PRESS CONFERENCE ON FINANCING FOR DEVELOPMENT EVENT PREPARATORY COMMITTEE HEARINGS WITH NGOS
Press Briefing
PRESS CONFERENCE ON FINANCING FOR DEVELOPMENT EVENT PREPARATORY COMMITTEE HEARINGS WITH NGOS
20001107The world of finance had become a global gambling casino, where huge sums were bet around the clock, Robin Round, Regional Coordinator of the Halifax Initiative, a Canadian non-governmental organization (NGO), told correspondents at a Headquarters press conference this morning.
Ms. Round represented one of the many NGOs participating in the two-day NGO hearings, held yesterday and today, with the Preparatory Committee for the 2001 High-level International Event on Financing for Development.
She was joined at the press conference by the Preparatory Committee's Co-Chairmen, Asda Jayanama (Thailand) and Jorgen Bojer (Denmark). Also participating were Lidy Nacpil, Secretary-General of the Freedom from Debt Coalition and member of the Jubilee South Coalition Steering Committee from the Philippines, and Humberto Campodonico from DESCO Centro de Estudios y Promoción del Desarollo of Peru.
The game was big -- $2 trillion per day, Ms. Round continued. Speculators profited from the minute fluctuations in currency values and interest rates. While huge profits accrued to the winners, including the 100 largest banks in the world, it had devastating social, economic and political impacts on the losers, who did not even play. Thirty-three million people in Asia had been pushed into poverty as a result of the South-East Asian financial crisis; they were still there.
In 1978, she said, James Tobin had proposed a small tariff of between 0.1 and 0.5 per cent on currency transactions to reduce exchange rate volatility and increase government autonomy over national monetary policy. The tax was low enough not to have an effect on legitimate trade in goods and services but high enough to cut into the margins that speculators profited from. While the proposal was interesting, it was shelved until the 1994 Mexican peso crisis, when people realized that markets were inefficient and prone to herd behaviour and panicked capital flight.
Since then, she went on, the Tobin proposal had evolved and had been refined by leading economists and academics to address critical unresolved issues, including feasibility in decentralized markets, evasion and avoidance, tracking and transparency as well as the need for universality. That had led to what was now known as the currency transaction tax -- a tax on inter-bank market settlements of foreign exchange transactions. It was a national tax, implemented by any government with the authority to tax, and would be coordinated internationally by a negotiated process designed to redistribute revenue and to avoid damaging tax competition.
There were two critical reasons for the tax's relevance to the financing for development process, she said. First, it was an important preventative measure to
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increase financial stability. There would be no development without economic and financial stability. The tax was designed to reduce speculative volume and could liberate immobile domestic capital held in reserves for development. In addition, it shifted the tax burden from labour to capital, which would free up money for development.
Second, she added, the tax would generate enormous revenue for social development and environmental protection. It would raise between $150 and $300 billion annually. The potential for redistribution, increasing equity and provision of social good and environmental protection was enormous. While government support for the tax was growing globally, its strongest opponent was the United States, which was attempting to block its inclusion in the draft text for the Event. Non-governmental organizations and supportive governments must work in a coordinated manner to ensure that the tax remained in the final document and that the recommendations arising from the Event were implemented.
Mr. Bojer said the two-day hearings were important since they gave civil society a chance to provide input to the preparations to the Event. The United Nations had two basic agendas, peace and development. While the peace agenda was being pursued, following the Millennium Summit, through the follow-up to the Brahimi Report, the development agenda was being pursued through the financing for development process.
The issue at the centre of the Summit, he said, had been how to ensure development for all in an era of globalization. Whereas the South emphasized the dangers of economic volatility, the North stressed the importance of freedom for mobilizing capital. In his opinion, both views were right. The role of the United Nations was to do what it did best -- to raise public awareness. In the follow-up to the Event, there would be close cooperation between the United Nations and many other actors, including the World Bank, the International Monetary Fund and the World Trade Organization.
Mr. Jayanama noted that the financing for development process was among the few processes driven mainly by developing countries. What made the Event unique was that it encouraged the participation of NGOs, the private sector and international institutions. That was why the Preparatory Committee was holding hearings with the NGOs. [Hearings with the business sector would be held on 11 and 12 December.]
Ms. Nacpil, whose organization was specifically concerned with debt, appealed to the United Nations to take a greater leadership role in solving issues related to financing for development. She urged the Organization to lead in the formulation of a comprehensive debt-cancellation programme that would be inclusive of all the countries of the South. The debt-relief programme presently being pushed by the international financial institutions -- the enhanced Heavily Indebted Poor Countries (HIPC) Initiative -- had failed.
In fact, she continued, the Initiative was being rejected by many countries because it was linked to economic conditionalities, which had proven to have disastrous effects on the countries and peoples of the South. The United Nations should work for the de-linking of debt cancellation from economic
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conditionalities. It also needed to make a strong statement on the right of nations to repudiate illegitimate debts. She called on the Member States from the South to form a "debtors alliance" to, among other things, work for the repudiation of illegitimate debts.
Mr. Campodonico said there were enormous imbalances among the most important currencies, namely the yen, the euro and the United States dollar. If there was a period of difficult lending for the United States economy, it would pose difficulties for the developing countries. The development of an international monetary system which promoted stability and predictability should also be tackled by the financing for development process.
There had been a process of financial deepening since the 1960s that had given capital unprecedented power in the world economy, he continued. That deepening meant that there was an excess of money all over the world and there was no international financial regulation for that capital. Nor was there regulation for off-shore centres or tax havens, from which capital came and went. There were no lenders of last resort or regulations in the international financial markets, as in national systems.
There were four issues that needed to be dealt with but were not on the table, he said. The first was the global implications of exchange rate movements of major currencies. The second was the unequal distribution of voting power in the global financial system, mostly inside the International Monetary Fund. Third was the reluctance to apply the obligations of transparency, accountability and equity on the capital markets and institutions of developed countries.
The final issue was development, he said. The development model had to be changed and the fight against poverty as well as unemployment must be put at its centre. Promoting employment was the most important way to fight poverty. That meant having the necessary sectoral, industrial and agricultural policies. The market alone could not generate employment.
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