6:40 AM Jun 1, 1994

WORLD SOCIAL CHARTER, NORTH-SOUTH COMPACT

Geneva 1 Jun (Chakravarthi Raghavan) -- The World Social Summit next year has been urged to give a new vision and new direction for development among others through a world social charter as a social contract among all nations and all peoples, and a new development paradigm of human development.

This is part of a six-point agenda for the Social Summit, which is set for Copenhagen next year, that is presented by the United Nations Development Programme (UNDP) in its 1994 Human Development Report.

The report is a mixture of the ideal and visionary for the 21st century, coupled with acceptance of the reality (of the hard core of the trade, money and finance systems and unlikelihood of the those wielding power allowing any dilution and democratic governance) and attempt to deal with the softer issues on the periphery.

The Social Summit, the report suggests, should set in motion a comprehensive review of existing framework of international development cooperation and studies on establishment of a global safety net with funding through a 0.1% levy of a world income tax on the rich nations and a global human security fund to be financed from global taxes such as the "Tobin tax" on speculative movements of international funds, an international tax on consumption of non-renewable energy, global environment permits and a tax on arms trade.

In his proposal to discourage international currency speculation and short-term capital flows, while encouraging long-term investments, Prof Tobin had advocated in 1978 a uniform global tax of 0.5 percent on foreign exchange transactions -- estimated to be a trillion dollars a day -- and most of which are taking advantage of interest rate variations and speculating against currencies to make quick profits. The 0.5% would work to a 4% difference in annual interest rates on three-month bills, and will act as a deterrent to short-term speculative movements, but will be too small to deter long-term investments. Tobin estimated that it could raise as much as 1.5 trillion dollars a year, though that was not the primary purpose of his idea.,

"if the environment be correctly priced, and tradeable permits issued to all nations -- 50% on basis of GDP and 50% on basis of population -- the rich nations would need to transfer as much as five percent of their GDP to the poor nations," the report notes.

The Report suggests that the Social Summit should mandate the UN to draw up a comprehensive blue-print for ensuring global human security and protecting people from threats in their daily lives (poverty, unemployment, drugs, terrorism, environmental degradation and social disintegration).

There should also be agreement at the Summit on a targeted reduction of three percent a year in global military spending over the decade 1995-2005, with a proportion of the potential savings -- 20 percent by the industrial countries and 10 percent by developing countries -- being credited to a global human security fund.

The UNDP has also sought to promote a "human development compact" over the next years with all nations pledging at the Summit to ensure basic human development levels for all their peoples and endorse the "20-20 proposal" for developing countries and aid donors devoting 20 percent of their budgets for minimum human priority concerns.

In terms of global governance, the UNDP advocates changes in the design of the United Nation's role in sustainable human development, and work towards creation of some new institutions, and pending that reforming and using some existing institutions to move in that direction.

The report suggests an Economic Security Council as a decision-making forum at the highest level, but notes that this might be difficult because of need for UN charter amendments. As an intermediate alternative, the UNDP advocates extending the mandate of the UN Security Council or using the ECOSOC, with a small and permanent executive board in permanent session.

The report argues that a World Central Bank is necessary for the 21st century for sound macro-economic management, global financial stability and assisting economic expansion of poor nations, but pending that the present IMF should be converted into an embryonic central bank.

This last could be done by a renewed issue of SDRs, with some innovations in its distribution; an expanded compensatory and contingency financial facility and an enhanced IMF role in global macroeconomic management and ability to review policies of all countries, whether or not they are active borrowers.

UNDP adds: "If major countries have unsustainable policies, such as high budget deficits or inappropriate interest rates, the IMF should request the Bank for International Settlements (BIS) to link the level of reservers that banks are required to hold against loans to their countries to the IMF's evaluation. This would restrict the industrial countries' ability to raise funds from private banks and give the IMF an important lever on their policies."

Since international capital flows now sweep with hurricane force across frontiers, sometimes creating havoc in international markets, there is a need for minimum of regulation in international capital markets, just as there are in national capital markets, the Report argues.

It advocates that the IMF in collaboration with the BIS should also acquire some regular control over international banking activities.

With funds from private capital markets flowing to just a handful of countries in East Asia and Latin America, there is need to help other developing countries gain greater access to these resources, .

The World Bank's role in this area has been "rather modest". While it has been helping developing countries to get funds at less expensive terms and lending them for social sectors, in net terms, the Bank's resource transfers to the developing countries has in fact been a negative one to two billion dollars a year. Its IDA resources have become constrained, now accounting for only 30% of its total lending.

A way out could be for the Bank to take on the role of an International Investment Trust, selling bonds to nations with a surplus and lending the proceedings to developing countries.

On the trade front, while the agreement to transform the GATT into the WTO and taking a "more systematic approach to management of world trade" was welcome, many inequities in the trade area had to be addressed. Trade in areas of primary interest to developing countries, such as labour services, need to be further liberalized and fundamental issues such as promoting environmentally sound trade without protectionism. The WTO should also operate a compensation plan, when one country injures another such as "when a rich country encourages brain drain from the poor, places limits on migration of low-skilled labour or imposes trade restrictions on exports"

The UNDP report also advocates the establishment of a World Anti-Monopoly Authority to deal with the concentration of power of TNCs which control 70 percent of international trade, and with 25 percent of it estimated to be intra-firm trade. They escape regulation by national authorities, and the speed and ease with which they restructure their assets, relocate production, transfer their assets, transfer technology and indulge in transfer pricing had become a matter of international concern. They also engage in oligopolistic practices and are insensitive to environmental concerns: more than 50% of the world's greenhouse gases are generated by their operations

"There is thus a strong case for some international supervision of the TNCs. A useful starting point could be the completion of the UN Code of Conduct on TNCs, to be followed up by creation of a World Anti-Monopoly authority to monitor observance of the code and ensure that TNCs don't resort to monopolistic and restrictive practices, particularly in their dealings with developing countries".