ACCESSIBILITY AT UNOG A A A A The United Nations in the Heart of Europe

ECONOMIC AND SOCIAL COUNCIL HOLDS HIGH-LEVEL POLICY DIALOGUE WITH INTERNATIONAL FINANCIAL AND TRADE INSTITUTIONS

Leonel Fernandez, Former President of the Dominican Republic, Gives Keynote Address
2 July 2013

The Economic and Social Council (ECOSOC) this morning held a high-level policy dialogue with the international financial and trade institutions on current developments in the world economy and heard a keynote address by Leonel Fernandez, former President of the Dominican Republic.  Participating in the policy dialogue were Pascal Lamy, Director-General of the World Trade Organization; Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development; Zhu Min, Deputy Managing Director of the International Monetary Fund; and Mahmoud Mohieldin, World Bank Group President's Special Envoy on the Millennium Development Goals and Financial Development.

Leonel Fernandez, former President of the Dominican Republic, said that the great recession had had an unprecedented cost on the global economy.  The total cost of the crisis may be even larger if its impact on innovation was taken into account, which constituted the main engine for economic growth.  Finance was meant to allocate resources for the real economy and should only act as an intermediary, at the service of innovation and therefore of development.  Appropriate regulations should be introduced at the global level, currently only national responses were provided to curb the financial sector. 

Nestor Osorio, President of the Economic and Social Council, in opening remarks, said that the short-term risks associated with the crisis in the eurozone still remained, and the economic slowdown in the world’s major economies had not diminished.  Meanwhile, new medium-term risks had emerged and posed a threat to global financial stability, as they had the potential to derail the feeble recovery of the world economy.  There was a need for concerted policy action at the international level to mitigate risks and ensure a sustained economic recovery.  Job creation and financing for sustainable development both required close attention.

Wu Hongbo, Under-Secretary-General for Economic and Social Affairs and Moderator of the High-level Panel, said that that there were three challenges which policymakers faced: how to strengthen economic recovery from the financial crisis; how to accelerate the implementation of the Millennium Development Goals; and how to advance the global development agenda beyond 2015.  Mr. Wu said that strengthening economic recovery and job creation should remain the main objectives of macroeconomic policy.  Bearing in mind that developed countries such as the United States, the eurozone and Japan had adopted different fiscal policies to tackle the crisis, what were the comments of the panelists on those different approaches?

Pascal Lamy, Director-General of the World Trade Organization, said that the trade situation in 2013 looked like a repetition of 2012 because most of the growth in international trade was closely correlated to growth as a whole, and remained below the long term trend.  What was clear was that the best short term solution was to stimulate the economy with low budgetary costs, for instance, by opening international trade more – which was the cheapest and swiftest way of promoting growth.  It was necessary to maintain attention on growth and continue to stress both quantitative and qualitative aspects.  The engine for reducing poverty continued to be increasing world growth.  The Millennium Development Goals up to 2015 constituted significant progress when it came to engaging the responsibility of the international community and mobilising it to achieving such goals, but they should not miss sight of accountability. 

Supachai Panitchpakdi, Secretary-General of the United Nations Conference on Trade and Development, said that the massive scale of the recession in the United States could not have been predicted, otherwise different measures would have been taken from the start in order to deal with what turned out to be the beginning of a devastating global financial crisis.  A major issue of concern was how they looked at economic matters and how they applied policy.  Interest rates should be kept at a low level in order to boost the economy but, at the same time, the possibility of excessive borrowing, which might create new economy “bubbles”, should be tackled.  It was imperative to look at the root causes of the global population’s discontent and to tackle those causes.   

Zhu Min, Deputy Managing Director of the International Monetary Fund, said that moderate growth was being forecast in the medium term but at the global level growth was slowing down and was uneven.  Low income countries had done well in previous years and showed strong growth, but the fundamentals supporting this growth had changed and low income countries should prepare for the upcoming challenges.  Innovation was becoming ever important.  External demand would be weak and thus the focus should be on domestic demand, addressing the supply side which came from innovation and competitiveness.  Investing to improve competitiveness was key to win the growth battle in the next 10 years.

Mahmoud Mohieldin, World Bank Group President's Special Envoy on the Millennium Development Goals and Financial Development, said that, despite the continued risks facing the global economy, developing countries continued to grow but conditions varied across regions.  The achievement of the Millennium Development Goals would require a good mix of sustained growth and effective social policies.  Climate change remained a major threat to the world community, and even though the global economy was transitioning towards a more stable period, growth remained subdued, especially in Europe.          

Nepal, Kuwait, India, Sudan, Indonesia and the Dominican Republic spoke in the interactive discussion.

The Council will resume its work this afternoon, at 3 p.m., when it will hear the national voluntary presentation of France, to be followed by the introduction of the reports of the Secretary-General and of the Committee for Development Policy and a general debate.

High-level Policy Dialogue with the International Financial and Trade Institutions

Documentation

ECOSOC has before it the World Economic and Social Survey 2013: Sustainable Development Challenges (E/2013/50).

ECOSOC has before it the World Economic Situation and Prospects as of mid-2013 (E/2013/70).

Opening Statement

NESTOR OSORIO, President of the Economic and Social Council, said that the short-term risks associated with the crisis in the eurozone still remained, and the economic slowdown in the world’s major economies had not diminished.  Meanwhile, new medium-term risks had emerged and posed a threat to global financial stability, as they had the potential to derail the feeble recovery of the world economy.  According to the latest forecast of the United Nations Department of Economic and Social Affairs, the world economy was only going to grow by just over 2 per cent, as it did in 2012.  In all of the world’s regions employment gains would remain low, which also meant a slower pace of poverty reduction and a slowdown in achieving the Millennium Development Goals.  The situation in the eurozone remained dire with unemployment record-high.  Growth prospects were stronger for developing countries than for developed countries, although growth was slowing down in emerging economies.  There was a need for concerted policy action at the international level to mitigate risks and ensure a sustained economic recovery.  Job creation and financing for sustainable development both required close attention.

Keynote Speaker

LEONEL FERNANDEZ, former President of the Dominican Republic, said that the great recession had had an unprecedented cost on the global economy.  Paper wealth lost by the United States homeowners totalled $ 9.1 billion dollars and consumption dropped much more severely than in any other recent economic meltdown.  Other sources indicated that developing and developed nations had seen 20 million jobs disappear since the beginning of the crisis and various nations had reached double-digit unemployment.  Furthermore, the crisis had a large spill-over effect in the developing world.  A total of 178 million children under five had difficulties growing as a result of lack of food and the number of people who had become undernourished worldwide had climbed to at least 1 million.  The total cost of the crisis may be even larger if its impact on innovation was taken into account, which constituted the main engine for economic growth.  Innovation played a major role to increase productivity and was the key driver to improve the human condition.  Four years after the burst of the housing bubble, the number of patent applications in most countries had yet to recover from its pre-crisis trend.  Investment in research and development by businesses were highly affected.  The credit crunch led to the fragility of the banking sector and made it difficult for business, especially small business, to find financial support for their activities and innovative projects.

Finance was meant to allocate resources for the real economy and should only act as an intermediary, at the service of innovation and therefore of development.  There was a strong need to mobilise financial resources to overcome the challenges faced, including in the health sector, the environment and the formation of human capital.  Appropriate regulations should be introduced at the global level, currently only national responses were provided to curb the financial sector.  Regulation was a challenge that should be undertaken globally, transparently and rapidly.  The International Organization of Securities Commission had proposed a framework that should be applied to assess the risks of financial instruments.    A dramatic innovation gap existed between developed and developing countries and all must be done to enable developing countries to participate in the knowledge-based innovation economy.  The Millennium Development Goals had been a fabulous instrument to focus the attention of the international community on poverty reduction.  Three out of the eight targets, on poverty, slums and water, had been met ahead of the 2015 deadline; but the crisis had slowed down progress on other targets.  The first report of the United Nations Task Force on the post-2015 development agenda underlined that “an essentially unregulated financial system” was a threat to development policies.  It was necessary to move towards a new economic paradigm to ensure that prosperity could be shared all over the world, which required a proper regulation of financial activities in order to make them an essential tool for development

Statement by the Moderator

WU HONGBO, Under-Secretary-General for Economic and Social Affairs and moderator of the panel discussion, said that there were three challenges which policymakers faced.  The first was how to strengthen economic recovery from the financial crisis.  Second, how to accelerate the implementation of the Millennium Development Goals.  And third, how to advance the global development agenda beyond 2015.  The world economy continued to recover from the global financial crisis which had erupted five years ago.  However, despite a measurable reduction of some of the systemic risks and despite an improvement in global financial markets, real economic activity worldwide remained subdued.  According to the latest report on the world economic situation, in 2013 the world economy would grow only by 2.3 per cent, the same sluggish pace at which it grew last year, and only a mild pick-up was expected in 2014.  Mr. Wu said that strengthening economic recovery and job creation should remain the main objectives of macroeconomic policy.  Bearing in mind that developed countries such as the United States, the eurozone and Japan had adopted different fiscal policies to tackle the crisis, what were the comments of the panelists on those different approaches?

Statements by the Panellists

PASCAL LAMY, Director-General of the World Trade Organization, said that the trade situation in 2013 looked like a repetition of 2012 because most of the growth in international trade was closely correlated to growth as a whole, and remained below the long term trend.  What was clear was that the best short term solution was to stimulate the economy with low budgetary costs, for instance, by opening international trade more – which was the cheapest and swiftest way of promoting growth.  It was necessary to maintain attention on growth and continue to stress both quantitative and qualitative aspects.  The engine for reducing poverty continued to be increasing world growth.  The Millennium Development Goals up to 2015 constituted significant progress when it came to engaging the responsibility of the international community and mobilising it to achieving such goals, but they should not miss sight of accountability.  The World Trade Organization had monitored the emergence of protectionist trends following the crisis and, while visible, they had been contained but it was important to maintain a high level of vigilance.  Concerning efforts to address future obstacles to international trade, Mr. Lamy highlighted that non-tariff barriers, which aimed at protecting consumers from certain risks through norms and standards, were increasing as development moved forward; they were different from one market to another and posed several challenges to trade.  Opening up and de-regulating were not equivalent and financial regulation was possible in a context of open trade. 

SUPACHAI PANITCHPAKDI, Secretary-General of United Nations Conference on Trade and Development, said that the massive scale of the recession in the United States could not have been predicted, otherwise different measures would have been taken from the start in order to deal with what turned out to be the beginning of a devastating global financial crisis.  A major issue of concern was how they looked at economic matters and how they applied policy.  Mr. Supachai wondered how effective were the “easing policies” which had been applied in the past few years.  Huge amounts of money had been injected into the system in order to give it liquidity, yet there had been no tangible results yet.  Job creation remained a major issue and, in that respect, clearer targets needed to be set and achieved by policymakers.  A large number of unemployed persons around the world had become so disillusioned that they had given up seeking employment altogether.  Interest rates should be kept at a low level in order to boost the economy but, at the same time, the possibility of excessive borrowing, which might create new economy “bubbles”, should be tackled.  The slow growth and lack of expenditure in many countries around the world had had a deflationary impact and had caused a drop in global demand, an important issue which required close attention.  It was imperative to look at the root causes of the global population’s discontent and to tackle those causes.   

ZHU MIN, Deputy Managing Director of the International Monetary Fund, said that moderate growth was being forecast in the medium term but at the global level growth was slowing down and was uneven.  There were concerns about the growth trends in a number of European countries and in the United States growth showed moderate rates.  Emerging markets growth rates had dropped in previous months, from Brazil to China, roughly 1 per cent down.  Because of monetary policies announced, the volatility of financial markets had increased and in the medium term would probably stay high.  What did this mean to low-income countries?  Low income countries had done well in previous years and showed strong growth, but the fundamentals supporting this growth had changed; commodity exports were slowing as these had been heading to high-income countries; the terms of trade improvement had been one of the major drivers of growth in previous years but was now ending; and local infrastructure investments promoted by liquidity and low interest rates was also about to change, in particular given the volatility of financial markets.  Low income countries should prepare for the upcoming challenges and the low growth external demand – review buffers and be conservative.  Concerning the global structure change and innovation, he said that in an adverse economy consumption as a percentage of GDP had increased and therefore investment had decreased.  Innovation was becoming ever important.  External demand would be weak and thus the focus should be on domestic demand, addressing the supply side which came from innovation and competitiveness.  Investing to improve competitiveness was key to win the growth battle in the next 10 years.

MAHMOUD MOHIELDIN, World Bank Group President’s Special Envoy on the Millennium Development Goals and Financial Development, World Bank, said that despite the continued risks facing the global economy, developing countries continued to grow but conditions varied across regions.  The achievement of the Millennium Development Goals would require a good mix of sustained growth and effective social policies.  Climate change remained a major threat to the world community, and even though the global economy was transitioning towards a more stable period, growth remained subdued, especially in Europe.  Growth in the Middle East and North Africa was also very weak, mainly because of political instability in the region.  There were encouraging signs in Sub-Saharan Africa, but it was questionable whether economic growth there was resulting in job creation.  There was also a risk that monetary easing policies in some regions of the world might create problems hard to resolve later on.  Concerning the Millennium Development Goals at the global level, four targets had been fully met by 2010, which was encouraging.  Nonetheless, much work remained to be done, especially in terms of eradicating poverty.  The achievement of the Millennium Development Goals at country level, on the other hand, left a lot to be desired.  Mr. Mohieldin stressed the importance of data collection and availability and said that more needed to be done to collect reliable data to be used for monitoring progress and for ensuring accountability.          

WU HONGBO, Under-Secretary-General for Economic and Social Affairs and moderator of the panel discussion, said that there was much to be done.  In the upcoming session of the General Assembly, in September, the President would organise a special event on the Millennium Development Goals and the United Nations Secretary-General would deliver a speech analysing the current situation and giving a wake up call to all Member States about the need to double efforts.  Concerning the relation between the Millennium Development Goals and future sustainable development goals, two cornerstones of the development agenda would concern the eradication of poverty and sustainability.  Although the first Millennium goal concerning the reduction extreme poverty had been achieved, a large number of people continued to live in extreme poverty.  Concerning sustainability, Mr. Wu hoped that the Millennium Development Goals would be carried over and continue to be implemented as part of the new framework.  The open-ended working group tasked with preparing a proposal on the sustainable development goals had made progress.  The working group was still at the stage of stock-taking and hopefully detailed negotiations would soon produce a set of development goals.  Financing for sustainable development was a concern for many countries and the Rio+20 outcome document had provided a mandate to set up a inter-governmental group of experts to address financial matters.  Mr. Wu hoped that this group of experts would be able to present a set of strategies to the international community by September next year. 

Discussion

Nepal said it was essential to enhance the capacity and international competitiveness of least developed countries in order to help them to sustain the momentum in achieving the Millennium Development Goals.  Investors should recognize the huge potential of the least developed countries and should invest in those countries, while innovative sources of financing should be explored in order to boost financing.  In addition, countries emerging from conflict, such as Nepal, required reconstruction and recovery packages. 

PASCAL LAMY, Director-General World Trade Organization, responding to Nepal, said that concerning capacity building, after the trade initiative taken in 2005, the volume of resources going to trade capacity building had significantly increased.  The proportion of this going to least developed countries had constantly increased and while a plateauing of the volume had been seen, the least developed countries’ share had increased.  The reality was that except for one member of the Organization for Economic Co-operation and Development (OECD), all other members had already been given duty-free quota-free access to least developed countries.  Non-OECD members such as China and Indonesia had announced that they were moving in a similar direction.  The case of the United States was particular, as least developed countries already enjoyed some advantages with it. 

Kuwait said that it was not enough to speak about economic development without focusing on economic and growth inclusion among citizens.  Different countries had seen growth without ensuring inclusiveness but in some places like Tunisia revolutions had occurred because inclusion did not accompany growth rates.  Concerning the need for financial resources for sustainable development, this had to be attached to good governance and transparency and administrative reform within countries were also necessary to reap the benefits from sustainable development. 

India said the main goal of the Millennium Development Goals should be to ensure a decent quality of life for all persons on the planet, which would also help the global economy to grow further.  In terms of economic growth, the silver lining for the entire world lay in the developing countries.  A reform of international economic governance structures was needed, because action at the domestic level without measures at the international level could not be as effective.  Sudan said that greater emphasis should be placed upon the needs of the least developed countries, which were most affected by everything that was happening on the world stage today.  The question of free trade as a means of boosting economic and social development should be considered.  Sudan greatly valued the role played by the private sector in the economies of the developing countries, and believed that the private sector should play an even greater role in the case of countries still struggling to attain the Millennium Development Goals. 

Indonesia highlighted the importance of promoting coherence between social and environmental policies and macroeconomic and fiscal policies, and the Economic and Council had an important role to play.  The Council should strengthen its interaction with global financial institutions in the context of current challenges demanding proactive approaches.  Indonesia believed that trade was a key driver for growth and development.  Trade was key for recovery and sustained growth – an open and balanced multilateral trading system should garnish trust.  Dominican Republic said that the presentations did not suggest a positive outcome.  A structural change was needed on how aid for development was financed.  International financial institutions must put in place instruments that could channel resources to those countries that had potential for growth and should focus on increasing liquidity in developing countries.

ZHO MIN, Deputy Managing Director, International Monetary Fund, said that the global situation was deteriorating in terms of gender equality, so structural reform was needed.  He agreed with India that low-income countries should be granted policy space, and said that the world should pay attention to those countries because they were the ones driving economic growth.  Regarding the reform of international economic governance structures, a point raised by Indonesia, India and the Dominican Republic, he said that that was an important point and that reform would help international bodies to maintain their legitimacy.   

MAHMOUD MOHIELDIN, World Bank Group President’s Special Envoy on Millennium Development Goals and Financial Development, World Bank, said that the inclusiveness of growth, a point raised by Kuwait, was a particularly important one, and stressed that progress made in issues relating to inclusiveness should be monitored closely.  He also pointed out that growth was not necessarily accompanied by inclusiveness, and said that there was a great deal of sectoral and gender discrepancy in many developing countries which were experiencing growth. 


For use of the information media; not an official record

ECOSOC13/004E


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