PRESS CONFERENCE BY CO-CHAIR OF UN PREPARATORY COMMITTEE, FINANCING FOR DEVELOPMENT PROCESS

Press Briefing

PRESS CONFERENCE BY CO-CHAIR OF UN PREPARATORY COMMITTEE, FINANCING FOR DEVELOPMENT PROCESS

How developing countries could attract more of the enormous existing flows of international capital was the focus of the Financing for Development process, Ambassador Jorgen Bojer of Denmark, Co-Chair of the United Nations Preparatory Committee for that process, told correspondents at a Headquarters press conference this morning.

“Financing for Development is an innovative process that takes a global approach to development,” Mr Bojer said. “The response to making globalization work for everyone must be comprehensive, in both how the substance is defined and in the inclusion of all relevant actors and stakeholders.” The press conference was part of the second day of hearings in which business leaders spoke on the issue of financing for development, as an early part of the process initiated by the General Assembly in December 1999. Findings from the briefings, along with input from non-governmental and international organizations, would be channelled into an upcoming global meeting on Financing for Development, to be held some time around the first quarter of 2002. The aim was to work towards a shared analysis of what worked to mobilize the sources of financing for development –- both inside and outside the countries involved, in the public and private spheres.

Joining Mr. Bojer at the press conference were three of the participating business leaders, introduced by Tim Wall of the Department of Public Information. Beatrice Rangel, Senior Adviser to the Chairman of the Cisneros Group, a Venezuelan multimedia conglomerate with assets in 28 countries in Latin America, said that the current period was, in some ways, “the best of times” in that region, with many opportunities for investment. Those countries could become very competitive in the global market if certain conditions of macroeconomic stability and good governance were met. For that second phase, the educational system and information infrastructure had to be improved in each country, so that the new economy could continue to grow and so that its opportunities could be distributed.

However, she said in response to a correspondent’s question, those challenges could not be met by national governments alone. The local and international business community had to make a contribution, along with multilateral organizations. Private investors could be tapped for assistance because, even though they were looking for a short-term return, they were also looking to the growth of the market and local skills. Alcatel, the French telecommunications multinational, was wiring schools in Latin America, for example, to help young people meet the profiles of the jobs that were being created.

Rodney Harper, a director of international operations at Alcatel, said that technology-related investments in developing countries were extremely important for his company. Even if the digital divide was currently widening

Bojer Press Conference - 2 - 12 December 2000

due to the Internet, it was also a great opportunity for developing countries to improve education, health and diet, and to allow local suppliers access to global markets. That could attract financial investment. But for that to happen, the Internet had to be adapted to local needs in terms both of literacy levels and of languages spoken. The private sector should and could effect those changes, along with creating increased access. As an example of such an effort, Alcatel was working with the Government of Mali to establish a pilot system of 702 cyber-centres across that country.

In addition to such direct investment by companies, there were vast new pools of capital available today in equity markets, according to Marshall Carter, Chairman of the United States-based State Street Bank, an investment- services company operating in 92 countries. The capitalization of those markets exceeded the combined gross domestic product of the world by $7 trillion. But countries that wanted to access that capital needed to assume obligations to protect investors, just as off-shore investors had an obligation not to exploit developing economies.

Such countries must, he said, provide confidence to investors through financial transparency, through market-based (as opposed to relationship- oriented) banking systems, and through sound macroeconomic policies that included sustainable foreign-exchange currency rates, to cite three examples. The United Nations had a key role in providing leadership in such reforms. With them, he said, “emerging markets can mobilize domestic savings and attract far more in both direct investing and portfolio flows than they’ve ever received in foreign aid.”

A correspondent asked why money from those vast pools of capital hadn’t yet gone to developing countries. Was it simply that they hadn’t created the proper conditions? Mr. Carter replied that investment managers have a responsibility to create best return at least risk. Philanthropic considerations did not come into it at all. However, there were developing economies, particularly in Asia, that had attracted a great deal of investment. It depended on what was considered a developing economy. There was a tremendous amount of money invested into the developing economy of South Korea 15 years ago. But, he said, “where you cannot get good transparency from the ownership of a company and the normal type of accounting information you need, people are hesitant to invest.”

Mr. Bojer added that, in the Financing for Development process, it was important to ask such questions. Then it was necessary to change conditions to get a more satisfactory distribution of private flows of capital, enlisting the efforts of all relevant actors -- governments and the private sector, the United Nations, the World Bank, the International Monetary Fund and the World Trade Organization.

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