press conference by Department of Economic and Social Affairs

to launch 2009 asia-pacific survey

 

The 2009 Economic and Social Survey of Asia and the Pacific, launched today, made a case for greater multilateral policy coordination and a stronger fiscal response to the current global economic and financial crisis in order to create a robust basis for sustainable long-term and equitable development, Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development, said today.

Speaking at a Headquarters press conference, he said that in the present time of uncertainty, the triple-threat to development ‑‑ the financial crisis, the 2008 food and fuel price shocks and climate change ‑‑ posed a serious risk of unpredictable “knock-on” effects.

The Asia-Pacific region was a varied one, with East Asian countries enjoying fiscal and other surpluses while the rest of the region was much more vulnerable, he said.  However, many countries, particularly in East Asia, had become heavily dependent on exports, which in turn had become a source of vulnerability.  Because of export dependency, domestic supply capacities had been compromised over the last three decades.  Fiscal surpluses were unevenly distributed within the region and fiscal stimulus measures as a whole had been muted.  However, the region’s public debt situation was manageable.  There had also been a decrease in growth, with a recession taking place in some places and population growth continuing at a brisk pace.

He said food and fuel prices had peaked in mid-2008, and had since fallen considerably, with considerable impacts on the region.  The price of rice, for instance, had risen by 150 per cent in 2008.  The Survey made strong policy recommendations, including stronger social-protection measures throughout the region.  While “not exemplary”, social protection measures were crucial in terms of weathering the crisis.

Turning to climate change, he said the Survey endorsed the proposed “Global Green New Deal”.  The proposal, a reaction to a sharp increase in private automobile transportation, made a strong case for strengthening public transport systems.  A system of feed-in energy tariffs, pioneered in Germany and now partially adopted by China, was worth emulating, particularly for the promotion of renewable energy sources.  The Survey also emphasized the need to avoid complacency.  The Pacific region was less complacent as its many islands were threatened by rising sea levels.

In conclusion, he said the Survey proposed a framework for inclusive and sustainable development, making a strong case for resuming economic growth and preserving macroeconomic stability through a number of measures, but most importantly through efforts towards greater regional consultation.

Asked about Asia’s role in overcoming the crisis, he noted that the region was home to two thirds of the world’s natural disaster victims and two thirds of its poor.  There was concern about what half a dozen East Asian countries enjoying fiscal surpluses would do if the United States dollar depreciated, as that would mean deterioration in the value of their reserves.  The Survey was firmly on the side of using sustained and, importantly, well-crafted fiscal stimulus measures.  The size of the response was crucial.

In response to a question about a discrepancy between the Chinese Government’s prediction of 8 per cent economic growth for 2009 and the United Nations forecast of 7.5 per cent, Mr. Jomo said projections by the Department of Economic and Social Affairs had been completed in October and November, and, based on data available today, they would be revised.  “The more recent the data, the more likely they are pessimistic.”

An 8 per cent growth rate was not infeasible provided that stimulus measures consisted of new money and redistribution to neglected populations was assured, he continued, cautioning that one should distinguish between stimulus and bail-out.  The current measures by China and Singapore were clearly geared towards stimulus, while other countries seemed to be using rescue packages.

Responding to a number of questions about the Secretary-General’s letter to the G-20, which mentioned that $1 trillion was needed to address the global financial crisis in a global manner, Mr. Jomo said the $1 trillion was the amount that would be required over two years, and was meant to emphasize the need for strong fiscal stimulus measures for both developed and developing countries.  The figure was in line with amounts mentioned by others, including Prime Minister Gordon Brown of the United Kingdom, who had spoken of $500 billion for one year, while the World Bank had mentioned $2 trillion over five years.

Half of that amount was meant for short-term liquidity financing, mainly through the issue of new Special Drawing Rights (SDRs), he said.  Two hundred fifty billion dollars was intended for long-term financing, including of the “Global Green New Deal, which would go through multilateral banks.  Another $250 billion consisted of official development assistance (ODA), including accelerated delivery of previous commitments such as those made at the 2005 G-8 Summit at Gleneagles.

Stressing the need to distinguish between financing and aid, he said the credit crunch had resulted in world trade shrinking by 10 per cent in 2009.  Developing countries had great difficulty in raising short-term trade credit at acceptable prices and financing was, therefore, required.  As for allegations of “double-counting” that claim might have been based on the fact that some of the additional money required had already been moved.

Asked about proposals to replace the dollar with a global currency, he said that had been a long-standing discussion, recalling that, back in the 1940s, John Maynard Keynes had proposed something similar.  The problem arose from the existing international monetary system.  The Bretton Woods arrangements had disappeared in 1971 and since then, the system had been based on ad hoc measures.  To describe that system as the international financial architecture was “an insult to architects”.

He went on to call for a system whereby the issuer of a national currency would not have the added responsibility of maintaining a global currency.  The last decade had seen huge a deficit in the United States, about which the current Chairman of the Federal Reserve had said the country was doing the world a favour by absorbing the surplus savings of Asia.  As United States Treasury Secretary Tim Geithner had said, it was clear that the current system did not work.

Asked to elaborate on the climate-change aspect of the Survey, he said the Secretary-General’s proposal for a “Global Green New Deal” was important, especially in light of the forthcoming conference to take place in Copenhagen, Denmark, in December.  That proposal contained two elements:  the plea to use stimulus measures for massive public transportation systems, particularly in developing countries, as an alternative to private automobile transportation; and the need to encourage the use of renewable energy sources through feed-in energy tariffs, whereby distributors would be obliged to buy renewable energy at above-market rates.

The Asia-Pacific region had specific climate-change challenges, he continued.  The East Pacific had been suffering from desertification and deforestation while the South Pacific islands and other countries, such as Bangladesh, were threatened by rising sea levels that would require infrastructures such as dykes.  On the other hand, Asia had also been a place of “green growth”, where green technologies were used to render green products.

Asked about Sri Lanka’s request for an International Monetary Fund (IMF) loan, he said the Fund was providing assistance to countries with balance-of-payments difficulties, not for domestic fiscal stimulus, which should be financed by domestic resources.  It was doubtful that the IMF would support or condone a country’s military priorities.

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For information media • not an official record