Jul 15, 1987

UNCTAD-VII: SOVIET DECISION BRINGS COMMON FUND NEARER REALITY.

AND IFDA SPECIAL FEATURES.

GENEVA, 13 JULY (IFDA), BY CHAKRAVARTHI RAGHAVAN The soviet announcement Monday of its decision to join the common fund, bringing the entry into force of the agreement nearer reality, is a major political gesture on the part of the soviet union to the group of 77 and UNCTAD itself that outweighs any immediate economic benefits.

The foreign Trade Minister of the Soviet Union, Boris Ivanovic Aristov, made the announcement at the end of his speech at the plenary of UNCTAD-VII, and was warmly applauded by the conference.

"This is the best news we have so far had at the conference the chairman of the group of 77, Carlos Lechuga told IFDA.

"This will probably be one of the best things we will have in the whole conference, taking into account what will happen" Lechuga added in a reference to the attitude and tactics of the OECD group of countries who are balking at any negotiations or negotiated decisions at UNCTAD-vii.

At the plenary, the president of the conference, Bernard Chidzero expressed his appreciation and gratitude for the "very positive and heartening" statement from Aristov.

The decision, Chidzero said, "represents a landmark in the history of UNCTAD and indeed of multilateral cooperation and augurs well for the success of this conference".

"I need not stress the political importance of such a decision, which means the long awaited entry-into-force of the common fund agreement has actually become a reality", Chidzero declared.

Chidzero noted that the soviet signature, followed soon by ratification, would bring total percentage of DCC of ratifying countries to 65.26 percent, just 1.4 percent short of the required two-thirds of the directly contributed capital.

He appealed to countries that had not yet done so, to sign and ratify the agreement as a matter of priority, in Geneva, during the conference, so that the remaining percentage could be reached before UNCTAD-vii was over.

He appealed specially to the countries who were beneficiaries of the OPEC or Norwegian offer, and who together account for 2.36 percent of the capital, and who have not yet ratified the fund, to act and do so.

While the soviet announcement was warmly welcomed by the G77, and provided a boost to the morale of the UNCTAD secretariat, it proved an embarrassment to the group B countries.

The soviets have stressed the role of the common fund in financing buffer-stocks for market stabilisation under international commodity agreements, and its potential as a catalyst in this regard.

So far now there are only three ICAS cocoa, coffee and natural rubber - that qualify to associate themselves with the fund.

But perhaps with the common fund in place, a new impetus could be provided to renewed efforts at forging new ICAS, with market stabilisation or other economic provisions.

But an immediate benefit of entry into force of the agreement would be chances of activating the second account of the common fund, and using the 270 million dollars of voluntary contributions pledged for it.

The soviets themselves have not been enthusiastic about the second account, and have not made any announcements of contributions, though they are aware by helping to make the fund operational, they would bring the second account operations into play.

The second account would be able to promote development activities - research and development, market promotion and diversification, and other such measures.

The amount itself is too small, and at best could serve as seed money for diversification programmes that the Group B countries have been advocating as the real solution to the commodity problems.

These countries will now be under pressure to help diversification.

Such diversification programmes would need billions of dollars of resources, would need transfer of technology and expertise, also opening up of markets without protection.

The incipient diversification moves of the commodity-dependent countries are actually being thwarted by the OECD countries.

The latest example of this is the inclusion of "jute" into the Multifibre arrangement, thus bringing within its restrictive scope any effort of the jute exporting countries to develop and market new jute products (other than the current traditional ones, like jute bagging for packing and carpet-backing, already facing competition from synthetics).

In making the announcement in the plenary, Aristov noted that the question of putting into effect the agreement, worked out within the framework of UNCTAD, had acquired "special urgency" in connection with the growing instability of the world commodity markets.

In view of the importance of this, the non-aligned movement and the Group of 77 had appealed to countries that had not joined the agreement to take a positive decision, possibly by UNCTAD-VII.

The soviet leadership, Aristov said, had carefully considered the question, and a decision had been taken on the USSR joining the agreement, and he had been authorised to sign it during UNCTAD-VII session.

"We hope that putting this agreement into effect will promote the creation of a more stable and predictable situation on the world commodity markets in the interests of both importing and exporting countries" Aristov said.

"We are convinced that creating such a situation is one of the most important factors in ensuring economic security of states and practical implementation of the UN programme of action for the establishment of a new international economic order".

Aristov is due to sign the agreement here Tuesday, and the soviet ratification is expected to follow soon.

The soviet decision is also expected to be followed by similar announcements and decisions by the Byelorussian and Ukrainian Soviet socialist republics, who are separate members of the UN.

There are reports here that apart from the soviets, a couple of other east Europeans would also be taking similar decisions and announcing it.

Till now, the agreement has been ratified by 94 countries, and a cumulative total of 277.59 million dollars or 59.06 percent of the directly contributed capital.

The soviet ratification and of the two others would take the number to 97 countries accounting for 65.26 percent of the DCC.

For entry into force, the agreement would still need ratification of countries accounting for another 1.4 percent.

But this is now within easy reach.

There are some 10 countries for whom the OPEC or Norway have offered to pay the subscription costs.

These include Burma, Maldives and Mauritania (covered by OPEC offer), and Costa Rica, El Salvador, Honduras, Madagascar, Mozambique, and Swaziland.

There are also a few G77 members who have signed the agreement, and announced they are taking steps to ratify, but have not yet done so. These include Thailand and Peru.