INTERNATIONAL TRADE, INVESTMENT, AID MUST COMPLEMENT DEVELOPING-FINANCING EFFORTS BY POOR COUNTRIES, SECOND COMMITTEE MEETING TOLD

Sixtieth General Assembly

Second Committee

10^th Meeting (AM & PM)

INTERNATIONAL TRADE, INVESTMENT, AID MUST COMPLEMENT DEVELOPING-FINANCING

EFFORTS BY POOR COUNTRIES, SECOND COMMITTEE MEETING TOLD

Earlier Panel Discussion Focuses on Debt Relief,

Challenges, Opportunities of Attaining Millennium Development Goals

Stressing that developing countries had adopted measures to promote domestic resources and attract foreign investment, Jamaica’s delegate called today for complementary external financing through international trade, investment and official development assistance (ODA), as the Second Committee (Economic and Financial) discussed the follow-up to and implementation of the outcome of the International Conference on Financing for Development.

Speaking on behalf of the “Group of 77” developing countries and China, he said that the volume of resources to developing countries had continued to fall short of the levels needed to promote sustained economic growth and eradicate poverty.  Measures to mitigate the impact of excessive volatility in short-term capital flows and sustain sufficient and stable private financial flows to developing countries were also needed.

The representative of the United Republic of Tanzania reinforced that point, noting that developing countries had increased domestic resources by instituting sound economic policies, the rule of law, solid democratic institutions and mechanisms to fight corruption.  Some had carried out economic and institutional reform under structural adjustment programmes, and implemented poverty-reduction strategic papers.  But despite those efforts, their resources still fell short while ODA and other international sources of development financing remained critical for development.

Delegates also pointed to imbalances, exclusions and discriminatory tendencies in the international trading system, noting that the conclusion of the Doha Development Agenda had remained a myth.  Exports from least developed countries faced a variety of barriers, the representative of Bangladesh said, adding that the international community should provide immediate duty-free and quota-free market access for all their exports, which should also be free of unrealistic rules-of-origin conditions.  The Doha development dimension should cover increased market access, flexibility in rules, longer transition periods for implementation, waivers on many reporting requirements, and greater policy space for home-grown development strategies.

Guyana’s delegate, speaking on behalf of the Caribbean Community (CARICOM), said many economies in his region had become unstable because sugar, a major export, no longer enjoyed preferential-trade treatment and no consideration had been given to the time and resources needed by the CARICOM nations to adjust to that change.  Moreover, they had been categorized as middle-income countries and ODA had declined from $1.2 billion in 1995 to $400 million in 2002.  The international community should pay special heed to the peculiar conditions of small, vulnerable economies and increase their role in shaping policies that had a direct impact on their well-being.

Other speakers emphasized the importance of aligning ODA with each recipient country’s needs and priorities, and to redefine debt sustainability in achieving the Millennium Development Goals.  Welcoming the proposal by the Group of Eight for a 100 per cent cancellation of the debt owed by heavily indebted poor countries, they also stressed the need for all bilateral and multilateral creditors to extend similar relief to the remaining least developed countries and to develop a roadmap for its immediate implementation.

Qatar’s representative addressed those concerns by saying that his country would host the first meeting to review the International Conference on Financing for Development in the Doha, the Qatari capital, in 2007.  Many non-controversial items on the development-financing agenda needed quick and well-coordinated action, such as providing adequate financing for developing-country infrastructures, including both “soft infrastructure” (human and institutional capacity building) and “hard infrastructure” (communication, transportation and construction).

Earlier today, the Committee held a panel discussion under the theme “External debt relief and the achievement of the Millennium Development Goals: Challenges and opportunities”.  Participants included Vikram Nehru, Director of the World Bank’s Economic Policy and Debt Department; Neil Watkins, National Coordinator of the Jubilee USA Network; Tom Scholar, United Kingdom Executive Director of the International Monetary Fund (IMF) and the World Bank; and Barry Herman, Senior Advisor in the Financing for Development Office, United Nations Department of Economic and Social Affairs.

Mr. Nehru reviewed the recent Group of Eight proposal to cancel external debt for 18 members of the Heavily Indebted Poor Countries (HIPC) Debt Initiative, noting that the International Development Association (IDA), a World Bank organ, would provide the largest amount of debt relief at $33 billion, the International Monetary Fund $3 billion and the African Development Bank $10 billion.  In an effort to keep HIPC-eligible countries from rapidly re-accumulating debt, the three institutions would review the situation early next year.

He said that as the largest debt reliever, the IDA wished to reduce any new money allocated to an equivalent of debt servicing absolved, and had also requested a dollar-for-dollar compensation from international donors, which had caused some concern.  As a way forward, the Group of Eight had proposed providing a share of that, which would be considered by the IDA donor group for final endorsement.  Compensation would be provided for poverty reduction purposes to all IDA-only countries, not only HIPC members, according to a performance-based allocation system.

Mr. Watkins welcomed the proposed Group of Eight debt cancellation, but noted that up to $56 billion of debt stock that would be cancelled by the three financial institutions represented just over 10 per cent of the external debt owed by low-income countries.  The proposal also failed to address debt cancellation for middle-income countries, or debt owed to other regional development banks, including the Inter-American Development Bank and the Asian Development Bank.

He said that the Jubilee USA Network opposed the HIPC Initiative policy of linking debt cancellation to countries’ economic policies, although the proceeds must certainly be kept out of the pockets of corrupt leaders.  It also objected to “illegitimate debt” from questionable projects (that channelled funds to external consultants or multinational corporations, for example), and “odious debt” contracted without the consent of a country’s population and used by governments for oppression or personal gain.  Analysis of World Bank documents showed that odious debts had occurred in Indonesia under former President Suharto; South Africa under the apartheid regime; the former Zaire, now the Democratic Republic of the Congo, under President Mobutu Sese Seko; the Philippines under President Ferdinand Marcos; Argentina under the military junta of the late 1970s and early 1980s; and many more.

During the ensuing discussion, delegates questioned the World Bank’s proposed review of continued HIPC-eligibility for debt relief, commenting that it amounted to additional conditionality.

Mr. Scholar defended the review by saying that international financial institutions were responsible to the world’s “tax payers” in ensuring that funds were used properly.  Moreover, countries tended to have strong track records and making the review was a mere formality in most cases.

To queries about debtor participation in designing a debt-sustainability framework, Mr. Nehru responded by saying that the two-year framework process had involved workshops in Africa and other developing regions, in addition to Europe and Washington.  It had also been influenced considerably by several outside stakeholders, including civil society groups.

Responding to another comment on delays in HIPC approval, he said that the countries concerned were often embroiled in or emerging from conflict and unable to meet the minimal conditions –- such as setting up a macroeconomic programme supported by the World Bank for six months -- due to a breakdown in governance.  The rush to help get out of debt in 2000 had led to diluted standards, and they now faced difficulties in reaching the HIPC completion point.  The World Bank had decided that future efforts should stick to higher standards.

Speaking during this afternoon’s general discussion were the representatives of the United Kingdom (on behalf of the European Union and associated countries); China; India; Peru; Pakistan; Switzerland; Cambodia; Algeria; Thailand; Ecuador; El Salvador; Guatemala; and Mexico.

The Committee also heard a statement delivered on behalf of the Under-Secretary-General and High Representative for Least Developed Countries, Landlocked Developing Countries and Small Island Developing States.

In addition, officials from the Department of Economic and Social Affairs introduced reports on the follow-up to and implementation of the outcome of the International Conference on Financing for Development, and on multistakeholder consultations on financing for development.

The Second Committee will meet again at 10 a.m. tomorrow, Thursday,
13 October, to hear a presentation by the New Rules for Global Finance Coalition on the outcome of multistakeholder consultations on “Systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development”.  The Committee will also conclude its consideration of financing for development.

Background

The Second Committee (Economic and Financial) met today to discuss the 2002 International Conference on Financing for Development, which was held in Monterrey, Mexico.

Before the Committee was the Secretary-General’s report on Follow-up to and implementation of the outcome of the International Conference on Financing for Development (document A/60/289), which reviews recent efforts to implement the Monterrey Consensus in such areas as official development assistance (ODA), innovative sources of development finance, debt relief and trade.

Regarding ODA, the report notes that the European Union has set an aid target of 0.56 per cent of gross national product (GNP) by 2010 and 0.7 per cent by 2015.  Additional commitments made at the Group of Eight meeting in Gleneagles, Scotland, in July will increase ODA by about $50 billion annually by 2010, compared with 2004.

On innovative development finance, the Global Alliance for Vaccines and Immunization announced a pilot project for the international finance facility proposed by the United Kingdom, the report says.  In addition, the French and Brazilian Governments, as well as members of the Action against Hunger and Poverty Initiative, intend to introduce a pilot project for a global solidarity contribution based on air tickets.

As for external debt, the report states that the Group of Eight meeting in Scotland proposed full relief from debt owed to the World Bank, African Development Bank and International Monetary Fund (IMF) under the Heavily Indebted Poor Countries (HIPC) Debt Initiative.  Regarding trade, negotiations for the December World Trade Organization meeting in Hong Kong are continuing in the areas of agriculture, market access for non-agricultural products, services, trade facilitation, and reinforcing the development priority of the Doha work programme.

The report stresses the importance of enhancing coherence and consistency in the international monetary, financial and trading systems.  It also reviews recent efforts to focus on development finance, including the annual meeting of the Economic and Social Council with the international financial and trade institutions, and the High-level Dialogue of the General Assembly on Financing for Development, as well as regional and intergovernmental follow-up.

Also before the Committee was the Secretary-General’s report on Follow-up to and implementation of the outcome of the International Conference on Financing for Development (document A/60/289/Add.1), which reviews multistakeholder consultations held in 2004-2005 on financial-sector development; external debt; public-private partnerships; private investment; and coherence and consistency in the international financial, monetary and trading systems. 

The report notes that consultations on financial-sector development aimed to produce a “Blue Book” (expected to be launched during the sixtieth session of the General Assembly) to provide principles to help Governments shape strategies for building inclusive financial sectors.  Among those, the book would state that financial services for the poor should be integral to overall financial-sector development, with a continuum of services made available to micro-, small and medium-sized enterprises as well as poor and low-income households.

During consultations on debt, the report says participants noted an absence of agreement on debt sustainability, underlining the need for an improved mechanism to achieve cooperative debt workouts from crises.  One approach suggested taking forward a set of principles for stable capital flows and fair debt restructuring in emerging markets, while another looked to a sharp break from current approaches to negotiated debt restructurings.  Consulting on public-private partnerships, participants stressed that such arrangements had a significant role to play in achieving the Millennium Development Goals, noting that increased private resources were being directed to development-oriented public-private partnerships.  Many participants called on the official and private sectors to better integrate public-private partnerships into the structuring and delivery of aid programmes, and to scale up their use.

Regarding the private investment climate, the report says recommendations were made on how to unlock “trapped capital” in both private and public multilateral development banks.  Those included strengthening risk-mitigation products offered by official sector agencies; providing financial and technical assistance to strengthen project development capacities; and implementing institutional changes within development organizations, including by reallocating underused capital within multilateral development banks to sub-sovereign lending and risk-mitigation products.

According to the report, consultations organized by the New Rules for Global Finance Coalition focused on structural features of the international monetary, financial and trading systems, the potential vulnerabilities they pose for developing countries, and the institutional design of the international financial system.  Participants made several concrete proposals aimed at establishing effective measures to prevent and resolve financial crises, secure viable sources of domestic finance, and improve governance in the international financial system.

The report suggests that a new series of consultations, in 2006-2007, could focus on major developing-country policy concerns and contribute to intergovernmental policy debate on financing for development.  Those areas include improving the regional regulation of financial sectors, rethinking the role of national development banks, and securing financing for basic services, particularly water, sanitation and energy.

Also before the Committee was a summary by the President of the General Assembly of the High-level Dialogue on Financing for Development (document A/60/219), which reviews statements made by ministers and other high-level officials at the Dialogue, held at Headquarters from 27 to 28 June, 2005.  During the event, many ministers stressed that commitments laid down in the Monterrey Consensus remained unfulfilled.  Developing countries had adopted reforms and progressed in several areas, but resources mobilized to finance development envisaged at the global conferences of the 1990s and the 2000 Millennium Summit fell considerably short of requirements.

Many participants highlighted the contribution to development of South-South cooperation, citing the New Partnership for Africa’s Development (NEPAD) as an example, the report states.  Several also underlined the development contribution of regional development banks as well as regional commissions, which could play a vital role in regional integration and in monitoring implementation of the Monterrey Consensus.  Speakers noted that current world economic growth was encouraging, pointing to progress in all regions, although growth within regions was far from uniform.  Moreover, several problems persisted, including major imbalances in the world economy, net outward transfer of financial resources from developing countries, and a volatile global environment, which impeded more rapid and even progress.

The report says ministers also agreed that the Economic and Social Council should be strengthened to follow up and implement the Monterrey Consensus, with some supporting the Secretary-General’s proposal to set up an executive committee that would interact with the Bretton Woods institutions and the World Trade Organization.  Also, several ministers called for a follow-up international conference to review implementation of the Consensus, and that a decision on conference modalities should be taken no later than 2005.

Introduction of Reports

OSCAR DE ROJAS, Director, Financing for Development Office, Department of Economic and Social Affairs, introduced the report on the follow-up to and implementation of the outcome of the International Conference on Financing for Development (document A/60/289), saying that since the Conference, a number of measures had been adopted to improve the quantity and quality of ODA.  In 2004, the total volume of aid stood at $78 billion, or 0.25 per cent of the gross domestic product (GDP) of the Organization for Economic Cooperation and Development (OECD) countries in 2003; a European Union initiative sought to increase the amount to 0.5 per cent by 2010 and 0.7 per cent by 2015.

The report underscored the need to improve ODA effectiveness, according to principles contained in the Paris Declaration.  Innovative financing was being discussed not just at the United Nations, but also at international financial institutions and the Group of Eight as well.  However, regarding the cancellation of debt, concerns remained about how to implement certain aspects of the measure and to deal with countries not covered by it.  Another question concerned how to implement the measure without decreasing the amount available for countries not covered by the initiative.

Regarding commodity-dependent countries, he said discussions were underway to assist those countries to achieve export diversification, increase the value of their exports, to bring about price stability, and to provide those countries with a new generation of financing plans.  Group of Eight efforts to support countries that were vulnerable to commodity price shocks were noteworthy.

He said the international financial system required reform due to an obvious need to increase international cooperation and to reduce trade and other economic imbalances.  In that regard, the issue of greater quality and participation by all countries had been raised as a means for international financial and economic governance modalities to involve more developing countries.  The possibility had also been raised of creating a Financing for Development Committee as an intergovernmental mechanism to foster the involvement of all trading counterparts, as well as an enhanced bureau of the Economic and Social Council with a regionally balanced composition.

ALEXANDER TREPELKOV, Chief, Multistakeholder Engagement and Outreach Branch, Financing for Development Office, Department of Economic and Social Affairs, introduced the report on multistakeholder consultations on financing for development (document A/60/289/Add.1), saying that the consultations, organized by the Financing for Development Office, drew together experts from the official and private sectors, as well as from academia and civil society, to examine selected issues by which informal and expert-level discussion might facilitate policy debates in international forums.

He said the consultations focused on five substantive areas:  building inclusive financial sectors for development; sovereign debt for sustained development; public-private partnerships to improve the reach and effectiveness of development assistance; improving the climate for private investment; and systemic issues.

Noting that the consultations had generated several promising proposals, he said the next step should be to continue exploring existing topical areas and viable recommendations, with a view to implementing them.  A new series of consultations, to be initiated in 2006-2007, should respond to the major policy concerns of developing countries and contribute to intergovernmental policy debate on financing for development.  Those areas could include improving regional regulation of financial sectors; rethinking the role of national development banks; and securing financing for basic services, especially water, sanitation and energy.

Discussion

The representative from Spain, referring to the pilot project on international financing of vaccinations launched by France and the
United Kingdom, stressed that her country supported the initiative jointly with other member States of the European Union.   Chile ’s representative said it would be difficult to achieve development goals, even if the target of 0.7 per cent of GDP in developed countries was reached.  It was regrettable that the Secretary-General’s report did not mention the decision by Chile to impose a tax of
2 per cent on all plane tickets to finance the Global Fund to Combat AIDS and other diseases.

MR. ROJAS said he was pleased that Chile was the first country that would implement, on 1 January 2006, the tax on plane tickets.

Statement on Behalf of High Representative

HARRIET SCHMIDT, Director of the Office for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States, spoke on behalf of Anwarul Chowdhury, Under-Secretary-General and High Representative, noting that the least developed countries were caught in a “poverty trap”, where slow growth and low income limited domestic savings, and foreign direct investment (FDI) was marginal.  Those countries needed special assistance because they could not meet their basic needs from domestic resources, regardless of their policies or quality of governance.  Support for them should be consistent with the Brussels Programme of Action, which outlined key areas to help break the poverty trap, including human-resource development, investment in supply-side constraints, environmental protection and investment for food security.

She said the least developed countries had made great strides in creating an enabling environment to implement national development strategies, with 32 of the 50 completing their poverty reduction strategy papers, and the remaining expected to complete them by 2006.  As budget support had emerged as a new means of effective resource transfer, especially if it increased the purchasing power of the poor and alleviated hunger and malnutrition, the accomplishments of those countries in designing their national strategies should encourage donors to channel their aid increasingly through such means.  In addition, untied and predictable aid was needed so that medium- to long-term ODA flows to the least developed countries could reduce uncertainty and unpredictability in implementing national development goals.

Statements

STAFFORD NEIL (Jamaica), speaking on behalf of the “Group of 77” developing countries and China, noted that developing countries had adopted measures to promote domestic resource mobilization and attract foreign investment, but the volume of resources had continued to fall short of that required to promote sustained economic growth and eradicate poverty.  Domestic resources should be complemented by external financing through international trade, investment and ODA in the implementation of national strategies for development.  Measures to mitigate the impact of excessive volatility in short-term capital flows and to sustain sufficient and stable private financial flows to developing countries were also needed.

He stressed that the United Nations -– the primary intergovernmental organization where developing countries had a voice -– had a significant role to play in shaping the global economic environment.  That role could be increased through greater and more predictable funding for development cooperation.  The lack of sufficient core resources for both administration and programme development represented the single most important constraint on the performance of development entities.  The continued reliance on non-core funding limited the extent to which resources could be committed, and increased the likelihood of a piecemeal, fragmented approach to development.

Many Monterrey Consensus commitments, he said, could be undermined by restrictive policies, such as political conditionality, in providing development assistance and concessionary financing, which impeded the progress of recipient countries.  It was also necessary for the trading system to support development.  In doing so, more serious and genuine efforts were needed to enhance the voice and effective participation of developing countries in global economic decision-making.

MICHAEL O’NEILL ( United Kingdom), speaking on behalf of the European Union and associated countries, said that domestic and external assistance could only be mobilized in an appropriate domestic environment.  Good governance, a transparent and accountable public financial-management system, equitable and efficient tax systems, the fight against corruption, the full integration of the Millennium Development Goals into country-owned plans, and a stable and predictable investment climate were all vital for the mobilization and effective use of both domestic and external resources.  The European Union recognized that increased ODA was urgently needed and that four of its member countries had exceeded the target figure of 0.7 per cent of GDP.  Financial assistance to sub-Saharan Africa would be increased to at least 50 per cent of the agreed levels of ODA earmarked for the continent, while respecting individual member States’ development assistance priorities.

In order better to respond to the need for stable resources in the view of an expected increase in ODA flows, the European Union would develop new, more predictable and less volatile aid mechanisms, he said.  Meanwhile, innovative financing mechanisms, such as the international financing facility and the tax on airline tickets to enable the financing of development projects, were being considered by some members of the European Union.  Reducing the cost of transferring remittances would also be supported, as would the broadening of access to financial services through microcredit programmes, the building of inclusive financial sectors, and the improvement of the international financial architecture in general.  The European Union looked forward to discussing the modalities for further review of the Monterrey Consensus.

IFTEKHAR CHOWDHURY ( Bangladesh) said that current international debt-relief measures had been far from effective, and that debt sustainability should be redefined in achieving the Millennium Goals.  The Group of Eight proposal for a 100 per cent cancellation of the debt owed by some heavily indebted poor countries was welcome, but it should be extended to all the least developed countries by all bilateral and multilateral creditors.  The proposal also needed a comprehensible roadmap for immediate implementation.  All future assistance should be unconditional and grant-based, and ODA distribution should be rational and not politically motivated.

He noted that while the Monterrey Consensus portrayed international trade as an engine for development, exports from many of the least developed countries faced a variety of barriers and the international community should provide immediate duty-free and quota-free market access for all their exports, which should not be subjected to unrealistic rules-of-origin conditions.  Also, the development dimension of the Doha Agenda was vital and should cover increased market access, flexibility in rules, longer transition periods for implementation, waivers on many reporting requirements, and greater policy space for home-grown development strategies.

LIU LIQUN (China), aligning himself with the Group of 77, said that while the responsibility for funding development projects rested with the Government of the country concerned, international help was critical.  In that context, the international community should deliver on its promise to increase ODA and implement debt cancellation.  Developed countries should also recognize the substantial gap between the level of aid provided and that needed to achieve development.  The international and economic financial systems should be improved in order to overcome obstacles to obtaining funds.

He stressed that adequate financing hinged on the state of the international financial system and that the Bretton Woods institutions required reform so that they could better raise funds for development.  For that reason, the practical concerns of developing countries should be considered at the forthcoming World Trade Organization ministerial meeting and the Doha Round concluded speedily.  Various ideas regarding innovative financing as a complement to ODA should also be studied and implemented when the time was ripe. 

At the same time, he said developing countries should perfect their domestic capacity for financing as a way to undertake self-development.  For that to occur, countries should strive to make their macroeconomic policies, governance and investment climate as favourable as possible for development.  Technical help from abroad could then be called upon to help accumulate experience.  Attracting foreign investment and opening up the economy had been fundamental to China’s economic growth, and successful enterprises were now encouraged to conduct their business abroad. 

SARTAJ SINGH CHHATWAL ( India) noted at least four levels of interaction that impinged on development:  aid, trade, debt and investment.  Governments were increasingly aware that their policies regarding each affected the sum of their contribution to development efforts.  They could either work on them synergistically, in favour of development, or at cross-purposes, negating any positive effects of their initiatives.  It was time to bring down the barriers, not just against trade but also development, which had been erected in several industrial economies, denying opportunities for faster growth in developing countries.

The absence of substantial progress in infusing adequate amounts of additional ODA to meet the Millennium Goals had promoted an exploration of various innovative financing mechanisms, he said.  Proposals to increase ODA, including through the international financing facility, solidarity contribution and global taxation, were interesting, but faced several challenges.  It was necessary to ensure that new mechanisms and innovative sources did not lead to greater burdens on developing countries or impact adversely on the need for their greater voice and representation in international financial institutions and decision-making.

REMINISCENCE P. MWASHA (United Republic of Tanzania), aligning himself with the Group of 77 and China, said that developing countries had committed themselves to increased domestic-resource mobilization by implementing sound economic policies, the rule of law, solid democratic institutions and fighting corruption.  Some had undertaken economic and institutional reform under structural adjustment programmes and implemented poverty-reduction strategic papers.  However, in spite of those efforts, they were unable to mobilize enough resources domestically, signalling that ODA and other international sources of financing for development remained critical to augmenting their efforts.

The efforts of developing countries needed support from the international community, multilateral financial institutions and development partners, who should genuinely fulfil their obligations, he said.  In addition, the imbalances, exclusions and discriminatory tendencies of the international trading system must be addressed.  The conclusion of the Doha Development Agenda was still a myth and if trade was truly to be an engine of development, subsidies and other disguised trade barriers must be eliminated and developing countries fairly represented in international financial institutions.  Tanzanian President Benjamin Mkapa had said that it did not take much to find money for military expenditures, but debate continued endlessly about different options to raise more money to fight global poverty.  The international community must reverse that trend.

CLAUDIA ALEMÁN ( Peru) said that recent economic reports had shown that inequality had continued to increase and that most developing countries would fail to attain the Millennium Goals.  The global partnership laid down at Monterrey had focused on ODA, which could reduce poverty but would not necessarily spur development.  Development meant laying the foundations of sustained economic growth, while creating decent jobs and the rule of law.  To that end, developing countries needed an open international trading system and a non-discriminatory financial system.

She said the international community must continue to support developing country efforts to achieve sustained growth and eradicate poverty through additional financial flows for development, the transfer of technology and reform of the multilateral trading system.  The Group of Eight proposal to cancel debt in the poorest countries was welcome, but should be extended to other lower- and middle-income countries.  Developing countries often had the resources but could not use them to promote productive, non-inflationary growth.  Among other solutions, they needed infrastructure projects that attracted investments and produced social benefits.

ASAD MAJEED KHAN ( Pakistan) said development could be described as the combined and judicious application of the three factors of production:  technology, labour and capital.  Capital was vital, not only as one of those factors of production, but in developing the other two.  The single common characteristic of developing countries was the low availability of investable or surplus capital.  Pakistan had tackled its fiscal deficit by reducing establishment costs and increasing revenue generation, freezing defence expenditures, and improving public sector corporations.  It had handled its external balance-of-payments deficit mainly by reducing expenditure on debt servicing, through debt write-offs and relief, and by reducing its debts.  Over the past five years, the country had seen its export earnings increase by over 100 per cent, remittances by more than 500 per cent and FDI by 400 per cent.

He said domestic financing alone would not lead to rapid development, which required sizeable amounts of external financing like grants, loans, export earnings, FDI, or other capital-market flow.  Trade was a vital component of development financing, but Pakistan’s trade potential was constrained by inequities in the global trading system, including agricultural subsidies, as well as high duties and tariff escalations.  Moreover, although the country was a good location for investment, it had failed to benefit fully from FDI flows, mainly due to perception problems.  To reverse that trend, steps could be taken to minimize political misperceptions through more objective analysis, and to adopt international and national policies directing FDI flows towards low-income countries.

THOMAS GASS ( Switzerland) said his country remained strongly attached to the approach adopted at Monterrey, which invited Governments, multilateral institutions, civil society, non-governmental organizations and the private sector to combine their efforts at the national, regional and international levels in order to achieve development goals.  While developing countries were primarily responsible for their own development, and should formulate and implement their own strategies for combating poverty, developed countries should increase the disbursement of aid, improve its quality and facilitate the transfer of financial resources, as well as further open their markets to developing countries.  The Swiss Parliament had recently decided on a programme of financial stringency, but after 2008, the Government planned to increase the percentage of its budget allocated to development aid in order to bolster the country’s share of international development aid efforts.

International trade could play a major role in the fight against poverty and Switzerland was aware of the vulnerability faced by developing countries, particularly the least developed.  The country also favoured more flexibility in trade agreements so that the situation faced by developing countries could be taken into account.  In order for developing countries better to benefit from trade agreements, the existing integration framework for technical assistance should be strengthened and extended to other beneficiaries before the launching of any new initiatives was considered.

CHEM WIDHYA ( Cambodia), aligning himself with the Group of 77, said international trade and finance had become more unbalanced than ever, threatening to destabilize the world economy.  It was urgent, therefore, to address the sensitive issue of market access and to reform the international financial architecture so it could be more responsive to the needs of developing countries.  In order for them to overcome poverty, an increase in ODA was needed and it was vital for all developed countries to honour their commitment to allocate 0.7 per cent of their GNP for aid to developing countries by 2015, and 0.15 to 0.20 per cent to the least developed countries as laid out in the Brussels Plan of Action.

At the same time, ODA should be given in line with the recipient country’s needs and priorities, he said.  Many countries had established democratic institutions to improve governance, which was necessary for sustainable economic development.  However, in the absence of universal measures regarding transparency, mutual accountability and good governance, double standards often arose, placing certain developing countries in an unfavourable position.  Cambodia favoured a level playing field that would ensure a viable and efficient partnership at the national, regional and international levels.

NACIN GAOUAOUI ( Algeria) said the Monterrey Consensus had provided a framework for international development financing and its implementation was key to achieving development goals, including those in the Millennium Declaration.  States had an individual and shared responsibility for development and should make every effort to form partnerships to that end.  ODA, which should remain central to the development process, had remained insufficient, and even decreased, since the 1990s.  Aid should not be tied to conditionality, and developing countries should assume full responsibility for their development strategies.  There were other sources of financing and they must play their role, although more initiatives were needed in that direction.

Welcoming the Group of Eight proposal to cancel debt in the poorest countries, he said the measure should be extended to other indebted countries.  International trade would play an essential role in development if developing countries were able to participate fully in the international trading system.  Ongoing negotiations at the World Trade Organization must reinforce the development dimension of the Doha Round.  An open world trading system was necessary to open up the productive capacities of nations and assist them with sustainable development.

LAXANACHANTORN LAOHAPHAN ( Thailand) said that, while the positive initiative in the area of debt relief and cancellation was welcome, it should not compromise the ability of development partners and international financial institutions to continue to provide grants and concessional loans to developing countries.  The initiative should also be extended to financially handicapped low-income and middle-income countries with serious debt burdens.  Developing countries should make the best use of the released resources through the adoption of sound and sustainable national development strategies.  In efforts to reverse the adverse effects of capital outflow in developing countries, Association of South-East Asian Nations (ASEAN), together with China, Japan and the Republic of Korea, had launched the Asian Bond Market Initiative aimed at providing regional savers with the option of savings in local and regional currencies.

She stressed that for ODA to be effective, it must be directed to the specific needs of developing countries in a timely manner.  The quality and effectiveness of aid were no less important than increasing its volume.  Thailand welcomed, in that regard, proposals to reduce imposed conditionality and to conduct a social-impact analysis of ODA.  Hopefully, trade issues like the elimination of export subsidies and building trade capacity for the least developed countries would be given special attention at December’s World Trade Organization Ministerial Conference in Hong Kong.  In addition to the traditional sources of financing for development, innovative approaches for such financing were imperative for the achievement of the Millennium Goals.  In addition, South-South cooperation could deliver as much as North-South cooperation, but the combination of both could enable the attainment of the Goals.

NASSIR ABDULAZIZ AL-NASSER ( Qatar) said his country had always been keen to contribute to, and further, the Monterrey Process and towards that end, would host the first review conference of the international conference on financing for development in Doha, Qatar, in 2007.  There were many non-controversial items on the financing for development agenda that required quick and well-coordinated action.  One such item was providing adequate financing for the infrastructure of developing countries, including both “soft infrastructure”, such as human and institutional capacity-building, and “hard infrastructure” like communication, transportation and construction.  Others included the mobilization of domestic resources, building the capacity of developing countries to attract and encourage investment, as well as strengthening the private sector, the institutional capacity to organize trade and the ability to negotiate and service debt.  Helping developing countries to prioritize the use of ODA was also important.

In that context, he noted an increased interest in South-South cooperation and urged developing countries to learn from the example of the European Union how to integrate the needs of disparate countries.  However, it was up to Member States to define the agenda and scope of the upcoming review of Monterrey’s implementation.  There would be no need to renegotiate the principles and basics agreed upon in Monterrey, but rather to give impetus to the successful implementation of the Consensus.

LUCA DALL’OGLIO, Permanent Observer of the International Office for Migration (IOM), said that while the essential role of migrants as agents of development still needed to be factored into overall development strategies, the contribution of remittances as an important source of external finance for developing countries had strongly emerged in recent years and now appeared well established.  Although not a substitute for development assistance, remittances usually increased in times of hardship and, for some countries, were more relevant than either FDI or ODA.  While remittances were private, it was reasonable to estimate that 15 to 20 per cent of them -– in the presence of appropriate incentives –- may be invested in the creation of small and medium companies and in other economic activities.

Aside from remittances, he continued, there were other areas in which migration could provide innovative forms of financing for development, tapping into the human and financial potential of diaspora communities.  The IOM Return and Reintegration of Qualified Nationals programmes in Africa, Asia and Latin America had for many years sought to support the social and economic advancement of developing countries.  More recently, the IOM had launched the Migration for Development in Africa (MIDA) programme whose overall objective was to help Governments achieve their development goals through the mobilization of vital skills and resources of qualified nationals in the diaspora. 

GEORGE TALBOT (Guyana), speaking on behalf of the Caribbean Community (CARICOM), and aligning himself with the Group of 77, said that the economies of several CARICOM countries had been unstable because sugar, a major export, no longer enjoyed preferential treatment.  Also, in deciding to remove preferential treatment, adequate consideration had not been given to the time and resources needed by countries in the region to adjust to the change.  To add to the region’s troubles, the CARICOM nations had been categorized as middle-income countries, for whom ODA had declined from $1.2 billion in 1995 to $400 million in 2002.  While many countries could resort to commercial borrowing, CARICOM countries had no special arrangements to deal with debt, even when their export earnings were wiped out by natural disasters, such as in Grenada’s case in 2004-2005.

He said many CARICOM countries were island and low-lying coastal States, vulnerable to natural disasters.  Appeals to the international community for consideration of insurance arrangements or facilities had led to a pilot project to assess the feasibility of a regional catastrophe insurance facility.  But aside from the high risk of natural disasters, the region’s economic problems were compounded by a shortage of highly skilled workers and the prevalence of diseases such as HIV/AIDS.  Thus, CARICOM called for a special focus by the international community on the peculiar conditions of small, vulnerable economies.  The role of developing countries in shaping policies that had a direct impact on their well-being should be increased.

VANESSA EUGENIA INTERIANO ( El Salvador), specifically addressing the issue of remittances and its treatment during the Committee’s discussions, said those funds belonged to individual citizens and should not be considered as tools for financing development. 

MARISOL NIETO ( Ecuador) echoed that sentiment, saying that Governments could not decide where those flows could be invested.  The decision must be left to the migrants and their families.  The issue of remittances fell under the topic of migration and development, which would be debated later.

JOSE ALBERTO BRIZ ( Guatemala), CARLOS RUIZ MASSIEU, ( Mexico) and Ms. Alemán ( Peru) all supported those statements.

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For information media • not an official record