9:13 AM Jun 27, 1995
MULTILATERAL ECDC IN FINANCE AND MONEY ADVOCATEDGeneva 26 June (Chakravarthi Raghavan) -- Developing countries could benefit by multilateralising their existing payments arrangements, and through capital market and investment cooperation to mobilise financial resources for trade and development, the UNCTAD Standing Committee on Economic Cooperation among Developing Countries (ECDC) has suggested. This is one of the agreed conclusions of the meeting of the ECDC Standing Committee here last week. In the context of the conclusion of the Uruguay Round of GATT trade negotiations and the creation of the WTO, the UNCTAD Standing Committee also suggested reflection on this by regional and subregional integration groupings on the role and implications of the Round for ECDC. The conclusion of the Round and process of regional and subregional integration among developing countries, it suggested, should be mutually reinforcing and developing countries should be encouraged to pursue "open and flexible" economic integration. The Committee also said that the new dispute settlement mechanism of the WTO mechanism "marks a clear improvement" and developing countries might benefit by using this mechanism effectively, and should consider cooperating with each other in this respect. The committee agreed with a secretariat document analysis of the state of the ECDC (nearly two decades after it was initiated and conceptualized at the Mexico meeting on economic cooperation among developing countries): there is a resurgence of interest in recent years in developing countries on mutual cooperation characterized by an increase in "open and flexible" ECDC: i.e. fully compatible with "globalization and liberalisation." Though not clearly defined and spelt out or differentiated from earlier instruments, the UNCTAD document seems to imply -- cooperation, regional and subregional, among developing countries running side by side with their opening up to the world economy and competition and arrangements with Northern or Northern-led integration groupings -- like the EC, Nafta, APEC etc and efforts of regional groupings like Mercosur or Caricom seeking arrangements with NAFTA, EC etc. The agreed conclusion describes the "open and flexible" ECDC as cooperation "in which ECDC is part of the globalization and liberalization processes and wherein the format and scope are becoming increasingly flexible.". The scope for ECDC, the committee has concluded, has expanded as some developing countries have reached a stage of development in certain fields that strengthen complementarity between their economies and where they can benefit from development experiences of others. Also some ECDC initiatives, it notes, have benefited from support of some industrialized countries and groupings for capacity-building and for lowering of intra-regional trade barriers. Stressing 'trade-financing'-- which in addition to trade, underpins business, investment and technological cooperation -- as an essential facet of ECDC, the committee has called for efforts in this on three fronts: assistance to developing and upgrading national and regional institutions to build up their institutional capacity and train personnel; mobilizing involvement of financial institutions such as development banks and export credit agencies in promotion of trade financing, especially for non-traditional exports and small-scale enterprises; and considering the launching of a process aimed at achieving multilateral credit arrangements among developing countries. Since capital market cooperation is of major importance in mobilizing financial resources, the Committee said it could be useful to develop, or introduce where they don't exist, inventories of regulations and legislative or other policy measures to work towards standardisation, harmonization, equal treatment and eventual adoption of international norms by integration groups interested in capital market cooperation. Also, strengthening of links among financial institutions, such as commercial banks of developing countries, was seen as another possible area that could contribute significantly to capacity-building and financial networking. Among regional partners seeking closer economic ties, predictable monetary policies are pre-requisites for stable and realistic foreign exchange rates. Monetary policy coordination, including on foreign exchange policies, is increasingly important and for this purpose the functions of regional and subregional monetary agencies, where they exist, need to be strengthened, but is silent on how and whether such cooperation can be in fact achieved, without common understanding and policies on development and industrial policy. Clearing and payments arrangements should be encouraged to assume a similar role where such a mechanism exists, the Standing Committee says and goes on to add that the attainment of currency convertibility by some developing countries does not diminish the importance of such clearance and payments arrangements since they play an important role in credit extension and monetary-policy coordination. The Standing Committee also calls for encouragement of direct investment among development and for this, consideration towards harmonization of investment policies and conclusion of bilateral and multilateral promotion and protection treaties. The Committee's other conclusions include need to create necessary conditions for encouraging cross-border business activities, dissemination and networking of information on investment opportunities, exchange of business experiences, including in successful export-processing in industrial and special economic zones which are also promoting ECDC by attracting investors from other developing countries. The Committee also calls for expanded contacts and linkages among business enterprises of developing countries, dissemination of information on developing country enterprises, support for business associations, trading companies and their associations, research institutes, venture capital financing associations etc. On the institutional front, the Standing Committee calls for strengthening the institutional and governmental mechanisms dealing with ECDC within developing countries, establishment of appropriate ECDC focal points in countries and exchange of experience among countries and integration groupings. Several of these ideas though have been affirmed and reaffirmed in the past both by bodies of the developing countries (NAM, Group of 77 etc) as also UN bodies. The conclusions emphasise exchange of experiences among regions covering all kinds and forms of cooperation. The Committee warns that Africa as a region might become marginalized and that in designing South-South cooperation strategies, special attention need to be given to Africa, specially least developed countries -- such as through technical assistance -- to enable them to play a greater role in the world economy. "Furthermore, Africa and the Indian Ocean Rim countries provide propitious domain for ECDC activities," the Committee says. While affirming the valuable work done so far, the Committee felt that it could have benefited more from increased participation of experts from capitals and that new methods of work should be pursued throughout UNCTAD. In its work so far, the Committee said, it had established a core of substantive issues and activities for UNCTAD in ECDC and that in future work on ECDC, UNCTAD has a role to play and should continue this work on issues where it has expertise and competence. As for 'institutional reform', the Standing Committee agreed that this should be deferred to UNCTAD-IX for consideration and the issue whether the existing form of the intergovernmental machinery is appropriate or some other form should be envisaged should be reviewed by the Trade and Developing Board in line with the Cartagena Commitment (of UNCTAD-VIII).