PRESIDENT OF INTER-AMERICAN BANK CALLS FOR "NEW DEVELOPMENT PARADIGM" TO DEAL WITH ECONOMIC VULNERABILITY, SOCIAL INSTABILITY

Press Release
TAD/1907

PRESIDENT OF INTER-AMERICAN BANK CALLS FOR ‘NEW DEVELOPMENT PARADIGM’ TO DEAL WITH ECONOMIC VULNERABILITY, SOCIAL INSTABILITY

Foreign Minister of Thailand, Ministers from Ireland, Sudan, Iran, Kuwait and Democratic People’s Republic of Korea Speak in Continuing General Debate

(Received from UN Information Officer.)

BANGKOK, 14 February -- The tenth United Nations Conference on Trade and Development (UNCTAD X), beginning its third day of deliberations in Bangkok, heard the President of the Inter-American Bank, Enrique Iglesias, observe this morning that while economic and political advances had been made in Latin America, strong, stable and equitable growth remained elusive. He therefore called for “a new development paradigm” to deal with economic vulnerability and social instability, neither of which were addressed by the old paradigm.

In the interactive discussion that followed, participants stressed that integration was a key to addressing the problems and opportunities of globalization. Regionalism was a powerful element of “positive globalization”; strong national institutions could serve to add balance to the globalization process.

Speakers advocated the inclusion of questions about labour, migratory populations, fiscal reform, capital flows and protection of intellectual property law on UNCTAD’s agenda. Others proposed that global control be exercised over expanding mega-companies created within the present multilateral trading environment.

The importance of small enterprises to developing States was mentioned, as was the need for supportive government policies for them. The need for economic policies to better cover the informal economy was raised, as was the need for employment strategies to be priority for developing countries.

In the Conference’s continuing general debate this morning, the Minister of Foreign Affairs of Thailand, Surin Pitsuwan, proposed a number of points as the basis for Conference deliberations. These include a global approach to manage globalization in order to maximize opportunities, minimize risks and avoid marginalization; addressing the growing anxiety and scepticism about trade liberalization; improvement in the international financial system to manage and prevent crises; and the development of policies to balance liberalization, competitiveness and development.

The Deputy Prime Minister of Ireland, Mary Harney, the Minister of Foreign Trade of Sudan, Mekki Ali Blail, the Minister of Commerce of Iran, Mohamad Shariatmadari, the Minister of Commerce and Industry of Kuwait, Abdul Wahab Al-Wazzan, and the Minister of Foreign Trade of the Democratic People’s Republic of Korea, Kang Jong Mo, also spoke during the general debate.

The Conference will meet again at 3 p.m. today to hold an interactive debate featuring the heads of the United Nations regional commissions. It will then resume its general debate..

Interactive Debate

ENRIQUE IGLESIAS, President of the Inter-American Development Bank: For my generation, the creation of UNCTAD had tremendous meaning. The first UNCTAD marked the first attempt to have a global view of the link between trade and development. It was also the first time developing countries had a big say in these issues, and it delivered a wider view of development.

Like people in South-East Asia, Latin Americans are feeling the strong need to discuss globalization. However, when you see the literature on the issue, you see that globalization means different things to different people. For some it represents an opportunity to eliminate social justice. Others believe that the way it is delivered results in loss of freedom and it is a threat to social and political balances. Any time humanity undergoes big changes there is uncertainty -- this is natural. In reality, we must look at globalization as a fact, and ask what can be done nationally and multilaterally to ensure it has a human face.

In history there are periods when ideas are ahead of facts, and other periods where facts are followed by attempts to understand or explain them. Originally, in Latin America, a paradigm of development was created -- called the Economic Commission for Latin America (ECLAC) paradigm -- and the facts followed. This paradigm was suspicious of the markets and expected a lot of government. By the 1970s and 1980s, facts, such as the oil-crisis, preceded ideas and led to the exhaustion of the old paradigm. The third phrase, called the “Washington consensus”, involved the introduction of an orthodox economic paradigm, which was followed to a greater or lesser extent by all Latin American countries. It advocated and was followed by fiscal reforms aimed at stability and the opening up of economies. The results of the implementation of the new paradigm was a return of international confidence, but selectively, and only for some countries. Coincidentally, it was accompanied by a return to democracy and the arrival of a new leadership in politics, in the management of economies, in bureaucracies, in labour unions and elsewhere.

At the end of the millennium, a big question remains: where do we stand now and what comes next? I believe a fourth paradigm is needed. Economic and political advances are impressive, but strong, stable and equitable growth remains an elusive goal in Latin America. For example, under the “Washington” paradigm, income distribution became more lopsided, even in those countries experiencing growth. The public perception of economic performance is also interesting. Despite economic advances, only 10 per cent of people think the economic situation is good, 40 per cent think it is regular, and half think it is either bad or very bad.

In any new paradigm, two things must be faced. These are the continuance of extreme economic vulnerability due to external factors, and the continued social instability. Economic vulnerability is a serious problem. Reducing the volatility of growth and increasing growth itself are the first challenges that must be faced. To achieve stable growth, integration has to be extremely successful. More savings are needed and a better distribution of exports is also required. The new paradigm must address these matters.

Regarding social inequality, one out of three Latin Americans still lives in poverty. The distribution of income is unacceptable. Latin America has the highest level of social expenditure in its budgets, but something else is clearly required. What is needed is efficient social spending, to really reach those at the bottom. The new paradigm must address social inequality, as it clearly is not addressed by the old one.

The old reforms clearly need to be reformed. They delivered some things, but strong and sustainable growth is still required, as is a central focus on social issues, and an increase in competitiveness in the light of change. Macroeconomic stability is, and remains, very important. It cannot be ignored. So new approaches to fiscal and monetary policy are needed. There are many theories and disagreements about how to do this, but no one argues against stability and growth.

Education has been the major problem in Latin America. Levels have fallen compared to South-East Asia. The only way to break the vicious circle of poverty is to increase the level of education. It is the most important element of social policy at our disposal. A major problem also exists in the size of the informal sector, with 55 per cent of the labour force there. Another is rural poverty. There are countries that have done everything according to the book, but still cannot reach the hardcore of 20 per cent -- mostly the rural poor.

The new paradigm must improve competitiveness. To improve competitiveness, Latin America must take up information technologies. It has not, and the market will not solve this problem by itself. The market has a tremendous role to play, as does the private sector, but in order to overcome problems of lack of competitiveness there must be a strategic alliance between government, the private sector, labour and civil society. A new concept of the role of the State must be found. This new role of the State -- and finding it - - are very important. The new role for government does not necessarily mean more government; it may mean less but better government.

More and more when you look to the challenges faced by developing States, two or three stand out. One is good governance. It is the basis of any development effort. We must learn to work together, nationally and internationally, to build new societies and a new world.

Integration is a major asset of Latin American history. It has become a very important part of the reform process. It is rooted in Latin American history and values. A major implication of integration is reciprocal opening of markets. There had been a weakening in commitment to this, but I am happy to see in recent months leaders have realized they cannot forget it. Why not a common Southern Common Market (MERCOSUR) currency? For any paradigm, integration must be at the heart.

Improving the international environment will also help. The old international trading system has served well, but it must adjust to account for change. More developing country engagement is required. Trade has now become an engine of growth. But Seattle was a wake-up call for a system that has to grow with the times. Industrialized States still have high levels of protection in precisely those areas where developing countries have a competitive advantage. There is a serious asymmetry here. Failure at Seattle and uncertainty about a new round of negotiations constitute a major setback for the developing world. A new multilateral trading system must allow better opportunities for World Trade Organization (WTO) participation by developing countries. They are unwilling to be passive observers. The big losers in Seattle were clearly the developing countries.

This is a time of opportunity and of risk, but I am an optimist. The world has learned not to fall into the mistake of missing opportunities. UNCTAD is a good sounding board for ideas about this. Ideas are a major asset of the United Nations system.

A great Latin American thinker said that the ideas of the French revolution were taking three centuries to be implemented in Latin America. The nineteenth century was the century of freedom. The twentieth was that of equality. And the twenty-first should be that of fraternity, or solidarity. Solidarity is much needed and should be a key feature of the new century.

Questions and Answers

During the interactive segment, which primarily addressed trade and development issues in Latin America and the Caribbean, a number of participants stressed that integration in the region, and in sub-regions such as the Andes, was a key response to the problems and opportunities presented by globalization, liberalization and the current multilateral trading system.

Others underscored placing more emphasis on export-based policies and diversification. However, achieving that aim required asking what ties and links could be established and what possible support the international community could give.

Another participant drew attention to the fact that the development process in Latin America had been partly interrupted by the region’s own errors, the rupturing of international markets and the inability of international community to handle the debt crisis in Latin America.

It was also widely acknowledged that regionalism was one of the most powerful elements of “positive globalization” and that strong national institutions could serve as agents of balance in the globalization process. The importance of strong regional and sub-regional institutions was stressed.

The incomplete and asymmetric nature of the international agenda was stressed. Such an agenda required themes and issues that were relevant to all countries. Key issues such as the labour force, migratory populations, fiscal reform, capital flows and protection of intellectual property law should be included on the agenda.

It was also proposed that some form of global control be exercised over the expansion of the mega-companies that were being created within the present multilateral trading environment. However, the key question to be asked was “Where were the resources to fulfil all of these requirements”?

Another question that was raised was whether the necessary leadership to maintain an open multilateral system could be expected. Also, would a financial architecture that would prioritize replacing resources in developing countries come into existence?

The importance of small enterprises was also mentioned, and the need for governments to lend them support and enhance their competitiveness. Another issue was the absence of anti-exclusionary policies. Safety nets were not adequate. Economic policies must have “inclusion” as part of their objectives. This must involve better coverage for the informal economy. Better absorption by developing countries of technological advances was also required.

Employment strategies were a priority for developing countries, it was pointed out. Small and medium-sized enterprises were critically important to developing countries, and UNCTAD should play a role in establishing strategies to assist them.

Replying to the remarks made, Mr. IGLESIAS said the Third Ministerial Conference in Seattle had generated a critical consciousness in certain sectors that would lead in certain positive directions. There was also an awareness of the right path to take.

Regarding the world financial architecture, he said there was an awareness that something had to be done. There was a need for the provision of greater transparency in markets. The markets were volatile and sensitive and major changes had occurred. Transparency was therefore necessary.

Concerning the Bretton Woods institutions, he said criticisms were generally leveled at very critical moments, for example, in the midst of a crisis. There were therefore clouds that had to be dispelled. However, there was a need for a more open and participatory structure which would incorporate developing countries.

Addressing the role of the State, he stated that there was a period where the central objective was to reduce the size of government. Today, however, because the market must be supplemented by intelligent action, there was a need for the State to adopt a proactive role.

The State was also an important ally in allowing participation in new frontiers, he continued. In addition, it assumed the role of multilateral institutions to support new international production changes. There were some 50 million micro-enterprises without a clear strategy. There was also a need for a more active State policy for micro-enterprises.

He said civil society, including women, was very important. Women were the managers in the world’s poverty and therefore an immense source of inspiration in confronting the challenges.

He also noted that the work of the United Nations was important and had given rise to critical consciousness at all levels. The United Nations should never lose sight of its role in that respect. He also said the question to be raised was “How can we strengthen interactive dialogue processes”?

Statements in General Debate

MARY HARNEY, Deputy Prime Minister of Ireland: At the Conference, States are urged to apply the lessons of the past to make globalization an instrument of development. There are lessons from the recent financial crisis, but the profound lesson from the South-East Asian region is that poorer countries can come to the foreground of the world economy and because of development strategies they have pursued. That the region is recovering more rapidly than expected from the recent crisis points to the underlying strength of a development policy based on open markets and investment in people and infrastructure. Developing successful policies are the aim for all. The building blocks in the various successful developing countries of this region have similar characteristics.

The major challenge facing the twenty-first century is how to deal with poverty. Eighty per cent of the global population still lives in poverty. Too often when we discuss development, we engage in sterile debate about the importance of macroeconomic environments, rather than examining domestic policies. Of course, the international environment, and the international financial and trading systems, must be conducive to long-term sustainable capacity-building. A strong global architecture is required to deal with difficulties and crises. Respect for human rights, democracy, good governance and the rule of law are also prerequisites for development. Nothing can happen without development of human beings through investment in health and education. Foreign direct investment represents about 7 per cent of global gross domestic product (GDP) and is far too important for anyone to ignore. The challenge was to increase its size and to ensure it is more widely spread. Unless poverty is addressed, development can not happen.

The plight of least developed countries (LDCs) should be central to the work of UNCTAD. Additionally, if globalization is to work for development, then new trade negotiations are essential. The most important lesson from Seattle -- and there were not many -- is that developing countries have a clear agenda, and that greater market access is now at centre stage. UNCTAD’s role in agenda- building for those trade negotiations is important.

SURIN PITSUWAN, Minister of Foreign Affairs of Thailand: We are gathered here to take stock, rethink and chart a new course to improve the livelihoods of people. Already a sense of renewal and collective purpose to forge a new consensus partnership on development can be detected. A strong, relevant UNCTAD will be the pathfinder in our collective effort to secure a greater United Nations role in international development cooperation and global economic issues. Recovery has begun in Thailand, with a positive growth rate, and $34 billion in foreign reserves, but the momentum of recovery also depends o the international economic environment. While the prospects for global recovery have improved and fear of recession has receded, the global economy continues under the shadow of repeated financial crises. The income disparity between rich and poor countries has widened, capital inflows into developing countries have not yet returned to pre-crisis levels and market access needs to be improved. The recent crisis proved that the downside of globalization and systemic imbalances in the international system must be addressed.

UNCTAD X should deliberate on four points. First, the process of globalization is not a matter of choice but an accomplished fact, along with its imbalances. Expected benefits have remained beyond the reach of many developed countries. A global approach to shape and manage the process is needed to maximize opportunities, minimize risks and avert the problem of marginalization. Second, the growing anxiety and scepticism about trade liberalization must be addressed, and existing multilateral trading system rules improved to better balance mounting obligations and unrequited rights of States. The pace of liberalization and integration must be commensurate with levels of development. Third, the existing international financial system must be improved to prevent a recurrence of the crisis and to provide better crisis management measures. It would be foolish to allow development gains to be again undercut by factors beyond developing countries’ control. Fourth, development policies and strategies must be developed to help attain a balance between liberalization, competitiveness and development, to strive for greater equity between nations.

Debate here inevitably revolves around partnerships between States, but we also need to address the livelihoods of vulnerable segments of our respective societies. Human security and human development are two sides of the same coin. This gathering provides a valuable opportunity to achieve the much-needed goal of a stable, balanced and equitable global economy.

MEKKI ALI BLAIL, Minister for Foreign Trade of Sudan: Globalization, while beneficial, has led to dislocation and destruction in some developing countries. The challenge now is mastering and staying the ship of globalization that is gathering speed and gaining momentum. Obviously we cannot counter the process, so the time has come to work together to make it a tool for more interaction and interdependence. Our hope is that UNCTAD will become the all-inclusive forum that will study and analyse the process and prescribe measures for the necessary economic and trade integration. The developed countries also have a role to provide the necessary integration conditions for incorporation of LDCs into the multilateral trading fabric.

Foreign debt has to be eliminated. It is also necessary for countries to honour their pledges in terms of official development assistance (ODA). Despite global policies and initiatives for trade liberalization, the flow of foreign direct investment is still concentrated in only a few developing countries. The last decade has seen the development of institutions and initiatives such as the WTO and the United Nations Development Initiative in Africa. However, the establishment of the multilateral trading system has created a number of challenges for developing countries. The texts on preferential treatment for LDCs, for example, had not been implemented.

The time has come to lay out an inventory of gains and losses. African initiatives will be of little value in the absence of political will and resources. As they stand, such initiatives are nothing more than temporary sedatives. There should be a review of existing policies and actions according to a time-bound frame. Access to the WTO is a great challenge for developing and lesser developed countries. It is a complicated issue fraught with difficulty. While numerous reviews have called for simplification and acceleration of the accession process, the reality is that there has been slow progress in negotiations.

MOHAMAD SHARIATMADARI, Minster of Commerce of Iran: In order to assure the balance and sustainability of development in less developed and developing countries, the approach to development should be globalized. Nations should work to change the multilateral trading system and improve the mechanism of its decision-making in a way that fair and non-discriminatory participation of all countries in the world can be secured. In this respect, a restructuring of the WTO is necessary. The present structure of the organization could be manipulated to obstruct the accession of some developing countries to the WTO, as has been the case with Iran. Using concepts such as sustainable development, transparency, good governance, social and environmental standards and the like as leverage should be avoided.

Work must be done to prevent the extraterritorial application of domestic legislation of developed countries and enforce laws and regulations to restrict transnational corporations and mergers from adversely affecting the competitiveness of developing countries. The continuous transfer of technology and know-how must be facilitated from industrialized countries to the developing world on a non-discriminatory basis.

UNCTAD should expand its technical assistance and continue its activities in the analysis of important international trade issues. Developing countries should be assisted to effectively negotiate in the WTO. The Conference should also actively cooperate with international financial and monetary institutions for their restructuring and the streamlining of their management. Its past mandate as a negotiating forum and consensus-building body should be revived.

ABUDUL WAHAB AL-WAZZAN, Minister of Commerce and Industry of Kuwait: The establishment of the WTO was designed to raise standards of living and to ensure continued growth. However, the desired results have not been achieved by most developing countries. Rather, they now have increased foreign debt and instability. Industrialized countries should provide all necessary assistance to developing countries, to remove all tariff barriers for their goods and to help with technology transfers. These actions will improve the whole world. In addition, industrialized countries must show greater flexibility to needs of the least developed.

The complicated economic problems faced by developing countries have been aggravated by the international system. UNCTAD should help them address the difficulties caused to developing countries by globalization and help build their technical capacities and internationalize their projects . Kuwait affirms the importance of cooperation between developing and industrialized countries and the need to provide all support to developing countries. Kuwait has done this. It is also currently transforming its trade laws so it can fit into the emerging world economy and is liberalizing trade.

States were attending UNCTAD X to discuss means of cooperation, to raise human prosperity and raise standards of living. This forum is designed to ensure that trade is open and freed from the obstacles that block it. However, first States must agree to protect the dignity and freedom of all people. An end should be put to the suffering of civilian prisoners held in Iraqi prisons for 10 years. This is Kuwait’s top priority. KANG JONG MO, Minister of Foreign Trade of the Democratic People’s Republic of Korea: The developed countries should not impose their values and economic modes on the developing countries, but rather respect their domestic strategies and policies for development that suits their specific conditions and circumstances. Next, practical measures should be taken to create a sound and dynamic international environment favourable to growth and development of the developing countries. It is unfair and unjust to demand the same standards from countries that find themselves in seriously inequitable relations due to their different levels of development. Accordingly, multilateral trade negotiations in the new millennium should focus on reviewing, repairing and reforming current trade systems and agreements.

The Generalized System of Preferences should also be improved and strengthened to meet the new trade environment and its application enlarged to encompass new fields and sectors, thereby ensuring market access for the developing countries. Any attempt to introduce issues such as environment, labour standards, intellectual property rights and human rights into the agenda of the WTO should be rejected, as these issues have no direct link with trade. Current international financial and monetary architecture should be seriously reviewed and reformed so as to ensure stability of financial markets and increase development financing for countries in the South. Developed countries should also improve technical transfer and financial support to the developing countries to enable them to have free access, on favourable terms, to advanced science and technology.

The UNCTAD should analyse and evaluate the dangerous effects of unfavourable trends in development in developing countries and continue to initiate policies and measures to remove such instabilities and dangers. The economic power of our country continues to grow stronger, even under present difficult circumstances in which hostile forces intensify attempts to isolate and stifle our republic with stricter economic blockades. There are also all sorts of trials and difficulties, including persistent natural disasters. However, our growth again stands as clear testimony to an economic policy based on the aspirations of our people and scientific analysis of the economic situation of our country.

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