INFORMATION NOTE
THE bail out of some of the world’s wealthiest companies have send strong signals about the likelihood of cut backs of financial support from the developed economies to the developing countries.
At a meeting of the Trade and Development Board (TDB), in Geneva on “Financing for Development” recently, concerns were raised on the need to continue economic support for the developing world despite the global crisis. Boahene Asamoah reports.
TRADE and development experts who spoke at the Geneva meeting were unequivocal on the need for a systemic remedy to the global financial crisis and also the need for the United Nations and its partners to play an active role in crafting solutions to the global financial turmoil.
These crises according speakers at the forum would impact financial support to especially developing countries, as rich countries have dolled out trillions of dollars to help bail out the affected financial institutions.
“The availability of phenomenal sums for bailouts and stimulus packages" in rich nations "makes it hard to understand why resources are suddenly so scarce when it comes to developmental assistance,” says Mr. Supachai Panitchpadki, the Secretary-General of the United Nations Conference on Trade and Development (UNCTAD) at the meeting.
His opinions were echoed by a various speakers a the just ended Trade and Development Board (TBD) meeting In Geneva.
Experts say the developing world is facing, with the expanding financial turmoil, difficulties over food costs, and wildly gyrating energy prices, a "triple crisis" that must be addressed.
Reports from some renowned economist, Jeffrey Sachs, indicate that Europe and the US have mobilised around US$3 trillion in the past month in guarantees and bailout funds for banks, but failed to mobilise even one ten-thousandth of that this year to help the world's poorest grow more food, and this is in the midst of a food and hunger crisis.
Senior officials from some developing countries were equally upset at the billions being dolled out to support such companies.
A deputy Minister of Trade, Industry, President’s Special Initiative and Private Sector Development, Mr Kwaku Agyeman-Manu, also expressed similar concerns.
“Even before the onset of the current turmoil, efforts to implement the “Monterrey Consensus "had been mediocre, because even though significant progress has been made in the area of debt relief, progress has been very limited in other areas of mobilisation of domestic and international resources for development, promoting international trade as an engine of development, and addressing systemic issues through expanded participation in global economic governance", Agyeman-Manu stated.
Preliminary research indicates that during past banking crises official development assistance (ODA) to poor nations has declined anywhere from 20 per cent to 40 per cent.
For the current crisis, according to estimates from the Organisation for Economic Co-operation and Development (OECD), foreign direct investment to developing countries would have declined by 40 per cent during 2008.
Remittances to developing countries from nationals working overseas who represents a huge source of income, according to reports, may fall by up to six per cent.
The International Labour Office has estimated that the financial crisis will cause global unemployment to increase by 20 million and extreme poverty to rise by 40 million.
“The current meltdown “must not be allowed to derail the very important efforts developing countries have made in recent years to sustain economic growth,” TDB President, Debapriya Bhattacharya of Bangladesh stated at the meeting.
Trade experts say the current global crisis should be an occasion for the United Nations to perform “an essential function in generating innovative ideas, fostering universal dialogue and building consensus,"
“It is the forum, par excellence, for universal participation in global decision making when needed,” Mr Supachai stated.
"People may discuss whether it is a recession or a depression,” Mr Bhattacharya said, adding that “we will soon find out."
Experts say it is necessary for the international community to move from "a fire-fighting approach" to a more concentrated and co-ordinated response to the financial crisis.
Again, they said “risky” financial instruments, “runaway speculation,” and insufficient supervision by regulatory agencies, particularly in developed countries, had led to the current crisis.
Impacts on developing countries could be expected to be significant, including declining exports, declining tax income, and expanded debt problems. These could make it difficult for governments “to meet basic human needs.”
Many analysts have called for a holistic approach to development which places equal emphasis on the health of the global economy as it does with individual national economies.
Civil society organisations were concern that financial markets would continue to deteriorate for some time, however they were optimistic that the failings of financial markets would not detract from the solid record of the market economy system and globalization in rescuing millions of people from poverty.
Others have said the crisis called for the widest possible dissemination of information on the turmoil and steps to improve and reform accounting and auditing and the overall financial system, so that confidence is restored.
There should be “democracy and stability” in the international financial architecture and the architecture itself "should be restructured," international trade experts stated.
UNCTAD said it has assembled a Task Force on Systemic Issues and Economic Co-operation to co-ordinate research on major weaknesses in the international financial system and related institutional architecture of concern to developing countries.
The task force, according to UNCTAD would focus, among other things, on currency speculation and global monetary co-operation; commodity futures speculation and price volatility; and financial sector regulation and surveillance.
Some senior European governmental officials have admitted that financial markets in the developed countries, the rules of the game have simply not kept up with the speed of globalization.
Analyst believe that financial stability was clearly "a global public good" that requires supervision and international co-operation.
While the EU said it was committed to financing for development and to achieving the Millennium Development Goals (MDGs), it called for steps to be taken, including through the essential role of the Bretton Woods institutions (the World Bank and the International Monetary Fund) to carry out an effective and complete reform of the international financial system based on the principles of transparency, banking stability, and the integrity of international economic and financial governance.
The African group at the meeting said a "concerted structural measures" can ease the effects on Africa of the financial crisis.
According to the African group, major steps must be taken to permit Africa to resist the external shocks caused by the current turmoil and enable it to protect and expand the economic progress it has made over the past five years and to sustain reductions in poverty.
According to experts the world economy had become much more integrated since 2002, and any talk of a supposed "de-coupling" of the South from the economies of industrialised countries was being exposed as untrue by the current crisis.
It also was a matter of concern that manufactured goods from developing countries had suffered, overall, a decline as compared to manufactured goods from developed countries.
“ Clearly there was a need for further aid and attention to expanding the productive capacities of developing-country economies, says the Assistant Secretary-General of the United Nations Department of Economic and Social Affairs (DESA)Mr. K.S Jomo .
Trade experts say three major issues should be addressed namely, greater international tax co-operation; the Financing for Development follow-up mechanism, which must be made more effective; and the matter of systemic financial reform which would ensure a widespread recognition of the need for new international financial architecture.
Many experts express concern that there was a widening global imbalances in current-account deficits and current-account surpluses among countries around the world, that indicates that the risks associated with the currency statuses of a number of countries have increased, which helps to explain why the financial crisis is having such a widespread fallout.
“This is a systemic question that can only be addressed at the global level,” senior economist at the UN stated.
According to senior analysts one long-standing UNCTAD proposal deserves further consideration were co-operative global financial and monetary system should be established that would assure, on a multilateral basis, the same rules of the game for all parties involved, more or less in the same way as multilateral trade rules apply to any trading partner.
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