1. None of the countries
which are members of the UNECE currently
qualify as least developed countries. Despite
this, many of them face similar economic
and social problems as the LDCs, such as
high levels of poverty, falling real incomes,
high unemployment, absence or severe deterioration
of social safety nets, lack of reliable
access to safe drinking water, sanitation,
housing and clean energy, declining life
expectancy, rising child mortality and malnutrition,
the growing threats of HIV/AIDS and deteriorating
educational status.
At its 2003 meeting the
Expert Group Meeting of the UN Committee
on Development Policy reviewed the situation
in countries with economies in transition
and highlighted the fact that nine countries
have been classified as low income by the
World Bank in at least one of the past three
years, namely Armenia, Azerbaijan, Georgia,
Kyrgyzstan, the Republic of Moldova, Tajikistan,
Turkmenistan, Ukraine and Uzbekistan. The
Expert Group noted that some of these countries
now have lower Gross National Income per
capita than many current LDCs and several
of them would also comply with the Economic
Vulnerability Index criteria for inclusion
in the list of the LDCs. However, as a result
of a relatively high Human Assets Index
(HAI) due to past social policies, none
of these low-income countries qualify as
least developed. Concerns were expressed,
however, that if the economies of some of
these countries do not improve in the near
future, erosion in social progress might
lead to the lowering of their HAI scores.
Since they do not qualify
as LDCs, low-income countries of the UNECE
region do not benefit from trade, financial
preferences and other commitments included
in the 2001 Brussels Declaration and Programme
of Action for the Least Developed Countries
for the Decade 2001-2010 offered by international
financial and trade institutions as well
as other developmental partners.
We firmly believe that
the international community must substantially
increase its attention and support to the
efforts of low-income countries with economies
in transition regardless of their status
vis-à-vis the LDC list.
2. During the 1990s, both
absolute and relative poverty levels increased
in the UNECE region, particularly in the
CIS and South-east Europe. Using the World
Bank figure of $2 a day poverty line, an
estimated 50 million people living in Eastern
and Southern Europe and the CIS are below
the poverty line. There are variations in
absolute poverty rates across the region,
with rates significantly higher in the CIS
than elsewhere.
Poverty in Eastern and
South-eastern Europe and the CIS is linked
either to transformation (like deep transitional
recession) and/or dissolution of States
frequently followed by war conflicts. In
the late 1990s or 2000 at the latest, positive
economic growth began in the low-income
countries with economies in transition.
Despite this, poverty is falling very insignificantly
and disparities in incomes are widening.
There is therefore an urgent need to implement
pro-poor growth policies that would generate
employment, and prevent further deepening
of income disparities and the growth of
poverty. A proper policy mix of fiscal,
monetary and social policies is needed.
This should be fully recognized
by the IMF, the World Bank and other IFIs
when formulating their conditionality. The
IMF's financing facility PRGF does not necessarily
reflect this requirement and is more of
a replica of traditional IMF programmes
which are hostile to poverty reduction.
The effectiveness of the conditionality
of IFIs can only be increased if it is customized
to country-specific requirements and is
the result of policy dialogue.
3. The appropriate policy
mix needs to be accompanied by the development
of institutions that would improve the efficiency
of governments, including public administration,
fiscal management, increased transparency
and accountability, democratisation of the
decision-making process and strengthening
the fight against corruption. It is unlikely
that real improvements in poverty reduction
will be achieved until governance is improved.
Stimulating pro-poor growth and reducing
income inequalities will often require a
fight against vested interests that often
hold back restructuring, competition and
efforts to improve public expenditure management
such as the introduction of public procurement.
Renewed emphasis on institution building
and continued capacity building at both
national and local levels to ensure delivery
on reforms remain essential. The United
Nations regional commissions provide a forum
for the exchange of best practices and experiences
in good governance and contribute to governance
improvement through their technical cooperation.
4. In the past decade,
the transition economies in the UNECE region
have faced the challenge of mobilizing the
external resources required for industrial
restructuring, the development of infrastructure,
etc. Low-income countries with economies
in transition have not been able to attract
private resources in the form of FDI, international
bond issues, bank loans or portfolio investments
in local securities. Mobilization of private
resources will require further progress
in reform and improving the creditworthiness
of the states. Attracting FDI is a high
priority for low-income States with economies
in transition. In most cases a lack of progress
towards economic stabilization, lower stages
of economic reform, often low security and
political instability decrease the ability
to attract FDI and private foreign financing.
A major improvement in these factors is
needed if low-income countries want to compete
for FDI.
5. Within the UNECE region,
a number of countries (Kyrgyzstan, Serbia
and Montenegro, the Republic of Moldova
and Tajikistan) are severely indebted and
rely mainly on official sources of finance.
Adequate support from the international
community in the form of generous financing
and debt relief where appropriate, and continuing
policy advice will be beneficial. Conditionality
applied prior to debt restructuring should
improve and not deteriorate prospects for
growth in the affected countries.
6. Although the external
financing needs of low-income transition
countries must be met increasingly by private
financing, official resources will remain
indispensable for some time. In this context,
further coordination of donors is needed,
and should be increasingly demand-led and
not supply-led. At the same time, donors
should have a coordinated strategy on how
to avoid a syndrome of aid-dependence. Aid
dependent growth, such as that in some low
income Western Balkan countries, should
gradually be disappearing and new factors
of growth (FDI, trade etc.) developed. Otherwise,
reduction of aid might reverse progress
achieved.
7. Trade is in general
recognized as the important instrument of
economic development. In most low-income
economies in transition, traditional trade
links have been disrupted and have not been
adequately substituted. Lack of synchronisation
of the WTO accession process in the region
might have further negative implications
on new WTO members. This was experienced
by Kyrgyzstan immediately after its accession
to the WTO. Increased cooperation in the
process of the WTO accession among the accession
countries might be beneficial to them and
the regional commissions might initiate
or further promote this cooperative approach.
Intra-regional trade should
further develop. Some of the low-income
countries with economies in transition have
diverted most of their trade to the EU.
Their bilateral agreements with the EU include
asymmetric trade arrangements in favour
of economies in transition. In spite of
this, they are not granted full market access
in agricultural and some non-agricultural
products of major importance to them. Further
elimination of tariff and non-tariff barriers
in trade with the EU is needed to ensure
their increased market access and positive
impact on development.
Low-income economies in
transition in Central Asia, and the Caucasus
should also aim to restore trade links among
themselves. This would not only be beneficial
for their economies but could help to build
and strengthen trust, minimize political
tensions and prevent new conflicts. Regional
trade policy dialogue has a potential for
strengthening development and security in
the region.
The Economic Commission
for Europe is committed to strengthening
its support of the development of the low-income
countries of Eastern Europe, the Caucasus
and Central Asia, and their integration
into the European and world economies. As
the UNECE is not a financial or development
institution, its assistance to these countries
is limited to the provision of technical
assistance and policy advice in the areas
of its expertise: transport, trade facilitation,
entrepreneurship and small and medium-sized
enterprise development, protection of the
environment, namely the sustainable management
of water, energy and wastes. In spite of
our limited resources, we are committed
to strengthening our support to those who
are most in need. We are also committed
to strengthening our on-going cooperation
in support of these countries with UNDP,
UNCTAD, DESA and other organisations and
agencies of the UN as well as other partners.
I would also like to use
this opportunity to call upon governments
as well as international organizations to
strengthen their attention to the United
Nations Programme for Central Asia (SPECA)
coordinated by two regional commissions,
UNECE and ESCAP. The five former Soviet
Union republics in Central Asia face big
challenges such as the transformation to
a democracy and market-based economy, the
destruction of the former trade links which
ensured the distribution of water and energy,
but also weak governments, new security
threats such as drugs and arms trafficking,
increasing poverty and the degradation of
education and health. Some of them have
a better capacity to deal with the challenges
and have achieved better results; progress
in some of them is very unsatisfactory.
SPECA includes initiatives
in transport development, investment mobilisation,
SME development, and water and energy management.
A recent achievement of SPECA is the Cooperation
Strategy to Promote the Rational and Efficient
Use of Water and Energy Resources in Central
Asia.
This year the UNECE, working
with other partners, will start the implementation
of a project funded from the UN Development
Account entitled "Capacity-building for
Air Quality Management and the Application
of Clean Coal Technologies in Central Asia".
It will support capacity-building for transboundary
water cooperation in Eastern Europe, Caucasus
and Central Asia, begin implementation of
the "Water, Environment and Security in
Central Asia" initiative, and will carry
out activities aimed at the modernisation
of governance systems in the fields of health,
water and waste management in Southern Caucasus,
and continue its work in support of entrepreneurship
and SMEs.
I would like to stress
that the UNECE stands ready to strengthen
its cooperation with other partners in support
of these and other activities in low-income
countries of Eastern Europe, Caucasus and
Central Asia and I reiterate my appeal to
all participants in this ECOSOC meeting
to mobilize and energize our efforts in
support of these countries.
________