Multi-Stakeholder Consultation on
Financing for Development 2004/ 2005
Rules for Global Finance that
promote sustained development
Gewerkschaftskoordination International
Promoting Sustained Development

About New Rules for Global Finance Coalition

International Financial Architecture
 Ties to Development
 Progress so far

Financing for Development Agenda & Process

Analysis of Problems
 Unstable and Insufficient Capital Flows
 Distribution of Capital
 Institutional Oversight

Seeking Solutions: Systemic Issues Consultative Process
Gewerkschaftskoordination International
2
About the New Rules Coalition
 Started in 1999 in response to the Asian crisis with the objectives of
developing reform proposals for the global financial architecture and
preventing future financial crises.
 Members of the New Rules Coalition are academics, activists, and
policy makers from developed and developing countries, from religious,
labor, development, and environmental perspectives
 New Rules employs inclusive dialogues to mobilize its expert and
experienced members to analyze existing financial institutions and
policies and to propose alternatives that will bring about more equitable
and environmentally responsible results.
 New Rules has been actively engaged in the Financing for
Development Conference and its Follow-up process
Gewerkschaftskoordination International
3
International Financial Architecture and
Development
 The wave of currency and banking crises that swept through
developing countries in the 1990s made it clear that fundamental
reforms were required in the international financial system.
 Besides the objective of achieving financial stability, an equally
important goal is the provision of adequate capital flows (private+
public) to developing countries.
A development -oriented reform of the financial system would not only
benefit developing countries. Strong growth in developing and
emerging market economies provides growing markets for developed
country exporters and profitable opportunities for developed
countries investors.
Gewerkschaftskoordination International
4
What progress so far
Progress to date on these issues has suffered serious problems
Reforms have focused excessively on making changes to
financial sectors in developing countries. Far less attention has
been given to international institutions and developed country
financial markets.
The design and implementation of financial system reforms
have been uneven and asymmetrical in several key aspects,
e.g., problematic governance in key institutions.
Gewerkschaftskoordination International
5
Financing for Development (FfD)
•In this regard the Monterrey Consensus provided for the first time
an agreed comprehensive and balanced international agenda and an
on-going process, which should be used to guide and evaluate
reform efforts.
• The sections of the Consensus on systemic issues are particularly
relevant to the reform of the international monetary and financial
system in support of development.
•New Rules will organize in close cooperation with the Financing for
Development Office (FFDO) a series of multi-stakeholder
consultations to examine issues, exchange information and promote
best practices in the area of systemic issues
Gewerkschaftskoordination International
6
Key Problems: Unstable and
Insufficient Capital Flows
For too many developing and
emerging market countries,
international financial capital flows
at times have been too volatile and at
others have been too insufficient to
promote sustained development.
This is the case for FDI, portfolio,
bank loans, and even official sources
of capital.
Gewerkschaftskoordination International
7
International Capital: Important But Not Dependable
All : GDP/Cap Flows
GDP
7
$250
Cap Flows, $billions
6
$200
5
$150
4
$100
3
$50
2
$0
1
0
-$50
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
Compares GDP of emerging market and developing countries including
selected advanced economies and capital flows of Emerging market and
developing countries including selected advanced economies.
Gewerkschaftskoordination International
8
International Capital: Important But Not Dependable
Africa: GDP/Cap Flows
7
6
GDP
Cap Flows, $billions
5
$14
$12
$10
4
$8
3
$6
2
$4
1
$2
19
81
19
8
19 2
8
19 3
84
19
8
19 5
86
19
8
19 7
8
19 8
89
19
9
19 0
91
19
9
19 2
9
19 3
94
19
9
19 5
9
19 6
97
19
9
19 8
99
20
0
20 0
0
20 1
02
20
03
0
-1
$0
-2
-$2
Gewerkschaftskoordination International
9
International Capital: Important But Not Dependable
Latin America: GDP/Cap Flows
GDP
6
$100
Cap Flows, $billions
5
$80
4
3
$60
2
$40
1
0
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
-1
$20
$0
-2
-3
Gewerkschaftskoordination International
-$20
10
International Capital: Important But Not Dependable
Asia: GDP/Cap Flows
10
$140
9
$120
8
$100
7
$80
6
$60
5
$40
4
$20
3
$0
2
-$20
GDP
Cap Flows, $billions
1
-$40
0
-$60
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
Developing Asia for capital flows defined to also include Hong Kong SAR, Korea, Singapore, and
Taiwan Province of China
Gewerkschaftskoordination International
11
Some types of flows are more volatile than others
$70
International Capital Flows: Latin Am
FDI
$60
Portfolio
$50
Other private
Official
$40
$30
$20
$10
$0
-$10
-$20
-$30
-$40
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
Latin America was chosen because of incomplete data for other areas.
Gewerkschaftskoordination International
12
Flows to some areas are more volatile than others
Private Portfolio Inflows
$80
$70
$60
$50
$40
$30
$20
$10
$0
-$20
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
-$10
-$30
-$40
Africa
Cen Eur
Lam
Asia
-$50
-$60
Net private portfolio flows include the purchase of private equity shares (amounting to less
than 10% of firm) and debt securities debt (e.g. bonds). Measured in US$ billions.
Gewerkschaftskoordination International
13
Some types of flows are too persistent
Foreign Debt
$800
$700
$600
Africa
Cen Eur
L Am
Asia
$500
$400
$300
$200
$100
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
$0
Total foreign indebtedness in billions of US$
Gewerkschaftskoordination International
14
Persistent debt and its legacy
Foreign Debt Service Payments
$180
$160
$140
$120
$100
Africa
Cen Eur
L Am
Asia
$80
$60
$40
$20
$0
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
1980
Principle and interest payments on total foreign indebtedness in billions of US$
Gewerkschaftskoordination International
15
The Problem: Distribution of
Capital
Private international capital, the
largest source of funds for
development, has a skewed
distribution pattern.
Gewerkschaftskoordination International
16
Capital flows are concentrated
Private Capital Flows
10 Year Average, $billion
Lam
Asia
Cen Eur
$38
$49
$8
Gewerkschaftskoordination International
Africa
$24
17
Even FDI is concentrated
Foreign Direct Investment
10 Year Average, $billion
Africa
Cen Eur
Asia
Lam
$54
$48
$9
$16
Gewerkschaftskoordination International
18
The current status of international
finance and development

The current financial system is characterized by instability and
highly uneven distribution of capital.

The current patterns of financial flows impede development and
worsen poverty, whether one looks at financial crises or more
recent financial droughts.

Developed, emerging market, and developing countries all require
adequate, long term, patient capital to sustain growth capable of
reducing poverty.

Stable and sufficient supplies of capital are needed, and so too,
are stable economic environments to attract and retain those
supplies.
Gewerkschaftskoordination International
19
The Problem: Institutional
Oversight of Financial Stability

Besides the WB and IMF, major policies are being
formulated in ad hoc fora such as the Bank for International
Settlements (BIS) and the Financial Stability Forum (FSF).

These bodies are organized and led by the developed
countries, with some participation by “systemically
significant” countries.

Private standard setting bodies, such as those for auditing
and accounting, and public standard setting bodies such as
those for securities and insurance are also formulating
international policies.
Gewerkschaftskoordination International
20
Next Steps
Therefore,
 The multi-stakeholder consultations on
Systemic Issues will focus attention on
institutions and policies that can result in
sustained development.
 Changing the rules and the rule-making
processes is likely to require a different
mix of decision-makers.
Gewerkschaftskoordination International
21
Core topics of the multi-stakeholder consultations
 Effective and equitable representation of all countries in the
design and implementation of financial system reforms
 The impact of the current reform agenda of international
financial institutions, in particular “Standards and Codes”, on
systemic stability and poverty reduction
 Evaluation of alternative policies, such as counter-cyclical
prudential regulation, designed to protect countries’ financial
sectors and support growth and poverty reduction
Gewerkschaftskoordination International
22
Number and location of meetings
•
Washington D.C., to ensure maximum participation from country
representatives and staff of World Bank and IMF
•
Two regional meetings to take place in developing countries ( Latin
America and Africa), with participation of the private sector, civil
society as well as participants from official institutions and
governments
•
New York, to ensure maximum input and recommendations from
UN member states delegations, to produce an integrating and
concluding multi-stakeholder session
Gewerkschaftskoordination International
23
Information on the Consultations
• Expert consultants will develop papers for each meeting
• All papers will be available to the public to provide for maximum
discussion and debate for the consultations
• New Rules will provide a report of the principal conclusions from
each meeting and a concluding publication on the outcomes and
recommendations of the consultations
• The New Rules Coalition and the FFDO will welcome proposals,
queries and comments from interested entities and individuals from
around the world
Gewerkschaftskoordination International
24
Thank you
Gewerkschaftskoordination International
25