The theme of the ongoing tenth ministerial meet of the UN Conference on Trade and Development (Unctad) indicates that it has come a long way from the sixties and seventies when it was seen mainly as a forum for developing countries to reiterate their commitment to the autarkic development model that relied on protectionism and strong state intervention. Today, Unctad secretary general Rubens Ricupero calls it a `world parliament on globalisation' which seeks lessons from the past to make globalisation an effective instrument for development. Unctad is being taken more seriously now by the developed world not just because of its reorientation but also because it was able to issue an early warning for the Asian financial crisis which the Bretton Woods twins could not.
Analysing the Asian crisis naturally has taken up a lot of the meeting's time and, expectedly, Malaysian Premier Mahathir Mohamad has not missed the opportunity to roundly condemn the textbook remedies prescribed as part of the Washington Consensus. He said that early in the crisis Malaysia abandoned the IMF's advice and relaxed fiscal policy, reduced interest rates and imposed selective exchange controls. These controls on short-term capital flows and other measures have proved highly effective, won western financial approval and emboldened Mr Mahathir to assert that the global financial system continues to be threatened by volatile capital flows. Unless it is reformed, the developing countries will remain vulnerable to further crises.
Michel Camdessus, the outgoing managing director of the IMF, naturally looked at the world differently and asserted that the problem with the Asian economies was that they had got their sequencing wrong, introducing liberalisation in `a disorderly fashion'. The right way to do it was to first liberalise foreign direct investment instead of allowing destabilising short-term capital flows. He felt that something `substantial' had been done to reshape the global financial architecture. There was far greater transparency in the working of banks and their regulators. The IMF had evolved codes of good fiscal and monetary management and the World Bank codes of good corporate governance and international accounting practices.
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The meeting is looking at how to benefit from globalisation against the backdrop of increasing marginalisation of the world's least developed countries (LDCs), as painted by the 15th Unctad report. Their number has gone up from 25 in 1971 to 48 now. Since the eighties these countries have lost 40 per cent of their share of world trade and today account for a mere 0.4 per cent of global exports and 0.6 per cent of imports. The LDCs have a heavily concentrated merchandise export structure in which usually one export product -- agricultural or mineral -- accounts for a major share of a country's exports. There is very little value addition in these exports and LDCs get less than 1 per cent of total foreign direct investment.
What is the remedy? More investment to promote efficient production structures and greater access to global markets. The developed countries' restrictions on free trade in farm products has been identified as a key impediment and the issue recommended as a focus for developing countries at the next trade round. The emphasis is to see the WTO as a window of opportunity and not a source of constraint.