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GA/EF/3218

INTERNATIONAL MONETARY FUND REPRESENTATIVE TELLS SECOND COMMITTEE HOW WORLD LEADERS AGREED ON COLLECTIVE ACTION FOLLOWING WEEKS OF HESITATION

16 October 2008
General AssemblyGA/EF/3218
Department of Public Information • News and Media Division • New York

Sixty-third General Assembly

Second Committee

11th & 12th Meetings (AM & PM)


INTERNATIONAL MONETARY FUND REPRESENTATIVE TELLS SECOND COMMITTEE HOW WORLD


LEADERS AGREED ON COLLECTIVE ACTION FOLLOWING WEEKS OF HESITATION


Delegates Hear of Failure to Keep Pace with Advances

In Financial Innovation as They Discuss Preparations for Monterrey Follow-up


After weeks of hesitation and ad hoc interventions, world leaders participating in the recent annual meetings of the Bretton Woods institutions agreed on a collective, coordinated policy response involving massive public sector intervention to shore up the global financial and credit system, and on the need for a full-scale overhaul to prevent future crises, Elliot Harris, Special Representative of the International Monetary Fund (IMF) to the United Nations, told the Second Committee (Economic and Financial) this afternoon.


He described deep-seated weaknesses in the management of risk, and in the regulation of banks and financial institutions, which led to a failure to keep pace with rapid advances in financial innovation, resulting in the present global financial and credit crisis.  In a bid to control the damage, the Group of Seven (G-7) called for broad access to liquidity and funding to unfreeze credit and money markets; injecting capital directly into financial institutions; deploying robust and consistent deposit-insurance and credit-guarantee schemes; restarting the secondary market for securitized assets; and ensuring the accurate valuation and transparent disclosure of the value of assets and liabilities.


Mr. Harris was speaking during a special briefing held by the Committee as it held its general discussion on the follow-up to, and implementation of, the outcome of the 2002 International Conference on Financing for Development and preparations of the 2008 Review Conference.


He said the International Monetary and Financial Committee had called for the prompt implementation of recommendations by the Financial Stability Forum, and for the IMF to increase its surveillance activities, particularly of macro-financial linkages, as well as for the development of effective early warning systems to identify clearly emerging risks and vulnerabilities.  The International Monetary and Financial Committee and the Group of 24, alongside the G-7, the Group of Two, the Development Committee and the Group of 20 (G-20), had agreed on the pressing need to deepen international cooperation and set clearer accounting rules and transparency.  The Group of 24 drew particular attention to the plight of developing countries and the need to help them in the face of potential instability.


Echoing that concern as he also briefed the Committee, Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development, said that, while developing countries and transitioning economies had largely survived the first-round effects of the crisis quite well, there was a sense that they would experience the lagging impact of the second round.  The World Bank estimated that the crisis had plunged 100 million more people into poverty and 40 million more had become malnourished -- factors that posed a threat to attainment of the Millennium Development Goals.  It remained to be seen whether the European financial rescue packages would do a better job of restoring confidence in the financial markets.


In the ensuing discussion, Mr. Jomo said the current World Bank reform proposal was considered very modest.  While it would add a chair for sub-Saharan Africa -- a move considered a good first step – that action had not been received with widespread enthusiasm.  While the IMF was supposed to be a cooperative, many countries, particularly developing ones, argued that the voting rights of a cooperative should be reflected in its governance arrangements.  However, addressing the global crises was not just a question of regulatory reform.  There was also an urgent need to deal with liquidity -- to introduce, implement and finance effective counter-cyclical policies, so as to offset a probable economic downturn, which had actually already started, as well as to provide the means to offset the adverse consequences likely to result from that downturn, such as unemployment.


Responding to a delegate’s question about perceptions of the upcoming Doha Review Conference, he said it was a sad reflection of the lack of coherence in multilateralism and evidence that foreign and finance ministries were not in sufficient conversation with one another.  There were several proposals to reform multilateralism, but it was necessary to distinguish between inclusive multilateralism –- as represented by such institutions as the United Nations and, to a lesser extent, the Bretton Woods institutions -– and exclusive multilateralism.


There was a sense that smaller countries, including developing countries and some in Europe, felt very estranged from such processes and left out of the G-20 and other mechanisms, he said.  The real systemic deficiency was a power imbalance, and it was quite clear that smaller countries were more likely to listen to advice or warnings than some of the larger ones.  Early warning systems were an imperative, even in advanced countries, and all countries must pay close attention to their economies and act on time.


Speaking earlier in the general discussion, on behalf of the Association of Southeast Asian Nations (ASEAN), Indonesia’s representative said the bloc’s member States were monitoring the global financial situation closely and remained vigilant to several risks that threatened to worsen growth prospects.  The Doha Review Conference would be a timely opportunity to examine critical issues in international economic development and cooperation, and its outcome should reflect progress made, lessons learned, and obstacles and constraints to implementation of the  Monterrey Consensus on financing for development.  Actions and initiatives to meet the financing needs that were essential to overcome the challenges posed by the financial crisis, as well as the current food, energy and climate change crises, must be an integral part of the outcome document.


Alexander Trepelkov, Chief of the Multi-stakeholder Engagement and Outreach Branch of the Financing for Development Office, in the Department of Economic and Social Affairs, introduced the Secretary-General’s reports for the Committee’s consideration.


Other speakers today were the representatives of Antigua and Barbuda (on behalf of the “Group of 77” developing countries and China), Kenya (on behalf of the African Group), Bangladesh (on behalf of the Least Developed Countries), Chile (on behalf of the Rio Group), Guatemala, China, Qatar, Colombia, Morocco, Japan, Algeria, Ethiopia, Philippines, Brazil, Ukraine, Belarus, Libya, El Salvador and Nigeria.


The Second Committee will meet again at 3 p.m. on Monday, 20 October, to consider the permanent sovereignty of the Palestinian people in the Occupied Palestinian Territory, including East Jerusalem, and of the Arab population in the occupied Syrian Golan over their natural resources.


Background


The Second Committee (Economic and Social) met today to begin its general discussion of the follow-up to and implementation of the outcome of the 2002 International Conference on Financing for Development and the preparation of the 2008 Review Conference.


Before the Committee were summaries by the President of the General Assembly of the review sessions on the six thematic areas of the Monterrey Consensus, held in New York between February and May 2008 (document A/62/921).  Each summary consists of two sections covering panel presentations and responses by the panellists to questions from participants, as well as an account of the policy deliberations.


According to the report, the review sessions were the result of General Assembly resolution 62/187, which requested the President of the General Assembly to provide a programme of work for the preparatory process for the Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus, to be held in Doha, Qatar, from 29 November to 2 December.  The sessions covered the following topics:  mobilizing domestic financial resources for development; mobilizing international resources for development:  foreign direct investment and other private flows; international trade as an engine for development; increasing international financial and technical cooperation for development; external debt; and addressing systemic issues:  enhancing the coherence and consistency of the international monetary, financial and trading systems, in support of development.


Also before the Committee was a summary by the President of the Economic and Social Council of the special high-level meeting with the Bretton Woods institutions, the World Trade Organization and the United Nations Conference on Trade and Development, held in New York on 14 April 2008 (document A/63/80-E/2008/67).  It includes details of the topics discussed during the meeting:  new initiatives on financing for development; supporting development efforts and enhancing the role of middle-income countries, including in the area of trade; supporting development efforts of the least developed countries, including through trade capacity-building; building and sustaining solid financial markets; and financing of climate change mitigation and adaptation.


The Committee also had before it the report of the Secretary-General on the latest developments related to the review process on financing for development and the implementation of the Monterrey Consensus (document A/63/179), which outlines the main recent developments under each of the six thematic chapter headings of the Monterrey Consensus document.


According to the report, the performance of the global economy is deteriorating, and there is a need for sound macroeconomic policies to contain inflationary pressures, well-targeted support for poor households most affected by rising food and fuel prices, and appropriate use of countercyclical fiscal policy.  Against that backdrop, the significant challenges facing the international community include sustaining the development effort, locking in recent gains in poverty reduction, and finding new ways to generate the external and domestic resources required to increase financing for development.


Also before the Committee was a note by the Secretary-General (document A/63/345) on the proposed organization of work of the Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus (Doha, 29 November-2 December 2008).


In addition, the Committee had before it a letter dated 8 July 2008, from the Charg é d’affaires a.i. of the Permanent Mission of Italy, addressed to the Secretary-General (document A/63/123), which transmits, on behalf of the Italian Presidency of the Inter-Parliamentary Union, the text of four resolutions adopted by the 188th Assembly of the Inter-Parliamentary Union, held in Cape Town, South Africa, on 18 April 2008.


The resolutions pertain to:  the role of Parliaments in striking a balance between national security, human security and individual freedoms, and in averting threats to democracy; the role of Parliaments and the Inter-Parliamentary Union in ensuring an immediate halt to the rapidly deteriorating humanitarian situation in conflict areas and its environmental dimension, in facilitating the right of the Palestinian people to self-determination -- particularly by ending the blockade in Gaza -– and in accelerating the creation of a Palestinian State through viable peace processes; migrant workers, people trafficking, xenophobia and human rights; and Parliamentary oversight of State policies on foreign aid.


Also before the Committee was a note verbale dated 6 October 2008 from the Permanent Mission of Chile addressed to the Secretary-General (document A/C.2/63/2), which transmits the Declaration on innovative sources of financing for development, signed on 24 September 2008 by the founding members of the “Action against Hunger and Poverty” initiative.


Introduction of Reports


ALEXANDER TREPELKOV, Chief of the Multi-stakeholder Engagement and Outreach Branch, Financing for Development Office, Department of Economic and Social Affairs, introduced the Secretary-General’s report on the latest developments related to the review process on financing for development and the implementation of the Monterrey Consensus (document A/63/179), and the Secretary-General’s note on the proposed organization of work for the Follow-up International Conference on Financing for Development to Review the Implementation of the Monterrey Consensus (document A/63/345).


He said that the report, prepared in consultation with major institutional stakeholders, outlined the main recent developments relating to financing for development, under each of the six thematic areas of the Monterrey Consensus.  With the deteriorating world economic situation as a backdrop, slower growth, the financial crisis, and high energy and food prices posed significant challenges for the mobilization of domestic and international resources for development.


On the domestic front, there was a continued need for sound economic management, including effective counter-cyclical domestic policies for mobilizing savings and investment, he said.  As for the mobilization of international resources, foreign direct investment remained the single largest source of private capital flows to developing countries, amounting to almost $500 billion in 2007 and involving a significant South-South component.


International trade could be an important engine for economic development, but trade growth was now sliding, he continued.  The collapse of the World Trade Organization (WTO) ministerial talks in Geneva last July signalled a serious setback in the Doha Round of trade negotiations, and progress was unlikely without the emergence of a more effective consensus on what would constitute a development-oriented result.


On external debt, the report noted that overall debt indicators had improved markedly, as a result of the confluence of such factors as low international interest rates and rapid growth in developing countries, he said.  Regarding systemic issues, the report reviewed the challenges involved in supporting more effective functioning, and coordination, of the international financial architecture and the economic aspects of global governance.  There was a need to update international public oversight and governance structures to make them more consistent with the changing global economic context.


Turning to the Secretary-General’s note, he said the document set out basic arrangements, including provisional rules of procedure, a provisional agenda and a proposed timetable of meetings for the Doha Review Conference.  The programme would include eight plenary meetings and six interactive multi-stakeholder round tables.  At the plenary meetings, Heads of State or Government, ministers and heads of delegation would be able to make formal statements.  The opening of the list of speakers would soon be announced in the United Nations Journal.


Discussion


The representative of the United States said the organizational note on the upcoming Doha Review Conference gave almost no information on the substance of the conference and its round tables.  No information was provided on the panellists and the focus of the panels.  The substance seemed basically to be an afterthought.  It was to be hoped that the Conference, which would bring together senior economic officials, would focus on key issues and have an imaginative and relevant programme of issues already covered in the review process on financing for development.  Rather than having a general discussion under the theme of foreign direct investment, the Conference should look at particular obstacles facing small island developing States, and other small markets, and how to facilitate investments in those countries.


Mr. TREPELKOV said that General Assembly resolution 62/187 dictated that the Conference would include plenary meetings and six multi-stakeholder interactive round tables on the six thematic areas of the Monterrey Consensus.  The Secretariat did not have much choice over what the general topics of the round tables would be.  However, that did not preclude using imagination within the thematic areas, as contained in the Monterrey Consensus.  It was the responsibility of the Assembly President, with the Financing for Development Office, to prepare the round tables.  At present, they were exploring the participation of experts from all walks of life.  The composition of the panels would be made available at an appropriate stage and when more information was available.  Delegates should convey their suggestions about the organization of the round tables to the Financing for Development Office.


The representative of Antigua and Barbuda, speaking on behalf of the “Group of 77” developing countries and China, supported the suggestion by the United States delegate that the round tables focus on the challenges facing small island developing States.


The representative of Australia, speaking on behalf of the CANZ Group (Canada, Australia and New Zealand), also called for a creative approach to formulating the round tables and stressed the importance of attracting senior-level participants.  Information about the proceedings should be on the Conference website.


The representative of Japan asked whether delegations could subscribe to as many round tables as they wished and whether the main committee would still be necessary.


Mr. TREPELKOV responded by saying that all round tables were open to participation by all States, and there would be no need to inscribe.  The provision concerning the main committee was for planning purposes only.  No main committee had been established for the main Conference, but it was necessary to make provisions in case one had to be set up.  If it was not established, there would be an excellent, full-sized room available for side events.


The representative of the United States took the floor again to note that the Doha gathering would be taking place in a competitive environment and falling on his country’s biggest annual travel holiday.  To attract senior participants, the Conference must have an interesting, relevant and topical programme.


Statements


BYRON BLAKE (Antigua and Barbuda), speaking on behalf of the Group of 77 and China, said the statement he had made on Monday already covered the Group’s views and expectations, and he simply wished to reinforce the fact that the current situation -– and the period before the Doha Review Conference -- marked a critical point in time.


He said there was a need for the highest level of participation in the Conference and for a mood to ensure that the kinds of results achieved would, in fact, drive the international economy, especially the developing countries, into the future.  There was also a need to ensure that the kinds of resolutions emerging from the General Assembly itself -- in terms of how States were supposed to proceed on the basis of what happened in Doha -- would create a real dynamic movement.  It was necessary to find ways to determine how States implemented what came out of Doha.


ADIYATWIDI ADIWOSO ASMADY (Indonesia), speaking on behalf of the Association of Southeast Asian Nations (ASEAN), said that, while he was optimistic about the long-term resilience of the global economy, short-term economic prospects had significantly dimmed.  Unfolding events in the global financial markets, the potential worsening of the housing and credit cycles, and inflationary pressures created by high food and energy prices, threatened to roll back the development gains of past decades.


She said there was an urgent need to address the crisis of confidence in international financial markets, stabilize their fluctuations, and consider how the global economic system could adapt to counteract the current complex challenges.  There was also an urgent need to revive the Doha Round as soon as possible.  Success in those negotiations would open new markets, especially for developing countries, and reinforce multilateral openness.


ASEAN members were closely monitoring the global financial situation and remained vigilant to several risks that threatened to worsen growth prospects, she said.  The best way forward for the bloc to sustain growth and development was by pursuing regional economic integration.  ASEAN represented a market of 550 million people with a combined gross domestic product (GDP) and total trade of $1 trillion.  Its financial markets had also become more interdependent, with increasing cross-border financial transactions.  ASEAN would continue to integrate and liberalize its economies, putting itself in a position to attract potential investments, particularly in energy, finance, property and agriculture.


The upcoming Doha Review Conference would be a timely opportunity to examine critical issues in international economic development and cooperation, she said.  Its outcome should reflect progress made, lessons learned, obstacles identified and constraints encountered in implementing the Monterrey Consensus on financing for development.  Actions and initiatives to meet the financing needs that were essential to overcome global challenges, such as the current food, fuel and financial crises, in addition to climate change, must be an integral part of the outcome document.  The Conference must also re-energize efforts to address systemic issues, and reform the current global financial and economic architecture, which may no longer be suited to the new challenges and demands.  There was need for improved regulation, supervision and greater participation by developing countries.


ZACHARY D. MUBURI MUITA (Kenya), speaking on behalf of the African Group, said a rapidly rising demand for commodities in developed and developing countries, particularly in Asia, had led to commodity pricing increases and an impressive increase in South-South trade, which now accounted for more than half the commodity trade of developing countries, and a trade increase in all regions.  African countries also accounted for a fair share of the growth in world commodity demand.  Those developments, new trends such as biofuel production, and a growing range of specialty products and end uses, opened both challenges and opportunities for African countries, especially those with high commodity dependence.  The implementation of assistance for trade to diversify African exports should be a consideration of the Doha Review Conference.


While reports indicated that aid flows had increased in real terms over the past decade, largely because of debt relief, official development assistance had actually declined in real terms in 2006.  Pledges made in 2005 to double aid to Africa by 2010 had not translated into increased total donor resources for programmes on the ground.  The Accra Agenda for Action on Aid Effectiveness provided a new paradigm.  Salvaging the global financial markets should not lead to measures that reduced assistance or impeded the meeting of commitments.


Financing of the global climate change response should relate both to adaptation and mitigation, he said.  Existing mechanisms should be enhanced and new financing modalities developed, to stabilize greenhouse gas concentrations.  Financing to meet the needs of the most vulnerable countries should also be a focus of the Review Conference, with a clear understanding that such moves would not lead to reductions in resources earmarked for other development activities.


ISMAT JAHAN (Bangladesh), speaking on behalf of the Least Developed Countries, said the central focus of the Monterrey Consensus was the means of implementing internationally agreed development targets goals, including the Millennium Development Goals.  The 2002 International Conference on Financing for Development had engendered immediate achievements, most notably with regard to pledges for development assistance, but little progress had been made thus far.  The Review Conference was taking place at a critical juncture.  Persisting global imbalances, sustained net capital exports from developing countries to the capital-rich developed world, high volatility in the exchange rates of major global currencies and the collapse of trade negotiations, among other things, all posed significant risks to sustained economic growth, poverty alleviation and sustainable development in developing countries, particularly the least developed ones.


She stressed that the international community must agree on an ambitious action plan for the full implementation of the Monterrey Consensus and for effectively addressing new and emerging issues from additional resources.  The least developed countries were the most vulnerable group, mainly due to their structural weaknesses.  Many of them would not be able to achieve the Millennium Development Goals, and other development targets, if the required level of financial resources was not assured.  Financing for development was critically important for them.  A well-crafted Doha outcome must place the special concerns and priorities of the least developed countries at its heart.  Effective participation by those countries in the Doha Review Conference was critically important and it must be supported through the trust fund, as stipulated in General Assembly resolution A/62/187.


ALFREDO LABBÉ (Chile), speaking on behalf of the Rio Group, said that the outcome document from the Doha Review Conference should cover elements of the Monterrey Consensus, including emerging issues and those that had undergone major changes since 2002.  The Conference should assess progress made, reaffirm goals and commitments, share best practices, and identify obstacles encountered, as well as actions to overcome them.  The Rio Group’s views on financing for development could be found on the web page of the Financing for Development Office.  It was vitally important that the Doha outcome document reflect the Monterrey Consensus follow-up mechanism, as the biannual high-level dialogues of the Economic and Social Council with the Bretton Woods institutions, WTO and the United Nations Conference on Trade and Development (UNCTAD) had not achieved the expected results.


He said the Rio Group had proposed a follow-up formula that was comprehensive, democratic, ongoing and multi-sectoral, and that made efficient use of available resources.  It advocated creation of a Forum to follow up on the International Conference on Financing for Development that would replace the biannual high-level dialogues.  The Forum would be composed of:  a group of members of the Economic and Social Council; representatives of the principal international organizations; and of regional development banks, civil society and the private sector.  It would meet once a year and focus on progress review, identification of obstacles and challenges, and on emerging issues.  It would create input containing recommendations and actions for a General Assembly draft resolution.


The situation of middle-income countries, which were home to more than 40 per cent of poor people surviving on less than $2 a day, was also an issue of vital importance to the Rio Group, he said.  Those countries had special development financing needs, and in order to consolidate progress and avoid setbacks, it was essential for the Doha Review Conference to endorse the main conclusions of the three conferences on middle-income countries held in Madrid, San Salvador and Windhoek, Namibia.  All sections of the Doha outcome document should also reflect the special characteristics of the numerous middle-income countries and address the question of debt.


JOSÉ ALBERTO BRIZ GUTIÉRREZ ( Guatemala) said the current global crisis affecting the intermediation mechanisms of the world’s main economies had features that had previously only existed in developing economies.  Meanwhile, many of the developing countries that had experienced good economic performance in the past decade were now in a better position than those very countries where the crisis was presently centred.  The world had a global economy, where good as well as recessive effects propagated strongly and equally, although with unequal impact on some countries.  That was why no one was exempt from what appeared to be the perfect storm in the financial and economic realm.  The main economies, however, had coordinated a robust response, which would at least mitigate its impact.


In any event, what had occurred would have consequences on financing for development, he said, noting that the attention of the main policymakers had been diverted to the current situation and its effects, which implied a risk that the priorities of the current situation would shift.  Rescuing the intermediate system would require a great amount of public resources, at least in the beginning, as well as supplies for development.  There was a greater need than ever to revise the institutional financial architecture, which had failed.  There must also be a reactivation of the International Monetary Fund (IMF) in order to attenuate the impact of the crisis on many medium economies, such as Guatemala’s, which had not turned to that institution in years but which might now find it necessary to do so.  States should not go to Doha without hope, because it presented an opportunity to find answers to questions about the international financial system and its current architecture.


TANG MENGXIAO ( China), associating herself with the Group of 77, said financial resources were a prerequisite and an important guarantee for development.  For years, a shortage of funds had been a serious impediment to the economic and social development of developing countries.  The global partnership advocated at the 2002 Monterrey Conference had become a major guiding principle in international efforts to eradicate poverty and promote development cooperation.  While some gains had been made in financing for development, a favourable external environment for the development of poor countries had not yet taken shape.


Noting the emergence of new challenges, such as the energy, financial, food security and climate change crises, she said development financing had become an even greater challenge for developing countries, particularly those in Africa.  China urged Member States not to miss the Doha Review Conference, where they should strive for substantive progress.  China had high expectations, and urged developed countries to set feasible timetables for achieving the official development assistance target allocation of 0.7 per cent of GDP.  The international community should also take further steps to promote reforms in the international financial system, establish a fair and just international trade system, and promote coherence and consistency in development, trade and financial policies.


TALAL FARHAN AL-ENAZI ( Qatar) said the new millennium had ushered in social and economic changes caused by the widening gap between rich and poor.  Peace, development and human rights were interdependent and the foundations of the United Nations.  The promotion of sustainable development was fundamentally important.  A comprehensive global vision was needed to address effectively such global challenges as poverty, hunger and disease, particularly HIV/AIDS.  With more than half the world’s population continuing to live on less than $2 per day, new partnerships should be forged, in order to reach common goals.


Describing the Monterrey Conference as a landmark in the pursuit of development finance, he noted that six years since that event, there had been different results in its six thematic areas.  Despite progress in adopting good governance and efforts to attract foreign direct investment, investment flows into many developing countries remained volatile.  Qatar looked forward to a final agreement resulting from the upcoming Doha Conference.  New and innovative financing sources should complement, not substitute, official development assistance.  Financing for development had acquired great significance, with the participation of senior officials from Member States and the Bretton Woods institutions.  Qatar firmly supported global development, and as host of the upcoming Review Conference, hoped that senior finance and economic officials would participate.


CLAUDIA BLUM (Colombia), associating herself with the Group 77 and China, said that in the context of the current financial and commodity price crises, the Doha Review Conference must pursue an ambitious outcome.  Beyond reaffirming commitments, it must widen the scope of the Monterrey Consensus.  For that reason, it should incorporate all inputs from review sessions, as well as from representatives of civil society and the business sector.  The Doha outcome document should also deal adequately with the regulation of financial and capital markets, emergency liquidity and other matters relating to better functioning of international markets.


She said measures to prevent illicit financial flows, particularly those funding terrorism, were a priority for her country.  Agreements on more stable, predictable and results-oriented cooperation were also important.  In the new architecture of cooperation, greater attention must be paid to the role and particular needs of middle-income countries, and South-South cooperation should be handled in a cross-cutting manner.  The continuity and effectiveness of financing for development depended on the political will to act jointly and to carry out periodic, critical examinations of the implementation of shared responsibilities.  Institutional arrangements with greater capabilities were also needed at both the political and technical levels.


ZAKIA EL MIDAOUI (Morocco), associating herself with the Group of 77 and China, and the African Group, said the most outstanding fact that had forced itself on the world’s attention was the soaring prices of basic commodities, which continued to darken prospects for the world economy.  It was imperative to show an unshakeable will and work together in making the international economic environment the best it could possibly be for financial development.  There were also serious repercussions regarding the achievement of internationally agreed development goals, which called for more foresight and transparency.  The financial markets constituted the centre and moving force of globalization, and their current state revealed the need for better international financial governance to determine the parameters of the financial and monetary policies that had such a great impact on the living conditions of millions of people.


Developing countries had registered an increase in their gross domestic product, which was anticipated to reduce poverty, but the situation varied according to regions, she said.  Africa was the only continent not on the correct path to achieve that goal.  The continent needed more aid to reduce the gulf dividing it in development terms, not only from the industrialized countries but also from other developing countries.  Morocco welcomed the positive results it had achieved from the projects it had created with several other African countries, and hoped for a renewed commitment to strengthen that work, in order to promote the attainment of the Millennium Development Goals.  The Monterrey Consensus confirmed that the efforts of developing countries should be supplemented by private capital flows, in particular direct foreign investment.


SHIGEKI SUMI ( Japan) noted that, although financial resources were a crucial component of development, there must also be a strong sense of ownership by recipient countries.  Furthermore, resources must produce tangible results in human security, and empower individuals and communities.  “Nation-building is people-building.”   The Monterrey Consensus called for the involvement of all relevant stakeholders from both public and private sectors.  That combination would lead to jobs, technology transfer and trade-and-investment-driven economic growth.


In sharing responsibility, development partners must also support, and promote, good governance and sound macroeconomic policy, as well as construct a business-friendly environment, he continued.  One quarter of international aid came from non-traditional donors, notably South-South investments constituting a quarter of foreign direct investment inflows to developing countries.  Such assistance must be carried out in line with the principles of the Paris Declaration on Aid Effectiveness.


He concluded by voicing concern about the shortfall in development resources, resulting from the current international financial crisis.  Because those resources were so crucial to infrastructure investment, education and health, Japan called for IMF to be given the responsibility for providing financial assistance and helping member countries cope with those crises.  Japan would be available to provide, if necessary, additional resources to that end.


NOR EDDINE BENFREHA ( Algeria) said the international community must step up efforts to work towards achieving the Millennium Development Goals.  The global crisis revealed the need to reorder global economic structures, in order to end hunger and poverty.  The United Nations must mobilize the necessary means to ensure an enabling environment for sustainable development through adequate financing.  Macroeconomic policies in many developing countries had mobilized resources but not enough to remedy the lack of capital, resulting from crises such as the current financial one.


He expressed hope that the Doha Review Conference would lead to a greater mobilization of resources for development.  Despite the Heavily Indebted Poor Countries (HIPC) Debt Initiative and others, debt alleviation had been insufficient.  Official development assistance had dropped in recent years, and it was feared that aid would be reduced further, due to the global financial crisis.  Aid was important in terms of quality and quantity.


Developing countries must have an equitable say in decision-making within the Bretton Woods institutions, he said.  The Doha Review Conference must work to create reliable mechanisms to place the United Nations at the centre of the Financing for Development process.  The Monterrey Consensus, which Algeria supported firmly, should lead to a world partnership for development.


HIRUT ZEMENE (Ethiopia), aligning herself with the Group of 77 and China, and the African Group, said that, in spite of encouraging developments, the pace at which countries were striving to meet the goals set by the Monterrey Consensus left much to be desired.  In times of dire economic challenges faced by many countries, particularly low-income economies, the decline in the flow and sustainability of official development assistance was a source of serious concern.


Ownership of national development was a crucial matter, requiring the painstaking formulation of clear policy directions and strategies aimed at effectively addressing multifaceted challenges, she said.  Developing countries should be able to choose their own course, while taking on board the support of their development partners.  With a view to promoting the gains of low-income countries from trade, provisions for duty- and quota-free market access should be realized fully, in combination with the speedy launching of the Doha Round, as well as the “Aid for Trade” initiative, both of which could help significantly in addressing the supply-side constraints experienced by most low-income countries like Ethiopia.


She said that, in line with the provisions of the Monterrey Consensus, her country strongly supported national ownership in planning its national development goals, expanding its financial resources and tax base, diversifying exports, and nurturing accountable governance.  Investing in the development of human resource and infrastructure, as well as crafting a conducive policy environment, were also part of Ethiopia’s serious commitment to open up and attract large-scale foreign direct investment, in addition to technology transfer.


Special Briefing on Highlights of Bretton Woods Annual Meetings


ELLIOT HARRIS, Special Representative of the International Monetary Fund (IMF) to the United Nations, said the financial crisis and its implications for the global economy had been a major focus of discussion in all official forums during the recent annual meetings of the Group of Seven (G-7), Group of Two, International Monetary and Financial Committee, the Development Committee and Group of Twenty (G-20).  The financial crisis and its implications had been the centrepiece of the IMF’s two flagship reports presented at the meetings:  World Economic Outlook and Global Financial Stability Report.  Other major issues addressed in depth included aid, trade, climate change and energy, the food and fuel price crises, and governance reform in the Bretton Woods institutions.  During the meetings, participants had analysed the causes of the financial crisis, recommended policy responses to deal with the immediate crisis, and discussed future reforms of the international financial system to prevent a recurrence, as well as the impact on developing countries.


The present crisis was the result of deep-seated weaknesses in risk management, and regulation of banks and financial institutions, which had failed to keep pace with rapid advances in financial innovation, he said.  The crisis had deepened in recent months and weeks, as financial institutions were forced into severe balance sheet corrections via abrupt, disorderly deleveraging.  After some weeks of hesitation and uncoordinated piecemeal interventions, there had been broad agreement on the key elements of the policy response needed to restore confidence and financial stability, including that it must be closely coordinated internationally among advanced as well as emerging economies, and that massive public sector intervention was needed.


He said the elements of the immediate response, set out in the G-7 plan, included intervening decisively through all available tools to prevent the failure of systemically important financial institutions; providing broad access to liquidity and funding to unfreeze credit and money markets; injecting capital directly into financial institutions; deploying robust and consistent deposit insurance and credit-guarantee schemes; restarting the secondary market for securitized assets, as appropriate; and ensuring the accurate valuation and transparent disclosure of the value of assets and liabilities.


The International Monetary and Financial Committee had called for prompt implementation of the recommendations of the Financial Stability Forum, underscoring the IMF’s lead role in fostering the required multilateral cooperation, drawing the necessary policy lessons from the crisis and recommending effective action, he said.  The International Monetary and Financial Committee had further underscored the importance of enhancing the Fund’s surveillance activities, particularly of macro-financial linkages, and developing effective early warning systems to identify clearly emerging risks and vulnerabilities.  There had also been broad agreement on the pressing need to deepen international cooperation, fundamentally reform the regulatory and supervisory frameworks of world financial markets, and set clearer accounting and transparency rules.


At the meetings and since, there had been increasingly detailed calls for comprehensive reform of the international financial architecture, he said.  In communiqués, for example, the International Monetary and Financial Committee had expressed its commitment “to the pressing need for reform of the financial system” while the Group of 24 had urged a “firm commitment to address the weaknesses in the global financial system through fundamental reform of the international financial architecture and improved instruments to assist developing countries in the face of potential instability”.  Some leaders had called for an international summit to address reform.  Participants had also noted that the financial crisis could adversely affect developing countries, even those with strong fundamentals, through the reversal of private capital flows, increased funding costs, shifts in investor sentiment, and spillover into the real economy.  The crisis could make it more difficult to mobilize aid resources for developing countries at a time when the food and fuel crises had already, in many countries, led to higher inflation, worsened income distribution, and caused setbacks to attainment of the Millennium Development Goals.


He said the Development Committee and the Group of 24 had called on donors to provide timely and predictable official development assistance, and to meet their commitments under the Monterrey Consensus, the Gleneagles Summit and other agreements.  They had also called for enhanced aid effectiveness through full implementation of the Accra Agenda for Action; additional resources to meet new global challenges like climate change, and the food and fuel crises; concrete outcomes at the Doha Review Conference and further commitments to protect aid flows; fundamental reforms of the international financial system; and improved instruments to help developing countries.


On trade, he continued, the meetings and various communiqués had highlighted the importance, in the present context, of resuscitating trade talks in order to reach an ambitious conclusion to the Doha Development Round and provide effective aid for trade to developing countries.  All had agreed that the climate change agenda should be advanced within the framework of the United Nations Framework Convention on Climate Change.  The Development Committee had lauded the World Bank’s adoption of the strategic framework and the creation of the Climate Investment Funds.  More financing was essential, particularly for adaptation in developing countries, as was the leveraging of private sector resources and the exploration of innovative market-based and other financing mechanisms.


On energy, there had been support for the World Bank’s Energy for the Poor initiative, he said.  There had also been calls for adequate safety nets and targeted transfer programmes to protect the vulnerable from the effects of high food and fuel prices, as well as calls for donors to provide the necessary additional resources to help developing countries deal with the short- and medium-term consequences.  Participants had also discussed reforming the Bretton Woods institutions.  The International Monetary and Financial Committee had welcomed the approval by the IMF’s Board of Governors of the resolution on quota and voice reform, as an important step towards realigning members’ quotas and voting shares.


JOMO KWAME SUNDARAM, Assistant Secretary-General for Economic Development, said the current world situation raised contentious issues and differences in perspective.  There had been general agreement, at recent ministerial meetings, that the first-round effects of the current crisis had been channelled largely through the financial markets, and that developing countries had largely survived that first round quite well.  Regarding the second-round impact, there was a sense that many countries, particularly developing and transitioning economies, would experience the lagging effects, which were very complex.


A great deal of attention at the ministerial meetings had been given to the energy and food crises, he continued.  The World Bank’s estimate was that 100 million more people had gone into poverty because of the crises.  It also estimated that 40 million more people were now affected by malnutrition than before the crises.  There was a great deal of concern about how that would affect attainment of the Millennium Development Goals, and a sense that greater international cooperation was needed to restore confidence in the markets.


There was also a sense that the European packages were much more confidence-restoring, but that also remained to be seen, he cautioned.  The announcement of new instruments and initiatives to mitigate the impact of the financial crisis included the World Bank’s Energy for the Poor initiative, and the IMF’s new liquidity instruments.  There was concern that the lending limits for the IMF facilities were rather modest, and that the attached conditionality was rather onerous.  Some ministers viewed the package on World Bank reform as an important first step, while others said it was not enough.


He said the financing for development question had been particularly emphasized in Sunday’s meetings of the Group of 24 and the Development Committee.  The Group of 24 had supported specific proposals for the Doha Review Conference, while the Development Committee had stressed the role of the Doha Review Conference in deepening the global partnership for development.


Turning to climate change, he said there had been much mention of the seriousness and magnitude of the problem, and how to finance mitigation and adaptation in light of the current global financial crisis.  The World Bank’s proposed strategic framework to deal with climate change had been received with mixed sentiment, particularly by developing countries.


Discussion


The representative of Antigua and Barbuda asked the experts to elaborate on the role of the Doha Review Conference in addressing the financial crisis.  Had the call to developed countries for increased official development assistance and additional resources only been “tongue and cheek”, and what scheme would ensure that it actually happened?  To what extent had the discussions focused on the negative impact of the financial crisis on developing countries and economies in transition?  Were there concrete proposals to address those problems and prevent them from happening again?


The representative of Pakistan pointed to inconsistencies in work on climate change in Washington, DC, and in the context of the United Nations Convention on Climate Change.


Mr. HARRIS explained that the role of the Doha Review Conference would be to form a deeper global partnership.  There was a real sense of the danger that the financial crisis would lead to a derailment of official development assistance.  Indeed, during the discussions participants had realized that developing and transition economies would not escape unscathed.  No real, concrete suggestions had been made on how to prevent the problems from recurring, but the IMF had put emergency procedures in place.  Assistance from the Fund may not be sufficient to meet requirements, but the idea was to catalogue a response as soon as possible.  Any significant discussion would be overshadowed at present by the financial crisis.  Most Governments were preoccupied by that aspect of things and there would be a lot of deep thinking about that in the weeks to come.


Responding to a question from the representative of Brazil about the divide between the global response and technical support, he said the initial response had been to get things going again.  Long-term discussions would be about how to reform the international financial architecture


Mr. JOMO, responding to a question about the perception of the Doha Conference by ministers in Washington, said it was a sad reflection of the lack of coherence in multilateralism and evidence that foreign and finance ministries were not in sufficient conversation with one another.  There had been a number of proposals to reform multilateralism, but it was necessary to distinguish between inclusive multilateralism –- as represented by such institutions as the United Nations and, to a lesser extent, the Bretton Woods institutions -– and exclusive multilateralism.  There was a sense that smaller countries, including developing countries and some in Europe, felt very estranged from such processes because they were excluded.  They also felt left out of the G-20 and other mechanisms, so there were legitimate grounds for differentiating between inclusive and exclusive multilateralism.


Dealing with the global crises was not just a question of regulatory reform, he said.  There was an urgent need to deal with liquidity -- to introduce, implement and finance effective counter-cyclical policies, so as to offset a probable economic downturn, which had actually already started.  It was also necessary to provide the means to offset the adverse consequences likely to result from that downturn, such as unemployment.  In that regard, those questions were perhaps distinct from, but not unrelated to, the urgent question of immediate reform, or short-term solutions.


Regarding governance and World Bank reform, he said the current reform proposal was considered very modest.  While the reform measure -– which would add a chair for sub-Saharan Africa – was considered a good first step, it had not been received with widespread enthusiasm.  As for the IMF, it was supposed to be a cooperative, and many countries, particularly developing ones, had argued that the voting rights of a cooperative should be reflected in its governance arrangements.  Moreover, the possibilities for organizing a multilateral development bank that would be different from what had been done at the IMF and the World Bank were certainly elements in which developing countries were particularly interested.  That was all part of the debate over systemic reform.


In response to a question from the representative of Mexico, on the role of the United Nations as a universal organization providing some form of coherence and consistency, he said multilateralism -- with the United Nations at the centre -– had been fundamental to the creation of the Bretton Woods institutions.  In the last decade and a half, the world had seen the development of international trade based on a multilateral, rule-based system associated with the WTO.  However, when it came to international finance, there was no multilateral rule-based system.  The IMF did not function in the same way as the WTO.  The world had experienced a great deal of globalization without commensurate global institutions or global rules to check the system, and that was the real challenge for the United Nations.


The Organization could provide the leadership to set in place the forces that would create and design an international financial architecture, he continued.  But what was really needed was some self-conscious recognition of the nature of the system as it had developed, and for States to develop the means by which the system could be checked, in order to avoid future problems.  That was not to suggest that such architecture could be completely foolproof, but States could at least try, because the world was on the cusp of a very important moment in the financial history of the world.


Explaining to the representative of Benin how such massive monetary resources could have been raised so quickly to deal with the current financial crisis, while developing countries lacked funds, he recalled that, at the end of the recent High-level Event on the Millennium Development Goals, a figure of $16 billion had been announced as the new amount pledged.  Thus far, the commitments made, in terms of public funding, to deal with the financial crisis were now in excess of $5 trillion.  That could provide a sense of what could be done when there was political will.


Mr. HARRIS, responding to a question from the representative of Bangladesh about defining the current financial situation, said the situation could easily be referred to as a crisis.  Whether States wished to call it a recession or a downturn depended on each one.  Countries could pull out of a global recession if they acted properly, but that was perhaps a moot point.  The global economy was at a dangerous point and required rapid action before it spiralled even further downward.

Responding to questions from the representative of Japan, about the IMF’s role, and the representative of Nigeria, on what national measures were needed, he said it was no consolation to say that the IMF was among those that had been warning about a financial crisis.  The real deficiency in the system was that there was a power imbalance, and it was quite clear that smaller countries were more likely to listen to advice or warnings than some of the larger ones.  That, unfortunately, sometimes led to the current kinds of problems.  Early warning systems were an imperative, even in advanced countries.  All countries must pay close attention to their economies and act on time; that applied as much to smaller countries as to big and powerful ones.


The Committee then resumed its general discussion on the follow-up to and implementation of the outcome of the 2002 International Conference on Financing for Development and preparations for the 2008 Review Conference.


Statements


HILARIO G. DAVIDE, JR. (Philippines) said the general tenor of the statements made during today’s meeting shared the same basic ideas -– that the current financial crisis was of such a severe nature that, added to the energy, food and climate change crises, it would further aggravate the economic difficulties that many developing countries were now facing.  Those grave challenges must force States to use the upcoming Doha Review Conference not only to review implementation of the Monterrey Consensus and to call for compliance with commitments, but also as a possible starting point to discuss and consider seriously restructuring the global financial architecture.  While it was correct to seek ways to avoid a repetition of the “perfect economic and financial storm”, there was much homework to be done, and there was no “one-size-fits-all” solution.


While there was a political imperative to support a change in the system next month in Doha, States might find resistance to change, characterized by long and tedious debates, he warned.  While there were widespread calls for better regulation of global financial markets, it was not so clear which body was in the best position to oversee that function.  Moreover, while some calm had returned to the markets because of drastic Government actions around the world, some experts pointed to instances where such policy measures as substantial liquidity support and Government guarantees of financial institutions’ liabilities had in fact been fiscally costly and might not have contributed to a speedy economic recovery.  Furthermore, if aid commitments had not been realized during the good times, what assurance was there that they could be met now?


GUILHERME PATRIOTA (Brazil), fully supporting the statement on behalf of Group of 77 and China, welcomed the launching of formal drafting sessions on the Doha outcome document, but noted that, due to the global crises gripping the international community, there was no time available for the Committee to “return to business as usual after a couple of weeks”.  Therefore, the outcome document must reflect the critical nature of the present circumstances and map out careful guidance on international cooperation for policymakers.


He then went on to note various points of importance regarding the outcome document, among them, the lack of progress on trade liberalization, particularly in the agriculture sector; on reviewing initiatives to reduce developing countries’ debt burden; and on ensuring that South-South cooperation not be seen as a substitute for, or replacement of, unfulfilled aid commitments by the North.   Brazil urged the Committee to undertake more decisive measures, and use the Doha Conference as an opportunity to investigate ways to enhance the Committee’s work, while protecting its concerted efforts from the negative impact of the financial crisis.


HANNA PROROK (Ukraine), noting that much remained to be done in ensuring sufficient development financing to meet the Millennium Development Goals by 2015, stressed her country’s commitment to implementing the Monterrey Consensus.  Ukraine welcomed the increase in foreign direct investment and other private flows for promoting growth in emerging markets.  The country’s accumulated foreign direct investment amounted to more than $36 billion as of July 2008.


Expressing hope that the ongoing financial and credit crisis would not substantially affect the increase in foreign direct investment to her country, she voiced support for the call to broaden those flows to include emerging market economies.  Efficient multilateral trade systems were not just an engine for growth in emerging market economies but also an opportunity to integrate successfully into the world economy.  Ukraine called for an open, transparent and non-discriminatory multilateral trade system.


Calling for an increase in the volume of aid and an improvement in its quality and effectiveness, she said foreign aid must also be aligned with recipient countries’ development priorities and harmonized between donors to ease administrative burdens on recipients.  Bilateral and multilateral donors, as well as recipient countries, should remain actively engaged in that regard.  Ukraine had acceded to the Paris Declaration on Aid Effectiveness in 2007.  New and innovative financing mechanisms could close existing gaps in resources and improve aid predictability.


ANDREI METELITSA ( Belarus) observed that hopes for radical liberalization of trade regimes, foreign investment and market strength did not come to fruition without national regulatory mechanisms and an international environment conducive to development.  Urgent actions were needed both to complete the Doha trade negotiations and to facilitate the democratic inclusion of new members in the World Trade Organization.  Rather than act as a means of economic and political pressure, Belarus called for the United Nations to play a stronger role in ensuring fair and equal conditions for Member States wishing to join the world trade body. 


He also underscored the need for the Bretton Woods institutions to pay more attention to middle-income countries.  They should be transformed so that they could also promote global development.  Belarus would hold the first-ever Belarusian Investment Forum in London in November 2008.  The upcoming event had been developed to improve the country’s national investment climate and introduce its investment projects to foreign businesses.


MOHAMED ALAHRAF ( Libya) said the achievement of development goals relied, more than ever before, upon the credibility, viability and fulfilment of commitments.  Despite the progress achieved, many developing countries required more investment, especially to deal with the food crisis, and in light of the macroeconomic policy reforms undertaken by those countries.  It was necessary to provide them with assistance to restructure their financial institutions.  Regarding the expansion of financing for small and medium enterprises, there was fear that the current financial crisis would shrink the mobilization of resources.  Libya was concerned that the flow of financial resources to developing countries had decreased, and that they were concentrated only on certain developing countries.


It was important to help developing countries in the transfer of technology to restructure their financial institutions and promote multilateral and multidisciplinary investment, he said, adding that such investments should focus on industry and improving services.  It was regrettable that the opportunities and benefits provided by trade were not affordable to everybody.  Too many developing countries did not benefit from international trade, because they relied mainly on one commodity or a limited number of commodities.  Given the volatility of the prices of those commodities, as well as their inability to compete with products from rich nations, it was vital that developing countries diversify production.  It was also important to provide them with assistance to build capacity and become more competitive in production and export.  Libya hoped the paralysis of the Doha Round would be broken, and that negotiations would resume with a new spirit and renewed focus.


CARLOS ENRIQUE GARCÍA GONZÁLEZ ( El Salvador) stressed the crucial importance of financing for development at the national and international levels, particularly in light of the current multidimensional crisis.  El Salvador was committed to the Monterrey Consensus, which was fundamental to mobilizing financial resources in a coordinated and effective manner.  The Doha Review Conference was a great opportunity to reconsider lessons learned in the context of the global crisis.  The international community must work together towards formulating a collective response.  El Salvador supported the call for a new follow-up mechanism to the Monterrey Consensus, that would boost participation and effective monitoring by all relevant actors of progress made and obstacles encountered.


Every country was responsible for attracting its own economic and social development, he said.  El Salvador had adopted diverse measures to promote strategic development policies and plans aimed at mobilizing national and international financial resources for sustainable development.  Official development assistance must complement other financing sources in middle-income countries.  It was important to continue supporting that category of countries in their struggle against poverty.  El Salvador had hosted the Second International Conference on Development Cooperation with Middle-Income Countries in October 2007, which had led to the adoption of the El Salvador Consensus.  That document called for more cooperation, including the implementation of new and innovative mechanisms to provide more focused cooperation, to avoid a reversal of progress achieved thus far.


ANTHONY A. SEKUDO (Nigeria), aligning himself with the Group of 77 and China, and the African Group, said his country had undertaken wide-ranging macroeconomic reforms resulting in some modest gains, in terms of real GDP growth.  However, it still faced numerous development challenges that had been compounded by the current crises, as well as by concerns about the capacity of the Monterrey Consensus to provide the necessary road map to a lasting solution.  For those reasons, Nigeria attached the utmost importance to the ongoing review process.


He said the Doha Conference should explore modalities to expand the range of new development financing initiatives, which would serve as veritable supplements to agreed-upon official development assistance and funds realized from debt relief.  Resources so realized should be transparently applied, but care must be taken to ensure that the implementation of such initiatives did not constitute additional burdens to developing countries.


The role of small and medium enterprises, as the main source of employment for a greater segment of the population, could not be overemphasized, he said.  For that reason, the Doha Review Conference should give serious thought to strategies for employing and maximizing international funds for the promotion and strengthening of such enterprises in developing countries.  Such efforts would, among other things, enhance the development of microfinance, with the support of donor countries.  Most developing countries lacked the human-resources capacity to formulate, implement and own development programmes.  The Review Conference should, therefore, also give substantial space to strategies that could help them improve their educational systems, in support of quality human resources capable of implementing the necessary development.


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For information media • not an official record
For information media. Not an official record.