Fifty-seventh General Assembly

Second Committee

8^th and 9^th Meetings (AM & PM)

HIGH COSTS OF TRANSPORT SERVICES KEEP LANDLOCKED DEVELOPING

COUNTRIES POOR, SECOND COMMITTEE TOLD

Landlocked developing countries spent three times as much as developed countries on transport services and twice as much as non-landlocked developing nations, Under-Secretary-General Anwarul Chowdhury told the Second Committee (Economic and Financial) this morning as it took up various trade, financial and development questions.

Introducing a report on Preparations for the International Ministerial Meeting on Transit and Transport Cooperation, to be held in Kazakhstan next year, Mr. Chowdhury said that the high transport cost -- which he based on 1995 International Monetary Fund (IMF) balance-of-payment statistics -- slowed export growth in landlocked developing countries, increased the prices of their imports and limited any trade gain.

Mr. Chowdhury, who is the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, said that high transport costs eroded the competitive edge of landlocked developing countries.  The resulting drop in trade was strongest in transport-intensive sectors that depended on exports.  Most landlocked developing countries were commodity exporters and highly sensitive to any rise in transport costs, he added.

Officials of the Department of Economic and Social Affairs and the United Nations Conference on Trade and Development (UNCTAD) introduced reports on the international financial system and development, and on external debt and development, respectively.

As the Committee took up those issues, in the ensuing meeting, Pakistan's representative highlighted the astronomical $3.5 trillion in external debt owed by developing countries in 2001, noting that many of them spent more than half their budgets on debt servicing, rather than sinking funds into desperately needed social programmes.  While the Highly Indebted Poor Countries (HIPC) initiative was the most comprehensive debt-relief programme to date, it covered a mere fraction of the unsustainable debt owed by developing countries.  Moreover, the programme imposed difficult eligibility requirements on potential beneficiaries.

He said that since the initiative's inception six years ago, only 26 of the 43 countries qualifying for debt relief had reached the "decision point", and of those, only six had reached the "completion point" for eligibility.  Debt

servicing had actually increased absolute poverty in developing countries, he pointed out, adding that as long as debt relief was tied to structural adjustments, resources desperately needed for development would remain out of reach.

The representative of the Russian Federation stressed that managing and reducing debt was a top priority for the poorest countries and warned of the serious impact of neglecting much-needed social programmes in order to service external debt.  Emphasizing that debt payments should be converted into investments for sustainable development, he said the Russian Federation was doing its part to ease the burden by eliminating $35 billion owed by indebted nations.  At the same time, it was taking measures to stay a step ahead in its own debt servicing.

Commenting on the international financial system, the representative of Barbados expressed that the consensus reached at the International Conference on Financing for Development at Monterrey had reinforced a global economic regime that had failed to predict, prevent or manage major international financial crises, rather than proposing reform of the system.  She added that the global economic environment urgently needed to ensure that international taxation was all-inclusive, but that might not arise as long as few States sought to impose their rule on others through exclusive forums.

Also speaking this morning were the representatives of Venezuela (on behalf of the “Group of 77” developing countries and China), Denmark (on behalf of the European Union and associated States), Mexico, Guyana (on behalf of the Caribbean Community), Ecuador, Switzerland, Lao People’s Democratic Republic, Burkina Faso, Azerbaijan, Mongolia, Japan, Armenia and Fiji.

Speaking this afternoon were the representatives of Afghanistan, Kazakhstan, Croatia, Yemen, Thailand, Georgia (on behalf of the GUUAM Participating States), China, Nepal, United States, Kenya, Indonesia, Burundi, Bhutan, Jordan, Uganda and Bolivia.

A representative of the International Labour Organization (ILO) also made a statement.

The Committee’s next meeting will be announced in tomorrow's Journal.

Background

The Second Committee (Economic and Financial) met this morning to begin considering its agenda item on international trade and development.

External Debt and Development

Before the Committee was the Secretary-General's report on external debt and development (document A/57/253), covering recent developments in the external debt of developing countries and economies in transition to both official and private creditors.

The report notes that unsustainable levels of external debt continue to severely hamper economic and social development in several low- and middle-income countries, which could threaten the attainment of the Millennium goals relating to development and poverty reduction.

Noting that implementation of the Heavily Indebted Poor Countries (HIPC) initiative has been slow, the report calls for a simplification of procedures, a review of the content of conditionality and of measures to speed up poverty and social impact analysis.  Measures to equip countries with tools to conduct their own analyses should also be considered, the report adds.

It states that in light of the serious economic problems facing HIPCs -- low savings capacity, aid dependence, export concentration and import dependence -- more rapid external financing to design and set up social safety nets, as well as public and private investment, are also needed.  Projections of growth and export earnings in debt sustainability assessments should consider past external shocks through volatility and probability analysis.  A safety margin should be set up to protect against future shocks and contingency financing mechanisms introduced.

Since the success of the HIPC initiative depends on additional debt relief, donor countries should increase efforts to comply with agreed official development assistance (ODA) targets for HIPCs and other poor countries, the report says.  Given the low domestic savings capacity of those countries, debt relief and ODA will play a critical role in raising growth and attaining the Millennium Development Goals.

According to the report, several low- and middle-income developing countries and economies in transition also face external public debt burdens exceeding the threshold level for sustainability in the HIPC framework.  Greater flexibility in the eligibility criteria for debt relief should be considered to improve poverty reduction efforts in such countries.  Recent experiences in Argentina and Turkey have shown a close relationship between the management of external debt and the quality of fiscal, macroeconomic and exchange-rate management, as well as the capital account regime.  Official bailouts linked to policies to restore confidence, including fiscal and monetary tightening, failed to check capital flight and currency collapse.

Referring to an apparent lack of coherence and predictability in the international approach to crisis intervention, the report noted that Turkey received additional funding to meet its external obligations and avoid default, while Argentina had to suspend debt service at the end of 2001, when it failed to meet conditions for continued disbursement of International Monetary Fund (IMF) credits.  If the international financial system had no coherent and realistic strategy to deal with financial instability and the debt sustainability of developing countries, they could return to the “muddling-through” which cost Latin America a lost decade in the 1980s, the report warns.

It recommends the establishment of mechanisms based on principles governing national bankruptcy legislation in developed countries in order to help restructure and write off international sovereign debt owed by developing countries to private creditors.  Orderly procedures could ensure that creditors and investors bear the consequences of risks they have taken, as well as the equitable distribution of the burden of crises between debtors and creditors.  Although the IMF Board has recognized that countries may, as a last resort, need to unilaterally stop debt payments, it is still unable to protect debtors through a stay on litigation.

According to the report, temporarily suspending currency convertibility and standstills on external debt payments are a practical means to work out external and domestic debt, and to stabilize exchange rates in countries facing international liquidity problems.  In the case of sovereign debt, standstills mean suspending payments by governments themselves, while private external debt required setting up temporary exchange controls to restrict payments abroad on specified transactions, including interest payments.

Further restrictions may also be needed on the capital-account transactions of both residents and non-residents, the report suggests.  An effective framework should involve voluntary and mandatory mechanisms, accompanied by official financing aimed primarily at helping debtor countries maintain imports and avoid a sharp decline in economic activity.  Normal access to IMF facilities, appropriately adjusted to the expansion of world output and trade, should meet such needs, the report adds.

International Financial System and Development

Also before the Committee was the Secretary-General's report on the international financial system and development (document A/57/151), which provides an update on the net foreign transfer of financial resources by developing countries and on major developments in international financial reform.  It stresses the importance of a balance between external financial and trading opportunities at the country level.  Even if a robust domestic financial sector in a developing country appropriately absorbs foreign capital inflows, export opportunities must also expand adequately.

Noting that open trade, especially with developed-country partners, is of vital importance for open finance, the report says many developed countries still heavily subsidize a number of products, while developing countries that efficiently produce the same items must compete against those subsidies in third countries.  Enlarging market access for developing countries and phasing out trade-distorting subsidies, especially in agriculture, would benefit the broad majority of people in both rich and poor countries.  Improving market access for developing countries should be a global priority, the report adds.

It notes that sustainable financing of trade and investment in developing countries should also be a global priority.  Senior international trade officials want to see robust international financial flows to increase investment and economic growth in capital-importing countries, and to facilitate trade itself.  Countries that fall into debt crises become poor markets for the exports of other countries, it adds.

Landlocked Developing Countries

The Committee also had before it a report by the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) on preparations for the International Ministerial Meeting on Transit Transport Cooperation (document A/57/340).  It notes that lack of territorial access to the sea, remoteness and isolation from world markets as well as high transit costs continue to impose serious constraints on the overall socio-economic development of landlocked developing countries.  Sixteen of the 30 landlocked developing countries are classified as least developed countries the report points out.

Noting that the international community has channelled significant resources into the development of transport infrastructure in landlocked and transit developing countries, the report says that the General Assembly's decision to convene an International Ministerial Meeting in 2003 reflects the priority accorded to addressing the development challenges of landlocked developing countries.

Recommending renewed efforts to ensure close and effective cooperation between landlocked developing countries and their transit neighbours in setting up efficient transit systems, the report stresses the need for greater international assistance to such countries that are also developing countries.  It adds that the issue of efficient transport systems in Africa should be addressed within the framework of the New Partnership for Africa’s Development (NEPAD).

According to the report, the Ministerial Meeting must agree on action-oriented measures that take into account such factors as unfettered access to the sea by all means of transport; inadequate infrastructure; imbalance of trade; inefficient transport organization; poor use of assets; reform of transit and transport policies; and weak managerial, procedural, regulatory and institutional systems.

The Secretary-General calls for the active involvement of development partners of landlocked and transit developing countries, international financial and development institutions, the private sector and other stakeholders in the preparatory process for the International Ministerial Meeting.  In order to facilitate the preparations, including the participation of representatives of landlocked and transit developing countries, the Secretary-General urges Member States to contribute

extrabudgetary resources.

World Commodity Trends and Prospects

The report of the Secretary-General of UNCTAD on World commodity trends and prospects (document A/57/381) discusses recent developments in the world commodity economy, international commodity markets and recent developments in international cooperation on commodities.

It states that while total world exports increased at an average annual rate of 6.1 per cent between 1990 and 2000, world commodity exports grew by only

3.1 per cent.  Meanwhile, food exports peaked at $468 billion in 1996 and declined every year thereafter, to $429 billion in 2000.  The level of commodity prices in current dollar terms was now comparable with that of the early 1970s, the report says.

Two major problems requiring the international community's urgent attention are the catastrophic falls in the prices of coffee, cotton, sugar and other commodities and the continuing agricultural support policies by developed countries, according to the report.  The two factors combined represent losses to developing commodity-producing countries comparable in magnitude to what all developing countries receive in ODA.  In the long term, developing countries need assistance to improve their supply capacity and participate in international value chains.

The report concludes that besides a sharp and meaningful reduction of subsidies, significant improvements in market access for developing-country agricultural exports require much deeper cuts in tariff cuts than those envisaged, large increases in the volumes admitted at lower tariffs, or preferably both.  The report calls for domestic reform and international support in areas where the commodity sector has not functioned as an engine of growth and industrialization in order to enable low-income countries to escape from the "poverty trap" imposed by commodity dependence.

        Meetings of Trade and Development Board

Also before the Committee were reports of the Trade and Development Board on its twenty-eighth executive session (document A/57/15 (Part I)); its nineteenth special session (A/57/15 (Part II)); and its forty-ninth session (A/57/15 (Part III)).

Introduction of Reports

ANWARUL CHOWDHURY, Under-Secretary-General and High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, introduced the report on Preparations for the International Ministerial Meeting on Transit Transport Cooperation.  He said that landlocked developing countries spent a far larger share of their foreign exchange earnings on international transport services than did other developing countries, which contributed to slow export growth, higher import prices as well as limit their ability to gain from trade.  According to estimates based on IMF balance of payment statistics, landlocked developing countries spent, on average, almost two times more of their export earnings in 1995 to pay for transport and insurance services than the average for other developing countries, and three times more than the average for developed economies.

High transport costs eroded the competitive edge of landlocked developing countries, he said, adding that the trade-reducing effect was strongest for transport-intensive activities dependent on exports or imported intermediate goods for production.  Most landlocked developing countries were commodity exporters, and were thus extremely sensitive to any increase in transport costs.  Among the measures taken by the international community in tackling the problems of landlocked and transit developing countries, were the provision of financial assistance for transport infrastructure by the World Bank, regional development banks, and bilateral assistance programmes; multilateral and bilateral technical assistance projects; as well as trade facilitation measures promoted by UNCTAD, regional commissions, the World Trade Organization (WTO) and other relevant international, regional and professional organizations.

He said the transit problems of landlocked developing countries had been generating serious interest at the United Nations and other international forums in recent years.  That had coincided with the astounding growth in both international trade and trade facilitation efforts.  Addressing specific problems faced by the least developed, landlocked and small island developing countries was recognized as one of the key targets for achieving the Millennium Development Goals.

IAN KINNIBURGH, Director of the Development Policy Analysis Division, Department of Economic and Social Affairs, introduced the report on the international financial system and development.  He said the net outward flow of financial resources from developing countries had dropped from an estimated

$190 billion in 2000 to $150 billion in 2001.  Preliminary data suggested that net outward transfer levels would remain the same this year.  Transfers from Latin America, due to reduced private financing in the region, would increase while flows from Eastern Europe and South Asia would decrease.  Inward flows to

sub-Saharan Africa would continue.

He said that the international community’s commitments, since July, to increase ODA and to ease restrictions on financial terms for borrowers, had been encouraging.  Following the Asian financial crisis, the international community had introduced international macroeconomic standards and financial codes for crisis prevention.  Still, the financial community must continue its commitments to assist developing nations to meet the Millennium Development Goals

Noting that the IMF Executive Board had approved a comprehensive revision of its Guidelines for Conditionality a week ago, the first such change since 1979, he said that would enhance national ownership, revise conditions for borrowers to include only those deemed necessary for achieving macroeconomic goals, and tailor conditions to country-specific circumstances.  He said developing countries and economies in transition must participate more actively and effectively in international economic policy development, adding that the Financial Stability Forum and the Basel Committee had both included non-members in talks regarding standards and codes setting.  That practice must be sustained and broadened to ensure the application of such standards to other countries.

VICTOR BUSUTTIL, Chief, Executive Direction and Management, UNCTAD, introduced the report on external debt and development, saying that the share of developing countries in world commodity exports had increased slightly in the 1990s, but was still below the levels reached before 1985.  To improve living conditions for the 2.5 billion people in developing countries who depended on commodity production for their livelihoods, incomes from commodity production must increase.  It was also necessary to improve the productivity of agriculture and the competitiveness of exporters in developing countries.

He noted that commodity prices had continued their downward trend, and that the level was now comparable to that of the early 1970s.  Since 1997, the fall in the prices of some commodities, including coffee, cotton and sugar, had been dramatic, causing large economic losses and increased poverty in several developing countries.  If prices had remained at the levels of 1998, coffee-producing developing countries would have earned $19 billion more over the

1999-2002 period, exports from sugar-producing countries would have earned

$1.4 billion more on the free market and cotton exports would have fetched an additional $1 billion.

He noted that unsustainable levels of external debt continued to create a considerable barrier to economic and social development in several low- and middle-income countries.  Several others, as well as economies in transition, were facing an external public debt burden exceeding the threshold level for sustainability in the HIPC framework.  Consideration should be given to greater flexibility in the eligibility criteria for debt relief to improve private reduction efforts undertaken in those countries.

The recent experiences of Argentina and Turkey had shown that the management of external debt was closely linked to the quality of fiscal, macroeconomic and exchange rate management and to the capital account regime.  The international financial system still lacked a coherent and realistic strategy to deal with financial instability and the debt sustainability of developing countries.

Statements

VICENTE VALLENILLA (Venezuela), speaking on behalf of the Group of 77 and China, stressed the importance of developing creative ways to bring financial resources and technologies to debt-ridden developing countries.  Debt remained an enormous obstacle for least developed countries and middle-income countries whose economies depended largely on manufacturing, and on agricultural and commodity exports.  Unstable prices and high tariffs had further exacerbated their economic woes.

Calling for debt cancellation and increased financial concessions for developing countries, he applauded the Monterrey proposal to link a nation’s ability to grow its economy to debt sustainability, and stressed the need for full financing and implementation of the HIPC initiative.

He also emphasized the importance of free market access for exports from developing countries, and called for lower tariffs and an end to the trade-distorting protectionist practices of developed nations, particularly agricultural subsidies.  Anti-dumping and anti-subsidy measures, however, should not themselves distort trade, he added.

ELLEN MARGRETHE LOJ (Denmark), speaking on behalf of the European Union and associated States, stressed that many countries, especially LDCs, would fail to achieve the Millennium goals without increased development assistance.  The European Union already provided the highest level of ODA to developing countries, and would increase its combined development assistance towards the 0.7 per cent target.  The Union had committed to collectively contribute an average of

0.39 per cent of gross national product (GNP) by 2006, but a significant increase in overall assistance must be accompanied by greater effectiveness and accountability in ODA-financed programmes, as well as greater harmonization of donor policies.

Resolving debt problems or finding solutions to questions related to the international financial system were shared national and international responsibilities, she continued.  Funds received, including those raised through debt relief, should be properly and effectively managed, and concessional debt relief must be reserved for severely indebted low-income countries.

It was important that countries that had already qualified for debt relief continue their efforts to use freed up resources effectively, strengthen productivity and growth, and invest in poverty reduction, she said, stressing the need for capacity-building in debt management and the integration of sustainable debt strategies in macroeconomic policies.  She urged all creditor and donor countries to contribute their share to securing the necessary financing for the enhanced HIPC initiative, and to secure equitable burden-sharing and financing for the uncovered costs of multilateral development banks.

MAURICIO ESCANERO (Mexico) proposed several steps to enable developing nations to reach their full economic potential, including international crisis prevention through improved supervision, particularly of economies whose collapse would severely destabilize other markets; measures to stabilize private capital flows; and warning systems for the early detection of financial crisis.  He also stressed the need to harmonize codes and standards for international financial transactions, and to develop international norms for good corporate governance.

He emphasized that multilateral financial institutions had an important role in strengthening the role of developing countries in international trade and economics.  They must tailor borrowing conditions to the development needs and priorities of developing nations, including job creation and socio-economic improvement programmes.  They must also be adequately funded to offer developing countries comprehensive and attractive financial relief and bail-out packages, he added.

GARFIELD BARNWELL (Guyana), speaking on behalf of the Caribbean Community (CARICOM), said commodity production and trade affected the livelihoods of millions of people, particularly those in small island States and least developed countries.  The CARICOM States had taken steps to prepare for increased trade and to improve their performance, but the region continued to be faced with many challenges.  Financial resources would be needed to improve trade, he noted, adding that consideration must be paid to specific socio-economic circumstances in small island countries, such as their size and vulnerability.  The real problem lay in the Uruguay Round agreement on agriculture, and the increased propensity of developed countries to support domestic agriculture with subsides, he said.  That had now been compounded by steel subsidies.  The structural adjustment programmes prescribed by the Bretton Woods institutions had hampered the capacity of developing countries to address those challenges.

The CARICOM was also concerned about the increasing tension between some indebted countries and the financial institutions which disbursed HIPC initiative funds, he said.  In keeping with what had been said at the Monterrey Conference, every effort should be made by the international community to ensure full implementation of that initiative.

YURIY ISAKOV (Russian Federation) stressed the need for an ongoing dialogue with the private sector in implementing the Monterrey and Johannesburg decisions.  The international financial community must work more vigorously to predict financial crises and prevent them from spreading to the nations.

Underscoring that debt management and reduction remained a top priority of the poorest countries, he said his country was doing its part to ease the burden by eliminating $35 billion of the debt owed by those nations.  It was also taking measures to stay one step ahead of its own debt-servicing obligations.  However, he warned of the serious impact of neglecting much-needed social programmes in order to service external debt.  Debt payments must be converted into investments in sustainable development, one of the goals outlined at Monterrey.

The Russian Federation supported non-discriminatory requirements for new membership in the WTO, he said.  Tariffs and non-tariff barriers must be eliminated as should dumping and technical barriers.  Noting that such roadblocks were undermining international trade for developing countries and economies and transition, he said his country was reducing import duties and giving special preferential treatment to imports from developing countries.

HUMBERTO JIMENEZ (Ecuador), noting that his country had had five rounds of debt renegotiations with bankers and financial institutions, said that by the end of 1999, Ecuador's total debt was 118 per cent of gross domestic product (GDP). Over the past five years, the country had transferred abroad more than $5 billion in debt repayments.  That case was not an exception, but illustrated the plight of many middle-income countries.  Current relief from indebtedness was not enough to release the resources needed for development.  Also, external crises had negatively affected Ecuador’s ability to service its debt.  Steps must be taken to find a lasting solution to that problem.

To achieve true relief from debt, it was necessary to review the terms of negotiation and IMF conditionality, he said.  That should not focus on macroeconomic policies alone, but also consider the social and political conditions of each country.  It was also necessary to strengthen regional and subregional development banks, which were playing an important role in providing long-term credit.

OLIVIER CHAVE (Switzerland) said sustainable development remained an overarching goal that could be achieved only through the creation of sound macroeconomic policies for developing countries.  That required coherent policies in financing, trade, debt management and monetary management, as well as in environmental protection and social development.

He stressed the need to ease the burden of the global economic slowdown particularly on middle- and low-income countries, calling for the timely restructuring of those nations’ unsustainable debt.  The proposed Sovereign Debt Restructuring Mechanism (SDRM) emergency bail-out programme could only take effect with the creation of credible, binding limits on official lending, he added.

Stressing that there should be no increase in official credit capacity, he said that increases in IMF quotas were also not warranted at present.  The IMF’s current resources were adequate to carry out its mandate, even though it had recently disbursed large credits.

ALOUNKEO KITTIKHOUN (Lao People’s Democratic Republic) said the geographical handicaps of landlocked developing countries made them dependent on the transport policies, enterprises and facilities of others.  As a result, they spent as much as twice the amounts paid by non-landlocked developing countries on transport and insurance services, and three times as much as developed countries.

He said the Group of Landlocked Developing Countries attached great importance to the upcoming International Ministerial Meeting which would be the first-ever United Nations conference at that level to address their specific needs directly and seek concrete means to improve transit systems in those countries.  There were high expectations for the outcome of the meeting, which would have a long-term impact on sustainable development.

DER KOGDA (Burkina Faso) said that his country, like many landlocked developing countries, was burdened with transit delays, high transport costs, steep customs fees and poor road infrastructure.  He expressed the hope that the International Ministerial Meeting in Kazakhstan would lead to comprehensive solutions to those issues.

Burkina Faso had formed partnerships with other African nations to improve and harmonize regional transport infrastructure, he said, stressing the need for cooperation between the Economic Commission for Africa (ECA) and the sub-Saharan Maritime Organization in institutional capacity-building.

ASHRAF SHIKHALIYEV (Azerbaijan) said his country had tried to offset the negative impacts of its landlocked remoteness by improving the efficiency of its current transit environment.  Such efforts included better coordination between the rail and road transport systems, as well as transport infrastructure development.  As a party to the Basic Multilateral Agreement on International Transport for the Development Transport Corridor Europe-the Caucasus-Asia, Azerbaijan was contributing its share in developing transport routes between the two continents.  The country also intended to join the North-South transport corridor and the Special Programme for Economies of Central Asia.

Unfortunately, he said, cooperation efforts were hampered by the continuing occupation of 20 per cent of Azerbaijan’s territory and the blockade on the country's Nakhichevan region by a neighbouring State.  That substantially not only undermined Azerbaijan’s development potential, but was also a major threat to development, security and stability in the South Caucasus.  A just political settlement of the conflict and the speedy liberation of all occupied Azerbaijani territory would facilitate the development efforts of all countries in the region.

MUHAMMAD HASSAN (Pakistan) pointed to the astronomical external debt owed by countries, an estimated $3.5 trillion in 2001, according to the Secretary General's report.  More than half of all developing countries had serious debt problems and many spent more than half their budgets on debt servicing, making it impossible to sink funds into desperately needed social programmes.

While the HIPC initiative was the most comprehensive debt-relief programme for developing countries to date, it covered a mere fraction of the unsustainable debt of developing countries.  Nations not classified as highly indebted were ineligible for assistance, and, moreover, the programme imposed difficult eligibility requirements on potential beneficiaries.

Since the initiative's inception six years ago, only 26 of the 43 eligible countries had reached the "decision point", and of those, only six had reached the "completion point" for debt-relief eligibility, he said.  Therefore, as long as debt relief was tied to structural adjustments, the goal of releasing resources for development would remain out of reach, he said, noting that debt servicing had increased absolute poverty in developing countries.

Debt was also a serious problem for several middle-income countries, he said.  Pakistan had spent 61.3 per cent of its total revenue resources on debt servicing in 1999-2000.  The United Nations should have a key role in devising and implementing comprehensive debt-relief programmes that should include the Secretary-General’s recommendation to create an independent panel to manage the debt of developing nations.  He should also recommend that the Organization act as a mediator between creditors and debtors and that debt-servicing funds be diverted to social development, as had been proposed by the President of Pakistan.

Ms. BATTUNGALAG (Mongolia) said that the ability of landlocked developing countries like her own to trade depended heavily on adequate transport infrastructure.  They spent twice as much on transport services and taxes as developing nations with territorial access to seas and oceans, and three times as much as developed nations.  In addition, their great distance from world markets and undeveloped transport infrastructure tended to discourage foreign direct investment flows.

She said that addressing the transport needs of landlocked developing countries would contribute significantly to the achievement of the sustainable development goals outlined at the Millennium Summit.  Mongolia encouraged full participation in the campaign recently launched by the Secretary-General and UNCTAD in preparation for the upcoming International Ministerial Meeting on Transit and Transport Cooperation.

MASASHI MIZUKAMI (Japan) said it was clear that lack of territorial access to the sea, remoteness and isolation from world markets and high transit costs imposed serious constraints on development in landlocked developing countries. Both infrastructure development and improved trade and transit facilitation measures were key to reducing difficulties arising from the geographical constraints of those countries.

He said his country had cooperated in building the Second Mekong International Bridge between the Lao People's Democratic Republic and Thailand to enhance the main regional corridor connecting Viet Nam and Myanmar.  Japan had also thrown its efforts into the construction of the Sindhuli Road in Nepal and the renovation of major roads in Kazakhstan.  In Africa, it had lent a helping hand in building the Chirundu Bridge over the Zambezi River between Zambia and Zimbabwe.

The problems of landlocked developing countries were not only those of infrastructure, he said.  Other obstacles to transit, such as a lack of fully harmonized customs and border-crossing procedures, were also a major hindrance to development.  It was critically important that landlocked and neighbouring transit developing countries deepen their transit facilitation arrangements, he said.

MOVSES ABELIAN (Armenia), noting that his country faced a long-standing blockade that was barring its access to European markets, said that transit and transport facilities were needed to landlocked countries to give them fast and reliable access to world markets.  Transit was a developmental priority and would benefit all.  For example, Armenia was in position to provide a transit corridor for oil and gas exports.

He said the Europe-Caucus-Asia transport network currently under way was of great importance for Armenia, since it would give the country access to wider transport networks.  The establishment of a new transport structure would also foster stability and trust in the entire region.  However, such a project would require collaboration among all the parties to ensure success, he said, describing cooperation as one of the most effective ways of overcoming the various impediments of being landlocked.

AMRAIYA NAIDU (Fiji) said the small size and remote geographical location of most small island developing countries and LDCs, coupled with an eroding economic base caused largely by globalization and trade liberalization, made commodity trade the only stable source of foreign exchange earnings for both categories.

Sugar was Fiji’s main export earner and largest employer, accounting for more than 12 per cent of its GDP.  Sugar production would continue to be Fiji’s main economic engine and base for environmentally sound and sustainable economic development, he said. The recent reduction in Fiji’s sugar exports must be reversed through various measures, particularly compensatory financing to offset rapid price drops, he stressed.

Calling for the removal of rigid trade rules such as the Application of Sanitary and Phyto-Sanitary Measures, which had often cut off market access for developing-nation commodities, he also urged special and differential treatment for agricultural exports from LDCs and small island States.

The following statements were made during the Committee’s afternoon meeting:

DONNA MICHELLE FORDE (Barbados) expressed regret that the Monterrey Consensus had not gone further in proposing the reform of the existing international financial system.  Instead, it had reinforced the legitimacy of a global economic regime that had failed to predict, prevent or manage any major international financial crises.  She reiterated a proposal made at Monterrey for the creation of a rules-based World Financial Authority, which would primarily supervise global capital and financial markets, and promote a stable and transparent international financial system.

In today’s global economic environment, with its increased scrutiny of offshore financial centres, she said, there was an even greater need to ensure that issues falling under international taxation were dealt with inclusively.  All States with a framework for mutual participation on deliberating international tax policy would be included. However, that opportunity may continue to be unavailable while a few States within the international community sought to impose their rule on others through exclusive forums.

Most importantly, there was a need for mechanisms to ensure that principles directing international standards and rules for the international financial system were clearly defined and mutually agreed.  Those principles should be advanced through a non-discriminatory and transparent process that allowed each and every country to participate and contribute.  Developing countries must also be involved in formulating and implementing standards and codes for crisis prevention and management, she emphasized.

CAROLINE LEWIS, Programme Assistant, International Labour Organization (ILO), said the principle foundational requirement for the integration of macroeconomic and social policies was the recognition and adoption of integrated goals:  income-generating work for all who wanted it and low inflation; equity, including poverty eradication and efficiency; and environmental sustainability,  as well as economic development.  A necessary condition for such “equitable human development” was the highest feasible level of sustainable employment-intensive economic growth.

She said growing financial interdependence had reduced the policy autonomy of countries that had liberalized their financial systems.  Monetary policy had to be kept tighter to cope with capital account volatility.  That had often led to increased interest rates, which constrained economic development and employment growth.  Reforming the international financial architecture was, therefore, essential for the achievement of social goals.  The growth of employment must become the highest priority for national and international economic and social policy.

RAVAN FARHADI (Afghanistan) said that the upcoming International Ministerial Meeting was the most important gathering on transit cooperation and transport development financing.  Afghanistan was a classic example of a landlocked country with great transit infrastructure problems.  It was hoped that the meeting would be action-oriented and that donor countries would participate actively.

Noting that Afghanistan, Iran, Pakistan and other Central Asian countries have signed a regional transport cooperation agreement, he said his country was in dire need of international funding for transport infrastructure development as armed conflict in the 1980s had destroyed Afghanistan’s road network.  The United States, Japan and Saudi Arabia had offered funding to build a road from Kabul to Kandahar and then into Iraq, a vital east-west trade route.  Still, Afghanistan needed more funds for north-south road development and was creating a list of repairs required on current north-south routes.

MADINA B. JARBUSSYNOVA (Kazakhstan) said that her country, which would host the International Ministerial Meeting on Transit and Transport Cooperation next year, would share its experience in managing the problems of territorial remoteness in the Central Asian region.  The Special Programme for Economies of Central Asia (SPECA), developed by the regional commissions in collaboration with Central Asian governments, encompassed all priority issues relating to the development of transit transport capacity and multiple pipeline systems.  Its current activities could serve as an example of appropriate regional cooperation among landlocked countries.

She underlined that a successful outcome of the International Ministerial Meeting would not be achieved, if the preparatory process failed to gain active participation in decision-making for all stakeholders, the meaningful involvement of the private sector, the mobilization of additional resources, and well-coordinated subregional and regional meetings.  Hopefully, the first International Ministerial Meeting would become a milestone, and a new stage of partnership for all countries, regardless of their geographical location.

IRENA ZUBCEVIC (Croatia) stressed that financial issues, trade and development cooperation must not be considered in isolation.  Consistency between financial sector development and capital account openness at the country level was essential.  Open trade, especially with developed-country trading partners, was crucial in opening up finance, thus improving market access for developing countries.  Avoiding crisis, strengthening surveillance over macroeconomic policies and laying the foundations for sustainable world economic development  was also of the utmost importance.

She said the international community should aim at working continuously on developing international standards and codes for macroeconomic policy-making and financial regulation.  That should be accomplished by involving the countries concerned in designing those standards, and ensuring adequate technical assistance to implement them.  The new International Accounting Standard Board should strengthen accounting standards and give domestic accounting firms incentives to follow agreed professional standards, strengthen corporate governance, and enhance corporate public disclosure, as well as the quality and independence of firm monitoring by investment advisers.

AHMED AL-HADDAD (Yemen) said that the global economic problem was mainly one of servicing external debt, and particularly affected developing and highly indebted poor countries.  The debt problem contributed to ongoing instability in some of those States, creating financial obstacles to development.  During 2002, there had been some economic recovery among indebted countries, but the total debt volume had not changed.  The Monterrey Consensus should provide the political impetus to develop far-reaching measures to resolve the debt problem.

The HIPC initiative had slightly improved conditions for a small number of indebted counties, he said, but, for a better result, obstacles to debt-relief eligibility should be eliminated and amended criteria developed.  Highly indebted countries also needed assistance from the IMF and the Paris Club.  A solution to the debt problem could only come about through sustained economic growth, and increased ODA flows.

KULKUMUT SINGHARA NA AYUDHAYA (Thailand), stressing the need for rapid and complete implementation of the Monterrey Consensus, proposed the creation of a debt-management mechanism to maintain financial stability and investor confidence in developing nations; promote shared responsibility between debtors and creditors in crisis management; and include developing countries in decision-making at the IMF and the World Bank.  Moreover, the IMF needed an equitable voting system, irrespective of financial contributions.

Referring to foreign direct investment (FDI), he said his country would continue to adopt sound economic policies and to promote good governance to sustain direct investment.  Thailand would also continue to create regional trade links.  It had already joined with the neighbouring Lao People's Democratic Republic and Viet Nam in developing a highway linking the three nations.

REVAZ ADAMIA (Georgia), speaking on behalf of the GUUAM Participating States (Georgia, Ukraine, Uzbekistan, Azerbaijan, Republic of Moldova), said that the consensus demonstrated at Monterrey and Johannesburg had given hope that hunger, disease and poverty could be eradicated through joint efforts.  Concerted action on macroeconomic policy questions -– particularly the issue of external debt -– was now needed in the equally significant process of following up the commitments undertaken.

There remained a need to develop internationally agreed debt relief measures, he said, pointing out that his country's foreign debt share against GDP amounted to 15 per cent of its total revenue.  Those critical resources would otherwise have been spent on reducing poverty, providing social safety nets for the population and investing in development.

He said the Monterrey Consensus highlighted the need to share responsibility between creditors and debtors.  One of the remaining difficulties in making judgements on debt relief was conditionality.  The GUUAM States supported calls to review conditionality, as well as the Secretary-General's call to link performance criteria to poverty reduction targets or other concrete development-oriented spending, rather than simply following general adjustment programmes.

ZHANG XIAO'AN (China) noted that at the spring and fall meetings of the Bretton Woods institutions following the Monterrey Conference, the World Bank and the IMF had incorporated the Monterrey Consensus and other conference outcomes in their priorities for future work.  They had made changes through a review and streamlining of conditionality and by strengthening the ownership of recipient countries.  The Fund Director had recognized that there was no one-size-fits-all approach, and that the needs of recipient countries should be better understood and their views fully heeded.

Those positive developments were a starting point, she said, adding that the outcome of implementation would be more important.  There was a long way to go in improving the work of the international financial institutions and a number of areas to focus on.  First, there should be greater ownership of the development process by developing countries.  International institutions and donor countries should learn that policies of privatization, liberalization and market-based reforms caused problems when imposed on developing countries.  The specific situations of recipient countries should be respected and their views should be heard.

She called for the broadening and strengthening of participation by developing countries in international economic decision-making and norm-setting.  International financial stability should also be strengthened to prevent financial crises.  Finally, effective debt-relief measures were required and the pace of implementing the HIPC initiative should be accelerated to benefit more highly indebted countries.

DHAN PRASAD PANDIT (Nepal) said that the external debt crisis had contributed to the deterioration of already weak social and economic situations in most developing countries, stunting investment, growth, trade and the overall capacity of those States.  Developing countries were spending a quarter of their public purse on debt servicing, which was generally impossible to sustain.  Immediate debt relief was essential to help poor countries redirect their debt-tied resources to poverty reduction and sustainable development.

Calling for the expansion of the HIPC initiative to cover all LDCs, he said those countries should also be provided with increased grant funding for their social sector projects aimed at poverty eradication and promoting sustainable development.

On the development of landlocked developing countries, he said they were at a comparative disadvantage in global markets due to high costs, insurance premiums, transit time and immigration difficulties.  That made the integration of their economies into the global economy extremely difficult.  To make globalization work for those countries required giving them direct access to sea-based resources, adequate resources to restructure their high-cost economies and concessional entry to markets in rich countries and better-off coastal developing States.

JOHN DAVISON (United States) said the world community had resolved to fight poverty by implementing proven development strategies aimed at liberalizing trade, increasing agricultural productivity and improving debt management.  Moreover, it had resolved to unlock all potential resources for development, recognizing that governance, rule of law, investment in people and access to markets were central to development strategies.

Export earnings from international trade were a major source of financing for development, he said, noting that sustained growth and productivity were not possible without trade and investment.  As the overwhelming majority of those living in absolute poverty lived in rural areas, where agriculture was the economic foundation, it was essential to address agriculture when fighting poverty, he added.

Another factor holding people in poverty was the accumulation of excessive debt, he said.  Expressing support for the HIPC initiative, he said it was also essential that new investment in development not lead to the re-accumulation of unsustainable debt burdens in the poorest countries.

NEHEMIAH ROTICH (Kenya) said that developing economies continued to be affected by external factors, especially fluctuations in commodity prices.  Kenya was also concerned that the high level of debt overhang, particularly in sub-Saharan Africa, was undermining development.  Recalling pledges made at Monterrey, underscoring the need to relieve that debt, he said that slow progress in debt relief and falling ODA levels had limited the ability of developing countries to develop.  He stressed the importance of unlocking development resources without conditionality and on a timely basis.

Kenya shared the view of other developing countries that the international financial system needed a coherent strategy to deal with financial crises, he said.  Ways must be found to put in place a clear set of principles to that end, as emphasized in the Monterrey Consensus.  Those principles would go a long way in addressing current and future crises.  Coherence and consistency were also important in the international trading and monetary systems, he stressed.

DARMANSJAH DJUMALA (Indonesia) noted that developing countries had made a net outward transfer of financial resources for the fifth year in a row.  The total debt stock of developing countries and economies in transition was almost  40 per cent of their gross national income.  In Africa, those figures had soared to crippling levels that were an enormous drain on development resources, greatly inhibiting efforts to achieve the Millennium Development Goals. 

Although the enhanced HIPC initiative provided the opportunity to strengthen the economic prospects and poverty-reduction efforts of eligible countries, he said, the Bretton Woods institutions should exercise more flexibility in order to speed up debt relief and make it more meaningful.

New initiatives, such as the swapping of debt for sustainable development and the cancellation of unsustainable debt, should be more fully explored, he stressed.  There was also great merit in using special drawing rights (SDRs) for development purposes.  That approach should be further explored as an innovative means for mobilizing sources of development financing, he said.

MARC NTETURUYE (Burundi) said landlocked developing countries were confronting serious transport difficulties, noting that the lack of direct sea access had increased the price of goods, created customs snafus and caused delivery delays of several weeks.  That meant higher prices and lower quality products, exacerbated by high fuel costs.

Many landlocked developing countries’ economies depended heavily on export earnings and could not meet those challenges without the assistance of the international community.  The international financial community should increase funding for regional transport infrastructure development projects.  The landlocked developing countries needed to harmonize customs rules and procedures with those of neighbouring countries.  Economic embargoes against those countries should be prohibited, he said, stressing that they hurt vulnerable and marginalized groups most, rather than governments.

GYALTSHEN PENJOR (Bhutan) described the geographical obstacles of landlocked countries as the single most debilitating factor in international trade. Landlocked nations were not in a position to compete with other countries until they had reached a level of development at which they could provide the necessary infrastructure to accommodate increased trade.

Achieving that state of development would require international support and assistance to overcome geographical handicaps, as well as resources to develop transit structures in order to make trade viable, he said.  Hopefully, those issues would be addressed and effective solutions would be found.  Next year’s ministerial meeting in Kazakhstan would be vitally important in that respect, he said.

ALI ALAYED (Jordan) said external debt was the main obstacle to sustainable development in developing nations.  Finding a radical solution to that problem must be a top priority of the international financial community.  Middle-income countries were drawing on scarce resources for debt servicing and foregoing the funding of desperately needed poverty-reduction and social-development projects. 

The outstanding debt of developing countries remained high, he said, expressing full support for debt cancellation programmes.  He said developing nations must be able to bring their commodities to market at competitive prices. Their inability to do so could push them into bankruptcy, resulting in serious social problems and unrest.

FRANCIS MUMBEY-WAFULA (Uganda) said the issue of transit transport was very important for Africa since 16 of 30 landlocked developing countries were located on that continent, most of them dependent on commodities.  They spent the highest proportion of their export earnings on transport services, up to 40 per cent in some cases.  The transit issue was, therefore, a high priority for NEPAD.

Of grave concern for Uganda was the link between commodity trends and external debt, he said, pointing out that the cyclical decline in commodity prices had adversely affected export earnings.  The key to getting out of indebtedness was to boost export earnings and economic growth, he stressed.  There should be progressive movement in getting out of excessive dependency on primary commodities through both horizontal and vertical diversification and by adding more value to

exports, he said.  Domestic policies alone could not accomplish that.  Policies were needed at the international level to complement national efforts.

EDUARDO GALLARDO APARICIO (Bolivia) stressed the need to study current methods of determining debt sustainability, saying that the main debt sustainability indicator for HIPC nations did not realistically take account economic performance and crises in those nations.

Stressing that the relationship between trade and debt sustainability should be examined more closely, he said that debt reduction and greater access to export financing could give the exports of HIPC-eligible countries greater access to markets in developed countries.  Debt reduction was a very viable strategy to spur sustainable development, enabling poorer nations to channel resources into poverty-reduction programmes.

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