Preparatory Committee for the

International Conference

 on Financing for Development

2^nd Meeting (PM)

DEVELOPMENT FINANCING CONFERENCE MUST NOT BECOME

NORTH-SOUTH CONFRONTATION, COMMITTEE IS WARNED

Japan Tells New Session of Preparatory Body ‘Blame Game’

Should Be Avoided at Next Year’s World Gathering in Mexico

Member States should not allow next year’s International Conference on Financing for Development to become another round in the blame game, where the North and the South accuse each other of being the reason progress towards development was too slow, the representative of Japan told the Preparatory Committee for the Conference as it continued its resumed third session this afternoon.

The representative added that Member States should also avoid setting unrealistic targets.  He said the outcome document of the Conference -- which takes place from 18 to 22 March 2002 in Monterrey, Mexico -- should be a forward-looking and very concise one, sending a clear and positive message to the whole world that Member States were determined to promote development.

The Preparatory Committee meets for the rest of this week to discuss the Conference, which is being convened to address broad development concerns, primarily obstacles faced by developing countries in mobilizing the resources needed to finance their development.

The representative of Belgium, on behalf of the European Union and associated States, told the Committee the draft outcome of the Conference should attach greater importance to the global challenge of poverty eradication and to mutual responsibilities between developed and developing countries.  Emphasis should be placed on the importance of national good governance, respect for human rights and conflict prevention, issues which were essential for creating a climate for attracting investment as well as official development assistance.

The representative of Nauru, speaking for the Pacific Islands Forum and the small island developing States, said the final outcome document should contain a consistent balance of policy issues, structure and substance, that expounded a clear set of obligations and commitments for all concerned.

Also addressing the Committee this afternoon was Under-Secretary-General for Economic and Social Affairs, Nitin Desai.  The Executive Coordinator of the Financing for Development secretariat, Oscar de Rojas, and the facilitator of the

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draft outcome document, Mauricio Escanero, introduced documents before the Committee.

Statements were also made by the representatives of the Sudan, Iran (on behalf of the “Group of 77” developing countries and China), Chile (on behalf of the Rio Group), Russian Federation, Norway and the Republic of Korea.

The Observer for Switzerland and the representatives of the World Bank, the International Monetary Fund, the International Chamber of Commerce and the Mexico NGO Forum Organizing Committee also made statements.

Shamshad Ahmad (Pakistan), co-chair of the Committee, made an introductory statement.

The Preparatory Committee will meet again at 10 a.m. tomorrow, Tuesday, to continue its session.

Background

The Preparatory Committee for the International Conference on Financing for Development -– to be held next year from 18 to 22 March in Monterrey, Mexico -- met this afternoon to continue its resumed third session.

Before the Committee is a letter dated 25 June from the Secretary-General to the President of the General Assembly (document A/55/1000) transmitting the report of the High-level Panel on Financing for Development.  The 11-member Panel, chaired by former Mexican President Ernesto Zedillo, was appointed to recommend strategies for the mobilization of resources required to accelerate equitable and sustainable growth in developing countries as well as economies in transition, and to fulfil the poverty and development commitments enshrined in the Assembly’s Millennium Declaration.  Member States are encouraged to consider the recommendations in the Preparatory Committee as well as in the Conference itself.

Among its principal recommendations, the Panel states that every developing country needs to set its economic fundamentals in order.  No country can expect to achieve equitable growth, or meet development goals, unless it focuses on building effective domestic institutions and adopting sound policies.  Also, the World Trade Organization (WTO) should launch a Development Round, with the principal objective of fully integrating the developing countries into the global trading system. 

In addition, the Panel urges the International Conference to obtain a commitment from the industrial countries to implement the target of providing official development assistance (ODA) equal to 0.7 per cent of their gross national product (GNP).  Further, donors should distribute ODA across countries according to two criteria:  the depth of poverty in a country, and their assessment of the extent to which the country’s policy is effectively directed to reducing poverty.

The Conference should also explore the desirability of securing an adequate international tax source to finance the supply of global public goods.  It had been suggested that a currency transactions tax might provide such a source, but the Panel concluded that further rigorous study would be needed to resolve the doubts about the feasibility of such a tax.  A better possibility would be for all countries to agree to impose a minimum level of taxation on consumption of fossil fuels (a carbon tax) as a way of combating global warming.

The Committee also planned to discuss the draft outcome prepared by the Conference Facilitator (document A/AC.257/25).  Under the proposed outcome, Member States would commit to achieving fully inclusive and equitable globalization.  They would work to ensure that the global systems of finance and trade fully supported economic growth and social justice for all the peoples of the world. They would join forces through a strengthened multilateralism to ensure stable and sufficient financing for sustainable, gender-sensitive, people-centred development in all parts of the globe.

Among the recommendations, the Member States would call for broadening and strengthening the representation and participation of developing countries in all global economic decision-making and norm-setting bodies.  It would also encourage the International Monetary Fund (IMF) and the World Bank to steadily continue exploring ways and means to enhance the role of the developing countries in their decision-making and deliberative bodies.

Multilateral financial and development institutions would be called upon to deepen their support to national effort to improve the investment climate.  In that regard, States would request the Secretary-General to explore, with the support of all relevant stakeholders, possible avenues to strengthen international cooperation in the promotion of foreign direct investments in developing countries and countries with economies in transition, through investment agreements.

To invigorate the political support required to mobilize more ODA, Member States would request the Secretary-General to launch a global information and advocacy campaign for the goals stated in the Millennium Declaration.  This campaign should be designed to raise public awareness in developed countries of the urgency of increasing international development assistance, as a vital investment in building a more secure world for all.

Members States would call on the IMF and World Bank to propose policy actions for prompt, comprehensive debt relief to low-income countries, small island developing States, and landlocked developing countries in the face of natural catastrophes and severe terms-of-trade and capital-account shocks.  The WTO would be encouraged to ensure that any steering group required to facilitate consensus complied with two conditions:  maintenance of the rule of decision-making by consensus and representation of the full WTO membership based on clear, simple and objective criteria.

Member States would strengthen the WTO by enhancing its focus on the priorities of development and upgrading its institutional relationship with the United Nations to a level similar to the one already established among IMF, the World Bank and the United Nations.  They would also explore, through a global network of tax authorities, the potential benefits and optimal designing of an international tax organization or other tax cooperation forum, taking into account the needs of developing countries and countries with economies in transition.

Member States would decide to launch open-ended consultations of the General Assembly to explore how to set up, under the aegis of the United Nations, a world economic body at the highest political level.  The role of such a body would be to provide a long-term strategic policy framework to promote economic and social development, to secure consistency in the policy goals of the major international organizations, and to provide political leadership to enhance the coherence and consistency of the international monetary, financial, and trading systems in support of development.  It would also request the Secretary-General to encourage public discussions on the issue and to establish a group of eminent persons with the mandate to propose options and recommendations.

Member States would also agree to meet again in 2005 as an open-ended intergovernmental forum, at the level of the highest economic authorities, to take stock of progress on the implementation of the decisions reached at the Conference and to continue building bridges between development, finance and trade deliberations.  The 2005 forum should be held under the auspices of the General Assembly.

Also, to carry on the work of the forum, Member States would decide to establish a mechanism for substantive engagement among the Economic and Social Council, the Bretton Woods institutions and the WTO, focused on supporting the implementation of the follow-up of the results of this Conference.

The Committee was also to hear the introduction of a number of technical notes prepared by the Financing for Development Coordinating secretariat (document A/AC.257/27 Adds. 1-10).  The notes contain existing proposals on a variety of topics related to issues falling under the substantive agenda for the Conference . Those topics include:  international cooperation on tax matters; international cooperation to combat corruption; innovative sources of finance; participation of developing countries in the trade and financial decision-making processes; prevention and treatment of debt problems; increasing market access to exports of developing countries; codes of conduct for transnational corporations and governments; prevention of financial crises; availability of sufficient international liquidity to avoid unnecessary recessive adjustment processes; and strategies for expanding access to microcredit.

Statements

NITIN DESAI, Under-Secretary-General for Economic and Social Affairs, said the preparatory process was nearing a crucial phase:  it was time to ensure that the outcome really marked an important step forward in the important sphere of finance and development.  It was heartening that there was so much strong interest by the private sector, especially those in the finance industries, in the preparations for the Conference.

He said that everyone was aware of the events of 11 September and the way the world had come together to fight the scourge of terrorism.  An important part of that fight dealt with the areas of finance, especially corruption and money laundering.  In light of that, it was important to show that the United Nations could come up with something important, not only on terrorism, but on those issues related to terrorism.

The Conference was also especially important in light of the state of the world economy, he said.  Forecasts showed that there would be a further reduction in growth in the world economy.  The burden of that slowdown would be on the developing world.  In that context, a successful outcome to the Conference would be a major confidence-boosting contribution.  At a time when there was great fear, such a statement would be an important boost to the world economy.

On Friday, 12 March, the Nobel Peace Prize was awarded to Secretary-General Kofi Annan and the United Nations, he said.  It was important to show that that award was not just a recognition for the past but also a promise for the future.  There was an additional obligation to work together to make sure the hopes and expectations implied in that award were justified.  The issue that had dominated the 1990s was the global financial system; the credibility of the United Nations rested in its approach and its solutions to global financial problems.

MARIA LICUANOS-CATTANI, President of the International Chamber of Commerce, said there was high interest in the world business community in the issue of financing for development.  Her organization was taking a number of steps in preparation for the Conference.  Among them, the International Chamber of Commerce office in Mexico had taken the lead for arrangements at the Conference to make the necessary on-the-ground arrangements.  There was also a proposal for a day-long business forum, to be held around the time of the Conference, which would deal with such themes as ensuring financial stability and trade issues.  The business world would be very honoured to take part in the various round tables taking place during the Conference.

FRINE LOPEZ, Mexican NGO Forum Organizing Committee, said the United Nations lent itself to a more democratic, participatory and inclusive decision-making process.  One of the major practices had been to encourage the participation of all the stakeholders -- for example civil society -- in all the conferences of the 1990s.  With that in mind, the Mexicans as well as the larger international civil society would arrange a Global Forum in advance of the Conference, from 14 through

17 March, in Monterrey.

She said the Forum would be crucial in influencing dialogue between and among civil society, governments, multilateral organizations, and the private sector.  The Forum would, among other objectives, provide a platform for civil society’s proposals regarding the official agenda items of the Conference, as well as those lacking adequate attention, such as environment, gender, labour and cultural rights.

OSCAR DE ROJAS, Executive Coordinator of the Financing for Development secretariat, introduced the technical notes before the Committee.  He said the secretariat was given the 10 topics on which to prepare the notes on 15 June and they were completed and posted on the Internet by 15 September.  The preparation of the notes was a joint undertaking between the secretariat, other bodies of the United Nations system, non-governmental organizations and representatives of academia.  One of the criteria for the preparation of the notes was that they should not be analytical in nature, but rather only make a list of the proposals already presented under the respective topics.  He hoped that delegations would provide feedback on the usefulness of the notes in their consideration of the issues.

MAURICIO ESCANERO (Mexico), facilitator for the preparation of the outcome, introduced the draft outcome paper which he had prepared.  He expressed his appreciation to the coordinating secretariat for its support.  The draft took into account all inputs presented within the framework of the substantive agenda, agreed to in June 2000, as well as the results of intergovernmental consultations and hearings with the business community.  In addition, the Zedillo report and Government submissions were also included.

The draft outcome was a concise document divided into three chapters, he continued.  The first chapter summarized the political measures involved in the financing for development process.  It stressed the need to strengthen multilateralism and emphasized the achievement of the Millennium Summit goals.  The second chapter identified the necessary measures to spearhead the achievement of financing for development.  The last chapter recognized that Monterrey was not the end of the road but a first step in the process in ensuring financing for development.  The text was a work in progress, a basis for continuing intergovernmental negotiations.  There was a collective responsibility to ensure that a meaningful outcome was achieved.

SHAMSHAD AHMAD (Pakistan), Committee Co-Chairman, said that globalization and integration had made everyone vulnerable to any negative developments taking place anywhere in the world.  They produced economic shocks which were transmitted instantaneously around the world.  Financing for development was not a tug-of-war between the developed and developing nations, nor was it the kind of controversial debate that kept the international community bogged down in the 1970s and 1980s.  It was about building synergies, reinforcing partnership and sharing the benefits of globalization.  A collaborative and coherent approach to today’s challenges was the only option.

The persistent anti-globalization demonstrations, the recent economic slowdown and the threat of international terrorism made tackling the issues before the Committee all the more urgent, he added.  They must be addressed collectively and in a spirit of cooperation and mutual understanding.  While all inputs would be taken into account, the sole focus of the Committee’s deliberations during the current session was the draft outcome document.

Discussions on Draft Outcome

MUBARAK HUSSEIN RAHMTALLA (Sudan) said that delegations should also address the nature of the outcome of the Conference in addition to the substance of the draft outcome.

BAGHER ASADI (Iran), speaking for the “Group of 77” developing countries and China, said that the long, and even tortuous, preparatory process for the Conference had generated high expectations for its success and final outcome.  The outcome should comprise a set of principles or objectives and action-oriented initiatives as well as a follow-up mechanism, which should be consistent with the substantive agenda of the Conference.  The action-oriented initiatives should contain measures and steps with specific timetables, and establish a follow-up mechanism for ensuring implementation, monitoring and review of the final outcome of the Conference.

Turning to the draft outcome document, he said it was a good basis for the beginning of negotiations.  It should be improved on through further deliberations of the intergovernmental process during the current session.  At the appropriate time, he would be prepared to present specific ideas and proposals, including the addition of some new concepts and themes to some paragraphs, improvement of some of the existing ones as well as the deletion of some other concepts or themes as they now existed in the text.

JEAN DE RUYT (Belgium), speaking for the European Union, and Bulgaria, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia, Cyprus, Malta, Turkey and Iceland, said that while in substance it was unbalanced and incomplete, the facilitator’s draft could serve as a starting point for discussions.  For example, it should focus less on systemic issues and attach greater importance to the global challenge of poverty eradication and to mutual responsibilities between developed and developing countries.  Emphasis should be placed on the importance of national good governance, respect for human rights and conflict-prevention, as cross-cutting themes essential to a climate for attracting investment, to ODA, trade liberalization and debt handling.

The outcome should be a political declaration identifying the main priorities and the measures to be taken to achieve internationally agreed development objectives and to reduce poverty, he continued.  The new text would have to bring out an integrated approach making allowance for the economic, social and environmental aspects of sustainable development, reflected in a reminder of each State’s primary responsibility for its own development.  Greater emphasis should also be placed on a broader concept of partnership involving shared responsibility and on increased participation by civil society and the private sector.

He added that it would not be appropriate to take any decisions regarding the reform of the international financial architecture.  In the context of the Conference, he was also not, in principle, in favour of establishing new institutional structures.

JUAN GABRIEL VALDES (Chile), on behalf of the Rio Group of Central and Latin American countries, said the Conference offered a unique opportunity to design, from the perspective of financing, a new global alliance that would provide committed support for development, especially in the developing countries.  That global alliance should provide for:  adequate mobilization of increased levels of internal resources; greater and more stable international financial flows; a system of international trade that offered better conditions of access to markets for the goods and services of developing countries; and a comprehensive approach to systemic questions which promoted the construction of a new international financial architecture.

During the preparatory process, Member States had an ideal occasion to advance, through dialogue and consultation, the consensus that was indispensable for the success of the Conference.  In that regard it was important to address the issue of international trade and to ensure that the multilateral trading system met the special needs of developing countries.  Within that system, there was a need to eliminate:  protectionism, including subsidies for production and exports in developed countries; rules governing subsidies that favoured the developed countries; use of anti-dumping measures for protectionist purposes; and high customs tariffs.

MATS KARLSSON, Representative of the World Bank to the United Nations, said the Committee was faced with the challenge of taking the process to the next phase, looking for common ground and “win-win” opportunities, avoiding easy lowest common denominators and not sacrificing the ambition that the subject matters deserved.  Discussions during the week should be characterized by vision as well as by realism.  The Committee should pave the way towards an outcome document on the basis of which the various stakeholders of financing for development could make concrete progress on areas of key importance to all.  That process would require a balancing of national and collective interests and innovative alliances and partnerships.  The World Bank stood ready to support the Committee in that effort.

REINHARD H. MUNZBERG, Special Representative of the International Monetary Fund (IMF), said that taking the facilitator’s paper as the starting point for discussions was a useful approach.  The financing for development process had to be firmly anchored in the Millennium Summit goals.  The Conference could play a crucial role in supporting the achievement of those goals.  The main issue was gaining support to mobilize the resources to finance development.  Market access, increase in ODA as well as improvement of ODA delivery, and helping to foster absorptive capacity were among the major issues.  Special attention should be given to the situation of least developed countries and poverty reduction. 

The creation of new institutions, he added, was not the solution to the issues on the agenda.  Rather, more effective cooperation within existing arrangements would be a better approach.  

VINCI N. CLODUMAR (Nauru), speaking on behalf of the Pacific Islands Forum and the small island developing States, said the final outcome document should be concise and focused on its bold objectives, eliminating distracting issues that diverted attention away from the core issues of financing for development.  It should contain a consistent balance of policy issues, structure and substance, that expounded a clear set of obligations and commitments for all stakeholders.  It was, therefore, vital for the Committee to propose and augment workable measures and timelines in the final draft that would deliver meaningful, practical and measurable results.

He reiterated his full support for the basic thematic issues for a comprehensive dialogue on financing for development.  Among them were the following:  domestic resources provided the foundation for self-sustaining development and the outcome document needed to highlight prescriptive measures that would help address the prevailing lack of institutional capacity in developing countries; foreign direct investment and other private flows were vital complements to domestic resource mobilization, and the outcome should set out some risk-mitigating measures that would enable private investors to invest in high-risk economies.

He said he shared a desire for greater participation in the formal process of reforming the international financial architecture, and in the governance of international financial institutions.

YUKIO TAKASU (Japan) said Member States should take care not to allow the Conference to become another round in the blame game in which the North and the South pointed fingers, accusing each other of being the reason progress towards development was too slow.  They should also avoid setting unrealistic targets.  The outcome document of the Conference should be a forward-looking and very concise one, sending a clear and positive message to the whole world of the determination of Member States to promote development.

Among other recommendations, he said, the draft referred to the idea of establishing a world economic body at the highest political level in the United Nations.  He understood the desire of developing countries to be more actively engaged in decision-making on international economic and financial issues.  On the other hand, it was also important to pay due attention to the role and responsibility played by existing institutions such as the General Assembly, the Economic and Social Council, the WTO, the IMFd and the World Bank.  What was required in order for those institutions to pursue a coherent development plan was not the establishment of a brand new body under the aegis of the United Nations, but that the coordinating role of the Economic and Social Council, mandated by the United Nations Charter, be strengthened.

He added that Member States could address issues of financing for development effectively only with active and constructive engagement of major institutional stakeholders, such as the Bretton Woods institutions.  Therefore, discussing the issue of establishing such a world economic body in United Nations forums made it difficult to effect closer cooperation with the major institutional stakeholders, and attaining development goals would thus become even harder.  He urged that due attention be paid to maintaining the independence of those institutional stakeholders.

NIKOLAI TCHOULKOV (Russian Federation) said the Conference should draw on international experience with a view to helping developing countries and countries with economies in transition to determine the principles, framework and priorities of their national policies for successful mobilization and effective use of domestic resources and international financial flows for development purposes. Another important task was the organization and selection by the donor community and relevant multilateral institutions of priorities for international cooperation in providing assistance, both financial and technical, to countries which needed it.

Russia, he said, would seek to ensure that the decisions of the Conference met the interests of all developing countries, including the special needs of the least developed countries and countries with economies in transition.  The Conference should pay special attention to the interaction between the international financial and trade systems and to their cooperation with the United Nations system in supporting development, as well as searching for more effective ways of integrating developing countries into the world economy. 

With regard to the draft outcome, he said it was important to stick to a pragmatic and realistic approach and to focus on the issues where progress was most likely.  He cautioned against incorporating into the outcome ideas or concepts which had not yet been sufficiently elaborated, had not yet demonstrated their usefulness and had not yet been widely recognized at the international level.  

JAN ERIK LEIKVANG (Norway) said experience showed that the ability of major international conferences to attract high-level attention and attendance, and for their outcome to have a lasting impact, was often in reverse proportion to the length of the outcome document.  Thus, a major effort should be made to keep it as short as possible, preferably shorter than the current draft.  The outcome document must effectively communicate that the measures agreed on to improve financing for development were means to achieve the shared goals set for development and poverty eradication.  The document must also build on and reflect the increasing convergence, cooperation and partnership that were evolving between the stakeholders in the area of development. 

Therefore, the Committee should aim for a crisp, concise, realistic and forward-looking outcome, he continued.  It must contain the right balance between action at different levels, between different actors and between the different items on the financing for development agenda, as well as respecting the different roles and functions of all involved.  There would be no easy, quick and

once-and-for-all “fix” to be found in Monterrey.  Rather, the success of the Conference would depend on the extent to which the international community would be able to take decisive steps in the right direction. 

CHUNG BYONG-HA (Republic of Korea) said the ongoing endeavour of preparation for the Conference should take into account the interests of developing and developed countries alike.  It should also be based on the shared understanding that each country had the primary responsibility for individual development and growth.  The final outcome of the Conference should be results-based and reflect realistic goals.  Furthermore, the perspectives and viewpoints of donor and recipient countries should be respected.

He added that there was also a need to pay attention in the Conference outcome to the ongoing reform process in the global finance system.  It was also premature at the current time to consider an international tax organization or establishing world common tax.

JENO C.A. STAEHELIN, Permanent Observer for Switzerland, said there was an imbalance in the draft outcome between measures called for at the international level and measures that were in the competence and responsibility of national governments.  While it was evident that industrialized countries played an important part in mobilizing development resources, it would serve Member States ill to underestimate the fundamental importance of measures required to mobilize domestic resources, notably the improvements in economic governance.  To make a point in that context, he was surprised to note that one of the most important measures in that area, the improvements of fiscal performance, went unmentioned.

Among other suggestions, he said the draft outcome lacked technical precision.  It attempted to promote a consensus by falling back on rather general and vague language.  It would most likely not be useful to seek a verbal consensus on certain controversial issues at the current early stage.  Furthermore, the document remained fixed on schemes that were largely unrealistic, such as the call for credit for all -- without any reference to savings on which investment must ultimately be base.  In that regard, the document did not touch upon the growing importance that public-private partnerships should take on, or upon the important leverage effect that ODA could have.

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