[South Bulletin 63 Article]

By Bhumika Muchhala

At the thematic debate on the world economy and finance in 2012, convened in the United Nations General Assembly on 17-18 May, many developing countries recalled the 2009 landmark UN Conference on the Economic Crisis and indirectly lamented that there had been a very weak follow-up process after the Conference. Although a working group was set up to follow up, it has only organised a few panel discussions. It is important that more effective implementation is undertaken, after this thematic debate.

The Community of Latin American and Caribbean States (CELAC) clarified in its statement that this debate is understood "as an event, among several others, to be organized in compliance with the mandate of UN resolution 65/313." This resolution decided in 2010 to explore ways to embark on an "intergovernmental follow-up process" of the June 2009 Conference. 

CELAC noted that the event would not discuss many systemic issues, such as global financial and economic governance, reform of the global reserve system or macroeconomic policies for recovery. However, it expressed hope that such critical issues absent in this debate will "be addressed in upcoming events in a comprehensive manner and with wide participation." The statement reiterated that, "the UN is par excellence the legitimate forum for the promotion of international cooperation for development and the creation of a fair, transparent and equitable global economic system."

CELAC stressed that reform of the international financial architecture needs to be advanced. The "current democratic deficit in the IMF and the lack of space for smaller economies to have a greater voice is incompatible" with both the current level of developing economy participation in the world economy and with the UN system and its principles.

CELAC stated that it is "of utmost importance to advance in the fulfilment and implementation of the proposals and commitments contained in the outcome documents of the Conference on the World Financial and Economic Crisis and its Impact on Development of June 2009, as well as the Monterrey Consensus on Financing for Development of 2002 and the Doha Declaration on the international follow-up of the Monterrey Consensus of 2008."

CELAC highlighted that the vast amount of financial resources mobilised in bailout packages and economic stimulus, as demonstrated by the US TARP program and various European financial safety nets, proves that finances are readily available in moments of crisis and urgency. Expansionary monetary policies of various central banks in systemically important countries, which constitute a central response measure in the current financial and economic crisis, are leading to possible risks and "new systemic effects for the world economy." These risks pose problems for national economies when excessive liquidity in international markets become capital flows that pressure local exchange rates to appreciate. 

Pakistan also supported the Outcome Document of the 2009 UN conference on the financial crisis, saying it "identifies a number of measures which if implemented can contribute to improving the global financial and economic situation." The Outcome Document contains the way forward including on addressing issues related to trade, debt, global liquidity, financial regulation and supervision, aid commitments as well as reform of the international financial system to ensure fair and equitable representation of developing countries in global economic governance.

Pakistan stressed that, "our own indecision and inability to work on the known and agreed solutions must not be used to humble this noble organisation." Instead, its benefit and universal membership and legitimacy should be fully employed, as the UN retains a status which enjoys universal confidence and which has delivered whenever called upon.

Pakistan hoped the ongoing debate will "help us determine why we have not been able to take those measures" in the 2009 Outcome Document, and renew and reiterate the need to generate momentum to adequately follow up on the 2009 Conference. The steps taken so far in the world economy "are not commensurate with the unprecedented challenges," and "if longstanding systematic issues and fragilities remain unattended, the likelihood of another downturn cannot be ruled out," said Pakistan.

Egypt added its voice to that of CELAC and Pakistan by stating at the outset of its statement that "this high-level thematic debate, though of importance, is not substitute for the fulfilment of the mandate to start inclusive open consultations to explore the most efficient modalities for the intergovernmental follow-up to the Conference on the World Financial and Economic Crisis and its Impact on Development."

Egypt stressed that a proper follow-up process to the 2009 UN Conference on the Financial and Economic Crisis should objectively assess progress made towards fulfilling the various commitments in the Outcome Document, particularly with regard to ODA commitments; mobilising additional resources for developing countries to address the impacts of the crisis; debt relief; enhancing access to credit and concessionary financing for developing countries; and, the reform of the financial and economic system including enhancing the participation of developing counties in global economic decision-making and norm-setting. 

Egypt highlighted debt sustainability of developing countries, and the necessity of establishing a debt workout mechanism that involves all creditors in order to contribute to a comprehensive approach to debt problems and to enhance the effectiveness of global safety nets. Describing the range of macroeconomic problems that currently beset the nation, Egypt said that it faces its greatest challenge in food security due to the fact that it is a net food-importing developing country.

China also voiced support for the 2009 conference, saying it "put forward a series of recommendations on ways to respond to the crisis and mitigate its negative impact on developing countries." 

Placing emphasis on the tasks ahead for the international community, China made four proposals:

(1) Global efforts should be clearly oriented towards effectively helping developing countries achieve development. The biggest bottleneck in the global economy is the inability of developing countries to realise full development. Between the developed and developing countries, there has long existed an imbalance in the access to resources, wealth distribution and opportunities for development. This has produced the vicious circle of the "the more undeveloped, the more backward; and the more backward, the harder to develop, which ultimately becomes a constraint on the sustained and stable development of the world economy." The task of the international community also involves "establishing a fair and effective development system, reinforcing development institutions and increasing development resources with a view to realising all the MDGs." 

(2) Global economic governance should reflect the changes in the world economic landscape in order to facilitate enhanced coordination and cooperation among countries to recover from the crisis. China stressed that the international monetary and financial system needs to be continually pushed toward greater fairness, equity, inclusiveness and orderliness. Financial regulation should be more targeted and effective, and credit rating institutions and cross-border capital flows should be better regulated. Stable liquidity of major reserve currencies should be maintained, and the international monetary system should serve toward a more equitable and rational world economic order. The voice and representation of developing countries in the IMF and World Bank should be increased.

The UN, and especially the General Assembly should use its advantages in representation and legitimacy to play a bigger role in global economic governance and promote effective mutual complementarities with multilateral institutions, including the G20.

(3) The multilateral trade system needs to be safeguarded. Protectionism needs to be resisted and opposed, markets for developing countries need to maintain openness.

(4) Each country should begin with reforming its own mode of economic development. Developed countries should implement responsible macroeconomic policies and address their sovereign debt issues and financial risks; and developing countries should actively expand their domestic demand and promote the transformation of economic growth to one that is driven by a combination of investment, consumption and exports. Environmental protection and social development "go hand in hand with the above initiatives," which can kick-start a development that is sustainable and aligns with financial, monetary, trade and industrial policies 

Donald Ramotar, President of Guyana, representing the Caribbean Community (CARICOM), said that developing countries have borne the brunt of the crisis while already "wrestling with unhelpful trading arrangement, and the consequences of an inconclusive Doha Development Round."

President Ramotar highlighted the most adverse effects of the persisting economic slowdown to developing countries as the following: a jobs crisis, cuts to social programmes, reduction in ODA and FDI flows, dampening of global trade volumes and aggregate demand and fast-rising levels of public and private indebtedness. The "knock-on effects" on domestic and international development finance resources is critical. He emphasized that "middle-income status, viewed through the prism of GDP per capita, has become an albatross, belying the real challenges faced by our countries and constraining access to much needed resources." "Crime and violence are the worst manifestations of the challenges faced by our societies," he added.

President Ramotar pointed out that CARICOM economies have been significantly impacted, particularly in the services and financial sectors, given a heavy dependence on services and tourism flows from North America and Europe. Contracting tourism demand, coupled with "unfair regulatory action against the financial services sector, has caused major economic dislocation in a region with limited scope for diversification." While the G20 may have initially helped to forestall a deepening of the crisis and to mitigate some of its worst effects, CARICOM nations believe that the pace and range of actions taken by the international community have not been commensurate with the severity and urgency of the crisis. 

"Very little has been accomplished in improving the working of the international financial system. And there is little evidence to suggest that there is better regulation. Even today some of the largest private financial institutions of the world are still coming under threat," said President Ramotar.

President Ramotar stressed the lack of due consideration given to CARICOM countries he represents, saying that due to the smaller economic size of the CARICOM region, "we are often lost in multilateral considerations for urgent action. The international community is unprepared to move with the same broad-mindedness for CARICOM economies as it does for developed countries who face economic distress."

"We call for special consideration of debt relief measures for small heavily-indebted middle-income countries. We also call for more structured and inclusive inter-governmental collaboration on international tax matters."

Bhumika Muchhala is a researcher for the Third World Network.