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12 February 2001
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Preparatory Committee for the
High-level International
Intergovernmental Event on
Financing for Development
12 February 2001
1st Meeting (AM)
Secretary-General Kofi Annan said this morning that there was a real chance that next year’s High-level Event on Financing for Development could mark a turning point in the fortunes of poor countries and people.
Addressing the opening session of the Preparatory Committee for the conference scheduled for early next year, he said, for that to happen, international institutions must work together, and both North and South must generate the required political will.
The Preparatory Committee’s task was to ensure that the commitments given by world leaders at the Millennium Summit, including halving the proportion of the world’s people living in abject poverty and hunger, were not forgotten, and that the means to achieve the Event’s goals had equivalent high-level support.
The representative of Mexico announced his Government’s preparedness to host the High-level Event if agreement was reached on its offer.
Harri Holkeri (Finland), President of the General Assembly, said the issues before the Preparatory Committee were difficult, but were vital and needed to be discussed openly. To that end, he had stressed the need within and outside the Organization to harmonize work in the financing for development field. The preparatory process represented an important link between the domestic and international levels of decision making.
Asada Jayanama of Thailand, Committee co-Chairman, said the financing for development process, first driven by developing countries, now seemed headed towards success. It was clear that financing for development affected all levels of society. There was also a growing realization that the issue was far too important to be left to one ministry, government or financial institution.
Mats Karlsson, Vice-President for External Affairs and United Nations Affairs of the World Bank, said the Millennium Declaration had emerged at a time when there had been a general confluence of international recognition on some of the most critical development issues. Those included the need for enhancing global poverty reduction strategies, focusing new emphasis on concerted action and promoting resource mobilization. The international community should act now and not lose the momentum gained at the Summit.
Rheinhard Munzberg, Special Representative of the International Monetary Fund (IMF) to the United Nations, stressed the need for all the relevant institutions to work together on the issues before the session. The IMF was pleased that the Secretary-General’s report reflected understandings that the Fund considered crucial -- the focus on two main pillars: sound domestic economic policies and external financing.
Patrick Low, Director of the Office of the World Trade Organization (WTO) Director-General, said there were strong and significant links between trade and financing for development. They included the role of trade in generating foreign exchange earning; the role of trade liberalization in promoting economic growth through increased efficiency and the removal of distortions; and the role that trade regimes and trade rules could play in encouraging inflows of foreign investment in both goods and services.
Next year’s high-level meeting of financial policy makers is focused on poverty eradication and fulfilling the social and humanitarian goals set by global conferences of the 1990s. The work of the Preparatory Committee, which is laying the groundwork for the event, is to address the broad development concerns expressed by world leaders at the Millennium Summit, particularly the obstacles developing countries face in mobilizing the resources needed to finance their sustained development.
To that end, the Preparatory Committee is reviewing the inputs to the substantive process and the High-level Event thus far, as well as beginning initial preparation of the Event’s outcome. It is also expected to adopt the draft provisional agenda for its third session.
The Preparatory Committee was established by the General Assembly early in 2000. The other co-chair of the Committee and the Bureau is Jorgen Bojer (Denmark).
Also speaking this morning were the representatives of Iran (on behalf of the “Group of 77” developing countries and China), Sweden (on behalf of the European Union), Pakistan, Chile (on behalf of the Rio Group), Saint Lucia (on behalf of the Caribbean Community), and Mexico.
The Committee will meet again today at 3 p.m. to continue its general debate.
Committee Work Programme
The Preparatory Committee for the High-level International Intergovernmental Event on Financing for Development met this morning to adopt the agenda for its second session and to begin consideration and review of the inputs to the substantive preparatory process and the High-level event.
The Committee has before it the Report of the Secretary-General on the High-level International Intergovernmental Event on Financing for Development (document A/AC.257/12), which presents a comprehensive assessment of how the world's development financing needs can be met. Prepared in consultation with leading international trade, financial and development agencies, the report addresses a broad range of problems, including recurring foreign debt and currency crises, reduced levels of foreign aid, restrictions on access to developed country markets in sensitive products, inadequate access to financial services by the poor and women, and gaps in economic governance at national and global levels.
The report recommends new norms for international cooperation and new mechanisms to foster implementation of its recommendation through greater public dialogue at all levels. It also recommends new ways to handle debt in crisis situations and to design appropriate financial regulations for developed and developing countries. According to the report, it will take tough measures to strengthen financial and legal institutions, fight corruption and improve transparency in advanced economies, as well as in developing countries seeking greater access to financial markets and development aid. It also asserts that in the context of sound macroeconomic policies, introduction of national controls on capital flows may be a valid and responsible measure, especially during periods of volatility.
The six chapters of the report are reflective of the six components of the agenda mandated by the Assembly for the financing for development discussions: domestic financial resources; international private flows; trade; international development cooperation and debt and systemic issues, including financial architecture reform; governance; and the role of the Organization itself. According to the report, the central question of global governance is: Is there room for improving the existing arrangements for norm setting and policy coordination, thereby raising the standards of effectiveness, equity, accountability, transparency, participation and voice?
The report goes on to highlight many recommendations for the international community to consider when discussing financing for development. Those include: developing supplemental macroeconomic instruments to deal with fluctuations in fiscal balances and the risks of instability accentuated by globalization; and ensuring support for the development of well functioning financial markets by establishing a transparent legal framework and facilitating access to financial services for the poor. It further recommends that developed countries immediately provide duty- and quota-free market access to all non-arms exports of least developed countries and highly indebted poor countries and consider doing the same for other developing countries.
Further to the report, countries should seek to improve women’s access to mainstream sources of financing, including by strengthening their rights to pledge collateral. Also, bilateral and multilateral creditors should pursue debt relief vigorously and expeditiously, including steps to provide significant and immediate debt relief to the poorest countries. Steps should also be considered to provide, in exceptional situations and where appropriate, for a moratorium or even for debt cancellations. It also recommends the establishment of a campaign for the Millennium Development Goals. That campaign would have a five-year life span and would be mandated to consolidate information on each stage of that process.
The Committee also had before it the report of the Regional Consultative Meeting on Financing for Development in the Asia and Pacific Region, Jakarta, 2 to 5 August 2000 (document A/AC.257/13). The report stresses the importance of the meeting in devising concerted approaches to resolve the problems created by a shortage of resources for development. Countries in the Asia and Pacific region had suffered severely during the recent economic crisis. Recovery from the crisis would depend upon following the right economic policies, as well as on attaining a positive sense of Asian identity by the people of the region.
According to the report, the regional meeting provided an opportunity to focus on an Asian identity. It was conducted through a series of panel discussions on the following six themes, with several panellists addressing issues of financing for development: issues in domestic resources mobilization in the Asia and Pacific context; external private flows; the regional implications of recent developments in the reform of international financial architecture; regional cooperation and collaboration on money and finance; innovative sources of financing and regional issues; and perspectives relating to the external sector, including official development assistance (ODA) and trade issues.
The report is based on the views and suggestions of member States and panellists during the interactive dialogue. It reflects the views of participants and provides options for future consideration in the appropriate forums and emphasizes, among other things, that ODA remains critical for many developing countries, particularly the least developed countries and the Pacific island developing countries. It also suggests that new modalities for delivery of ODA could include support for public/private partnerships to facilitate trade and investment and that poorer countries need official assistance to improve their attractiveness to foreign investors, as well as to build up their capacity to negotiate with potential foreign investors.
The Committee also had before it the report of the Regional Consultative Meeting on Financing for Development in the African Region, and Preparatory Meeting for the Third United Nations Conference on Least Developed Countries, Addis Ababa, 15-17 November 2000 (document A/AC.257/14). According to the report, high-level ministers at that regional meeting stressed the importance of preparing for the two upcoming United Nations conferences, particularly in view of the continuing economic and social problems persisting in many parts of Africa and its marginalization from the global economy.
The ministers noted that Africa faced serious difficulties in mobilizing development finance, especially in the face of declining ODA and the persisting debt problem. Also, according to the report, the situation had been worsened by the HIV/AIDS pandemic, and there was a need for concerted efforts by Africa and its development partners to address the problem by adopting comprehensive and concrete measures.
The report goes on to highlight the key issues identified and discussed during the three-day meeting. Those included mobilizing domestic resources for development in Africa, mobilizing international resources for development, and Africa in the global economy. The recommendations emanating from the meeting were subsequently presented to the Economic Commission for Africa (ECA) Conference of Ministers of Finance at its eighth session, on 21 and 22 November 2000. Thereafter, the Conference of African Ministers of Finance adopted a ministerial statement, which is contained in the annex to the report.
The Committee also had before it the report of the European region consultative meeting, held in Geneva on 6 and 7 December 2000 (document A/AC.257/15). According to the report, that meeting was conducted through a series of panel discussions on five specific themes related to the general problem of financing for development. Participants emphasized the fact that Europe is unique for its wide disparities in levels of economic development. It was suggested that official assistance and debt relief should be tailored to the specific needs of individual countries. Enhancement of market access for developing countries' exports was deemed a cornerstone for supporting economic growth.
The report notes that regional cooperation was highlighted throughout the meeting as crucial to enabling developing and transition countries to enter the global economy and to stimulating foreign direct investments, and as a determining factor contributing to peace, conflict prevention and reconstruction. It was also recognized that ODA remained an indispensable component of development finance, and representatives of the donor countries committed to the 0.7 per cent of gross domestic product (GDP) target for ODA, reaffirmed their commitment to reach this target as soon as possible.
Further to the report, participants saw the financing for development process and the High-level Event as a unique opportunity to strengthen the international community's understanding of a number of factors essential to development and poverty reduction.
The report of the Economic and Social Commission for Western Asia (ESCWA) regional consultation that took place in Beirut on 23 and 24 November 2000 was also before the Committee (document A/AC.257/16). It focuses on mobilization of domestic and international financial resources for development, and the enhancement of coherence and consistency of the international monetary, financial and trading systems in support of development. The views and ideas of participants spanned a wide range of attitudes and approaches to development financing. They particularly advocated optimum utilization of different policy instruments to achieve high growth results such as sound monetary and fiscal policies.
According to the reports, it was agreed that industrialized countries should facilitate the transfer of technology to, as well as open their markets to, goods and services exported by developing countries. The need for the development of savings instruments, such as diversified banking services and pension funds oriented towards sophisticated financial markets, was also stressed. The openness of the region to the world economy should help it increase its share of foreign direct investment, the participants noted, adding that an opportune policy framework that creates an appropriate environment should be put in place.
The report notes that when the discussions turned to systemic issues, the participants stated that their countries must improve their international competitiveness to take part in current efforts to transform the international financial system. They should also undertake reform in different areas, including addressing the size, as well as the role, of the State, and should implement a comprehensive programme of liberalization.
Also before the Preparatory Committee is a report of the Latin America and the Caribbean regional meeting held in Bogotá, on 9 and 10 November 2000 (document A/AC.257/17). The report includes a summary of proposals presented by the Executive Secretary of Economic Commission for Latin America and the Caribbean (ECLAC), which states that the region, with few exceptions, has failed to achieve the savings and investment rates required to fuel high rates of growth in production. It calls for access to markets for their exports, as well as a new international financial architecture that, with improved governance, will ensure greater stability for capital flows.
According to the report of the regional consultation, a group open to all delegations from the Latin American and Caribbean countries approved a statement entitled, "Towards the High-level International Intergovernmental Event on Financing for Development". It called for a fair, equitable and rules-based multilateral trading system, involving effective participation of the developing countries in decision-making, improved market access for goods and services of particular interest to them, and effective and full implementation of special and differential treatment.
The report further states that the High-level Event must consolidate a broad agenda to address national, international and systemic issues relating to financing for development in a holistic manner in the context of globalization and interdependence. This global agenda should be action-oriented, raising international cooperation for development to a higher political platform. Two delegations, Saint Lucia, on behalf of the countries of the Caribbean Community (CARICOM), and the United States, requested that their statements be included in the report. The Caribbean States called for the strengthening of the role of the United Nations in policy coherence and coordination. The United States said that the “preliminary agenda” for the final Event should be distilled to reflect international consensus.
Also before the Committee was a summary of panel presentations and discussions of financing for development: hearings with civil society, 6 and 7 November 2000 (document A/AC.257/18). In its resolution 54/279, the General Assembly decided that the Preparatory Committee for the High-level Event would hold two sets of hearings with civil society organizations and the business community to consider their views on areas of the financing for development agenda.
The civil society hearings were held in New York on 6 and 7 November 2000, and the report summarizes the presentations made by 23 panellists, representing civil society organizations. It also provides a synopsis of the dialogue among delegations, panellists and other non-governmental organization representatives that took place during the hearings.
The main areas of discussion were: mobilizing domestic financial resources for development (sect. I); mobilizing international resources for development: foreign direct investment and other private flows; and trade (sect. II); increasing international financial cooperation for development through, among other ways, official development assistance; and debt (sect. III); and addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development (sect. IV).
The summary of panel presentations and discussions on financing for development: hearings with the business community, 11 and 12 December 2000 (document A/AC.257/19) was also before the Committee. The report summarizes the presentations made by 17 senior business representatives, and provides a synopsis of the dialogue among delegations, speakers, international agencies, civil society and other business representatives.
According to the report, the main areas of discussion were: mobilizing domestic financial resources for development (sect. I); foreign direct investment, project finance and venture capital (sect. II); other private capital flows (sect. III); and trade, systemic and other issues (sect. IV).
Some of the suggestions offered by business leaders during the dialogue included recommendations on government policies that are supportive of the development of microcredit, as well as the importance of relaxing general restrictions on lending activities and raising interest rate ceilings on microcredit loans. Leaders also stressed the development of savings and insurance services for the poor. They further enumerated several strategies for enhancing growth prospects for Africa, including the creations of a stable macroeconomic environment, including a sound exchange rate policy and attracting the right kinds of finance, including venture funds.
The Committee also had before it its provisional agenda and annotations and organizations of work (document A/AC.257/20) and a list of non-governmental organizations (NGOs) recommended by the Bureau of the committee for accreditation in the substantive preparatory process and the high-level event (document A/AC.257/10/Add.2).
Statements
ASADA JAYANAMA, Committee co-Chairman (Thailand), said it was a pleasure to be at the heart of a process to which the international community was now fully committed. That process had been first driven by the developing countries some 10 years ago. Since that time, the journey had been a long one, but he was pleased to note that the financing for development process was still moving towards its destination with a clearer roadmap guided by broader cooperation. The fact that the process seemed headed towards success was a testament to the realization that financing for development affected all levels of society. There was also a growing realization that the issue was far too important to be left to one ministry, government or financial institution.
He said that the financing for development process needed an integrated and holistic approach. It should also encourage all stakeholders to harmonize their activities at national and State levels for all the people of the world. He hoped that during the current session, all governments would work to express what they really wanted to accomplish during the High-level Event.
HARRI HOLKERI (Finland), President of the General Assembly, said the Millenium Summit Declaration underlined the important link between development and peace. It had also reiterated the goal of halving poverty by 2015. The clarification of those and other goals surrounding the fight for financing for development was a major step in achieving the Summit’s outcome. Those issues would also inform the discussions on financing for development in other United Nations forums and international events. In that regard, he was pleased to see that the international community was now seeking fresh ways to act together, rather than merely preparing for an isolated event. As a global intergovernmental forum, the United Nations was well suited to facilitate the current preparatory process. The Organization fostered the spirit of international actors working together towards a common goal.
He went on to say that the Secretary-General’s report, which would be reviewed in depth by the Committee during this session, was unprecedented. The issues before the Committee were difficult, but were vital and needed to be discussed openly. To that end, he had worked hard within and outside the Organization to stress the need to harmonize work in the financing for development field. The preparatory process represented an important link between the domestic and international levels of decision-making. Indeed, he was pleased to note that the process was being built on broad participation by the United Nations, regional groups, local governments and NGOs. Harmonization was vital. Finally, he was certain that confidence and trust between all partners concerned would help secure financing for development on a predictable and sustainable basis.
Statement by Secretary-General
Secretary-General KOFI ANNAN recalled that, at the Millennium Summit last September, leaders of United Nations Member States had resolved to do a number of things by the year 2015, including halving the proportion of the world’s people living in abject poverty and hunger, without safe drinking water; ensuring basic education for children everywhere; and reducing maternal mortality by three quarters and under-five child mortality by two thirds, of their current rates.
The leaders also resolved to halt and begin to reverse the spread of HIV/AIDS, malaria and other major diseases. They expressed their concern about the obstacles developing countries faced in mobilizing the resources they needed to finance sustained development. The leaders saw the High-Level Event as crucial to removing those obstacles, the Secretary-General said, adding that it was in that context that they had resolved to make every effort to ensure its success.
The Secretary-General said the world leaders had understood clearly at the Summit that globalization offered an unprecedented chance for extreme poverty to be removed. But almost all the leaders from developing countries had expressed frustration and anger at the fact that most of their own people had yet to feel any benefit.
He said the first task for the session was that there must be agreement on the main policies to be applied. Flows of private capital to the developing world as a whole were far larger than official assistance, but they were not evenly or equally distributed. Many of the developing countries, especially in Africa, were almost completely left out. The session must establish clearly what was needed to enable all developing countries to mobilize private capital in that way.
Ways must be found to ensure the stability of private capital flows, so that they did not become the cause of crises throwing millions back into poverty, as had happened in parts of Asia, Latin America and eastern Europe after 1997, added.
The Secretary-General said policies would have to be agreed among all the different actors and stakeholders involved, including governments, the private sector, civil society, and international institutions such as the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). The United Nations must work in close partnership with those institutions, he said, adding that their secretariats had already been very active and useful partners in preparing his report which was before the session. It was very important that at the international level developing countries be better represented in the policy discussions.
The second task before the session, the Secretary-General said, was to catch the attention of political leaders and financial authorities throughout the world. He said development was far too important to be left to specialized ministries or agencies. It must mobilize the energies of governments and societies as a whole. Developing countries must be helped to organize themselves in a way that encouraged investors, both domestic and foreign.
The Secretary-General also referred to the high-level panel he had formed, chaired by former President Ernesto Zedillo of Mexico, whose report, he said, should provide an independent view and should be eye-catching. The report should be available by the end of May.
He noted that the broad goals of the High-level Event had already been agreed by all States at the highest level. The task now was to ensure that commitments given were not forgotten and that the means to achieve the goals had equally high-level support.
If all the international institutions worked together, and if the political will was mustered by all countries, there was a real chance that next year's high-level event could mark a turning point in the fortunes of poor countries, and poor people, all over the world, the Secretary-General concluded.
MATS KARLSSON, Vice-President for External Affairs and United Nations Affairs of the World Bank, highlighted the successful outcome of the Millennium Summit, noting that the Millennium Declaration could only help the international community identify key global development goals and set the framework for the achievement of those goals in the years to come. Indeed, the Declaration had emerged at a time when there had been a general confluence of international recognition on some of the most critical development issues, such as the need for enhancing global poverty- reduction strategies, focusing new emphasis on concerted action and promoting resource mobilization.
He said the recommendations in the report of the Secretary-General on financing for development echoed the Bank’s policies aimed at poverty reduction and sustainable development. Such harmonization of key issues was a testament to the notion that the international community should act now and not lose the momentum gained at the Summit.
The Bank endorsed the thrust of the report on domestic resource mobilization, he continued. Clearly, robust revenue collection was critical to self-sustained development. Sound financial development was also needed, as was the elimination of obstacles to finances, particularly for the poor. Dynamic investments strategies were seen as a prerequisite to attracting foreign investors.
Turning to trade measures that might aid the financing for development process, he said it would be most important to lift, once and for all, the trade barriers that stopped the goods from developing countries from reaching world markets. While starting with lifting trade barriers on least developed countries made sense, it was important to note that most of the world’s poor lived outside recognized least developed countries. A way must be found to enhance participation at all levels to find a solution to that problem.
Official development assistance also remained crucial and, in light of increasing international attention to that particular issue, the time appeared to be the right time for a “boost”, he said. Why not work towards a “Millennium Boost” in ODA to complement the Millennium Declaration? The international community must be pragmatic and not ignore the constraints faced by many developing countries in that regard, but it must also realize the untapped wealth of public recognition of the desire to increase aid and decrease poverty and move towards the notion of global public goods.
He went on to say that some of the most important international issues begged for broad cooperation. Managing global issues now would make the difference. Bringing the debt of low-income countries down to sustainable levels was critical. And even though some countries had benefited from international initiatives in that regard, the integration of debt-relief programmes into development schemes remained important. The Secretary-General’s report called for making better use of the United Nations agencies and funds in development efforts to further the course of sustainability. The report also recommended strengthening economic cooperation.
Better coherence and strong leadership at all levels was crucial, he said. As the Committee was now poised to begin its work, the key to success would be the ability to identify action areas. Only that would ensure that the outcome would not be characterized by the brilliant prose of a final document, but in the international community’s ability to deliver.
RHEINHARD MUNZBERG, Special Representative of the International Monetary Fund (IMF) to the United Nations, stressed the need for all the relevant institutions to work together on the issues before the sessions. The IMF was pleased that the Secretary-General’s report reflected understandings that the Fund considered crucial -- the focus on two main pillars: sound domestic economic policies and external financing.
He noted that the IMF had been involved in the preparatory process for the High-level Event, and had contributed to the agenda. There was need to ensure that issues were linked and not separated. The IMF Board would continue to remain engaged in the substantive discussions of the preparatory process. Its staff would also do the same. The Fund would try to create the consensus needed for the ultimate objective of a better approach to development.
PATRICK LOW, Director of the Office of the World Trade Organization (WTO) Director-General, said WTO members were preparing their own political input to the High-level Event through the organization’s Committee on Trade and Development. A report on that input would be brought to the Preparatory Committee on 20 February. The WTO was a not a finance organization, but a forum for negotiated multilateral trade liberalization. As a guarantor of multilateral rules for international trade, it had an important role to play in that area.
There were strong and significant links between trade and financing for development, he said, adding they included the role of trade in generating foreign exchange earning; the role of trade liberalization in promoting economic growth through increased efficiency and the removal of distortions; and the role that trade regimes and trade rules could play in encouraging inflows of foreign investment in both goods and services.
He said those regions that had liberalized trade had experienced the fastest growth in trade and output. In some developing countries, quite significant trade barriers remained. They carried not only domestic costs for the countries imposing those barriers, but also affected exports from developing countries, including the least developed. There was, therefore, still scope for cutting tariffs and lock-in reforms through binding commitments in the WTO.
He said there was need for greater consistency between donors’ trade and aid policies. Policy efforts in trade and other fields must be integrated into a consistent set of mutually reinforcing strategies for an effective pro-poor development to be achieved. There was need for donor partners, developing countries and all international institutions to address development objectives through operational strategies informed by economic good sense and supported by the highest level of political commitment.
BAGHER ASADI (Iran), speaking on behalf of the “Group of 77” developing countries and China, said that entire international community should utilize the tremendous potential inherent in the upcoming High-level Event and work to ensure that it was not a “one-time-only” event. Rather, it should be perceived as a historical turning point for a bold, innovative and continuing process that would set the stage for the international community to reach a new consensus and strive collectively to achieve goals that were important to all.
In the course of intergovernmental deliberations thus far, he continued, it had become clear that any new or innovative approach to the question of financing for development should be seen in the context of globalization and all its associated challenges and benefits. Further, the international community should recognize the fact that globalization was paving the way for a “multi-actor” world community in which decision and policy makers could interact on ever more sophisticated levels. Given that, achieving a better understanding of overall development parameters at the global level was crucial.
The central challenge before the Committee would be to set the goals and put in place the measures and mechanisms required to achieve them, he said. That challenge could be directly addressed by the exercise of political will by all stakeholders and participants to address obstacles and impediments at all levels and to ensure the success of the Event and its follow-up. The requisite political will would all but ensure the success of the financing for development process.
Turning next to highlight some substantive issues before the Committee, he said the respective outcomes of the various regional meetings, particularly those held in developing countries, had proved most important in informing the overall preparatory process. Despite the different challenges faced by various regions, most faced similar difficulties in the area of financing for development. To that end, his delegation was pleased that mobilizing domestic and international resources for financing for development, trade, and addressing systemic issues had been identified as key areas for discussion.
Highlighting the importance of those and other issues, he noted the crucial nature of the ODA issue for a majority of developing countries. He also said the debilitating burden of external debt also deserved particular attention. The crux of the Committee’s discussion of systemic issues was that international financial architecture should be made responsive to the priorities of growth and development at the global level, especially in developing countries, and to the promotion of economic and social equity.
RUTH JACOBY (Sweden), speaking on behalf of the European Union, said the financing for development process offered a unique opportunity to effectively mobilize and channel resources to attain international development targets. Poverty eradication through sustainable growth and economic development of benefits to all must be the overarching goal of the process. The process also provided the opportunity to discuss how the impact of various sources of financing could be maximized by strengthening complementarity.
The special needs of Africa and of the poorest countries must be given particular attention, she said. In that regard, it would be important to make full use of the synergies between the financing for development process and the upcoming third World Conference on Least Developed Countries, as well as other relevant international meetings and conferences.
She went on to highlight the various agenda points before the Committee. First and foremost, she said, the importance of a favourable and constructive domestic environment could not be overemphasized. Enabling such an environment, one that would mobilize domestic resources needed to attract international private flows, foreign direct investment and ensure the most effective use of ODA, would be based on developing a sound macroeconomic framework. A sound macroeconomic framework should include incentives for increased savings, the development of open trade policies, and strengthening and reform of the financial sector.
Domestic resource mobilization, along with good governance, was fundamental for economic growth, she said. It was important to note, however, that conflict was the greatest threat to creating a positive enabling environment. Conflict prevention and resolution must, therefore, receive top priority. The spread of HIV/AIDS must also be addressed.
She said that international private flows also had a critical role to play. More innovative forms of multilateral and bilateral investment guarantees could be developed, and better information to the private sector on investment opportunities in poorer countries could be provided. Trade was also a dynamic engine for sustainable growth at the national, regional and international levels. The international community must recognize that open, transparent and stable multilateral trade liberalization, including enhanced market access opportunities for developing countries, was crucial for integrating those countries into the global economy. Efforts must also be focused on making trade more conducive to poverty reduction. To that end, trade issues must become an integral part of developing partners’ national development strategies.
Her delegation was committed to the pivotal role ODA played in poverty reduction, she said. There was a continuing need for ODA flows, especially to the poorest countries in support of their own development efforts, capacity building and for removing obstacles to that development. The financing for development process could also add positively to international discussions on debt relief.
Turning to systemic issues, she noted that a major goal would be to ensure that the international system optimized best efforts to ensure mobilization of both domestic and international resources. Greater policy coherence at all levels was key, and a strong endorsement of the international financial codes and standards should be welcomed.
JORGEN BOJER (Denmark), co-Chairman of the Preparatory Committee, briefed the session on the separate meetings the Bureau of the Preparatory Committee held with the executive directors of the World Bank and the IMF in Washington last Monday and Tuesday. He stressed the importance of the interface with the two institutions and with the WTO.
The main topics covered in the meeting with the directors of the World Bank included collaboration and modalities for enhancing the dialogue. It was noted that development was a multifaceted process. The financing for development process was seen as important for harnessing the contribution of all stakeholders.
A managing director of the World Bank noted that the Secretary-General’s report on next year’s high-level event was a good basis for work on the preparatory process, and that the police proposals it contained were important. Other staff said its contents should be sharpened, adding that it needed to be trimmed. It was noted that ministers responsible for finance and economic development should be involved in the work on the preparatory process.
Also discussed were the key features of the financing for development process, Mr. Bojer said, adding that poverty eradication was seen as an overarching goal. It was noted that the United Nations was leading a very crucial process. It would take time for its objectives of the High-level Event to be achieved. Several of the directors questioned the need for new institutions. There was some general comment on the need for capacity-building and human resource development in the developing countries, the role of the market and trade issues. Mr. Bojer said that, in general, the meeting, the second with the World Bank, was constructive.
The meeting with the directors of the IMF, the first, broke important new ground in the process of financing for development, he said, adding that the tone was very collegial. The Managing Director of the IMF told the meeting that the Fund itself was in the midst of reform, Mr. Bojer said. It saw financing for development as rooted in two pillars -- sound economic policies and external financial support. He looked forward to real cooperation between the Fund and the United Nations. He reportedly told the meeting that the Fund should be challenged and that it welcomed criticism. Such criticism should be a two-way process.
Mr. Bojer said it was agreed that the meeting was timely and that collaboration between the two institutions was important. Some IMF directors said proliferation of forums could be counter-productive and stressed the key role of the IMF. It was pointed out that the Fund should support United Nations peacekeeping efforts.
Several stressed the responsibility of developing countries in carrying out macroeconomic policies, and creating the enabling environment for investment, he said. The need for increased ODA was stressed, and one participant said the goal of 0.7 per cent in ODA should be achieved. The discussions also covered debt relief and trade.
General Statements
SHAMSHAD AHMAD (Pakistan) said the Secretary-General’s report identified the main issues involved in financing for development and underscored the need for remedial action in each area, but did not provide answers to how those issues were to be addressed. Similarly, he said the links between various proposed actions could have been further elaborated. The elements of an enabling international economic environment could have been listed with specific actions. Excessive emphasis had been placed on prescriptive guidelines and good governance, both leading to conditionalities.
He said the section of the report on external debt needed to be elaborated, as the subject continued to be a key obstacle to development in the developing countries and, in some cases, was the principal drain on their domestic savings and resources. There was a need for a comprehensive approach to the problem, one that should also provide debt relief to middle-income developing countries. Funding for debt relief must be additional and not a substitute for other forms of development assistance.
The United Nations should provide proposals for proper debt relief that ensured a country’s capacity to raise output and a recognition of debtor’s rights. The Preparatory Committee might consider a number of suggestions, such as the recommendations of the Secretary-General submitted to the fifty-fifth session of the General Assembly on the subject, which included a proposal for an independent panel to find durable solutions to the external debt problems of developing countries.
He reiterated that the High-level Event should be a summit meeting on financing for development. The possible outcome might consider the fact that the event should be the beginning, and not the culmination of a process. The financing for development initiative should also lead to a political declaration expressing the international community’s determination for collective action to address the issues of development finance. It should also lead to a programme of action to achieve adequate and sustained financing for development and a follow-up mechanism with collective periodic reviews.
J. GABRIEL VALDÉS (Chile), speaking on behalf of the Rio Group, said the work of the Committee and the upcoming High-level Event itself held great promise for putting international cooperation for development, equity in international economic relations and the profoundly human meaning of development back on the international agenda. The Group placed particular emphasis on three fundamental aspects of the current process, including: a broad agenda that addressed in a holistic manner all factors that impacted financing for development; convergence of efforts of the United Nations system with those of the Bretton Woods institutions, the WTO and the private sector; and a spirit of genuine partnership between the industrialized world and developing countries.
He said the Committee should devote most of its time during the current session to a dialogue aimed at identifying the major areas of political consensus to strengthen the prospects for improvement in all aspects of international economic relations relevant for financing for development. There were clear prospects for political agreement on several issues, including the opening up of markets to the goods of developing countries and the goal of 0.7 per cent of GDP in ODA. There was also increasing representation and effective participation of developing countries in forums that set financial and monetary policy. But the Committee should not be satisfied merely with consensus on political objectives; it should also be capable of having preliminary discussions on specific actions that the preparatory process and the Event would promote.
He said the Committee must not let slip this opportunity to transform the preparatory process into an activity with high impact and potential for improving the real living standards of people. In that regard, it was necessary to reaffirm the Millennium Summit’s goals. The United Nations was the one indisputable “home” for humankind, and from it would spring the initiatives that could make universal aspirations for peace, cooperation and development a reality.
GEORGE ODLUM, Minister for Foreign Affairs and International Trade of Saint Lucia, speaking on behalf of Caribbean Community (CARICOM), said he was disappointed that the United Nations Conference on Trade and Development (UNCTAD) did not have a representative present to address the opening of the current session. He hoped that, at some point over the next two weeks, Committee members might have the opportunity to hear from an UNCTAD representative.
While noting the comprehensive nature of the Secretary-General’s report, he also pointed out some general concerns. Foremost, he highlighted the aggregate approach given to developing countries. Such an approach neglected the heterogeneous nature of those countries, particularly as it related to financing for development. The differences between groups, or even regions within regions, could not be ignored. Indeed, while the challenges facing developing countries were similar, small island developing States had peculiar vulnerabilities and characteristics. Their small domestic markets, limited resources, dependence on international trade, weak institutional capacity and fragile environment made small islands vulnerable to natural disasters and climate variability. Those and other reasons made development disproportionately costly.
He went on to say that the report made little distinction between growth and development. In CARICOM’s view, while growth incorporated increasing output based on existing productive capacity, development was increasing output based on expanding that capacity. Development involved, among other factors, raising living standards and reducing unemployment while making use of environmental resources. Development must seek to provide the highest level of welfare to the greatest number of people. He also noted the diminished role of governments in the development process. The report failed to acknowledge that, for small islands, governments provided public goods and acted as effective regulators of economic activities. Indeed, it was the government’s responsibility to create an enabling macroeconomic environment to underpin growth and development.
He turned next to highlight the major themes on the agenda for the financing for development process. While he agreed that domestic resources should be a primary source for financing, he noted that small island economies were often unable to generate high levels of savings or investment. Small States also continued to encounter difficulties in their efforts to attract international bank loans and must rely on foreign direct investment.
He went on to stress the importance of ODA. It was troubling that small States in the Caribbean continued to be graduated out of the concessionary financing category based purely on per capita income. That situation must be adequately addressed by the international community. Further, effective access to global markets provided a true substitute for aid. Enhanced market access would enable CARICOM countries to export more products and generate more foreign exchange earnings. He reiterated the need for the Preparatory Committee to remain focused on the agreed agenda with a view to discussing development in a holistic manner.
JORGE-EDUARDO NAVARRETE (Mexico) reiterated the strong commitment of the new Government to the proposed High-level Event. It urged agreement by the international community on a worldwide consensus to respond to the development challenges with financing for development as a key component. The Secretary-General’s report was an excellent basis for discussions, he said, noting that his delegation would have specific comments on some of the issues it raised during the session.
He called for a closer look at the issue of international finance. He said ways must be found to help countries deal with structural adjustment programmes and financing resources. There should be arrangements to combat volatility of capital to help countries avoid financial crises.
He announced that Mexico was prepared to host the High-level Event if agreement was reached at its attendance at a high political level. It was prepared to engage in informal consultations on its proposal, he said.
* *** *
High-level International
Intergovernmental Event on
Financing for Development
12 February 2001
1st Meeting (AM)
Secretary-General Kofi Annan said this morning that there was a real chance that next year’s High-level Event on Financing for Development could mark a turning point in the fortunes of poor countries and people.
Addressing the opening session of the Preparatory Committee for the conference scheduled for early next year, he said, for that to happen, international institutions must work together, and both North and South must generate the required political will.
The Preparatory Committee’s task was to ensure that the commitments given by world leaders at the Millennium Summit, including halving the proportion of the world’s people living in abject poverty and hunger, were not forgotten, and that the means to achieve the Event’s goals had equivalent high-level support.
The representative of Mexico announced his Government’s preparedness to host the High-level Event if agreement was reached on its offer.
Harri Holkeri (Finland), President of the General Assembly, said the issues before the Preparatory Committee were difficult, but were vital and needed to be discussed openly. To that end, he had stressed the need within and outside the Organization to harmonize work in the financing for development field. The preparatory process represented an important link between the domestic and international levels of decision making.
Asada Jayanama of Thailand, Committee co-Chairman, said the financing for development process, first driven by developing countries, now seemed headed towards success. It was clear that financing for development affected all levels of society. There was also a growing realization that the issue was far too important to be left to one ministry, government or financial institution.
Mats Karlsson, Vice-President for External Affairs and United Nations Affairs of the World Bank, said the Millennium Declaration had emerged at a time when there had been a general confluence of international recognition on some of the most critical development issues. Those included the need for enhancing global poverty reduction strategies, focusing new emphasis on concerted action and promoting resource mobilization. The international community should act now and not lose the momentum gained at the Summit.
Rheinhard Munzberg, Special Representative of the International Monetary Fund (IMF) to the United Nations, stressed the need for all the relevant institutions to work together on the issues before the session. The IMF was pleased that the Secretary-General’s report reflected understandings that the Fund considered crucial -- the focus on two main pillars: sound domestic economic policies and external financing.
Patrick Low, Director of the Office of the World Trade Organization (WTO) Director-General, said there were strong and significant links between trade and financing for development. They included the role of trade in generating foreign exchange earning; the role of trade liberalization in promoting economic growth through increased efficiency and the removal of distortions; and the role that trade regimes and trade rules could play in encouraging inflows of foreign investment in both goods and services.
Next year’s high-level meeting of financial policy makers is focused on poverty eradication and fulfilling the social and humanitarian goals set by global conferences of the 1990s. The work of the Preparatory Committee, which is laying the groundwork for the event, is to address the broad development concerns expressed by world leaders at the Millennium Summit, particularly the obstacles developing countries face in mobilizing the resources needed to finance their sustained development.
To that end, the Preparatory Committee is reviewing the inputs to the substantive process and the High-level Event thus far, as well as beginning initial preparation of the Event’s outcome. It is also expected to adopt the draft provisional agenda for its third session.
The Preparatory Committee was established by the General Assembly early in 2000. The other co-chair of the Committee and the Bureau is Jorgen Bojer (Denmark).
Also speaking this morning were the representatives of Iran (on behalf of the “Group of 77” developing countries and China), Sweden (on behalf of the European Union), Pakistan, Chile (on behalf of the Rio Group), Saint Lucia (on behalf of the Caribbean Community), and Mexico.
The Committee will meet again today at 3 p.m. to continue its general debate.
Committee Work Programme
The Preparatory Committee for the High-level International Intergovernmental Event on Financing for Development met this morning to adopt the agenda for its second session and to begin consideration and review of the inputs to the substantive preparatory process and the High-level event.
The Committee has before it the Report of the Secretary-General on the High-level International Intergovernmental Event on Financing for Development (document A/AC.257/12), which presents a comprehensive assessment of how the world's development financing needs can be met. Prepared in consultation with leading international trade, financial and development agencies, the report addresses a broad range of problems, including recurring foreign debt and currency crises, reduced levels of foreign aid, restrictions on access to developed country markets in sensitive products, inadequate access to financial services by the poor and women, and gaps in economic governance at national and global levels.
The report recommends new norms for international cooperation and new mechanisms to foster implementation of its recommendation through greater public dialogue at all levels. It also recommends new ways to handle debt in crisis situations and to design appropriate financial regulations for developed and developing countries. According to the report, it will take tough measures to strengthen financial and legal institutions, fight corruption and improve transparency in advanced economies, as well as in developing countries seeking greater access to financial markets and development aid. It also asserts that in the context of sound macroeconomic policies, introduction of national controls on capital flows may be a valid and responsible measure, especially during periods of volatility.
The six chapters of the report are reflective of the six components of the agenda mandated by the Assembly for the financing for development discussions: domestic financial resources; international private flows; trade; international development cooperation and debt and systemic issues, including financial architecture reform; governance; and the role of the Organization itself. According to the report, the central question of global governance is: Is there room for improving the existing arrangements for norm setting and policy coordination, thereby raising the standards of effectiveness, equity, accountability, transparency, participation and voice?
The report goes on to highlight many recommendations for the international community to consider when discussing financing for development. Those include: developing supplemental macroeconomic instruments to deal with fluctuations in fiscal balances and the risks of instability accentuated by globalization; and ensuring support for the development of well functioning financial markets by establishing a transparent legal framework and facilitating access to financial services for the poor. It further recommends that developed countries immediately provide duty- and quota-free market access to all non-arms exports of least developed countries and highly indebted poor countries and consider doing the same for other developing countries.
Further to the report, countries should seek to improve women’s access to mainstream sources of financing, including by strengthening their rights to pledge collateral. Also, bilateral and multilateral creditors should pursue debt relief vigorously and expeditiously, including steps to provide significant and immediate debt relief to the poorest countries. Steps should also be considered to provide, in exceptional situations and where appropriate, for a moratorium or even for debt cancellations. It also recommends the establishment of a campaign for the Millennium Development Goals. That campaign would have a five-year life span and would be mandated to consolidate information on each stage of that process.
The Committee also had before it the report of the Regional Consultative Meeting on Financing for Development in the Asia and Pacific Region, Jakarta, 2 to 5 August 2000 (document A/AC.257/13). The report stresses the importance of the meeting in devising concerted approaches to resolve the problems created by a shortage of resources for development. Countries in the Asia and Pacific region had suffered severely during the recent economic crisis. Recovery from the crisis would depend upon following the right economic policies, as well as on attaining a positive sense of Asian identity by the people of the region.
According to the report, the regional meeting provided an opportunity to focus on an Asian identity. It was conducted through a series of panel discussions on the following six themes, with several panellists addressing issues of financing for development: issues in domestic resources mobilization in the Asia and Pacific context; external private flows; the regional implications of recent developments in the reform of international financial architecture; regional cooperation and collaboration on money and finance; innovative sources of financing and regional issues; and perspectives relating to the external sector, including official development assistance (ODA) and trade issues.
The report is based on the views and suggestions of member States and panellists during the interactive dialogue. It reflects the views of participants and provides options for future consideration in the appropriate forums and emphasizes, among other things, that ODA remains critical for many developing countries, particularly the least developed countries and the Pacific island developing countries. It also suggests that new modalities for delivery of ODA could include support for public/private partnerships to facilitate trade and investment and that poorer countries need official assistance to improve their attractiveness to foreign investors, as well as to build up their capacity to negotiate with potential foreign investors.
The Committee also had before it the report of the Regional Consultative Meeting on Financing for Development in the African Region, and Preparatory Meeting for the Third United Nations Conference on Least Developed Countries, Addis Ababa, 15-17 November 2000 (document A/AC.257/14). According to the report, high-level ministers at that regional meeting stressed the importance of preparing for the two upcoming United Nations conferences, particularly in view of the continuing economic and social problems persisting in many parts of Africa and its marginalization from the global economy.
The ministers noted that Africa faced serious difficulties in mobilizing development finance, especially in the face of declining ODA and the persisting debt problem. Also, according to the report, the situation had been worsened by the HIV/AIDS pandemic, and there was a need for concerted efforts by Africa and its development partners to address the problem by adopting comprehensive and concrete measures.
The report goes on to highlight the key issues identified and discussed during the three-day meeting. Those included mobilizing domestic resources for development in Africa, mobilizing international resources for development, and Africa in the global economy. The recommendations emanating from the meeting were subsequently presented to the Economic Commission for Africa (ECA) Conference of Ministers of Finance at its eighth session, on 21 and 22 November 2000. Thereafter, the Conference of African Ministers of Finance adopted a ministerial statement, which is contained in the annex to the report.
The Committee also had before it the report of the European region consultative meeting, held in Geneva on 6 and 7 December 2000 (document A/AC.257/15). According to the report, that meeting was conducted through a series of panel discussions on five specific themes related to the general problem of financing for development. Participants emphasized the fact that Europe is unique for its wide disparities in levels of economic development. It was suggested that official assistance and debt relief should be tailored to the specific needs of individual countries. Enhancement of market access for developing countries' exports was deemed a cornerstone for supporting economic growth.
The report notes that regional cooperation was highlighted throughout the meeting as crucial to enabling developing and transition countries to enter the global economy and to stimulating foreign direct investments, and as a determining factor contributing to peace, conflict prevention and reconstruction. It was also recognized that ODA remained an indispensable component of development finance, and representatives of the donor countries committed to the 0.7 per cent of gross domestic product (GDP) target for ODA, reaffirmed their commitment to reach this target as soon as possible.
Further to the report, participants saw the financing for development process and the High-level Event as a unique opportunity to strengthen the international community's understanding of a number of factors essential to development and poverty reduction.
The report of the Economic and Social Commission for Western Asia (ESCWA) regional consultation that took place in Beirut on 23 and 24 November 2000 was also before the Committee (document A/AC.257/16). It focuses on mobilization of domestic and international financial resources for development, and the enhancement of coherence and consistency of the international monetary, financial and trading systems in support of development. The views and ideas of participants spanned a wide range of attitudes and approaches to development financing. They particularly advocated optimum utilization of different policy instruments to achieve high growth results such as sound monetary and fiscal policies.
According to the reports, it was agreed that industrialized countries should facilitate the transfer of technology to, as well as open their markets to, goods and services exported by developing countries. The need for the development of savings instruments, such as diversified banking services and pension funds oriented towards sophisticated financial markets, was also stressed. The openness of the region to the world economy should help it increase its share of foreign direct investment, the participants noted, adding that an opportune policy framework that creates an appropriate environment should be put in place.
The report notes that when the discussions turned to systemic issues, the participants stated that their countries must improve their international competitiveness to take part in current efforts to transform the international financial system. They should also undertake reform in different areas, including addressing the size, as well as the role, of the State, and should implement a comprehensive programme of liberalization.
Also before the Preparatory Committee is a report of the Latin America and the Caribbean regional meeting held in Bogotá, on 9 and 10 November 2000 (document A/AC.257/17). The report includes a summary of proposals presented by the Executive Secretary of Economic Commission for Latin America and the Caribbean (ECLAC), which states that the region, with few exceptions, has failed to achieve the savings and investment rates required to fuel high rates of growth in production. It calls for access to markets for their exports, as well as a new international financial architecture that, with improved governance, will ensure greater stability for capital flows.
According to the report of the regional consultation, a group open to all delegations from the Latin American and Caribbean countries approved a statement entitled, "Towards the High-level International Intergovernmental Event on Financing for Development". It called for a fair, equitable and rules-based multilateral trading system, involving effective participation of the developing countries in decision-making, improved market access for goods and services of particular interest to them, and effective and full implementation of special and differential treatment.
The report further states that the High-level Event must consolidate a broad agenda to address national, international and systemic issues relating to financing for development in a holistic manner in the context of globalization and interdependence. This global agenda should be action-oriented, raising international cooperation for development to a higher political platform. Two delegations, Saint Lucia, on behalf of the countries of the Caribbean Community (CARICOM), and the United States, requested that their statements be included in the report. The Caribbean States called for the strengthening of the role of the United Nations in policy coherence and coordination. The United States said that the “preliminary agenda” for the final Event should be distilled to reflect international consensus.
Also before the Committee was a summary of panel presentations and discussions of financing for development: hearings with civil society, 6 and 7 November 2000 (document A/AC.257/18). In its resolution 54/279, the General Assembly decided that the Preparatory Committee for the High-level Event would hold two sets of hearings with civil society organizations and the business community to consider their views on areas of the financing for development agenda.
The civil society hearings were held in New York on 6 and 7 November 2000, and the report summarizes the presentations made by 23 panellists, representing civil society organizations. It also provides a synopsis of the dialogue among delegations, panellists and other non-governmental organization representatives that took place during the hearings.
The main areas of discussion were: mobilizing domestic financial resources for development (sect. I); mobilizing international resources for development: foreign direct investment and other private flows; and trade (sect. II); increasing international financial cooperation for development through, among other ways, official development assistance; and debt (sect. III); and addressing systemic issues: enhancing the coherence and consistency of the international monetary, financial and trading systems in support of development (sect. IV).
The summary of panel presentations and discussions on financing for development: hearings with the business community, 11 and 12 December 2000 (document A/AC.257/19) was also before the Committee. The report summarizes the presentations made by 17 senior business representatives, and provides a synopsis of the dialogue among delegations, speakers, international agencies, civil society and other business representatives.
According to the report, the main areas of discussion were: mobilizing domestic financial resources for development (sect. I); foreign direct investment, project finance and venture capital (sect. II); other private capital flows (sect. III); and trade, systemic and other issues (sect. IV).
Some of the suggestions offered by business leaders during the dialogue included recommendations on government policies that are supportive of the development of microcredit, as well as the importance of relaxing general restrictions on lending activities and raising interest rate ceilings on microcredit loans. Leaders also stressed the development of savings and insurance services for the poor. They further enumerated several strategies for enhancing growth prospects for Africa, including the creations of a stable macroeconomic environment, including a sound exchange rate policy and attracting the right kinds of finance, including venture funds.
The Committee also had before it its provisional agenda and annotations and organizations of work (document A/AC.257/20) and a list of non-governmental organizations (NGOs) recommended by the Bureau of the committee for accreditation in the substantive preparatory process and the high-level event (document A/AC.257/10/Add.2).
Statements
ASADA JAYANAMA, Committee co-Chairman (Thailand), said it was a pleasure to be at the heart of a process to which the international community was now fully committed. That process had been first driven by the developing countries some 10 years ago. Since that time, the journey had been a long one, but he was pleased to note that the financing for development process was still moving towards its destination with a clearer roadmap guided by broader cooperation. The fact that the process seemed headed towards success was a testament to the realization that financing for development affected all levels of society. There was also a growing realization that the issue was far too important to be left to one ministry, government or financial institution.
He said that the financing for development process needed an integrated and holistic approach. It should also encourage all stakeholders to harmonize their activities at national and State levels for all the people of the world. He hoped that during the current session, all governments would work to express what they really wanted to accomplish during the High-level Event.
HARRI HOLKERI (Finland), President of the General Assembly, said the Millenium Summit Declaration underlined the important link between development and peace. It had also reiterated the goal of halving poverty by 2015. The clarification of those and other goals surrounding the fight for financing for development was a major step in achieving the Summit’s outcome. Those issues would also inform the discussions on financing for development in other United Nations forums and international events. In that regard, he was pleased to see that the international community was now seeking fresh ways to act together, rather than merely preparing for an isolated event. As a global intergovernmental forum, the United Nations was well suited to facilitate the current preparatory process. The Organization fostered the spirit of international actors working together towards a common goal.
He went on to say that the Secretary-General’s report, which would be reviewed in depth by the Committee during this session, was unprecedented. The issues before the Committee were difficult, but were vital and needed to be discussed openly. To that end, he had worked hard within and outside the Organization to stress the need to harmonize work in the financing for development field. The preparatory process represented an important link between the domestic and international levels of decision-making. Indeed, he was pleased to note that the process was being built on broad participation by the United Nations, regional groups, local governments and NGOs. Harmonization was vital. Finally, he was certain that confidence and trust between all partners concerned would help secure financing for development on a predictable and sustainable basis.
Statement by Secretary-General
Secretary-General KOFI ANNAN recalled that, at the Millennium Summit last September, leaders of United Nations Member States had resolved to do a number of things by the year 2015, including halving the proportion of the world’s people living in abject poverty and hunger, without safe drinking water; ensuring basic education for children everywhere; and reducing maternal mortality by three quarters and under-five child mortality by two thirds, of their current rates.
The leaders also resolved to halt and begin to reverse the spread of HIV/AIDS, malaria and other major diseases. They expressed their concern about the obstacles developing countries faced in mobilizing the resources they needed to finance sustained development. The leaders saw the High-Level Event as crucial to removing those obstacles, the Secretary-General said, adding that it was in that context that they had resolved to make every effort to ensure its success.
The Secretary-General said the world leaders had understood clearly at the Summit that globalization offered an unprecedented chance for extreme poverty to be removed. But almost all the leaders from developing countries had expressed frustration and anger at the fact that most of their own people had yet to feel any benefit.
He said the first task for the session was that there must be agreement on the main policies to be applied. Flows of private capital to the developing world as a whole were far larger than official assistance, but they were not evenly or equally distributed. Many of the developing countries, especially in Africa, were almost completely left out. The session must establish clearly what was needed to enable all developing countries to mobilize private capital in that way.
Ways must be found to ensure the stability of private capital flows, so that they did not become the cause of crises throwing millions back into poverty, as had happened in parts of Asia, Latin America and eastern Europe after 1997, added.
The Secretary-General said policies would have to be agreed among all the different actors and stakeholders involved, including governments, the private sector, civil society, and international institutions such as the World Bank, the International Monetary Fund (IMF), and the World Trade Organization (WTO). The United Nations must work in close partnership with those institutions, he said, adding that their secretariats had already been very active and useful partners in preparing his report which was before the session. It was very important that at the international level developing countries be better represented in the policy discussions.
The second task before the session, the Secretary-General said, was to catch the attention of political leaders and financial authorities throughout the world. He said development was far too important to be left to specialized ministries or agencies. It must mobilize the energies of governments and societies as a whole. Developing countries must be helped to organize themselves in a way that encouraged investors, both domestic and foreign.
The Secretary-General also referred to the high-level panel he had formed, chaired by former President Ernesto Zedillo of Mexico, whose report, he said, should provide an independent view and should be eye-catching. The report should be available by the end of May.
He noted that the broad goals of the High-level Event had already been agreed by all States at the highest level. The task now was to ensure that commitments given were not forgotten and that the means to achieve the goals had equally high-level support.
If all the international institutions worked together, and if the political will was mustered by all countries, there was a real chance that next year's high-level event could mark a turning point in the fortunes of poor countries, and poor people, all over the world, the Secretary-General concluded.
MATS KARLSSON, Vice-President for External Affairs and United Nations Affairs of the World Bank, highlighted the successful outcome of the Millennium Summit, noting that the Millennium Declaration could only help the international community identify key global development goals and set the framework for the achievement of those goals in the years to come. Indeed, the Declaration had emerged at a time when there had been a general confluence of international recognition on some of the most critical development issues, such as the need for enhancing global poverty- reduction strategies, focusing new emphasis on concerted action and promoting resource mobilization.
He said the recommendations in the report of the Secretary-General on financing for development echoed the Bank’s policies aimed at poverty reduction and sustainable development. Such harmonization of key issues was a testament to the notion that the international community should act now and not lose the momentum gained at the Summit.
The Bank endorsed the thrust of the report on domestic resource mobilization, he continued. Clearly, robust revenue collection was critical to self-sustained development. Sound financial development was also needed, as was the elimination of obstacles to finances, particularly for the poor. Dynamic investments strategies were seen as a prerequisite to attracting foreign investors.
Turning to trade measures that might aid the financing for development process, he said it would be most important to lift, once and for all, the trade barriers that stopped the goods from developing countries from reaching world markets. While starting with lifting trade barriers on least developed countries made sense, it was important to note that most of the world’s poor lived outside recognized least developed countries. A way must be found to enhance participation at all levels to find a solution to that problem.
Official development assistance also remained crucial and, in light of increasing international attention to that particular issue, the time appeared to be the right time for a “boost”, he said. Why not work towards a “Millennium Boost” in ODA to complement the Millennium Declaration? The international community must be pragmatic and not ignore the constraints faced by many developing countries in that regard, but it must also realize the untapped wealth of public recognition of the desire to increase aid and decrease poverty and move towards the notion of global public goods.
He went on to say that some of the most important international issues begged for broad cooperation. Managing global issues now would make the difference. Bringing the debt of low-income countries down to sustainable levels was critical. And even though some countries had benefited from international initiatives in that regard, the integration of debt-relief programmes into development schemes remained important. The Secretary-General’s report called for making better use of the United Nations agencies and funds in development efforts to further the course of sustainability. The report also recommended strengthening economic cooperation.
Better coherence and strong leadership at all levels was crucial, he said. As the Committee was now poised to begin its work, the key to success would be the ability to identify action areas. Only that would ensure that the outcome would not be characterized by the brilliant prose of a final document, but in the international community’s ability to deliver.
RHEINHARD MUNZBERG, Special Representative of the International Monetary Fund (IMF) to the United Nations, stressed the need for all the relevant institutions to work together on the issues before the sessions. The IMF was pleased that the Secretary-General’s report reflected understandings that the Fund considered crucial -- the focus on two main pillars: sound domestic economic policies and external financing.
He noted that the IMF had been involved in the preparatory process for the High-level Event, and had contributed to the agenda. There was need to ensure that issues were linked and not separated. The IMF Board would continue to remain engaged in the substantive discussions of the preparatory process. Its staff would also do the same. The Fund would try to create the consensus needed for the ultimate objective of a better approach to development.
PATRICK LOW, Director of the Office of the World Trade Organization (WTO) Director-General, said WTO members were preparing their own political input to the High-level Event through the organization’s Committee on Trade and Development. A report on that input would be brought to the Preparatory Committee on 20 February. The WTO was a not a finance organization, but a forum for negotiated multilateral trade liberalization. As a guarantor of multilateral rules for international trade, it had an important role to play in that area.
There were strong and significant links between trade and financing for development, he said, adding they included the role of trade in generating foreign exchange earning; the role of trade liberalization in promoting economic growth through increased efficiency and the removal of distortions; and the role that trade regimes and trade rules could play in encouraging inflows of foreign investment in both goods and services.
He said those regions that had liberalized trade had experienced the fastest growth in trade and output. In some developing countries, quite significant trade barriers remained. They carried not only domestic costs for the countries imposing those barriers, but also affected exports from developing countries, including the least developed. There was, therefore, still scope for cutting tariffs and lock-in reforms through binding commitments in the WTO.
He said there was need for greater consistency between donors’ trade and aid policies. Policy efforts in trade and other fields must be integrated into a consistent set of mutually reinforcing strategies for an effective pro-poor development to be achieved. There was need for donor partners, developing countries and all international institutions to address development objectives through operational strategies informed by economic good sense and supported by the highest level of political commitment.
BAGHER ASADI (Iran), speaking on behalf of the “Group of 77” developing countries and China, said that entire international community should utilize the tremendous potential inherent in the upcoming High-level Event and work to ensure that it was not a “one-time-only” event. Rather, it should be perceived as a historical turning point for a bold, innovative and continuing process that would set the stage for the international community to reach a new consensus and strive collectively to achieve goals that were important to all.
In the course of intergovernmental deliberations thus far, he continued, it had become clear that any new or innovative approach to the question of financing for development should be seen in the context of globalization and all its associated challenges and benefits. Further, the international community should recognize the fact that globalization was paving the way for a “multi-actor” world community in which decision and policy makers could interact on ever more sophisticated levels. Given that, achieving a better understanding of overall development parameters at the global level was crucial.
The central challenge before the Committee would be to set the goals and put in place the measures and mechanisms required to achieve them, he said. That challenge could be directly addressed by the exercise of political will by all stakeholders and participants to address obstacles and impediments at all levels and to ensure the success of the Event and its follow-up. The requisite political will would all but ensure the success of the financing for development process.
Turning next to highlight some substantive issues before the Committee, he said the respective outcomes of the various regional meetings, particularly those held in developing countries, had proved most important in informing the overall preparatory process. Despite the different challenges faced by various regions, most faced similar difficulties in the area of financing for development. To that end, his delegation was pleased that mobilizing domestic and international resources for financing for development, trade, and addressing systemic issues had been identified as key areas for discussion.
Highlighting the importance of those and other issues, he noted the crucial nature of the ODA issue for a majority of developing countries. He also said the debilitating burden of external debt also deserved particular attention. The crux of the Committee’s discussion of systemic issues was that international financial architecture should be made responsive to the priorities of growth and development at the global level, especially in developing countries, and to the promotion of economic and social equity.
RUTH JACOBY (Sweden), speaking on behalf of the European Union, said the financing for development process offered a unique opportunity to effectively mobilize and channel resources to attain international development targets. Poverty eradication through sustainable growth and economic development of benefits to all must be the overarching goal of the process. The process also provided the opportunity to discuss how the impact of various sources of financing could be maximized by strengthening complementarity.
The special needs of Africa and of the poorest countries must be given particular attention, she said. In that regard, it would be important to make full use of the synergies between the financing for development process and the upcoming third World Conference on Least Developed Countries, as well as other relevant international meetings and conferences.
She went on to highlight the various agenda points before the Committee. First and foremost, she said, the importance of a favourable and constructive domestic environment could not be overemphasized. Enabling such an environment, one that would mobilize domestic resources needed to attract international private flows, foreign direct investment and ensure the most effective use of ODA, would be based on developing a sound macroeconomic framework. A sound macroeconomic framework should include incentives for increased savings, the development of open trade policies, and strengthening and reform of the financial sector.
Domestic resource mobilization, along with good governance, was fundamental for economic growth, she said. It was important to note, however, that conflict was the greatest threat to creating a positive enabling environment. Conflict prevention and resolution must, therefore, receive top priority. The spread of HIV/AIDS must also be addressed.
She said that international private flows also had a critical role to play. More innovative forms of multilateral and bilateral investment guarantees could be developed, and better information to the private sector on investment opportunities in poorer countries could be provided. Trade was also a dynamic engine for sustainable growth at the national, regional and international levels. The international community must recognize that open, transparent and stable multilateral trade liberalization, including enhanced market access opportunities for developing countries, was crucial for integrating those countries into the global economy. Efforts must also be focused on making trade more conducive to poverty reduction. To that end, trade issues must become an integral part of developing partners’ national development strategies.
Her delegation was committed to the pivotal role ODA played in poverty reduction, she said. There was a continuing need for ODA flows, especially to the poorest countries in support of their own development efforts, capacity building and for removing obstacles to that development. The financing for development process could also add positively to international discussions on debt relief.
Turning to systemic issues, she noted that a major goal would be to ensure that the international system optimized best efforts to ensure mobilization of both domestic and international resources. Greater policy coherence at all levels was key, and a strong endorsement of the international financial codes and standards should be welcomed.
JORGEN BOJER (Denmark), co-Chairman of the Preparatory Committee, briefed the session on the separate meetings the Bureau of the Preparatory Committee held with the executive directors of the World Bank and the IMF in Washington last Monday and Tuesday. He stressed the importance of the interface with the two institutions and with the WTO.
The main topics covered in the meeting with the directors of the World Bank included collaboration and modalities for enhancing the dialogue. It was noted that development was a multifaceted process. The financing for development process was seen as important for harnessing the contribution of all stakeholders.
A managing director of the World Bank noted that the Secretary-General’s report on next year’s high-level event was a good basis for work on the preparatory process, and that the police proposals it contained were important. Other staff said its contents should be sharpened, adding that it needed to be trimmed. It was noted that ministers responsible for finance and economic development should be involved in the work on the preparatory process.
Also discussed were the key features of the financing for development process, Mr. Bojer said, adding that poverty eradication was seen as an overarching goal. It was noted that the United Nations was leading a very crucial process. It would take time for its objectives of the High-level Event to be achieved. Several of the directors questioned the need for new institutions. There was some general comment on the need for capacity-building and human resource development in the developing countries, the role of the market and trade issues. Mr. Bojer said that, in general, the meeting, the second with the World Bank, was constructive.
The meeting with the directors of the IMF, the first, broke important new ground in the process of financing for development, he said, adding that the tone was very collegial. The Managing Director of the IMF told the meeting that the Fund itself was in the midst of reform, Mr. Bojer said. It saw financing for development as rooted in two pillars -- sound economic policies and external financial support. He looked forward to real cooperation between the Fund and the United Nations. He reportedly told the meeting that the Fund should be challenged and that it welcomed criticism. Such criticism should be a two-way process.
Mr. Bojer said it was agreed that the meeting was timely and that collaboration between the two institutions was important. Some IMF directors said proliferation of forums could be counter-productive and stressed the key role of the IMF. It was pointed out that the Fund should support United Nations peacekeeping efforts.
Several stressed the responsibility of developing countries in carrying out macroeconomic policies, and creating the enabling environment for investment, he said. The need for increased ODA was stressed, and one participant said the goal of 0.7 per cent in ODA should be achieved. The discussions also covered debt relief and trade.
General Statements
SHAMSHAD AHMAD (Pakistan) said the Secretary-General’s report identified the main issues involved in financing for development and underscored the need for remedial action in each area, but did not provide answers to how those issues were to be addressed. Similarly, he said the links between various proposed actions could have been further elaborated. The elements of an enabling international economic environment could have been listed with specific actions. Excessive emphasis had been placed on prescriptive guidelines and good governance, both leading to conditionalities.
He said the section of the report on external debt needed to be elaborated, as the subject continued to be a key obstacle to development in the developing countries and, in some cases, was the principal drain on their domestic savings and resources. There was a need for a comprehensive approach to the problem, one that should also provide debt relief to middle-income developing countries. Funding for debt relief must be additional and not a substitute for other forms of development assistance.
The United Nations should provide proposals for proper debt relief that ensured a country’s capacity to raise output and a recognition of debtor’s rights. The Preparatory Committee might consider a number of suggestions, such as the recommendations of the Secretary-General submitted to the fifty-fifth session of the General Assembly on the subject, which included a proposal for an independent panel to find durable solutions to the external debt problems of developing countries.
He reiterated that the High-level Event should be a summit meeting on financing for development. The possible outcome might consider the fact that the event should be the beginning, and not the culmination of a process. The financing for development initiative should also lead to a political declaration expressing the international community’s determination for collective action to address the issues of development finance. It should also lead to a programme of action to achieve adequate and sustained financing for development and a follow-up mechanism with collective periodic reviews.
J. GABRIEL VALDÉS (Chile), speaking on behalf of the Rio Group, said the work of the Committee and the upcoming High-level Event itself held great promise for putting international cooperation for development, equity in international economic relations and the profoundly human meaning of development back on the international agenda. The Group placed particular emphasis on three fundamental aspects of the current process, including: a broad agenda that addressed in a holistic manner all factors that impacted financing for development; convergence of efforts of the United Nations system with those of the Bretton Woods institutions, the WTO and the private sector; and a spirit of genuine partnership between the industrialized world and developing countries.
He said the Committee should devote most of its time during the current session to a dialogue aimed at identifying the major areas of political consensus to strengthen the prospects for improvement in all aspects of international economic relations relevant for financing for development. There were clear prospects for political agreement on several issues, including the opening up of markets to the goods of developing countries and the goal of 0.7 per cent of GDP in ODA. There was also increasing representation and effective participation of developing countries in forums that set financial and monetary policy. But the Committee should not be satisfied merely with consensus on political objectives; it should also be capable of having preliminary discussions on specific actions that the preparatory process and the Event would promote.
He said the Committee must not let slip this opportunity to transform the preparatory process into an activity with high impact and potential for improving the real living standards of people. In that regard, it was necessary to reaffirm the Millennium Summit’s goals. The United Nations was the one indisputable “home” for humankind, and from it would spring the initiatives that could make universal aspirations for peace, cooperation and development a reality.
GEORGE ODLUM, Minister for Foreign Affairs and International Trade of Saint Lucia, speaking on behalf of Caribbean Community (CARICOM), said he was disappointed that the United Nations Conference on Trade and Development (UNCTAD) did not have a representative present to address the opening of the current session. He hoped that, at some point over the next two weeks, Committee members might have the opportunity to hear from an UNCTAD representative.
While noting the comprehensive nature of the Secretary-General’s report, he also pointed out some general concerns. Foremost, he highlighted the aggregate approach given to developing countries. Such an approach neglected the heterogeneous nature of those countries, particularly as it related to financing for development. The differences between groups, or even regions within regions, could not be ignored. Indeed, while the challenges facing developing countries were similar, small island developing States had peculiar vulnerabilities and characteristics. Their small domestic markets, limited resources, dependence on international trade, weak institutional capacity and fragile environment made small islands vulnerable to natural disasters and climate variability. Those and other reasons made development disproportionately costly.
He went on to say that the report made little distinction between growth and development. In CARICOM’s view, while growth incorporated increasing output based on existing productive capacity, development was increasing output based on expanding that capacity. Development involved, among other factors, raising living standards and reducing unemployment while making use of environmental resources. Development must seek to provide the highest level of welfare to the greatest number of people. He also noted the diminished role of governments in the development process. The report failed to acknowledge that, for small islands, governments provided public goods and acted as effective regulators of economic activities. Indeed, it was the government’s responsibility to create an enabling macroeconomic environment to underpin growth and development.
He turned next to highlight the major themes on the agenda for the financing for development process. While he agreed that domestic resources should be a primary source for financing, he noted that small island economies were often unable to generate high levels of savings or investment. Small States also continued to encounter difficulties in their efforts to attract international bank loans and must rely on foreign direct investment.
He went on to stress the importance of ODA. It was troubling that small States in the Caribbean continued to be graduated out of the concessionary financing category based purely on per capita income. That situation must be adequately addressed by the international community. Further, effective access to global markets provided a true substitute for aid. Enhanced market access would enable CARICOM countries to export more products and generate more foreign exchange earnings. He reiterated the need for the Preparatory Committee to remain focused on the agreed agenda with a view to discussing development in a holistic manner.
JORGE-EDUARDO NAVARRETE (Mexico) reiterated the strong commitment of the new Government to the proposed High-level Event. It urged agreement by the international community on a worldwide consensus to respond to the development challenges with financing for development as a key component. The Secretary-General’s report was an excellent basis for discussions, he said, noting that his delegation would have specific comments on some of the issues it raised during the session.
He called for a closer look at the issue of international finance. He said ways must be found to help countries deal with structural adjustment programmes and financing resources. There should be arrangements to combat volatility of capital to help countries avoid financial crises.
He announced that Mexico was prepared to host the High-level Event if agreement was reached at its attendance at a high political level. It was prepared to engage in informal consultations on its proposal, he said.
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