Whither Conference on Financing for Development?
The already-agreed draft outcome of the upcoming international Conference on Financing for Development in Mexico represents a damaging surrender by the UN to the dictates of the dominant neoliberal ideology, prompting Chandrakant Patel to pose the following question: What exactly will the heads of state and ministers do at Monterrey, in what has now effectively become a non-event?
GENEVA: The United Nations Conference on Financing for Development (FfD) will take place in Monterrey, Mexico in March, with the Conference expected to approve a declaration, predictably christened the Monterrey Consensus, that was finalized in late January in New York by a Preparatory Committee.
The organizers anticipate participation by heads of state and ministers of finance and of foreign affairs at the Monterrey meeting. In order to ensure such participation, however, the UN Secretary-General has designated as his Special Envoys Mr. Michel Camdessus, the former Managing Director of the IMF, and Mr. Trevor Manuel, Minister of Finance of South Africa. Not surprisingly, the initiative has been condemned by NGOs as “callous” and “a ringing endorsement of the market-friendly orthodoxy”.
After four years of meetings involving governments, civil society, business and international organizations, does the consensus document measure up to the expectations of developing countries, the demandeurs of the Conference?
The launch of the FfD process under the umbrella of the UN General Assembly became possible in large part as a fallout of the financial and development crisis that engulfed East Asia beginning mid-1997. The spread of the crisis to other regions and to the financial sector of developed countries (the near-collapse of one of the largest US hedge funds, Long-Term Capital Management, in 1998 being a prominent case in point) helped convince the official financial establishment that a review of the global financial architecture was overdue.
At that time, the US President Bill Clinton went so far as to suggest that the crisis was “the greatest financial challenge facing the world in the last 50 years.”
The agreement to initiate discussions in the UN in 1997/8 was seen in some quarters as the possible launch of a process that would lead at some point to a reform of the financial and monetary systems. In a report to the Preparatory meeting of the Conference, the UN Secretary-General had stated, “The opportunity for a detailed discussion in the United Nations is a historic one.”
Even if such optimism was misplaced, given the gridlock the G-7 exercises over the management of the global economy and its institutions, it was nevertheless believed that involvement of the General Assembly in the consideration of systemic issues and those of global governance was an important precedent. If it succeeded, it would acknowledge the UN as primus inter pares (the original intention of the UN Charter) and the most democratic and transparent of the global institutions.
Against this background, the Co-chairman of the PrepCom, Ambassador Shamshad Khan of Pakistan, has lauded the outcome, the Monterrey Consensus, as being “one of the rarest of PrepComs that could accomplish its task with consensus.” Setting aside the hyperbole characteristic of such occasions, an analysis of the content of this ‘consensus’ suggests a setback for the efforts of developing countries to assert the primacy of the UN in promoting development cooperation and setting the development agenda. Equally damaging has been the setback to the cause of systemic reform and progress towards attainment of the Millennium Summit goals.
The document prepared for the Conference contains 64 paragraphs over 14 pages of text and covers six substantive subjects: domestic resources, private flows, official flows, international trade, debt and systemic issues. A final section titled “Staying Engaged” deals with the follow-up process.
A close reading of the text suggests that a very large number of the 64 paragraphs are either hortatory or homilies about good housekeeping or best-endeavour promises. At the same time, however, the text taken as a whole unmistakably advocates a neoliberal model of development long promoted by Washington-based bodies and now, it seems, by the UN as well. This, the New York-Washington consensus, represents a damaging surrender by the UN to the dictates of the current, dominant ideology.
During the negotiations, developing countries attempted, with varying degrees of success, to limit the damage by rejecting many of the more egregious positions advanced by developed countries. In the area of international trade, for example, the European Union attempted to inject language supportive of its position on the four “Singapore issues” in the text, an effort that was thwarted by the Group of 77 and China and condemned as “reprehensible” by the African NGO caucus.
However, with the support of the Conference Bureau, the developed countries have succeeded in promoting their agenda and in refusing to negotiate the many proposals put forward by the G77 and the NGO Caucus.
If the so-called consensus outcome in New York was not of the order of the coup de grace delivered in Doha, at least in form, orientation and implications for development, it comes fairly close to the Doha outcome.
Several factors made the task of engineering the outcome easier and to the liking of developed countries. In the first place, the negotiations were based on a framework preset by a report of the UN Secretary-General last year (A/AC.257/12).
In making a large number of recommendations on issues before the PrepCom, the Secretary-General’s report delineated the PrepCom’s work and consequently prejudged the outcome. Instead of being driven by member states and especially the demandeurs of the Conference, the process and the product were both hijacked ab initio by a report whose content was largely designed by the staff of the Bretton Woods institutions and the WTO.
Secondly, in asking the former President Zedillo of Mexico to head a panel of distinguished experts and prepare a report for the Conference, the Secretary-General perhaps unintentionally succeeded in dividing the G77: the Zedillo report went even beyond the much-criticized report of the UN Secretary-General in support of the neoliberal model. Some members of the Zedillo group later said privately that the entire report had been already prepared by the secretariat with a consultant representing the Washington Consensus view, hence a very general endorsement, with the ‘not all members agree with every recommendation’ caveat.
The Zedillo report was soon followed at the end of the year by a draft negotiating text (A/AC.257/32 of 7 December) prepared by a Facilitator at the request of the Bureau and which now, with relatively minor changes, has emerged as the Monterrey Consensus.
The adoption of a declaration weeks before the Conference was also due to the pressure tactics employed by the Bureau of the Conference and the United States, in particular. It was conveyed to Third World delegates in unmistakable terms that if the PrepCom did not adopt a clean consensus text in January, some of the heads of state, notably the US President, would not participate.
Whether the threats had the desired effect or not will never be known with any certainty; the contrived nature of the text suggests, however, that key negotiators were indeed pressurized.
African NGOs, on the other hand, have raised the question whether it is even useful for their heads of state to attend a Conference whose outcome has been predetermined by the organizers from the very start of the process.
The main elements of the consensus document are:
* On domestic resource mobilization (paragraphs 7-17), despite developing countries’ doubts about the role and value of an international conference on finance to promote domestic resource mobilization, the Monterrey document makes detailed proposals on matters almost entirely concerned with national policies.
The text covers the by now familiar set of prescriptions on governance (“essential for sustainable development”), corruption (“a priority”), good housekeeping (“will pursue appropriate policy and regulatory framework”), and pursuit of “sound macroeconomic policies” together with homilies on micro-finance and micro-credit, credit for small and medium-size enterprises, mortgage finance, development banks, etc.
* The section on mobilizing private international resources for development (paragraphs 18-22) makes the orthodox case for promoting foreign direct investment and refers to it as “a vital complement to national and international development efforts”. It places the onus of attracting such flows almost entirely on recipients by urging them to continue “efforts to achieve a transparent, stable and predictable investment climate.”
To achieve such goals, the document promises more technical assistance and support for capacity-building. Nowhere does the text acknowledge the possible negative consequences of FDI on employment, the balance of payments, income distribution or the environment.
* In section three dealing with international trade (paragraphs 23-31), the heading titled “International trade as an engine for development” betrays the ideology of the paragraphs that follow. The case for trade liberalization is advocated without acknowledging possible consequences of such a process on domestic industries and national development strategies. The text welcomes “the WTO’s decisions to place the needs and interests of developing countries at the heart of the WTO Work Programme.”
Gratuitous references to the WTO in the text are unlikely to assuage the concerns of many developing countries that increasingly view its decisions and processes as severely circumscribing their development options.
* In an environment of falling official development assistance (ODA), projected to continue to decline even further over the foreseeable future, the consensus text (paragraphs 32-40) largely restates the non-binding and best-endeavour commitments contained in texts such as the Brussels LDC Conference. Much of the negotiating effort in this area was devoted to persuading developed countries to make good on the commitments they had made at the highest level in the Millennium General Assembly to halve poverty and hunger by 2015.
In support of this, the UN and World Bank secretariats have conjured up a sum of $50 billion per year to cover the additional resources required for achieving the 2015 Millennium goals. This target, which has been strongly advocated by the Secretary-General, conveniently corresponds to half the ODA target of 0.7% of national income. The US’ refusal to accept this or any other target gives this section of the document a surreal character as it “underline[s] the importance of undertaking to examine the means and time frames for achieving the targets and goals.”
* Perhaps the most contentious issue before the PrepCom was that of debt and its treatment in the text drafted by the Facilitator. This was one area where many developing countries and NGOs believed that some progress was possible. In the event, the text fully endorses the discredited HIPC (Heavily Indebted Poor Countries initiative) approach and calls for poorer developing countries instead to “take the policy measures necessary to become eligible for the Initiative”.
As regards arrangements for debt reorganization, opposition from the major developed countries and some middle-income developing countries meant that the text remains silent on new and innovative arrangements for debt reorganization. Proposals put forward for sometime now by the UN Conference on Trade and Development (UNCTAD) on debt standstill and related institutional/procedural innovations are widely supported by developing countries and NGOs but were not acknowledged in the consensus text.
The intentions of the creditors to continue to exercise a tight leash over debtor countries are nowhere clearer than in the text which states that debt relief be pursued “vigorously and expeditiously including within the Paris and London Clubs and other relevant fora.”
* Regarding systemic issues (paragraphs 46-59), it became clear from the start of the FfD process that developed countries would not entertain a substantive consideration of systemic issues and issues of reform. Since the breakdown of the par value system in 1971 and the series of ad hoc adjustments to the IMF’s Articles designed to ex post rationalize the collapse of the Bretton Woods system, no coherent effort has been attempted towards a reform of the system.
For many developing countries, the main rationale for going through the FfD process was the prospect, however remote, of some progress towards systemic reform. The East Asia experiences and the havoc wreaked by unfettered capital flows, IMF policies and functioning of the exchange rate (non-)system on their development now appear to be matters of history. The unravelling of the IMF/Argentina model at the very time the PrepCom was meeting failed to elicit any concern among developed countries.
The policy of blaming victims for their problems now appears to have been sanctioned by the Monterrey Consensus. A related message of this section appears to be: if it ain’t broke don’t fix it. Notwithstanding the unsubstantiated claim in paragraph 47 that “[i]mportant international efforts are underway to reform the international financial architecture”, none of the issues of concern to developing countries, including decision-making, review of IMF quotas, provision of increased unconditional liquidity, reform of IMF facilities, SDR allocation and the IMF/World Bank conditionalities, are meaningfully addressed. The result is a document that gives a UN imprimatur to the policies of the Bretton Woods institutions, encouraging them to continue to do more of the same.
* The final section “Staying Engaged” (paragraphs 60-64) contains recommendations concerning a follow-up to the FfD process. The intention of this section is to provide room for the UN to continue to play the role of primus inter pares in setting the development agenda. In presuming to keep the dialogue on track at the UN, it is reluctantly acknowledged by the New York-based officials and delegations that a second-best solution may be preferable to one that closes the door to a role by the General Assembly.
The tortuous arrangements proposed for follow-up, built “upon the successful experience of the Conference and the process leading up to it” (paragraph 61), include the usual strictures on coherence, coordination and interactions between the General Assembly, UN Economic and Social Council (ECOSOC), WTO, World Bank and the IMF. This effort is now expected to be supported by new reports and reporting arrangements as well as the provision of “effective secretariat support.” By 2005, a new International Conference is “to review the implementation of the Monterrey Consensus”.
Since there is no binding or firm commitment in the entire document, the question arises: exactly what will a new International Conference do? More immediate, however, is the question: what will the heads of state and ministers of foreign affairs and of finance do at Monterrey? In order to encourage and ensure the participation particularly of finance ministers who are known to have avoided close encounters with the FfD process, the Secretary-General’s two Special Envoys are to encourage their finance counterparts to become engaged in the process and attend the Conference. It remains to be seen whether their roving diplomacy will succeed in drawing them to what has now become a non-event. Since the Monterrey Consensus has already been adopted in New York, many are now asking, what value will their presence add to the event?
As regards arrangements at Monterrey, it has been decided that the meeting will have 12 roundtables over the five official working days of the Conference covering three themes: “Partnerships in Development”, “Coherence on Development” and “FfD Looking Forward”. The roundtables, high-level segments, ministerial-level segments and head-of-state-level segments appear to follow the now familiar pattern of UN meetings, particularly those of UNCTAD and ECOSOC. These encounters and roundtables have become an expensive and often embarrassing ritual promoted by their organizers as reborn North-South dialogue. The Monterrey roundtables are also expected to involve agency heads, prominent and not-so-prominent academics, business representatives and NGOs.
Irrespective of the levels of participation and indeed of the value of the Conference, for the host-country organizers the event will be no more than a curtain raiser to the more important business of hosting the next WTO Ministerial meeting. (SUNS5056)
Chandrakant Patel, a retired UNCTAD official with experience in LDC programmes and technical assistance activity, represented the African NGO Southern and Eastern African Trade Information and Negotiations Initiative (SEATINI) at the final FfD PrepCom in New York.
TWE No. 274 (1-15 Feb 2002)