UN Economic Conference to receive agreed outcome draft text
New York, 24 Jun (Meena Raman) -- The UN Conference on the "World Financial and Economic Crisis and its Impact on Development" opens Wednesday morning with speeches by UN dignitaries and some political leaders that have gathered here to discuss ways and means to address the crisis.
However, the main event will be whether a Main Committee decides to adopt a draft outcome document that has been transmitted to it by diplomats who have been negotiating intensely in the past few months.
The draft was agreed to by Parties on 22 June afternoon, without discussion, after it was presented by the two co-facilitators.
Following intense negotiating sessions almost round the clock till 4.30 am on Sunday, 21 June, co-facilitators Ambassador Carlos Gonsalves of St Vincent and the Grenadines and Ambassador Frank Majoor of the Netherlands issued the revised draft outcome document in the early morning of 22 June.
An informal session was convened in the afternoon of 22 June for Parties to give their views on the document. No party gave any comments which then led to co-facilitator Majoor to gavel agreement of the Parties to the document. He also said that the document will be transmitted to the Conference for its adoption.
Many delegates were taken by complete surprise as the document was gaveled for transmission to the Conference. Given the polarised views among developed and developing countries over several areas of the original text that was negotiated, it was expected that long and intense negotiations would follow on the revised co-facilitators' document, even going on till the last day of the Conference.
On the early morning of 24 June in New York, hours before the Conference began, diplomats were still speculating whether the draft document will be re-opened when the Main Committee of the Conference starts meeting at 3.00 p. m.
According to diplomatic sources, the G77 and China as a group is unlikely to make a move to re-open the text, even though there are at least four points which the group is not satisfied with. The European countries are said to be able to live with the text too. A question mark, however, hangs over the position of the United States, as it is known that the delegation is unhappy with some issues.
The revised outcome document is comprised of 59 paragraphs in about 15 pages. One of the most important decisions is to set up a follow-up mechanism to take the work forward after the Conference. The document "invites the General Assembly to establish an ad hoc open-ended working group of the General Assembly to follow-up on the issues contained in this outcome document, and to submit a report on the progress of its work to the General Assembly before the end of the 64th Session."
The following are excerpts from some of the key paragraphs:
Causes of the Crisis
9. The drivers of the financial and economic crisis are complex and multi-facetted. We recognize that many of the main causes of the crisis are linked to systemic fragilities and imbalances that contributed to the inadequate functioning of the global economy. Major underlying factors to the current situation included inconsistent and insufficiently coordinated macroeconomic policies, and inadequate structural reforms, which led to unsustainable global macroeconomic outcomes. These factors were made acute by major failures in financial regulation, supervision, and monitoring of the financial sector, and inadequate surveillance and early warning. These regulatory failures, compounded by over-reliance on market self-regulation, overall lack of transparency, financial integrity and irresponsible behaviour, have led to excessive risk-taking, unsustainably high asset prices, irresponsible leveraging, and high levels of consumption fuelled by easy credit and inflated asset prices. Financial regulators, policymakers and institutions failed to appreciate the full measure of risks in the financial system or address the extent of the growing economic vulnerabilities and their cross-border linkages. Insufficient emphasis on equitable human development has contributed to significant inequalities among countries and peoples. Other weaknesses of a systemic nature also contributed to the unfolding crisis, which has demonstrated the need for more effective government involvement to ensure an appropriate balance between the market and public interest.
Lines of Action
Make the stimulus work for all
14. While a number of developed and emerging market economies have implemented stimulus packages, the majority of the world's developing countries lack fiscal space to implement countercyclical measures to combat the effects of the crisis and spur recovery. Many also face foreign exchange shortages. In order to adequately respond to the crisis, developing countries will need a larger share of any additional resources - both short-term liquidity and long-term development financing. We call for examination of mechanisms to ensure that adequate resources are provided to developing countries especially the least developed countries. We underscore that developing countries should not be unduly financially burdened by the crisis and its impacts.
15. Developing countries facing an acute and severe shortage of foreign reserves because of the fallout of the crisis, which is negatively affecting their balance of payment situation, should not be denied the right to use legitimate trade defense measures in accordance with relevant WTO provisions, and, as a last resort, impose temporary capital restrictions and seek to negotiate agreements on temporary debt standstills between debtors and creditors, in order to help mitigate the adverse impacts of the crisis and stabilize macroeconomic developments.
17. Countries must have the necessary flexibility to implement countercyclical measures and to pursue tailored and targeted responses to the crisis. We call for a streamlining of conditionalities to ensure that they are timely, tailored and targeted and support developing countries in the face of financial, economic and developmental challenges. In this context we note the recent improvement of the IMF's lending framework, through inter alia modernizing conditionality, and the creation of more flexible instruments, such as a flexible credit line, as a welcome step. New and ongoing programmes should not contain unwarranted pro-cyclical conditionalities. We call on the Multilateral Development Banks (MDBs) to move forward on flexible, concessional, fast disbursing, and front-loaded assistance designed to substantially and quickly assist developing countries facing financing gaps. While doing so, MDBs need to assure the application of agreed safeguards to ensure their financial stability.
18. The increasing interdependence of national economies in a globalizing world and the emergence of rules-based regimes for international economic relations have meant that the space for national economic policy, that is, the scope for domestic policies, especially in the areas of trade, investment and international development, is now often framed by international disciplines, commitments and global market considerations. We recognize that these regimes, disciplines, commitments and considerations have presented challenges to many developing countries seeking to fashion a national responses to the financial and economic crisis. We also recognize that many developing countries have called for opportunities to exercise greater policy flexibility within the scope of these constraints as a necessary component of recovery from the crisis and to address specific national concerns, which include, inter alia, the human and social impacts of the crisis, safeguarding progress achieved towards implementation of the MDGs, effective use of credit and liquidity facilities, regulation of local financial markets, institutions, instruments and capital flows, and limited trade defense measures. It is for each Government to evaluate the trade-off between the benefits of accepting international rules and commitments and the constraints posed by the loss of policy space.
Contain the effects of the crisis and improve future global resilience
22. Closer cooperation and strong partnership between the United Nations development system, regional development banks and the World Bank and their scaled-up efforts can effectively address the needs of those hardest hit and ensure that their plight is not ignored. We call for the mobilization of additional resources for social protection, food security and human development through all sources of development finance, including voluntary bilateral contributions, to strengthen the foundation for early and sustained economic and social recovery in developing countries, particularly least developed countries. Such additional resources should be channelled through existing institutions such as the United Nations development system, the World Bank-proposed Vulnerability Fund and Framework, and Multilateral Development Banks, where appropriate. These funds, including those for the United Nations development system, should be provided on a predictable basis. Furthermore, we stress the importance of the UN development system, given its broad field presence, in supporting the activities at country level to mitigate the impact of the crisis in developing countries.
25. The crisis has severely impacted on international trade in most countries, especially developing countries. For many developing countries, these impacts include, among others, fall in exports and loss in export revenue, diminishing access to trade finance, reduction in export-oriented and infrastructure investment, lower fiscal revenues and balance of payments problems. We undertake to resist all protectionist tendencies and rectify any protectionist measures already taken. At the same time we recognize the right of countries to fully utilize their flexibilities consistent with their WTO commitments and obligations. It is important that we contribute to the efforts of the WTO and other relevant bodies to monitor and report on protectionist measures, including on how they affect developing countries.
26. We must also fully harness the potential of trade as an engine of sustained economic growth and development in our efforts to overcome this crisis. In this regard, we reaffirm our commitment to a universal, rules-based, open, non-discriminatory and equitable multilateral trading system. We reaffirm that international trade is an engine for development and sustained economic growth. We therefore reiterate our call for an early, ambitious, successful, and balanced conclusion to the Doha Round that increases market access, generates increased trade flows, and places the needs of developing countries at its centre. We welcome the commit to implement duty-free and quota-free access to least developed countries, as agreed in the WTO Hong Kong Ministerial Declaration, to make operationally effective the principle of special and differential treatment for developing countries, to the parallel elimination of all forms of export subsidies and disciplines on all export measures with equivalent effect, and substantial reductions in trade distorting domestic support, in accordance with the mandate of the Doha Round and the WTO Hong Kong Ministerial Declaration, and to meeting existing aid for trade pledges. We also reaffirm the need to make progress on the implementation of the WTO work programme on small economies, mandated in the Doha Ministerial Declaration.
28. An effective response to the current economic crisis requires timely implementation of existing aid commitments... Donors should review, and if appropriate increase or redirect, their assistance to developing countries to enable them to mitigate and more effectively respond to the crisis in accordance with their national strategies.
33. The deepening crisis threatens to increase the debt and therefore the debt sustainability of developing countries. This growing pressure limits the ability of these States to enact the appropriate fiscal measures to mitigate the impact of the crisis or engage in development financing. We affirm that the appropriate measures must be taken to mitigate the negative effects of the crisis on the indebtedness of developing states and to avoid a new debt crisis. In that regard, we support making full use of the existing flexibility within the Debt Sustainability Framework.
34. We call on States to redouble efforts to honour their commitments regarding debt relief and stress the responsibility of all debtors and creditors on the issue of debt sustainability, and emphasize the importance of equivalent treatment of all creditors. Donors and multilateral financial institutions should also increasingly consider providing grants and concessional loans as the preferred modalities of their financial support instruments to ensure debt sustainability. We will also explore enhanced approaches to the restructuring of sovereign debt based on existing frameworks and principles, broad creditors' and debtors' participation and comparable burden-sharing among creditors. We will also explore the need and feasibility of a more structured framework for international cooperation in this area.
35. We recognize that increases in global liquidity play a useful role in overcoming the financial crisis. Therefore, we strongly support and call for early implementation of the new general SDR allocation of $250 billion. We also call for the urgent ratification of the Fourth Amendment of the Articles of Agreement of the IMF for a special one-time allocation of SDRs, as approved by the IMF's Board of Governors in September 1997. We recognize the need for keeping under review the allocation of special drawing rights for development purposes. We also recognize the potential of expanded SDRs to help increase global liquidity in response to the urgent financial shortfalls caused by this crisis and to help prevent future crises. This potential should be further studied.
36. The crisis has intensified calls by some states for reform of the current global reserve system to overcome its insufficiencies. We acknowledge the calls by many states for further study of the feasibility and advisability of a more efficient reserve system, including the possible function of SDRs in any such system and the complimentary roles that could be played by various regional arrangements. We also acknowledge the importance of seeking consensus on the parameters of such a study and its implementation. We recognize the existence of new and existing regional and sub-regional economic and financial cooperation initiatives to address, inter alia, the liquidity shortfalls and the short-term balance of payment difficulties among its members.
Improved regulation and monitoring
37. The current crisis has revealed many deficiencies in national and international financial regulation and supervision. We recognize the critical need for expanding the scope of regulation and supervision and making it more effective, with respect to all major financial centres, instruments and actors, including financial institutions, credit rating agencies, and hedge funds. The need for tighter and more coordinated regulation of incentives, derivatives, and the trading of standardised contracts is also apparent... We underscore that each country should adequately regulate its financial markets, institutions and instruments consistent with its development priorities and circumstances, as well as its international commitments and obligations. We underscore the importance of political commitment and of capacity building to ensure that the measures taken are implemented.
38. We emphasise the need to ensure that all tax jurisdictions and financial centers comply with standards of transparency and regulation... Inclusive and cooperative frameworks should ensure the involvement and equal treatment of all jurisdictions. We call for consistent and non-discriminatory implementation of transparency requirements and international standards for exchange of information.
40. ... We recognize the need for even handed and effective surveillance by the International Monetary Fund of major financial centres, international capital flows, and financial markets...
Reform of the international financial and economic system and architecture
42. This crisis has added new impetus to ongoing international discussions on the reform of the international financial system and architecture, including issues related to mandate, scope, governance, responsiveness, and development orientation as appropriate. There is consensus on the need for continued reform and modernisation of the International Financial Institutions to better enable them to respond to the current financial and economic challenges and to the needs of Member States, and to better equip them to strengthen existing monitoring, surveillance, technical assistance and coordination roles to help prevent the occurrence of similar crises in the future, in accordance with their respective mandates.
43. We stress the urgent need for further reform of the governance of the Bretton Woods Institutions, based on a fair and equitable representation of developing countries, in order to increase the credibility and accountability of these institutions. These reforms must reflect current realities and should enhance the perspective and voice and participation of dynamic emerging markets and developing countries, including the poorest.
44. We call for a expeditious completion of the reform process of the World Bank's governance and of an accelerated road map for further reforms on voice and participation of developing countries, with a view to reaching agreement by April 2010, based on an approach that reflects its development mandate and with the involvement of all shareholders in a transparent, consultative and inclusive process. We also call for inclusive consultations on further reforms to improve the responsiveness and adaptability of the World Bank.
46. We recognize the importance of strengthening regional development banks, taking into account the interests of all their member countries It is also important for them to provide medium and long term assistance to meet the development needs of their clients. We support measures to enhance the financial and lending capacity of regional development banks. Furthermore, we recognize the importance of other regional, interregional and sub-regional initiatives and arrangements aimed at promoting development, cooperation and solidarity among their members.
47. We recognize that it is imperative to undertake, as a matter of priority, a comprehensive and fast tracked reform of the IMF. We look forward to this accelerated progress in order to increase its credibility and accountability, its legitimacy and effectiveness. We acknowledge the agreement to accelerate the implementation of the package of IMF quota and voice reforms agreed in April
2008. We strongly support completion of the next quota review, which, based on current trends, is expected to result in an increase in the quota shares of dynamic economies, particularly in the share of emerging market and developing countries as a whole, to be completed no later than January 2011, thus enhancing the legitimacy and effectiveness of the organization.
48. We reaffirm the need to address the often expressed concern at the extent of representation of developing countries in the major standard-setting bodies. We therefore welcome, as a step in the right direction, the expansion of the membership in the Financial Stability Board and Basel Committee and encourage the major standard-setting bodies to further review their membership promptly while enhancing their effectiveness, with the view to enhancing the representation of developing countries as appropriate.
49. We agree that the heads and senior leadership of the International Financial Institutions, particularly in the BWIs, should be appointed through open, transparent, and merit-based selection processes, with due regard to gender equality, geographical and regional representation.
50. The United Nations and the International Financial Institutions have complementary mandates that make the coordination of their actions crucial. Accordingly, we encourage continued and increasing cooperation, coordination and coherence and exchanges between the United Nations and the International Financial Institutions. In this regard, we believe that this Conference represents an important step to ensure increased cooperation.
The Way Forward
54. We invite the General Assembly to establish an ad hoc open-ended working group of the General Assembly to follow-up on the issues contained in this outcome document, and to submit a report on the progress of its work to the General Assembly before the end of the 64th Session.
55. We encourage the President of the General Assembly to make the world financial and economic crisis and its impact on development a main theme of the General Debate of the 64th Session of the United Nations General Assembly.
56. We request the Economic and Social Council to:
(a) Consider the promotion and enhancement of a coordinated response of the United Nations development system and Specialized Agencies in the follow-up and implementation of this outcome document, in order to advance consistency and coherence in support of consensus building around policies related to the world financial and economic crisis and its impact on development.
(b) Make recommendations to the General Assembly, in accordance with the Doha Declaration of 2 December 2008, for a strengthened and more effective and inclusive intergovernmental process to carry out the financing for development follow-up.
( c) Examine the strengthening of institutional arrangements to promote international cooperation in tax matters, including the United Nations Committee of Experts on International Cooperation in Tax Matters.
(d) Review the implementation of the agreements between the United Nations and the Bretton Woods Institutions in collaboration with these institutions, focusing in particular on enhancing collaboration and cooperation between United Nations and BWIs, as well as on the opportunities for contributing to advancing their respective mandates.
(e) Consider and make recommendations to the General Assembly regarding the possible establishment of an ad hoc panel of experts on the world economic and financial crisis and its impact on development. The panel could provide independent technical expertise and analysis, which would contribute to informing international action, political decision-making and fostering constructive dialogues and exchanges among policy makers, academics, institutions, and civil society.