World economic issues and deterioration of economies of developing nations discussed in general debate.

World economic issues and deterioration of economies of developing nations discussed in general debate

A detailed discussion of world economic issues--focusing on the deteriorating economic situation in developing countries, their massive external debt, the fragile economic recovery in developed countries, and the rising trend of protectionism--took place from 8 to 16 October in the Second Committee (Economic and Financial) of the General Assembly.

Widespread support was expressed for the convening of a special session of the General Assembly on the critical economic situation in Africa. Calls for international conferences on the external indebtedness of African countries, and on money and finance for development were also discussed.

At the outset of the Committee's annual general debate, Jean Ripert, Director-General for Development and International Economic and Social Affairs, said that despite disaffection with multilateralism, "the international framework of the United Nations remains essential in certain sectors for the joint pursuit of prosperity and economic and social development'.

There was "greater recognition of the risks of inaction and of the need for more active international co-operation', he said. The Second Committee's task was "to pursue these openings, to broaden them wherever possible and . . . to achieve concrete results'.

In the debate, support was expressed for proposals made at the recent World Bank-International Monetary Fund meetings at Seoul to alleviate the debt burden of developing countries by adopting policies to stimulate those nations' growth and development.

Speakers called for a return to genuine multilateral co-operation and for strengthening the role of the United Nations in the economic field. Among recent positive developments were the consensus on the mid-term review and appraisal of the implementation of the International Development Strategy for the Third United Nations Development Decade and adoption of the "Forward Looking Strategies' by the World Conference to Review and Appraise the Achievements of the United Nations Decade for Women.

Many countries were concerned that the gap between developed and developing countries would only be narrowed through the launching of global negotiations and establishing of a new international economic order.

Debtor's plea: Mr. Ripert said that current strategies to deal with the debt problem needed to be adapted to changing conditions. The plea of developing debtor countries that greater attention be paid to their dramatic situation should not be lightly dismissed, "for harsher economic conditions, unemployment, social misery and political instability were natural allies'. Shared responsibility by debtor and creditor countries and financial institutions should be accepted with emphasis on reducing the interest burden and providing additional finance.

Serious misalignment of currencies was now taking its toll, he went on. Structural weaknesses in the monetary system needed to be addressed. The issues having been defined, and agenda for discussion and action must be worked out. That underlined the importance of the proposal for an international conference on money and finance for development.

He also spoke of world trade, commodity prices, the emergency situation in Africa, science and technology, population, environment, the 1987 International Year of Shelter for the Homeless, the mid-term review of the Substantial New Programme of Action for the Least Developed Countries and more effective co-ordination of the Organization's economic and social activities.

Advantage should be taken, Mr. Ripert said, of the presence at the current Assembly of so many Heads of State and Government so that progress could be made in the North-South dialogue. A meeting of Heads of State and Government "could provide current negotiations on some key issues with the impetus they so needed'. That meeting could be followed next year by a ministerial-level special session of the Economic and Social Council, which would maintain the political momentum.

Shuaib U. Yolah, Under-Secretary-General for International Economic and Social Affairs, in his overview of the current world economic situation, said that 1985 had been "characterized by slower growth and increasing trade imbalances and tensions'. Rising protectionism, said Mr. Yolah, would lead to rapid increases in the debt-service ratios of developing countries as the growth rate in the value of their exports would probably remain susbtantially below nominal interest rates.

Debate

Egypt, on behalf of the "Group of 77', reported on their October meeting of Ministers of Foreign Affairs and outlined some practical measures concerning economic issues included in the Group's Declaration (A/40/762). They had expressed "deep concern over the persistence of international economic problems and the impasse in the negotiations necessary to cope with the situation', stressed the need for international support for African Governments to develop the continent, and urged measures to address the structural causes of the critical economic situation in Africa and prevent its recurrence. Governments of creditor developed countries and international financial and banking institutions were urged to undertake a dialogue with debtor developing countries to solve the debt problems of developing countries.

Egypt concluded that no substantial results would be forthcoming, except through launching global negotiations aimed at establishing a new international economic order.

Several Latin American countries drew attention to the vast sums of money leaving their continent each year because of debt servicing. Peru put the figure at $87 billion over the last three years. African countries also stressed the external debt problem. Nigeria said it spent almost 45 per cent of its export earnings on debt servicing.

Some developing countries expressed concern at the deterioration in the price of commodities, the export of which was crucial to their economies. Anwarul Karim Chowdhury (Bangladesh) said that the price of his country's main export, jute, had fallen by 25 per cent since 1980.

Protectionism continued to grow, some countries pointed out, preventing developing countries from maintaining their level of exports. Implementation of the Integrated Programme for Commodities and the entry into full operation of the Common Fund were urged. Several African nations wanted, in addition to emergency measures, a long-term economic rehabilitation plan for the continent.

The Soviet Union called on all States "to reduce their military expenditures in order to use the resources thus released for the purposes of development, including that of the developing countries'. United Nations estimates indicated in the second half of the 1980s world arms expenditure would reach $1 trillion. By the end of 1985 the foreign debt of developing countries would approach the same figure.

Major capitalist Powers, it said, were using the indebtedness of developing countries to interfere in their internal affairs. A radical restructuring of the international monetary and financial system should be the focus of the proposed conference on monetary and financial questions, but leading developed capitalist countries had avoided discussing that subject at the United Nations.

The German Democratic Republic favoured an immediate start to preparations for an international conference on money and finance. Indebtedness of developing countries was a political problem since it affected the further independent development of those States, it said.

Mongolia said the world's economic problems could only be resolved in a climate of peace and reduced tension. The arms race was "swallowing up vast material and intellectual resources which could be devoted to development'.

Luxembourg, on behalf of the European Economic Community, said that during the past year world trade had increased and the industrialized countries had sustained moderate and noninflationary economic growth. However structural rigidity, unstable currency markets, trade barriers, high interest rates and, above all, unemployment, persisted.

Although the recovery and effects of adjustment programmes were gradually spreading, conditions in developing countries remained worrisome due to recession, stagnation, high inflation rates, the threat of social unrest, and foreign debt which had "mortgaged all development plans'.

Developing countries' adjustment efforts had been significant in reducing their external current account deficit; they should be supported by adequate World Bank assistance, justifying an increase in its capital. Official development assistance was also an essential element of external finance. Such assistance granted by industrialized countries had increased by 6 per cent in 1984. Community members that had not yet done so would try to reach the official development assistance goals of 0.7 and 0.15 per cent, set forth in the International Development Strategy for the Third United Nations Development Decade and the Substantial New Programme of Action for the Least Developed Countries respectively.

The United States shared concerns over the external debt burden and the uncertainty regarding international trade. However, it said, the world economy had improved since 1983, with reduced inflation, resumption of growth in developed and developing countries, and lessening of financial tensions stemming from international debt. To expand the scope of the recovery, each country should adopt a sound, growth-oriented national policy. Industrialized countries must correct current account imbalances through economic dynamism, more balanced growth and the setting of exchange rates that reflected economic realities.

The United States had at Seoul made constructive proposals to assist debtor countries, which must adopt comprehensive policies to improve growth, reduce inflation and adjust balance of payments. Multilateral development banks, in collaboration with the International Monetary Fund, must provide increased loans to support market-oriented growth policies. Countries pursuing sound adjustment policies must have more access to private lending.

Other developed market countries generally supported the views of the European Economic Community and the United States. Denmark, on behalf of the Nordic countries, suggested practical steps to rebuild confidence in the United Nations role in the economic field, including improving the Secretariat's preparatory work, and better organization of work and coordination of operational activities. Co-operation between member countries, however, was the most important condition of progress. Canada referred to the need for transition for many developing countries from the "crutch' of short-term relief to the path of longer-term development and self-reliance.

Photo: Mr. Ripert

Photo: Heads of specialized agencies, many of whom participated in the work of the Second Committee, assembled at dais of General Assembly Hall, October 1985.