31/10/2003
World Bank Chief Attacks Imbalance between Defence and Development Spending

The World Bank is concerned about the imbalances in the global system especially in instances in which defence spending reached $800 billion, but development assistance only $56 billion, James Wolfensohn said this week in the first address by a World Bank President to the United Nations General Assembly.

The statistics were troubling when some $800 billion was spent on defence budgets and only $56 billion on official development assistance (ODA), an amount topped by migrant worker remittances of $80 billion, he said on the second day of the Assembly's two-day ministerial dialogue on financing for development.

The Assembly's work, debates and discussions on such issues as sustainable development, poverty eradication and the environment following the development summit that took place in Monterrey, Mexico, in March 2002 had given international financial institutions a good idea of where implementation of Monterrey stood, Mr. Wolfensohn said.

The World Bank, or the International Bank for Reconstruction and Development, was created at Bretton Woods, New Hampshire, in 1945 to help finance the reconstruction of post-war Europe and made its first loan in 1947. The stated goals of the Washington, D.C.-based institution since then have been to strengthen national economies and expand markets in the effort to reduce poverty.

Mr. Wolfensohn spoke after UN Secretary-General Kofi Annan told the Assembly that almost $200 billion in resources had moved to rich countries from poor countries last year.

The other Bretton Woods institution, the International Monetary Fund (IMF), works mainly on balance of payments and currency stability problems.

IMF Managing Director Horst Köhler told the Assembly the prospects of recovery for advanced economies have been improving.

"This is good news for emerging market and developing countries, as well, which have also benefited from a supportive financial market environment," he said.

One of the risks remaining, however, was the world economy's excessive dependence on the United States, which has given rise to current account imbalances, he said.

Mr. Köhler said he believed that correcting those imbalances in an orderly manner should be the primary objective of international economic policy. He recommended a cooperative approach that would involve all major countries and regions in strengthening the domestic forces of growth, especially in Europe and Japan.

"Sound and sustained global growth remains the single most important condition for making decisive progress in the fight against poverty," he said.

As a partner in working on the Monterrey Consensus, "we are strengthening the framework of rules for the global economy, in collaboration with public and private sector institutions, by developing and implementing international standards and codes," Mr. Köhler said.

Speaking at the outset of the session, General Assembly President Julian Hunte of St. Lucia called for a pragmatic discussion so that a realistic assessment could be made of progress made "and the urgency with which we must proceed with the tasks ahead."

"There are nascent and encouraging signs pointing towards the resolution of the debt crisis, with ideas such as a 'comprehensive statutory approach to restructuring the external debt of governments' and the use of collective action clauses now being discussed," he said.

"For their part, many developing countries and countries with economies in transition are working towards the creation of an enabling environment at the national level, by strengthening economic governance and enhancing democratic participation, as called for in the Monterrey Consensus."

Civil strife, military conflict and lack of basic health care were among the factors hindering development in some of the most vulnerable populations, Mr. Hunte said.

He questioned whether the United Nations system, for its part, was positioned to have an adequate impact on the development funding process. "To arrive at pertinent answers," he asked whether the donor agencies were improving their coherency and efficiency and whether an adequate effort was being made to engage civil society and the private sectors nationally and internationally.

"And in respect of the General Assembly and the Economic and Social Council (ECOSOC) - what should be their role in tracing progress made and proposing further steps for implementing the commitments and agreements made at Monterrey?" he said.

Mark Malloch Brown, Administrator of the UN Development Programme (UNDP), said today's world was more unequal and more insecure than ever.

In a world of six billion people, one billion owned 80 per cent of global wealth, while another one billion struggled to survive on less than $1 per day, he said.

Poverty on this scale was no longer inevitable, Mr. Malloch Brown said, because the world possessed the means to achieve the Millennium Development Goals (MDGs) of halving poverty, removing hunger, educating every boy and girl and stemming the global crisis in health care and the environment by 2015.

What was too often missing was the political will to accomplish these goals, he said.

UNDP was working to coordinate, through the resident coordinator system at the country level, the Common Country Assessments (CCA) and UN Development Assistance Frameworks (UNDAF), Mr. Malloch Brown said. UNDP was also working closely with the World Bank to integrate the MDGs into Poverty Reduction Strategy Papers (PRSPs) that the government of each country could claim and implement.

ECOSOC President Gert Rosenthal of Guatemala said he was convinced that the Conference on Financing for Development in Monterrey was the most significant contribution the United Nations had made to the development effort in its history.

Only the United Nations was capable of bringing together so many Heads of State and Government at the same time and, perhaps, only the United Nations could have elaborated as lucid a road map for development as the Monterrey Consensus.

That Consensus had surpassed mere rhetoric in setting out what must be done, who had to do it, how domestic and international responsibilities should interact and how to organize for proper implementation, Mr. Rosenthal said. It offered clear guidelines for policymakers at the national and international levels, as well as a follow-up mechanism that the Assembly should now refine.

The first ECOSOC post-Monterrey meeting with the Bretton Woods institutions last spring emphasized increasing coherence, cooperation and coordination in the implementation of the Monterrey Consensus, he said.

The accent on partnerships reflected the spirit of cooperation in the Charter of the United Nations, Mr. Rosenthal said.

World Trade Organization (WTO) Deputy Director-General Francisco Thompson-Flores said the setback in the Cancún Round of trade negotiations in September 2002 proved to be a disappointment, but was not a collapse.

WTO was already exploring ways to move forward; the first step being to identify the areas of greatest difficulty at Cancún and to get people discussing them again, he said.

Rubens Ricupero, Secretary-General of the UN Conference on Trade and Development (UNCTAD), said that one of the most important aspects of the process that produced the Monterrey Consensus was its holistic approach to the problems of financing development.

It had not, however, provided a blueprint that guaranteed economic development, he said. It was not a point of arrival, but a point of departure for an ongoing process that must keep abreast of the rapid changes in the global economy.

In assessing the progress made so far, it was important to bear in mind that the impetus for Monterrey was the negative net resource transfers by many Latin American countries in the aftermath of the 1980s debt crisis - what had come to be called the "lost decade" of development.

This year was likely to be the seventh year the world would experience negative net flows of financial resources from developing to developed countries, thereby suggesting the world may be in another "lost decade," he said.