IMF MANAGING DIRECTOR SAYS EXTREME POVERY COULD NO LONGER BE TOLERATED AS MEANS TO AMELIORATE IT ALREADY EXISTS

Press Release
TAD/1905

IMF MANAGING DIRECTOR SAYS EXTREME POVERY COULD NO LONGER BE TOLERATED AS MEANS TO AMELIORATE IT ALREADY EXISTS

UNCTAD X Meeting in Bangkok Also Hears Statements By President of Cambodia, President of Conference, UNCTAD Secretary-General

(Received from UN Information Officer.)

BANGKOK, 13 February -- Poverty is the greatest threat to stability in a global world, the Managing Director of the International Monetary Fund (IMF), Michel Camdessus, told the United Nations Conference on Trade and Development (UNCTAD) this morning in Bangkok. In a keynote address to the Conference, he declared that extreme poverty in the poorest countries could no longer be tolerated since the means to ameliorate it existed. Poverty was no longer inevitable -- if it had ever been.

The world had unprecedented prospects, he explained, but it also faced financial instability and exclusion. Although the most severe economic crisis of the last 50 years had been overcome with unprecedented speed, people’s anxiety was not unreasonable. However, if the dynamics of recent history could be identified, a new chance to improve human well-being would be created.

Among those dynamics, he said, was a recognition that major economic crisis could be overcome. Another was the new development paradigm that was emerging. A third dynamic was the knowledge that globalization could lead to world progress, if properly handled -- “and that is a big if”, he cautioned.

Rubens Ricupero, the Secretary-General of UNCTAD, said the present gathering was a good place to conduct a thorough in-depth reflection of the development process -- what went right, what went wrong and why? He called on the Conference to avoid old conceptualizations like “the State versus the market” and face the real challenges of the present, by analysing facts, not ideologies. There was an “arrogant” strain of globalization that endorsed unfettered power of footloose capital, and was only concerned with profit. For UNCTAD, globalization meant interdependence, the mutuality of interest and “win-win” situations.

Also addressing the Conference this morning were the President of Cambodia, Samdech Hun Sen, and the President of UNCTAD X, Supachai Panitchpakdi, of Thailand.

Finally, the Conference decided to recommend the establishment of a Committee of the Whole, electing Philippe Petit (France) as its Chairman. It elected Mohammad Nahavandian (Iran) as Rapporteur and appointed the following States as Vice-Presidents of the Conference: Bolivia, Burundi, Canada, China, Colombia, Czech Republic, Dominican Republic, Egypt, Ethiopia, the former Yugoslav Republic of Macedonia, Gabon, Guatemala, Japan, India, Lebanon, Lesotho, Mexico, Netherlands, Nigeria, Norway, Pakistan, Peru, Philippines, Russian Federation, Singapore, Slovenia, South Africa, Spain, Sweden, Switzerland, United Kingdom, United States and Uruguay.

The Conference will meet again at 3 p.m. today to hear an address by the Prime Minister of Viet Nam, Phan Van Khai, and a statement by former UNCTAD Secretary-General Gamani Corea. It will then begin its general debate.

Address by IMF Managing Director

Managing Director of the International Monetary Fund (IMF), Michel Camdessus: The world faced a situation at present where there is a promise of unprecedented prospects but also financial instability and exclusion. There are serious reasons for the anxiety felt by some about globalization, even though the world has reasonably overcome, with unprecedented speed, the most severe economic crisis of the last 50 years and even though it enjoys better prospects for sustainable growth. There is a unique opportunity at present -- too good to be missed -- to try to identify the dynamics in recent history, and thereby offer a new chance to improve the well-being of humankind.

There is also a unique opportunity to recognize that poverty is the threat to stability in a global world, and that an all out effort is needed to overcome world poverty.

Three of the positive dynamics in recent history are that major economic crisis can be overcome and that a stable world can be built on its lessons; that a new development paradigm is emerging; and that we now recognize that globalization, if properly handled -- and that is a big “if” -- can be an opportunity for progress for the world.

The resilience of Asian economies to such a severe crisis, the courage of authorities and the capacity of the international community to respond promptly with technical and financial assistance must be noted. While the human cost of the recent financial crisis is to be deplored, by 1999 all economies were recovering and the gross domestic product (GDP) of the Republic of Korea and the Philippines already exceeded pre-crisis levels. Thailand, too, would soon be “graduated maxima cum laude” from the IMF programme. Its economy is on the path of recovery and industrial output is now at pre-crisis level.

The Asian nations and emerging markets elsewhere which have confronted the crisis with such fortitude are to be saluted. It is a tribute not only to their governments and institutions but also to their people. We must not pretend the reform process is over, but it is important that economies have stabilized and fundamental changes in finance and corporate sectors have been made. These States have now gained a better chance now of achieving high quality growth. Beyond the recovery, there is another golden opportunity to press for a world less vulnerable to upheaval.

There are three basic lessons to be learned from these countries. First, that it is of essential importance to strengthen all available means of prevention, and that institutions must be given these means to prevent crisis. Second, that the strength and determination of governments is of decisive importance in avoiding crisis. Third, that the international community has the ability to respond and thus reduce the length of the crisis. These lesson are an important avenue for stability in the future, and underline the extensive reform agenda for international monetary and financial system which is being implemented.

The recoveries rest on, or have developed in parallel with, positive developments in the way the international community approaches its economic challenges. A new paradigm of development is progressively emerging here. A key feature of this is the progressive humanization of basic economic concepts. It is now recognized that markets can have major failures, and that growth alone is not enough and can even be destructive of the natural environment and of social and cultural goods. Only the pursuit of high-quality growth is worth the effort.

High-quality growth is growth sustained over time without domestic and external imbalances, but it is also growth that has the human person at its centre. It is accompanied by high levels of investment in education. It is growth that is sustainable, based on continuous efforts for equity, poverty alleviation and for empowerment of poor people, and that promotes the protection of the environment.

A second key feature is the convergence between respect for ethical values and the search for economic efficiency and market competition. This augurs well for the highest quality growth. There is now a far wider recognition that participatory democracy can maximize the effectiveness of sound economics, that transparency, openness and accountability are basic requirements of economic success, and that combating collusion, corruption and nepotism is a legitimate concern of the international community. Stability and strong institutions are clearly essential for growth and hence poverty alleviation, but popular support for stabilization and reform cannot be counted on unless the whole population, including the poorest, are able to contribute.

In short, a new economic paradigm is emerging. New opportunities arising from information technology, compounded with more reasonable efforts to share the benefits of growth, will amplify economic and monetary stability. The new paradigm is rooted in fundamental human values, and together with a better ability to prevent and manage crisis, it is a distinct and positive chance of our times.

A vigorous call to turn globalization into an effective instrument for development can be detected. Globalization can be seen in a positive light -- not as a bland malevolent force. Globalization should be seen as a logical extension of human and economic relations that have already brought prosperity to many countries and people, and as the best means of improving the human condition throughout the world.

If such powerful positive dynamics are at play, one must ask why there is such anxiety and rejection of globalization. There is anxiety because globalization has not yet demonstrated that it is concerned enough, or capable of, overcoming the greatest concern of our times -- poverty.

Poverty is the ultimate systemic threat facing humanity. Consideration of the positive dynamics makes the lack of pace in reducing poverty all the more unacceptable. The widening gaps between rich and poor within nations and the gulf between affluent and impoverished nations, are morally outrageous, economically wasteful and potentially socially explosive. It is not enough to increase the size of the cake. The way it is shared is deeply relevant. If the poor are left hopeless, poverty will undermine societies through confrontation, violence and civil disorder. We cannot afford to ignore poverty anywhere.

The extreme poverty in the poorest countries can no longer be tolerated. We must work together to ameliorate it. The means exist to do this. The information technology revolution reveals its potential daily and could eliminate forever the knowledge gap between rich and poor countries. Global markets can easily allocate resources to poor countries, provided the environment is right, and the poorest countries are more determined than ever to centre their policies on human development.

Poverty is no longer inevitable -- if it has ever been. It can be addressed, provided new opportunities are mobilized for the poorest. This can be done by being respectful of priorities of those countries themselves. The best way to respond now -- North and South together -- is to mobilize all our resources at least to implement the not-overly-ambitious pledges already made by States at the United Nations conferences of the 1990s.

By taking the necessary steps to this effect immediately -- tomorrow will be too late -- we can significantly increase the chances of a diverse synergy between social spending and growth. We can thereby achieve the higher level of national growth necessary to reduce poverty by half by 2015. And the acceleration of growth in developing countries can stimulate growth everywhere.

The principles States committed themselves to in the 1990s must become operational. The challenge is to work together to build developing country capacities to fight poverty and to mobilize resources to support their efforts. Poverty is a challenge that the poor countries must confront themselves. They are on the front line. Many have shown what can be done when the ultimate objective is human development.

The content of programmes is important, but so is the degree of national support for them. A programme will only work if people and society support it. Success lies in national ownership through a participatory approach that engages civil society. It is essential to ensure that poor countries are in the driver’s seat of the process, and the rest of world should be ready to provide support when a country indicates it needs it.

Development partners can assist by assigning the highest priority to providing unrestricted market access for all exports from poorest countries. They can also work to encourage private flows of investment to lower-income developing counties. And they can back up their pledges to reduce poverty, in the North and in the South. Official bilateral creditors and donors should be ready to step up the level of assistance. Aid fatigue is not a credible excuse, but is almost cynicism when, for the past decade, advanced countries have enjoyed the peace dividend. It is no longer fashionable to mention the commitment to provide 0.7 per cent of GDP as overseas development assistance, but that objective is still relevant. Debt relief is a most welcome contribution, but must not be seen as a substitute for new financial flows.

Multinational institutions are ready to play their part. It is imperative that a new higher level of cooperation exists between the United Nations system and the Bretton Woods agencies, as together they try to support the work of countries to alleviate poverty. The task is just monumental. All out effort is needed to alleviate poverty. A higher level of cooperation is needed. A reinvigorated multilateralism must be the response.

The international community is giving with one hand but taking away with the other. Governments have made a far-reaching decision in the Bretton Woods institutions to reduce by half the debt of 35 to 40 of the poorest countries. However those same governments have failed, in the World Trade Organization (WTO), to launch a trade round or to take steps to eliminate trade barriers to exports from poorest countries. The latter initiative has the greater long-term potential for export-led growth and for income generation and lifting the poor out of poverty. Unless reversed, these failures by governments will make a mockery of their debt-relief initiatives.

There is a similar incoherence in government activities for peace and development in Africa. Just as development is the other name of peace, so peace is the other name of development. The arms trade and military expenditures must be restrained. Perhaps United Nations Secretary-General Kofi Annan’s suggestion that military expenditures be set at no more than 1.5 per cent of GDP in Africa could be followed. States could also cooperate in the interdiction of the smuggling of raw materials and natural resources to finance armed conflicts, and they could broaden the United Nations arms register to involve more countries and to include small arms. How many ploughshares could be forged with such an oversupply of swords?

In the past two years, a great deal has been done to identify the architecture needed to reform the international monetary and financial system and a start has been made on that reform. All countries have a responsibility to make sure they are doing everything to make their institutions and economies measure up.

However, there must also be more coherence in the attitude of governments to political support for multilateral institutions. Governments sometimes find it convenient to fail to support measures in public that they wholeheartedly support in the executive bodies of international institutions. In a world where demagogic campaigns can develop in a flash, no multilateral body can fulfil its responsibilities unless it is perceived for what it is -- a faithful instrument of its member states. The IMF and others must be seen to have the legitimate political support of their shareholders.

Multilateralism is the best way of enhancing the coherence of actions and initiative for all humanity, but multilateral institutions are also the only avenues to properly address the broad issue of world economic governance. This is not a utopian vision of world government but an effort to find global responses to inescapable global problems.

Globalization has until now operated at the whim of financial and technological forces, but it is high time that responsibility for it is taken. The world needs to be imaginative enough to conceive of institutions that will best serve this purpose, or at least make necessary changes to the Bretton Woods or United Nations institutions to allow them to do so.

Strong dynamics are at play in our history, carrying the promises of more financial stability, of a new paradigm of development and of a better chance of humanizing globalization. They could make it possible to fulfil the universal pledge to reduce poverty. Through reinvigorated multilateralism, we can better address the global dimension of problems.

The bell that UNCTAD has chosen as a logo for this Conference is reminiscent of the bells of villages -- calling old people to wake up and reminding them that an angel has visited the earth. It can serve as a reminder that, provided humanity cooperates, the world can be saved. Positive dynamics for high quality equity development have been given to the world today. It is up to us to cooperate, in a spirit of responsibility and solidarity, as good citizens of one global village.

Replies to Questions

Asked what kind of IMF was needed, Mr. CAMDESSUS said that first, the IMF must remain as it was. Its purposes were as valid today as they were 50 years ago. The growth of balanced international trade must be promoted, while developing the public resources of all members. The Fund must also continue to assist in the establishment of a multilateral system of payments and give confidence to all its members.

The IMF continued, he said, to be a self-reforming institution and it accomplished this according to the needs of the time. Its central task, however, was not financing but surveillance. Its goal was to help all countries perform with excellence, optimize their economic policies, improve the plight of their people and assist them in their contributions to the world.

Surveillance must now be broadened to incorporate the establishment of stability, strengthening banking and financial systems and improving the quality of governments, he declared. The new world financial architecture must also have the full participation of the financial and private sectors.

Poverty reduction must be at heart of programmes, because experience has taught that there is a kind a positive equation taking place: sound macro- economic and monetary policies led to growth, as well as poverty and inequity reduction.

He said the Fund’s focus on surveillance and crisis prevention should not be carried by abandoning members. The IMF was committed to its 180-plus members. Systematic crises could occur, as it did in Thailand, but the IMF must be constant in its support.

The private sector must also be involved in market-based solutions, he said. The emphasis made earlier that debt relief and market access must go hand-in-hand was an issue he favoured. Debt relief was only a temporary means. The relief provided by the World Bank had to be balanced by the provision of market access by the WTO.

On a question raised about crises and poverty reduction, he said action must be taken now and solidarity must be demonstrated. It will be necessary to spend more for social purposes. But resources must be generated through a more flexible economy. Flexibility must be stressed so that country economies could grow. South Africa, for example, did not grow enough and there was a need for structural changes to fuel such growth.

The IMF was seen unjustly as an instrument that created marginalization, he said. “Let me, however, refer you to 80 countries that currently have IMF programmes”, he added. Would they want such programmes if the Fund did encourage marginalization? The IMF tried to work hand-in-hand with governments, and it did everything it could to help the poorest, with help of the World Bank, the United Nations and other institutions.

The IMF, he said, also wanted to be attentive to the problem of the smallest and weakest countries. It was trying to bring their problems to the attention of the international community. It was currently doing this and had not closed its agenda to such countries.

On the question of the yardstick used to define poverty situations, he said the IMF was open to any serious discussion on this issue. “But you must help us to convince the world that this kind of measurement must be reviewed”, he added.

He said he was also aware that it was not one-country, one-vote which prevailed in the current system. Although this was the desired system, it was not in his hands to change the status quo. However, all of the important decisions taken by the Fund’s board were taken by unanimity and not by a majority imposing its views on the world

There also seemed to more interest in dwelling on the mistakes of the past than in discovering avenues for the future. The IMF, as part of a larger system, shared the mistakes of the system and had made mistakes. However, the IMF was more interested in learning the lessons from these mistakes. It had been accused of being erroneous in its handling of the Asian crisis. “How then are we witnessing such a quick recovery?”

Another criticism is that interest rates were very high. But did countries have the courage to take the necessary action to reduce them? A number of Asian countries, however, were reducing inflation because such policies were working.

There was also no “cronyism” between the IMF and Wall Street, as had been inferred. Read the Wall Street Journal to see how critical they were of some of the IMF policies.

And yes, the IMF did share many of the views of the United States treasury because it had 18 per cent of its capital. The United States, however, was also in the forefront of the fight to establish a global market economy.

Statement by President of Cambodia

SAMDECH HUN SEN, Prime Minister of Cambodia: Freedom for short-term gain market forces to operate at their own will and pace have already proven disastrous, as exemplified in this region two years ago. There is a need to establish and enforce a policy-based set of parameters within the environment in which the market forces will operate. Much needs to be done to encourage and enable developing countries to reach their full potential and to use their comparative advantages in low-cost productivity factors. Attaching unreasonable and stringent conditionalities to the use of such factors in order to achieve standards that took centuries to be reached elsewhere thwarts and negates the underlying principle of growth and free trade.

Globalization cannot only be discussed in terms of economic liberalization. The envelope has to be expanded beyond its restrictive economic and free trade parameters and extended to the concept of achieving a common minimum level of human condition all over the world in the shortest possible time. In essence, this has to be the goal of all development. Within each country, pro-active policies and programmes are required and can alleviate poverty. We therefore stand at an important juncture invent a new inclusive developmental paradigm which will benefit the many and uplift them to an acceptable level of human condition.

Along with this new paradigm we may also have to think of devising a new yardstick of measurement of progress towards this goal -- perhaps an “index of minimum human consumption based on a basket of essential needs”. An essential ingredient for the future should be to reinstate the sense of sharing which has governed human existence from the dawn of history. In a more developmental sense, this sharing has to extend to more transfer of financial and technological resources and free opportunities for trade with developed markets without hidden conditionalities and domestic subsidies. More grant rather than loan funds also have to flow to the poorer countries for development.

Statement by UNCTAD Secretary-General

RUBENS RICUPERO, Secretary-General of UNCTAD: the current gathering is an appropriate stage to conduct an in-depth reflection on the exercise of development over the last few decades. It should be a stock-taking exercise: what went right, what went wrong and why? The Conference should ask what was missing from the original approach when the emphasis was on capital accumulation, productivity increases and trade and not aid? Some of the answers were obvious: the environment and how it conditioned the sustainability of development, the quality of growth, income distribution, poverty reduction, the role of women, institution-building and human development. These were a few of the dimensions that have to be integrated in a fresh paradigm.

What were the challenges ahead? While taming short-term capital volatility, broadening the supply basis away from dependence on a few commodities, incorporating technology in an age when development would depend more on knowledge than on other factors, would probably be on everybody’s list; there were certainly many more.

Dichotomies such as the State versus the market, price stability versus economic expansion, labour flexibility or job protection, dirigisme versus free enterprise, foreign or national capital and integration versus autarchy were false problems, conceptually solved a long time ago. The Conference should concentrate on the real challenges of the present, focusing on facts, empirical evidence and not on ideologies.

Coherence is a key word. But the world is still highly heterogeneous and unbalanced, and countries find themselves at extremely different vantage points as they attempt to achieve coherence or promote universal aspirations. Development requires flexibility, gradualism, adaptability, diverse policies and therapies and appropriate sequencing of reforms. This is why there can be no immutable set of recipes.

Some still insist that the problem of development will be better dealt with by bringing about a level playing field. How truly equal is equal in this case? Should we not recognize that competition requires, as all games do, not only clear rules and impartial arbitrators, but training and preparation as well? This is work of patience that will take generations and require a massive concerted cooperation effort for capacity and institution-building.

In UNCTAD, we never speak about globalization without immediately adding “interdependence”. There is an arrogant strain of globalization that exclusively underlines the unfettered unlimited power of footloose capitalism, and is only concerned with the search for profit. In contrast, interdependence highlights the mutuality of interest and the “win-win” situations. Attention was drawn at the first-ever UNCTAD to the “trade gap” -– the fact that imports and other goods, which the developing countries require, far exceed what they can finance from their export earnings. Last year UNCTAD revisited the concept and it was found that the trade deficit still existed. There is no denying that a significant part of the blame has to be laid on the unbalanced way in which trade liberalization has proceeded.

An IMF publication once drew attention to the fact that the trading system had been allowed to succeed because of the deliberate choice of excluding agriculture and textiles and clothing. One can argue the point, but none can reject the fact that after 53 years of existence, the system has not been able to fully cope with the need to integrate these two central sectors for developing countries. For many years, UNCTAD was almost a lone voice drawing attention to the problem. Now, however, there is support from many quarters.

UNCTAD’s role is clear. As a knowledge-based and consensus-building organization, it should assist developing countries to build institutions and develop skills to formulate trade, investment and economic policies in general, to negotiate successfully with their partners and to take the best advantage of the concessions resulting from negotiations. It should also assist in commercial diplomacy, investment-training programmes or in national or regional capacity-building projects in all areas relating to trade, investment and correlated issues.

For many developing countries the problem is not so much one of market access, but one of supply as well. How to broaden the productive basis and how to become capable of offering a variety of goods and services in the marketplace is something that, much more than technical assistance, will require sustained national and foreign investment, technology and enterprise skills.

There is certainly scope for improvement in all areas, and UNCTAD, as the body of the General Assembly with a mandate to promote development through trade, has a legitimate role to play. It is an enterprise that has to be carried out by all countries together, not in some utopian alternative system that does not exist, but from the inside of the real world system which is always imperfect and always perfectible.

Statement by UNCTAD X President

SUPACHAI PANITCHPAKDI (Thailand), President of UNCTAD X: As we enter the new millennium, the objectives of the WTO and UNCTAD have converged. Their roles in the pursuit of a multilateral trading system to promote trade liberalization and development have become complementary and compatible. The multilateral system that is being promoted should have certain fundamental characteristics. It should equally serve the interests of all Member States. It should adapt to new realities and it should be coherent with the development objectives of the global community. UNCTAD has a special responsibility to assist developing countries in maximizing the opportunities and benefits from the evolving multilateral system. It accomplishes this task, not in isolation, but by interacting and working closely with other international organizations, particularly those striving to create a coherent and balanced multilateral trading system.

Developing countries should not pursue trading opportunities simply for the sake of trade expansion, but more importantly, to serve development and enhance the quality of life. In doing so, developing nations, need to be able to effectively participate in the multilateral trading system on an efficacious basis. As a knowledge-based organization, UNCTAD is in a unique position to take the lead in preparing these countries for this challenging task. It can, for example, also assist these States in their accession process to the WTO, as well as in developing the supply capacity required for an effective integration into the global economic system. The policy debate at UNCTAD needs to be geared towards attaining practical and concrete approaches in meeting development challenges. We needed to de-politicize the dialogue between developed and developing countries.

The independent analysis and research undertaken by UNCTAD can serve as an objective and well-prepared basis for forging consensus on global development- related issues. The work of the Conference should, as much as possible, use a stakeholder approach, allowing the various members of society to partake in the elaboration of strategies, understanding of emerging issues and in technical and capacity-building activities.

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