Multi-Stakeholder Consultation on Financing for Development 2004/ 2005

Gewerkschaftskoordination International

Multi-Stakeholder Consultation on Multi-Stakeholder Consultation on Financing for Development 2004/ 2005Financing for Development 2004/ 2005

Rules for Global Finance that promote sustained development

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Promoting Sustained DevelopmentPromoting Sustained Development About New Rules for Global Finance Coalition

International Financial Architecture Ties to Development Progress so far

Financing for Development Agenda & Process

Analysis of Problems Unstable and Insufficient Capital Flows Distribution of Capital Institutional Oversight

Seeking Solutions: Systemic Issues Consultative Process

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About the New Rules Coalition

Started in 1999 in response to the Asian crisis with the objectives of developing reform proposals for the global financial architecture and preventing future financial crises.

Members of the New Rules Coalition are academics, activists, and policy makers from developed and developing countries, from religious, labor, development, and environmental perspectives

New Rules employs inclusive dialogues to mobilize its expert and experienced members to analyze existing financial institutions and policies and to propose alternatives that will bring about more equitable and environmentally responsible results.

New Rules has been actively engaged in the Financing for Development Conference and its Follow-up process

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International Financial Architecture and Development

The wave of currency and banking crises that swept through developing countries in the 1990s made it clear that fundamental reforms were required in the international financial system.

Besides the objective of achieving financial stability, an equally important goal is the provision of adequate capital flows (private+ public) to developing countries.

A development -oriented reform of the financial system would not only benefit developing countries. Strong growth in developing and emerging market economies provides growing markets for developed country exporters and profitable opportunities for developed countries investors.

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What progress so far

Progress to date on these issues has suffered serious problems

Reforms have focused excessively on making changes to financial sectors in developing countries. Far less attention has been given to international institutions and developed countryfinancial markets.

The design and implementation of financial system reforms have been uneven and asymmetrical in several key aspects, e.g., problematic governance in key institutions.

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Financing for Development (FfD)

•In this regard the Monterrey Consensus provided for the first time an agreed comprehensive and balanced international agenda and an on-going process, which should be used to guide and evaluate reform efforts.

• The sections of the Consensus on systemic issues are particularly relevant to the reform of the international monetary and financial system in support of development.

•New Rules will organize in close cooperation with the Financing for Development Office (FFDO) a series of multi-stakeholder consultations to examine issues, exchange information and promote best practices in the area of systemic issues

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Key Problems: Unstable and Insufficient Capital Flows

For too many developing and emerging market countries, international financial capital flows at times have been too volatile and at others have been too insufficient to promote sustained development. This is the case for FDI, portfolio, bank loans, and even official sources of capital.

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International Capital: Important But Not Dependable

All : GDP/Cap Flows

0

1

2

3

4

5

6

7

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

-$50

$0

$50

$100

$150

$200

$250GDP

Cap Flows, $billions

Compares GDP of emerging market and developing countries including selected advanced economies and capital flows of Emerging market and developing countries including selected advanced economies.

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Africa: GDP/Cap Flows

-2

-1

0

1

2

3

4

5

6

7

-$2

$0

$2

$4

$6

$8

$10

$12

$14GDP


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Latin America: GDP/Cap Flows

-3

-2

-1

0

1

2

3

4

5

6

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

-$20

$0

$20

$40

$60

$80

$100GDP


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Asia: GDP/Cap Flows

0

1

2

3

4

5

6

7

8

9

10

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

-$60

-$40

-$20

$0

$20

$40

$60

$80

$100

$120

$140

GDP


Developing Asia for capital flows defined to also include Hong Kong SAR, Korea, Singapore, and Taiwan Province of China

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Some types of flows are more volatile than others

Latin America was chosen because of incomplete data for other areas.

International Capital Flow s: Latin Am

-$40

-$30

-$20

-$10

$0

$10

$20

$30

$40

$50

$60

$70

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

FDI

Portfolio

Other private

Official

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Flows to some areas are more volatile than others

Net private portfolio flows include the purchase of private equity shares (amounting to less than 10% of firm) and debt securities debt (e.g. bonds). Measured in US$ billions.

Private Portfolio Inflows

-$60

-$50

-$40

-$30

-$20

-$10

$0

$10

$20

$30

$40

$50

$60

$70

$80

198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003

Africa Cen Eur Lam Asia

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Some types of flows are too persistent

Total foreign indebtedness in billions of US$

Foreign Debt

$0

$100

$200

$300

$400

$500

$600

$700

$800

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

Africa Cen Eur

L Am Asia

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Persistent debt and its legacy

Principle and interest payments on total foreign indebtedness in billions of US$

Foreign Debt Service Payments

$0

$20

$40

$60

$80

$100

$120

$140

$160

$180

19

80

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

02

20

03

Africa Cen Eur

L Am Asia

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The Problem: Distribution of Capital

Private international capital, the largest source of funds for development, has a skewed distribution pattern.

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Capital flows are concentrated

Private Capital Flows10 Year Average, $billion

$49$38

$24$8

Lam

Asia

Cen Eur

Africa

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Even FDI is concentratedForeign Direct Investment

10 Year Average, $billion

$9$16

$54 $48

Africa

Cen Eur

Asia

Lam

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The current status of international finance and development The current financial system is characterized by instability and

highly uneven distribution of capital.

The current patterns of financial flows impede development and worsen poverty, whether one looks at financial crises or more recent financial droughts.

Developed, emerging market, and developing countries all require

adequate, long term, patient capital to sustain growth capable of reducing poverty.

Stable and sufficient supplies of capital are needed, and so too, are stable economic environments to attract and retain those supplies.

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The Problem: Institutional Oversight of Financial Stability

Besides the WB and IMF, major policies are being formulated in ad hoc fora such as the Bank for International Settlements (BIS) and the Financial Stability Forum (FSF).

These bodies are organized and led by the developed countries, with some participation by “systemically significant” countries.

Private standard setting bodies, such as those for auditing and accounting, and public standard setting bodies such as those for securities and insurance are also formulating international policies.

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Next Steps

Therefore, The multi-stakeholder consultations on

Systemic Issues will focus attention on institutions and policies that can result in sustained development.

Changing the rules and the rule-making processes is likely to require a different mix of decision-makers.

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Core topics of the multi-stakeholder consultations

Effective and equitable representation of all countries in the design and implementation of financial system reforms

The impact of the current reform agenda of international financial institutions, in particular “Standards and Codes”, on systemic stability and poverty reduction

Evaluation of alternative policies, such as counter-cyclical prudential regulation, designed to protect countries’ financial sectors and support growth and poverty reduction

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Number and location of meetings

• Washington D.C., to ensure maximum participation from country representatives and staff of World Bank and IMF

• Two regional meetings to take place in developing countries ( Latin America and Africa), with participation of the private sector, civil society as well as participants from official institutions and governments

• New York, to ensure maximum input and recommendations from UN member states delegations, to produce an integrating and concluding multi-stakeholder session

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Information on the Consultations

• Expert consultants will develop papers for each meeting

• All papers will be available to the public to provide for maximum discussion and debate for the consultations

• New Rules will provide a report of the principal conclusions from each meeting and a concluding publication on the outcomes and recommendations of the consultations

• The New Rules Coalition and the FFDO will welcome proposals, queries and comments from interested entities and individuals from around the world

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Thank you

Documents

Multi-Stakeholder Consultation on Financing for Development 2004/ 2005