International Conference on Financing for Development
Monterrey, Mexico, 18 March 2002
Statement by Mrs. Brigita Schmögnerová
United Nations Economic Commission for Europe
1. Interregional co-operation
I would like to deal with two aspects of the United Nations Economic Commission for Europe's role in financing for development: interregional and also intraregional. This is because on one side, the UNECE region represents the richest part of the world, and on the other side, there is an enormous heterogeneity inside the region in terms of incomes per capita.
The advanced ECE economies have been a major source of finance for developing countries, both directly and indirectly, through the intermediaries of multilateral regional and global institutions. Although the actual ODA has remained significantly below the target of 0.7 per cent of GNP, some of the developed countries' contributions in terms of their GDP are worth mentioning here today such as Denmark (1.06%), the Netherlands (0.84%), Sweden and Norway (0.8%). President Bush recently made a proposal for a three-year US $ 5 billion increase in American foreign aid to poor nations.
The UNECE secretariat welcomes the statement in the Monterrey Draft Outcome, which urges developed countries that have not done so to make concrete efforts toward the target of 0.7 per cent of GNP. Nevertheless, it agrees with the Consensus document that further progress needs to be made in the coordination of assistance among donors, that funds should be disbursed quickly in a coherent framework of assistance. Providing debt relief to most indebted and poorest countries that face unsustainable debt burdens should be further re-considered.
However, although the ODA is important it will not have the expected impact unless effective institutions of a market economy complement it. This is a lesson from the experience in the UNECE region in both the past and the present. This points to the important role which international organizations, including the regional commissions, can play in promoting capacity building, including the creation of a legal and institutional framework. Another important aspect is the support of policy dialogue among countries at the regional level, and the provision of policy advice, which, as mentioned in the Consensus, should take into account the social costs of adjustment programmes.
The work of the UNECE on norms and standards has contributed to capacity building and promoted at the same time the integration of the transition economies into the wider division of labour in the region and the world economy at large.
This body of work represents a considerable investment by UNECE member governments and other participants. Therefore, we strongly support the Consensus' call to strengthen the participation of developing countries and countries with economies in transition in norm setting.
We believe that many of these standards, norms and conventions would create larger benefits if they were adopted beyond the UNECE region, and one of the activities of the organisation has been to increase their global visibility.
Developing countries should also be encouraged to follow the regional integration mechanisms that have been successful in the UNECE region. These comprise not only measures to reduce barriers to trade but also to foster policy dialogue, which could be supported by the UNECE.
2. Intra-regional co-operation
Since 1990, Europe has witnessed dramatic political and economic changes with the collapse of the Communist regimes in Central and Eastern Europe and the former Soviet Union. There has been considerable progress toward the goal to create functioning market economies, and in most countries of Central and Eastern Europe this transition process is now nearly complete.
In recent years, most transition economies have experienced relatively strong economic growth, but there remains still a considerable gap in real incomes per capita compared with Western Europe. Within the UNECE region, eight low-income countries are eligible for the IMF Poverty Reduction and Growth Arrangement. In seven low-income countries of the CIS - Armenia, Azerbaijan, Georgia, Kyrgyzstan, Republic of Moldova, Tajikistan, and Uzbekistan (CIS7) about 20 million people, about half of the total population, live in extreme poverty. Most of these countries are highly indebted and rely almost exclusively on official sources of finance.
That gap in development levels compared with Western Europe remains one of the most important challenges of the European continent because it risks being a source of economic and political instability. On the basis of this, one can draw an immediate conclusion that there will be a further need of ODA from most developed states of the region to the low-income countries of the region. An important part of aid is coordinated by the EU and oriented to candidate countries through PHARE and also to non-candidate countries through TACIS.
In addition to the need for assistance, the UNECE has always insisted on the importance of institutions (including private property rights, law enforcement, fighting corruption) and other socio-political variables in determining economic performance. These factors play also a crucial role in the transition process in Eastern Europe and the CIS.
During the past decade attracting foreign direct investment has been one of the priorities of the transition economies. Experience proves that multinational corporations (MNCs) contribute to output and employment by restructuring acquired enterprises, investing in new capacity/and or improving the efficiency of existing operations.
3. The role of UNECE in the follow-up to the FFd Conference
The adoption of the Monterrey Consensus must not be the only outcome of this Conference; it should have a follow-up for all participants. The challenge to close the development gaps inside the region will also shape the future activities of the UNECE. In this connection:
- The UNECE fully supports the Monterrey Consensus, para. 64, according to which the Regional Commissions should foster policy dialogue among countries at the regional level on macroeconomic financial, trade and development issues.
- The UNECE also shares the view that sustainable development is inevitable and that we should not sacrifice social developments and environmental protection to growth. The report of the Secretary-General on the implementation of Agenda 21 (para 238) suggests that the Regional Commissions could effectively transform themselves into regional sustainable development commissions. The UNECE will include the social dimension of economic development into its agenda - it is the only Regional Commission in which the social dimension is missing.
- The intra regional aspect of FFd will further accelerate cooperation among regional commissions in such areas as trade facilitation, FDI promotion etc.
I thank you for your attention.