General Assembly to Consider Global Meeting on
'Finance for Development'
Excerpts from UN Development UpdateFall 1998
Fallout from the East Asian financial crisis is accelerating the decade long convergence of the world's two leading financial institutions with the United Nations, strengthening the ability of all three bodies to fulfill their mandates. But interviews for this article with a number key officials also indicate limits on how closely the Bretton Woods institutions -- the World Bank and the International Monetary Fund (IMF) -- and the UN will align, given differences in mandates and competition for funds.
The recent period of intensifying UN-Bretton Woods dialogue, capped by UN Secretary-General Kofi Annan's early-August weekend retreat with World Bank President James Wolfensohn, included a number of "firsts": an April meeting of the UN Economic and Social Council (ECOSOC) with finance ministers fresh from the World Bank-IMF's annual meeting, and a July formal visit of UN permanent representatives to World Bank headquarters in Washington, D.C. These close-up consultations with the UN give Bretton Woods institutions access to the social and political viewpoints of developing countries, and to the UN's ability to forge consensus on difficult issues, says UN Under-Secretary-General for Economic and Social Affairs Nitin Desai. The value of these assets has been rising since the East Asian crisis, when not only the severity of the economic downturn but its effects on standards of living and political stability were at first overlooked or underestimated.
The United Nations, in return, gains more influence for its positions on sustainable development in Bretton Woods decision-making, Mr. Desai noted, as well as for developing country views on macro-economic policies. (Technically part of the UN system, the Bank and the IMF are directly responsible to their own boards, dominated by the donor countries.) At times, however, convergence can look more like huddling together in a storm than a forward march toward multilateralism. The UN, stung by criticism of slow progress on goals set at its global conferences, and hamstrung by a general decline in official development assistance and shortfalls in its own funding, needs improved financial leverage that will promote sustainable development. And with the recent breakdown in economic rescue plans for East Asia and Russia, the Bretton Woods institutions have need for political support.
The East Asian crisis "automatically intensified collaboration and the exchange of information" between all three institutions, according to Justin Zulu, IMF special representative to the UN. "We're all in the same boat, dealing with the same crisis", he explained.
New compact
That there has been a disjuncture between economic and social policy making is readily conceded by World Bank Vice-President for External Affairs and UN Affairs Mark Malloch Brown. This gap can be traced back to differences between national finance and foreign ministries that are even wider than those between Bretton Woods and the UN. The recent meetings of finance ministers assigned to the Bretton Woods institutions with foreign ministry ambassadors serving at the UN thus fulfill an important "ice-breaking" role, he said. But the main payoff may have already been achieved: a "new intellectual compact" incorporating the social views of the UN and economic development policies of the Bank, Mr. Malloch Brown said.
Since the end of the cold war, critics at the UN "have accepted the logic of our policies against huge deficits and in favour of global integration", while "we've acknowledged that the UN really has a point" on issues raised at the global conferences on development. Not only have these points been incorporated in Bank lending principles, Mr. Malloch Brown said, but the Bank makes every effort to work side-by-side with UN officials at the country level, not in the least because of the UN's credibility with Southern countries.
Also working in favour of increased collaboration in drawing up country programmes, Under-Secretary-General Desai points out, is the trend in development assistance away from physical infrastructure projects and toward UN areas of specialization, such as human resources, governance, social integration and the environment.
Mr. Desai noted that the UN holds another high card: multiple points of contact and involvement with civil society. The Bretton Woods institutions frequently find themselves under fire from pressure groups and non-governmental organizations for supposedly placing macro economic considerations above concerns for human welfare.
The limits of convergence are likely to be tested early next year, when a working group of the Second Committee of the UN's General Assembly discusses the scope and format of a global meeting on the issue of finance for development. The working group will be a political "hot potato", according to Ambassador Oscar de Rojas (Venezuela), chairman of the Second Committee during the previous GA session and an early proponent of a finance-for-development conference.
Bretton Woods II
The industrialized countries will want to focus on the responsibility of developing countries to improve governance and to mobilize domestic resources, Ambassador de Rojas said. The developing countries will try to broaden the discussion to encompass systemic forces influencing international capital flows, including the roles of international financial institutions. Among the proposals that already have been aired are a formal role for the UN in Bretton Woods institutions, and a new World Financial Organization that would oversee international capital flows and negotiate debt repayments in crisis situations.
Such a meeting could be "Bretton Woods II", Ambassador de Rojas said, stressing that full participation of the Bank and the IMF would be desirable and necessary to such a process, and even suggesting joint UN Bretton Woods sponsorship and a Washington, D.C., venue.
But the Bretton Woods institutions, and the major contributing countries on their boards, are nevertheless wary that coordination with the UN might lead to oversight or supervision. The UN (which attends the World Bank's Development Committee as an observer) should never become a voting member, Mr. Malloch Brown said "that's where policy coordination would cross over to intrusion". Furthermore, he maintained, no case has been made that structural weaknesses or gaps in the operations of the Bank and the Fund necessitate a new World Financial Organization. Mr. Malloch Brown also makes the point -- one that the raised at the most recent session at ECOSOC -- that good coordination takes place between agencies with clear and distinct mandates, and that if the respective roles of agencies are muddled, agency donor bases are at risk.
Indeed, "being identified with the UN traditionally has not been helpful for getting US money" for the Bank and the Fund, says Robert Gardner, former United States Ambassador to Italy and to Spain and formerly in charge of UN affairs for the State Department, and might also hurt their ability to tap private capital markets. Mr. Gardner, who is the author of a book on the founding of Bretton Woods, nevertheless feels that closer coordination is a proper and logical outcome of the multilateral system created at the conclusion of World War II.
Mark Malloch Brown emphasizes cooperation at the national level, saying that high-level consultations are a sterile exercise unless they produce results "where the rubber meets the road". It is at the national rather than the international level that new mechanisms for coordination are most needed, he says, especially in terms of incorporating the priorities of national governments and local civil societies into development planning.
Nitin Desai says that the way to avoid pitfalls in the UN-Bretton Woods relationship is to raise the comfort level all around. "You never lose anything by talking and by finding common ground", he says.
More Information on Financing for Development
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