PHM-Exch> world econoic, financial crisis

[Claudio Schuftan]

  22 June 2009
     Press Conference
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 *Department of Public Information • News and Media Division • New York*

 press conference by head of south centre on world economic, financial
crisis

The United Nations should be the place that “educates the innocent and the
victims” on how to deal with the world economic and financial crisis, Martin
Khor, Executive Director of South Centre, said at a Headquarters press
conference this morning.

He said that, having played no role in causing the crisis, the developing
countries had suffered the most “collateral damage”, with losses averaging
6 per cent of gross national income as their economic growth was expected to
fall from 8.3 per cent in 2007 to 1.6 per cent in 2009.

This week’s United Nations Conference on the World Financial and Economic
Crisis, however flawed, presented the best chance to start addressing the
crisis, he said.  Two main issues up for discussion were how to help
developing countries cope with the crisis, and reform of the international
financial system.

He went on to note that South Centre, a Geneva-based developing-world think
tank with 50 members, had recently produced a major paper on the key issues
for developing countries to do in response to the crisis.  Sudan, as Chair
of the “Group of 77” developing countries and China, had also produced a
statement summarizing the views of developing countries following the
beginning of negotiations in April on the substantive aspects of this week’s
Conference.

Much of international action on the crisis so far had been undertaken by
such exclusive clubs as the Group of Eight (G8) or Group of Twenty (G20),
but this week’s meeting would be the first-ever event in which all countries
could come together, he pointed out.  It was especially important for
developing countries, most of which had no other forum but the United
Nations in which to discuss the most serious economic downturn since the
1930s.  Among the most crucial issues was the need for a follow-up mechanism
to continue with the technical work after the Conference determined the main
direction of action.  The process should not end with the Conference, and
the United Nations should play a central role in that regard.

Many substantive issues could not be resolved by the event, since there had
been too little time to negotiate the complex issues involved, he said,
calling for the establishment of a working group to elaborate on decisions
and issues arising from the Conference.  It could prepare recommendations
for real action.  External financing was needed to make up the $1,000 to
$2,000 billion shortfall in income from reduced developing-country exports
and the outflow of capital caused by the crisis.  Those funds should come
from new special drawing rights that the International Monetary Fund (IMF)
could issue to developing countries.

Allocated by quota, the $250 billion in special drawing rights already
approved by the G20 would go mainly to developed countries, he continued,
stressing that any new allocation should be provided on the basis of need.
There was also a case to be made for a temporary moratorium on debt
repayments for countries facing problems arising from the crisis, as well as
the establishment of an international debt court that would allow countries
in trouble to declare a “debt standstill” while arranging debt restructuring
similar to Chapter 11 of the United States Bankruptcy Code.

Noting that developing countries needed “policy space”, he emphasized the
need to address IMF- and World Bank-imposed loan conditions as well as
free-trade-agreement provisions that curbed the use of policy measures to
promote fiscal stability, pointing out also that developing countries facing
balance-of-payments constraints could not apply counter-cyclical policies.
The Conference should recognize their right to undertake trade measures
within World Trade Organization rules, as well as “debt standstill” and
temporary capital controls.

There was a need to examine world economic governance, he said, proposing
the establishment of a new global forum to coordinate and ensure the
coherence of policies undertaken by various international agencies.  That
would allow developing countries to participate in crisis-related
decision-making and other world economic issues.  There was also a need to
reform the governance and policies of the IMF and the World Bank, regulate
financial markets and capital flows, strengthen surveillance of
developed-country policies and create a new reserve system based on special
drawing rights.  The lack of regulation and reform in those complex areas
had contributed to the crisis and should be addressed immediately.

Responding to numerous questions about the Conference and its possible
outcome, he said all the ingredients for success were in place and the main
issues were reflected in the draft outcome document.  However, the next few
days would see “an intense battle”.  Developing countries were expected to
put their faith in the United Nations.  “We must make the UN a place again
-– if not the place, then a place -– to discuss these fundamental issues,
because all of us are here in this home and we have put forward […] these
proposals here.”

He went on to caution that not all issues could be settled during the
Conference, but at least some of them could be resolved in principle and
passed on to the working group, which could tackle technical details and
elaborate concrete recommendations to the General Assembly.  While there was
no expectation that any specific decisions would be taken, if the Conference
pointed in a certain direction, determined certain principles and made some
general decisions, it would be a success.  However, if the event failed to
produce such outcomes and ended with a decision merely to hold another
conference “in 10 years’ time, when there is another crisis”, it would be a
profound failure.

Replying to a question about United States President Barack Obama’s
financial policies, he said there had been many hopes that the new
Administration would look at the United Nations and the world differently.
The President’s Cairo speech had been “path-breaking”.  He added:  “We are
all waiting for the action, but the words are good.  I am still waiting for
an Obama speech on how we are going to help developing countries in the
economic area.”

Asked about the role of the General Assembly President, he said perhaps the
Conference would not have taken place had it not been for him.  The document
produced by the President contained many useful elements, which had been
retained in subsequent drafts.  However, many people at the United Nations
were not used to “the flowery rhetoric and so on”, and that was what had
“upset” many people.  For example, many diplomats had questioned the
reference to “Mother Earth”, wondering what that had to do with the economic
crisis.  However, there had been serious negotiations in the last two weeks
and it was to be hoped that the Conference would be given the best chance to
succeed.  It was important to look at the substance and added value of the
proposals.

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*For information media • not an official record*
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