SECRETARY-GENERAL’S FINANCING FOR DEVELOPMENT REPORT LAUNCHED

A comprehensive assessment of how the world's development financing needs can be met -- prepared by the United Nations in consultation with the leading international trade, financial and development agencies -- was released today in New York. 

Addressing correspondents at a Headquarters press briefing, Nitin Desai, Under-Secretary-General for Economic and Social Affairs, called the report (see document A/AC.257/12) the first major step in a process that would culminate in the holding of the High-level Intergovernmental Event on Financing for Development in 2002. 

According to material distributed at the press briefing, the report addresses a broad range of problems, including recurring foreign debt and currency crises, fallen levels of foreign aid, volatile international commodity prices, restrictions on access to developed country markets in sensitive products (like textiles and agriculture), weak financial systems, global tax-dodging, inadequate access to financial services by the poor and women, and gaps in economic governance at national and global levels.

The report recommends new norms for international cooperation and new mechanisms for implementation.  It recommends new ways to handle debt in crisis situations, strengthen cooperation on tax matters, improve the effectiveness of aid, design appropriate financial regulations for developed and developing countries.  It advocates the use of tough measures to strengthen financial and legal institutions, fight corruption and improve transparency, in advanced economies as well as in developing countries seeking greater access to financial markets and development aid.  It also asserts that, in the context of sound macroeconomic policies, introduction of national controls on capital flows may be a valid and responsible measure, especially during periods of volatility.

Joining Mr. Desai at the press briefing were Reinhard Munzberg, Special Representative of the International Monetary Fund (IMF) to the United Nations, and Enrique Rueda-Sabater, World Bank Senior Manager.

At the outset of the briefing, Mr. Desai stressed the comprehensive nature of the report, which addressed all of the areas identified by the General Assembly.  While it was a report from the Secretary-General, he noted the collaborative and consultative nature of the drafting process.  Partner institutions, such as the World Bank, the IMF and the World Trade Organization (WTO) had been consulted, and there had been important cooperation within the United Nations itself.

He noted that the basis of the report had been provided by task forces chaired by different groups.  A task force on domestic financial resources for development had been convened by the Department of Economic and Social Affairs, as had the one on systemic issues; one on investment had been convened by the United Nations Conference on Trade and Development (UNCTAD), and one on aid and debt issues had been convened by the World Bank.  Following the individual

consultations, Mr. Desai had met for three days with the convenors, and the result had been the report.  He stressed that the United Nations accepted full responsibility for the report and noted the important role played by Oscar de Rojas, of the Department of Economic and Social Affairs, in the process.

Stating that there had also been important engagement with the financial industry, he read from a list of those who had addressed the preparatory process and the earlier working group.  That list included the Chairman of the State Street Corporation and the Chairman of the Industrial Bank of Japan. 

He said the report was a starting point for the intergovernmental process.  The Secretariat was there to provide further elaboration when States started prioritizing from "this menu of 87 recommendations".

Mr. Munzberg said the process of drafting the report had been an innovative approach to the issue of financing for development.  He echoed Mr. Desai's comment on the deep cooperation between the secretariats of the various institutions.  The IMF, like others, had been able to add its perspective on the issue.  The process had demonstrated how broad the agenda was, and how impossible it was to disconnect the various issues.  He noted the importance of recognizing that domestic and international efforts must go hand-in-hand, and that systemic issues must play a role. 

He said the process involved bringing together different perspectives and creating an informed dialogue.  The IMF had found it a very helpful exercise and would continue to participate at the intergovernmental level.

Mr. Rueda-Sabater said that while it had been a United Nations process with United Nations rules, that had not been a "strait jacket".  That was a tribute to the flexibility of the participants from the Secretariat and Member States.  He noted the advantage of starting with a common purpose -- reducing poverty.  That was a tall order, but it was also very motivating.  The Millenium Declaration provided a nice framework for the efforts.

The Bank had participated in various ways in the process, he said, and had learned a lot from the different perspectives of those in the United Nations.  In his work on the official development assistance (ODA) section of the report, he wished to signal the important work of the United Nations Development Programme (UNDP), which had a shared perspective on the realities of the challenges faced in the field. 

Now the challenge was to determine how, if the report was seen as a menu, to select a meal that made sense, he said.  In doing so, it would be important to determine in which areas there was the greatest potential to move beyond rhetoric into action and make sure the process was a fruitful one. 

A correspondent asked at what point the proposals made in the report "kicked in" and action was taken.  Mr. Desai said the report was the start of the intergovernmental process.  Action would start with the next stage of the preparatory process on 12 February and would continue at different stages

throughout the year, culminating in the Event itself, tentatively scheduled for end of March 2002. 

The purpose of the process was to get a shared basis for action among

188 governments, he said.  The report was a starting point for the process.

Another correspondent asked what kind of outcome document could be expected from the Event.  Mr. Desai said that what the Event produced was one of the key things that must yet be decided.  It was not a treaty negotiation process, he added.  It was more like the processes at past United Nations conferences, where the result had been a commonly-agreed basis for action. 

The force of the outcome would be derived from the degree of seriousness with which the Member States approached the process, he said.  The challenge was to move from something that was a Secretariat document to something that Member States saw as their document.

In response to a question on foreign direct investment, Mr. Desai drew the correspondents' attention to the relevant section of a fact sheet that had been distributed during the briefing.  That would give them a sense of the scale of recent investment in developing countries.  He also noted that chapter II of the report was devoted to the issue.  The next chapter, on trade, could also be useful.

Mr. Rueda-Sabater said the composition of external financing of a given country was interesting to track.  He noted that different developing countries had a very different composition of financial flows -- some depended on private investment, others on official investment.  He said the challenge to be faced was how to make developing countries attractive to private capital flows.  Much of that had to do with governance and policies, but there was much that could be done to facilitate the process. 

A correspondent asked if any of the 87 items contained in the report might be deemed of greater importance than others.  Mr. Desai stressed that this determination would be up to the Member States. 

In response to a question, Mr. Desai explained that progress in the attainment of internationally-agreed development goals had been monitored and reviewed in the context of the United Nations.  He noted the growing crystallization of commitment, particularly on the broad objective of poverty eradication, around certain goals agreed to in the United Nations conference process.  He added that monitoring trends in development cooperation policies and performance was something that the General Assembly and the Economic and Social Council were involved with.  

The United Nations had also played an important part in keeping the subject of low-income country debt on the agenda, he said.  There had been serious action in that area largely because of that involvement. 

Taking up a follow-up question from the same correspondent, Mr. Desai said the issue of low-income country debt was very much considered in the process. 

At the political level, the United Nations had provided a forum for discussions that were influential on certain segments, such as aid and debt.  The important thing was to bring things together what had previously been looked at separately.

Mr. Rueda-Sabater added that even when their debt payments were taken into account, low-income countries were only getting roughly 10 per cent of their rough net gross national product from the donor community.  With that in mind, it was very hard to argue that the debt issue was the problem by itself -- debt was one of many of the problems of low-income countries.  Fundamental issues must be considered.  There was no easy answer. 

A correspondent asked about a recommendation in the report on instituting a national currency transaction tax.  Mr. Desai clarified that the report was not recommending the institution of such a tax.  This was simply one of the suggestions that had come up during the discussions.  A whole range of options for innovative financing had been put on the table.

Mr. Desai was asked how the representatives of the financial sector would continue to be involved in the process.  He explained that the way in which the financial industry had taken an interest was one of the very positive features of the process.  He hoped that the preparatory process would determine how best to maintain their involvement.  An important opportunity afforded by the process was that a key part of the world economic system which had not yet been fully engaged in a multilateral process could be effectively brought in.

In response to another question, Mr. Desai said the issue of foreign direct investment was very much up to individual Member States.  When the agenda for the process had been fixed, one of the themes that had come up had been the importance of foreign direct investment flows and what must be done to insure that they were more evenly spread.  Concern had been expressed during the process that although amounts had gone up, most of it was directed at a small group of countries.  Emphasis had been placed on the importance of social protections, such as ensuring fair access of poor people to credit, he added.

Mr. Munzberg underlined the importance of identifying the criteria necessary for securing long-term financial flows.  Structures must be in place and the rule of law must be assured.  Those aspects would have an affect on people’s willingness to invest.

To a final question, Mr. Desai said that there was a fairly broad sense among economists that the gains to a country from foreign direct investment were far more clear than gains that might accrue from opening up short-term capital flows.  Maximizing gains to the recipient country was the goal, he stressed.

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