South-North Development Monitor (SUNS)
#6234 Thursday 19 April 2007
UN SG FOR MORE VOICE FOR SOUTH IN INTERNATIONAL ECONOMIC
GOVERNANCE
By Celine Tan, New York, 17 April 2007
The United Nations Secretary-General Ban Ki-moon, in his first major speech on
development, has joined the recent chorus of calls for developing countries to be given a
greater voice in international economic decision-making, reflecting commitments made
by state parties to the Monterrey Consensus on Financing for Development in 2002 and
the changing state of the world economy today.
In a statement to the Special High-Level Meeting of ECOSOC with the Bretton Woods
Institutions (BWIs), the World Trade Organisation (WTO) and the United Nations
Conference on Trade and Development (UNCTAD), Mr Ban contended that while
developing countries constituted 79% of the world's population and 45% of global output
measured in purchasing power parities, "their significance is poorly reflected in forums
where crucial decisions about their economic and social future are taken".
In an implicit reference to the current crisis of legitimacy surrounding the World Bank
and the International Monetary Fund (IMF), the secretary-general said that some
international institutions were created 60 years ago under vastly different circumstances
and the strengthening of their credibility, legitimacy and effectiveness needs to be
grounded in deeper engagement in the reform of their governance structures to reflect
today's economic realities.
This, he argued, "means increasing the weight of several developing countries, which
have grown substantially in recent decades" as well as "giving adequate voice to smaller
economies where many of the world's poor live."
Ban's calls were reiterated by developing countries during the plenary sessions of the
high-level meeting as well as during a special roundtable discussion on the issue. A
statement by the G77 and China delivered by Pakistan's Amb. Munir Akram expressed
support for "a comprehensive reform package of the international financial architecture,
including enhancement in the voting powers of developing countries in a time-bound
manner."
The G77 and China also called for reform efforts to reflect the objectives for which the
IMF was created, that is, "to ensure financial stability" and "to ensure access to (shortterm) financing for those countries who actually need it." The G77 and China, Akram
said, will "continue to press for such a fundamental reform of the international financial
system and its governance architecture, in all relevant forums."
The UN secretary-general and developing countries also highlighted the fragmented and
politicised nature of official development assistance (ODA) and the lack of developing
country input into the policies and operational mechanisms of aid and aid allocation,
leading to its ineffectiveness.
Ban said that "recipient countries have little influence" over the process of providing
ODA and "all too often, aid is driven more by politics than need."
The aid system, he said, "has become unnecessarily complicated, fragmented and poorly
coordinated" and although there has been an increase in ODA in the last decade, much of
this growth "has stemmed largely from increased debt relief rather than fresh funding"
which is urgently needed for developing countries "to overcome the financing gap and
achieve the Millennium Development Goals." Ban was also concerned that ODA fell by
more than 5% in 2006.
"The question of developing country participation," is relevant here too, as while "the
interests and views of donor countries are well represented in the multilateral financial
institutions, there has been no effective permanent forum reflecting the interests of
recipient countries." The secretary-general hoped that the launch of the Development
Cooperation Forum at ECOSOC later this year would "help improve oversight of
development assistance". He encouraged the BWIs and the WTO "to be active
participants in this new initiative."
The G77 and China, in their statement, criticised the way the ODA is offered and
delivered in developing countries, arguing that for the most part, bilateral and multilateral
aid "is not responsive to national policies and plans, since it is mostly earmarked to donor
determined sectors and projects." The developing countries also contended that "such
development financing is often accompanied by conditionalities, is tied to procurement
from the donor country and often expended largely on expensive consultants and experts
from UN agencies or donor organizations."
On the issue of domestic governance, Ban highlighted the need for "good governance at
all levels" to ensure that development resources are mobilised and used effectively to
achieve the objectives of the Monterrey Consensus - with "participation, transparency
and accountability" serving as "crucial components" of this process. However, the
secretary-general stressed that governance reforms must be country-driven with
experience. "Donor-driven initiatives, especially when externally imposed, can weaken
the legitimacy of domestic efforts, and may be counter-productive."
In an implicit reference to the current focus on anti-corruption at the World Bank, Ban
argued that while corruption reflects "a failure of governance," the fight against
corruption should not be made "synonymous with governance," but addressed as part of
comprehensive governance reforms, including grounding in internationally agreed norms,
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notably the UN Convention Against Corruption which, Ban noted, industrialised
countries have been slower to ratify than developing countries.
Calling for a multilateral trading system that is responsive to the developmental needs of
developing countries and welcoming the recent resumption of the Doha Round of
negotiations at the WTO, Ban stressed that its "development promise" should not be
compromised.
He said that developing countries, especially the least developed among them, need better
market access, as well as more help to improve their production and trading capacity.
There is a need to eliminate all export and trade-distorting agricultural subsidies of
industrialized countries.
"And the rules for intellectual property rights need to be reformed, so as to strengthen
technological progress and to ensure that the poor have better access to new technologies
and products," Ban stressed.
The G77 and China also criticised the "insufficient focus on the development of
international trade" in international trade negotiations, including the issue of developed
country subsidies, fears of de-industrialisation in developing countries as a result of
severe industrial tariff cuts and the constraints on national development and access to
technology placed by aspects of the current IPR regime and other technology control
regimes. The G77 and China called for a review of the regime by the World Intellectual
Property Organisation (WIPO), the WTO and UNCTAD.
The G77 and China said that while developing countries had "demonstrated a sincere
commitment" towards implementing internationally agreed development commitments,
including commitments "to devise national development strategies, improve governance
and create a macro-economic climate conducive for growth, trade and investment," there
have not been corresponding commitments from developed countries to assist in their
development efforts.
"Unfortunately, our development partners have not demonstrated a similar alacrity in
implementing their part of the commitments whether in development assistance and
financing, trade, technology transfer or other areas of cooperation," Akram said.
In its intervention, the United States criticised the G77 and China's assessment of the
international economic architecture, calling their remarks "provocative". The US accused
the developing countries of trying to run the international institutions down.
The US representative Terence Miller said that in spite of their remarks to the contrary,
developing countries had yet to demonstrate implementation of the agreed international
development commitments, including the implementation of sound economic policies.
On the complaint that development assistance was not responsive to developing country
needs, Miller said that if that was the case, the US could re-evaluate the provision of such
financing to see if such assistance was still needed.
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Criticising the developing countries' assessment of the current international financial
system which forced the developing countries to accumulate large foreign exchange
reserves as a means of self-insurance in the absence of comprehensive international
mechanisms to address financial volatility, Miller said that such reserves were
accumulated through trade and purchases by developed countries and that if the
developing countries did not approve of such reserve accumulation, "we can stop these
purchases."
Miller also criticised the G77 and China's position on the IPR regime, saying that the
WTO's TRIPS agreement provided much needed research and development (R&D) for
development, including research for tackling issues such as climate change.
In a response to Miller's outburst, Akram said that the statement of the G77 and China
was a factual reflection of "how we see the current situation" and was not meant to be
"deliberately provocative," unlike the remarks of the US representative. Akram also
clarified that the developing countries never said that they had fulfilled the
implementation of their internationally agreed development commitments but that they
were committed to achieving them and to say so otherwise was a "wrong interpretation,"
adding that he hoped that it was not a "deliberately wrong interpretation."
Akram said that the G77 and China were "not talking in the air" when highlighting
systemic issues with the international trade and financial architecture but that they were
speaking the truth and standing up for their rights. They were not trying to dismiss the
need for aid but rather to emphasise the problems associated with the current aid regime
and to call for ODA to be made more effective and responsive to developmental needs of
countries who need it.
The G77 chair also countered the US remarks on reserve accumulation by reiterating that
reserve accumulation was an indication of global financial volatility. He argued that if the
international financial architecture could assure financial stability, there would be no
need for reserve accumulation by developing countries and such reserves could be used
for consumption and investment in development purposes rather than being "ploughed
back into treasury bonds in other countries."
Akram also dismissed US charges that TRIPS protects R&D, arguing that R&D existed
before TRIPS and instead, TRIPS has limited, rather than encouraged, such research in
developing countries. Akram's riposte was applauded by delegations and observers
present at the meeting.
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