Mon, 29 Sep 2003

New global equilibrium

The World Bank and International Monetary Fund (IMF) annual meetings ended in Dubai last week with an increasingly urgent call for more equality between rich and poor countries -- a more equitable global system.

This message was a surprise indeed as it came from two multilateral institutions where the voting power is based on the size of share ownership and is, consequently, always controlled by the developed countries.

However, those closely monitoring the proceedings of the meetings would have expected such conclusions because the tone of the conference had clearly been set by World Bank President James D. Wolfensohn in his opening speech.

Wolfensohn reiterated the urgent need for a new balance between developed and developing countries on aid and trade, a new global equilibrium. He called for more concerted efforts by the developed countries to help reduce extreme poverty in the developing nations, warning that peace and prosperity in the world would be sustainable only with a more equitable global system.

It was not simply a coincidence that Indonesia's President Megawati Soekarnoputri conveyed a similar message to world leaders in New York last week. Addressing the UN General Assembly, Megawati warned essentially that injustice in the global system was one of the root causes of terrorism.

There is virtually nothing new in Wolfensohn's message, nor in Megawati's warning. The developing nations have been fighting since the mid-1970s for a similar course, which was then alternately called either a new world order or new economic order, to correct what they criticized as a grossly inequitable global system.

However, these latest warnings purveyed a stronger sense of urgency, especially in view of the collapse of the recent Cancun trade talks held as part of the Doha round of global trade negotiations under the World Trade Organization (WTO).

Finance ministers from developing countries who addressed the meetings in Dubai referred to the Millennium Development Goals (MDGs), notably those in cutting absolute poverty by 50 percent in 2015, and contended that no progress had been made since the launching of the MDGs in 1990.

The World Bank chief drove the message home in a harsher tone when he pointed to the irony whereby the developed countries annually gave only US$56 billion in development assistance to the developing nations, but at the same time spent US$300 billion on farm subsidies and $600 billion on defense.

It is indeed imperative now for the developed countries to increase their overseas development assistance (ODA) to achieve 1 percent of their gross domestic product, the minimum level set more than three decades ago. More financing is required to achieve the MDGs, which include universal primary education, a reduction in child mortality, improvements in maternal health and environmental sustainability.

However, much more important than mere financing, the developing nations need more market access, which in the MDGs is defined as a global partnership for development.

This is what the developing nations have been striving for since the launching of the Doha round of trade talks in 2001. However, as the WTO conference in Cancun earlier this month painfully showed, the developed countries have yet to demonstrate their commitment to true global partnership with the developing nations.

True, aid is necessary to help accelerate the development of physical infrastructure and human resources in developing nations. Likewise, market access is essential to help poor countries sell their products to gain better earnings. But they are not enough to achieve the MDGs in poor countries.

The developing nations need to put up their share by implementing reforms, building good governance, establishing sound macropolicies and enhancing people's participation in the development process.

Experience has shown that development aid, market access and policy reform always interact and reinforce each other in the development process.

Hopefully, the strong message from the World Bank-IMF meetings in Dubai will serve as another wake-up call for the international community to be more determined to promote a true global partnership, fully realizing that all its members are in one boat, in an interdependent world.