COMMENTARY
INTERVIEWS
SPECIALS
CHAT
ARCHIVES

Globalisation worries developing countries

Developing countries, including India, have expressed their anxiety about the potential costs and risks of globalisation. They have sought the establishment of a task force to review the capacity of international financial institutions' response to crises induced by large-scale capital movements.

This was expressed in a communique by finance ministers of the Group of 24 Developing Countries (G-24), who met in Washington on April 15 night to finalise its strategy for the three-day annual spring meeting of the World Bank-International Monetary Fund. The ministers expressed their concern at the weaker growth performance of the world economy, deflationary pressures generated by the Asian crisis, and the challenges posed by the uncertainties in the wake of the introduction of a new currency, the euro.

These developments called for stronger international cooperation to improve the functioning of the global economy. It was important to to reduce the potential costs and risks of globalisation for the participants and to ensure that the potential benefits accrue to all countries, the communique added. It wanted the task force, comprising industrial and developing countries -- with representation based on the principle of inclusion, not exclusion -- to go into the appropriateness of the conditions prescribed by the multilateral financial institutions to deal with such crises.

The communique said the task force should also look into the sharing of the costs of post-crisis financial stabilisation among private creditors, borrowers, and governments and more effective surveillance of major industrialised countries, affecting key international monetary and financial variables, including capital flows.

India was represented by its finance minister Yashwant Sinha at the G-24 meeting. Algerian finance minister Abdelkarim Harchaoui was in the chair. World Bank president James Wolfensohn, IMF managing director Michel Camdessus, and United Nations undersecretary general Nitin Desai were also present.

The developing countries made out a strong case for their increased representation at the decision-making level of international financial institutions to properly reflect their growing role in the world economy, including the thorough revision of the bases determining the voting power in these institutions.

They stressed the need to enhance the role of special drawing rights in the international monetary system to achieve greater stability, particularly in view of the prospect of an emerging polarisation among three major currencies -- dollar, yen, and the expected euro.

The communique said the IMF's central role in the international monetary system and the deterioration of its liquidity position emphasised the need to increase the IMF's resources.

They wanted the IMF to play a leading role in promoting an orderly and gradual liberalization of capital movements, while being sensitive to the particular situation of each country.

They welcomed the principles expressed in the convention on combating bribery, asserting that fight against corruption must be carried out on the basis of symmetry with regard to the responsibility of both developed and developing country governments.

They expressed their deep concern at the fall in the level of official development assistance from the developed to the developing countries to 0.25 per cent of their GNP in 1996, the lowest level in the last three decades.

The communique said the decline came at a time when the poorest countries were in need of ODA to fight poverty. In this context, they reiterated their call on the international donor community to reverse this trend to achieving the 0.7 per cent goal.

UNI