in efforts to advance Thailand’s competitive edge. BURAK OZUGERGIN (Turkey) said that a new business philosophy aimed at creating an enabling national environment in which the private sector could operate most efficiently, would likely be one in which State involvement in industrial and commercial activities would be minimal. Policies that sought to enhance the organizational and monitoring functions of governments in economic activity should include special emphasis on ensuring fair competition, securing intellectual and industrial property and labour rights, consumer protection and free flow of information.

The SMEs were among the most reliable players in a market economy, he said. They often yielded greater and more varied output with less investment, and adapted to changes in demand and consumption patterns with relative ease. However, they had difficulties obtaining business loans, and, given their limited production capacity, did not benefit as much as larger business concerns from incentives or finance mechanisms. Support services to SMEs, in the form of training, technical, management and marketing advice and financial help could result in more effective public-private cooperation.

ABDALLAH BAALI (Algeria), speaking on behalf of the official development assistance foreign direct investment Organization of African Unity (OAU) and the African Group, said that the question of industralization in Africa had not received the same attention from the international community as other development regions, such as Asia and Latin America. The Second Decade could fail because of broken promises. With all the will in the world –- and Africa’s will was considerable -- the mobilization of internal resources would not suffice. Official development assistance (ODA) and foreign direct investment (FDI) remained of vital importance.

Africa’s share in world trade was insignificant, he said. The negative impact of globalization could not be invoked here to explain that fact. Africa had been spared the consequences of the Asian crisis. To help Africa’s export revenues, to revitalize its export sector, there must be more resolute movement towards diversification of the Continent’s economies. Greater access to the markets of developed countries was therefore vital. The international community should support the efforts of African countries, made at great sacrifice.

Aware of the stakes involved in industrialization, African leaders were committed to redoubling efforts to reverse the downward trend of FDI and to limit obstacles hampering foreign investment. The crucial role of the private sector needed emphasizing, but the private sector was not a panacea for Africa’s problems, since it was mostly guided by its quest for profits. Moreover, the private sector was not very generous in the transfer of new technologies. The private sector debate should not be allowed to cloud the responsibility of the international community, since Africa, in the not-too- distant past, had been considered as a reservoir of natural and human resources to be plundered and exploited, all too often as cannon fodder.

DANIEL TESHOME (Ethiopia) said that the industrial sector’s response to Africa’s multifaceted efforts to create conducive economic environments for investment and trade had been insignificant. That weak response was attributed largely to supply-side rigidities, which had their genesis in infrastructure bottlenecks and demand constraints that stemmed from the lack of purchasing power. Moreover, policies designed to correct macroeconomic imbalances had failed to factor in coherent strategies focusing on the industrial sector. Coupled with trade liberalization, that failure had resulted in large inflow of cheaper commodities, which contributed to the reduction in demand for domestically produced industrial goods.

The integration of Africa into the globalization process through effective industrial-sector development required decisive action in improvement of the human resource base, diversification of the industrial sector, and the provision of adequate and effective financial services. The international community had to embark on genuine cooperation, based on the principles of partnership, ownership and the promotion of national capacities. That cooperation should be based on the understanding that efficient utilization of Africa’s significant mineral, agricultural and human resources could promote the overall welfare of the global economy as well.

CLAUDE-STANISLAS BOUAH-KAMON (Côte d’Ivoire) said that industrial development was of overriding importance for his country and all of Africa. It was one of the major pillars of Africa’s economic development. As the Secretary-General rightly pointed out in his report on implementation of the programme for the Second Development Decade, Africa’s marginalization was largely due to its heavy reliance on commodities, which accounted for 80 per cent of its export revenues. Export revenues had also undergone serious erosion. It was against that disadvantageous international backdrop that African countries had attempted to diversify their products in favour of manufacturing. Speeding up industrial development was one of the fastest ways to achieve development for Africa. However, that industrialization was running into stumbling blocks, such as the lack of necessary resources, the declining trend in ODA, the debt-servicing burden, and a lack of scientific and technical know-how.

He said that African countries had recognized the special role played by industrialization in poverty reduction and employment generation. He lauded the efforts of the UNIDO to assist African countries in getting programmes off the ground. In the context of its own industrialization policy, Côte d’Ivoire was building a strategy based on strengthening the agricultural sector and on development of the four major sectors –- agriculture, mining, energy and industry. The strategy also aimed at improving relations between Government authorities and the private sector. He hoped that in pooling efforts with the international community, African countries would be able to gain greater access to the international economy and take their rightful place among the global economies.

KWABENA OSEI-DANQUAH (Ghana) said that prospects for Africa’s rapid economic transformation lay in linking industrial development to agricultural activity, including higher agricultural productivity and enhanced access to knowledge and technology. The economic reform measures African countries were undertaking, within the framework of the World Bank and International Monetary Fund (IMF) and donor-driven macroeconomic formula, had killed off local industries while at the same time sharply raising the cost of living. On the other hand, the successful implementation of attractive investment and tax policies in many African countries had not led to greater inflows of foreign direct investment, due mainly to non-commercial risk perceptions.

Therefore, he said, there was a need for continuing refinement of the process, begun in Washington, of making poverty reduction and other social aspects of development the basis for macroeconomic policy-making in countries undertaking reforms. Also, innovative ways for leveraging capital for industrial development in Africa must be considered. The use of investment guarantees and risk insurance schemes would have to be expanded and targeted more effectively. Furthermore, technical assistance would be critical to enable Africa to take advantage of future trade preferences.

The fourteenth meeting of the Conference of African Ministers of Industry (CAMI), just held in Senegal, recognized that it was the responsibility of African governments to support and strengthen the development of Africa’s private sector, he said. The Conference had called on African countries to ensure conditions for a sound banking sector, which would of course require support in terms of capacity-building from the international community.

V. RESHETNIAK (Ukraine) said that successful implementation of the processes of entrepreneurial development, privatization, de-monopolization and administrative deregulation was of special significance to economies in transition, towards a market economy. The private sector was particularly relevant to the activities of SMEs, which had a crucial role to play in spurring the transformation to a market economy. Ukraine had inherited the internal contradictions of an administratively-planned system, accumulated and multiplied over the decades, which was stiff, totally militarized and structurally unbalanced. After gaining independence, the country had undertaken decisive measures to renew both the economy and people’s thinking, in order to free market forces, develop a spirit of entrepreneurship in the country and strengthen the private sector.

The President of Ukraine, Leonid Kuchma, had identified seven major tasks to be accomplished: to complete the privatization process; elaborate the effective mechanisms for realization of the right to land ownership; create an effective legal and regulatory framework of protection of creditors and investors; create a favourable and enabling competitive economic environment; carry out a profound reformation of the tax system; strengthen the national currency; and intensify the integration process, including strengthening cooperation with the international financial institutions and accelerating accession to the World Trade Organization (WTO). To achieve competitiveness at the global level, it was imperative to strengthen national institutional and technological capacities. At the same time, he stressed the importance of a supportive international economic environment.

GARETH HOWELL, Deputy Director of the International Labour Office, International Labour Organization (ILO), said that the ILO’s relationship with the private sector was unique within the United Nations system. It included actual integration of the private sector as equal partners with governments. The ILO’s tripartite constituents adopted and promoted implementation of its resolutions and instruments, mainly by consensus between representatives of governments, employers and workers. Those partners had an integral role in standard setting, but also in advancing the principles of the ILO’s strategic objectives, such as promoting and achieving fundamental rights at work, helping secure decent jobs and income for women and men, and enhancing social protection.

In recent years, the wide range of private voluntary corporate initiatives had given rise to new kinds of relationships at the global, national and local levels, which moved beyond existing business, community and workplace relations. The Second ILO Enterprise Forum, the Global Compact between the United Nations and the world business community, and the ILO’s technical cooperation programme were some examples of how the ILO was forging new ways of assisting and guiding that dialogue.

In some cases, he said, business had directly funded United Nations work. But its far more quantitatively significant role was as a channel of investment, a developer of natural resources and the principal provider of jobs, goods and services. At the very least, it must learn to become compliant with basic civilized norms. The ILO’s Declaration on Fundamental Principles and Rights at Work committed Member States to respect, promote and realize freedom of association; recognition of the right to collective bargaining; elimination of forced labour; abolition of child labour; and elimination of discrimination in jobs.

ADAM VAI DELANEY (Papua New Guinea) said that an active private sector, whether it involved small- , medium- or large-sized enterprises, was a society’s principal means of generating employment, creating wealth and promoting the delivery of goods and services for the well-being of its population. The role played by privatization in expanding opportunities for wider participation of resource owners could be substantial if more locals enjoyed control over enterprises. A flourishing private sector was a crucial generator of much needed revenue for governments to support sustainable development. However, it was superficial to expect real growth in the domestic private sector when countries spent their export earnings on external debt servicing. His country was determined to pursue privatization efforts to stimulate productive activity, in an effort to improve its overall economic stability and create an enabling environment for investment.

Papua New Guinea was committed to an overhaul of its public sector to weed out corruption and raise confidence among all stakeholders, private businesses, resource owners, civil servants and political leaders, he said. Corruption and bribery were not just unethical, but demeaning and harmful to the integrity of human development. Promoting better working conditions would enhance accountability and responsibility. Investors too could show greater responsibility by adhering to strict codes of conduct. His country was ready to explore options on international cooperation to recover public monies that had been leaking from developing countries as a result of corrupt practices. He requested that those recommendations be included in forthcoming reports on global action to return public monies taken from countries through corrupt means.

AUSTIN P. ETANOMARE OSIO (Nigeria) said that any industrialization programme for Africa would amount to little unless poverty-alleviation measures were adequately factored into it. Poverty was a core issue and must be addressed in a holistic approach that would, first and foremost, enable citizens in industrial employment to feel the concrete benefits of industrialization in the improvement of their living standards, and thereby enhance their capacity for increased productivity.

On the subject of business and development, he said that a lot of policy prescriptions in the report were based on the assumption that, in every developing country, there was a functioning modern free-market economy. But what monetary or fiscal policy would one apply in countries where more than 80 per cent of the money in circulation was outside the banking system, and where the interest rate had no bearing on investment? What point was there in talking of “capital markets” -- when more than 80 per cent of young university graduates had no hope of employment, or where the State could not provide basic services, including law and order? The United Nations agencies should take a deeper look at the underlying economic structures of those countries and prescribe policy solutions that truly reflected realities.

Millions of dollars belonging to developing countries had been illegally transferred abroad with the active collaborations of foreign companies, in deals that verged on corruption. A country’s development must be protected from such adverse business elements as corruption. An injection of ethical considerations would give the relationship between the private sector and governments a better chance of accelerating the pace of development in many countries.

MUBARAK HUSSEIN RAHMTALLA (Sudan) said that there was a modest potential for growth in Africa. But it was a matter for concern that Africa’s share in world trade of manufactured goods did not exceed 2 per cent, and that its share in global investment flows did not exceed 1 per cent. The negative trend in FDI left African countries unable to come to grips with poverty eradication and achieving progress in building up the industrial sector, -- which resulted in further marginalization. In order to reduce technical disparities and poverty, fresh initiatives and more strenuous efforts to narrow the gap between the have- and have-not nations were needed. He called on the international community to find the financial resources needed to translate United Nations programmes into reality.

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