Areas of work Regions Publications

UN Conference on the World Financial and Economic Crisis and its Impact on Development

The UN Conference on the World Financial and Economic Crisis and its Impact on Development, taking place in New York between 24 and 26 June 2009, gathers for the first time all 192 UN member countries to discuss the most pressing issues related to immediate crisis mitigation measures and long-term structural reform of the global economic system. Less inclusive fora, such as the G8 or G20, have so far dealt with the issues of crisis response, leaving those who have been hit hardest - the developing countries - outside the playing field.

However, the main concern of industrialised states on the eve of the Conference has been to limit the role of the UN in global economic governance to a minimum. This defensive stance is reflected in the expected level of representation of developed countries in the UN Conference – no single Head of State from the North will be attending this Summit and many countries will be represented at below-ministerial level, which has triggered a wave of withdrawals of Head-of-State representation from other major country groups as well.

Opposition to establishing a crisis follow-up mechanism within the UN contributes to further downgrade the conference. Rather than giving the UN the lead on global economic governance, Northern countries persist in handing the scepter to the G20 as a follow-up forum, stating its decision-making effectiveness due to its limited membership, and leaving the steering role in global economic issues to the International Financial Institutions.

Conversely, the Group of 77, a coalition of developing countries focused on the interests of the poorest members of the international community, promotes the establishment of a robust follow-up mechanism to the Conference and making the global economic crisis a priority agenda item for the next UN General Assembly Summit in September 2009, due to take place just before the next scheduled meeting of the G20.

Given this political struggle and its undesirable consequences for the prospect of long-term relief for the world’s poor, global civil society has been targeting the different political players and promoting the consideration of the interests of the most vulnerable on the eve of the Conference and it will continue to do so during the Summit itself. CIDSE is actively engaging in this process and trying to raise public awareness about the pressing need for profound reforms of the international economic and financial architecture and for urgent resource mobilisation for developing countries aimed at mitigating the social costs of the crisis and safeguarding hard-earned progress towards the achievement of the Millennium Development Goals.

'Reaching the MDGs amidst a Financial and Economic Crisis', a side-event by CIDSE and partners

Much of the progress that the world community has so far booked in achieving the Millennium Development Goals (MDGs) risks being undermined or even negated by the recent financial crisis. The World Bank estimated that 53 million people would be driven into poverty in developing countries as a result of it. The UN Conference on the World Financial and Economic Crisis and its Impact on Development (New York, 24-26 June 2009) offers a key opportunity, with its explicit mandate to address the impacts of the world financial and economic crisis on the achievement of the Millennium Development Goals and agree on coordinated and collaborative actions and appropriate measures to mitigate them.

In the spirit of contributing to the debate, CIDSE, together with Cordaid, Oxfam International, Afrodad and Latindadd, organised a side event sponsored by the Permanent Mission of the Kingdom of the Netherlands which aims at generating an exchange on three areas of action that could help fulfill such mandate:

Enhancing international cooperation to counter illicit financial flows including tax evasion
A comprehensive and lasting solution to sovereign unsustainable debt
Making financial regulation work for development and the MDGs

The panel:

- Bert Koenders, Minister for Development Cooperation, the Netherlands
- Vitalice Meja, Programs Director, Lobby and Advocacy, Afrodad, Zimbabwe
- Jomo Kwame Sundaram, Assistant Secretary General for Economic Development, UN-Department of Economic and Social Affairs and member of the Commission of Experts of the President of the UN General Assembly on Reforms of the International Monetary and Financial System
- Mauricio Escanero, Former Facilitator, UN International Financing for Development Conference, Mexico
- René Grotenhuis, President of CIDSE, Director of Cordaid, the Netherlands (picture below)

Moderator: Bernice Romero, Advocacy Director, Oxfam International

Introduction

Jomo Kwame Sundaram's opening presentation outlined that the achievement of most MDGs, especially the eradication of poverty and hunger, is moving beyond reach due to the cumulated effects of the current crisis. This increases the risks of social unrest which is posing imminent threats for the political stability in an interconnected global context.

Despite this grim outlook, panellists shared the perception that the current crisis offers a unique opportunity for a global agreement on a paradigm shift towards a more sustainable economic model based on equality and development and providing a level playing field for all actors in the international economic arena.

Tax

René Grotenhuis, President of CIDSE, Director of Cordaid, attending the side-event by Cidse and Partners (©Pasi Nokelainen/Kepa) René Grotenhuis emphasised the critical importance of domestic resource mobilisation in developing countries, especially in times when international donors are failing on the fulfilment of development aid pledges. Many developing countries face a severe obstacle in this regard: enormous financial outflows in the form of tax evasion and capital flight, destined to tax havens worldwide, contribute to the depletion of their budgets.

Intensified global cooperation in tax matters within an international tax authority integrated into the UN System is imperative to prevent resource outflows and to enable developing countries to sustain economic growth, Grotenhuis said. Such a tax authority could also work towards creating a code of conduct on combating tax evasion and avoidance including rules on transparency, automatic exchange of information between states and establishment of binding legal instruments.

Debt

The economic crisis is putting a severe strain on developing countries’ ability to sustain balanced state budgets as the needs for social protection of their vulnerable citizens have increased dramatically as a result of the crisis. In this context, René Grotenhuis expressed concern about the looming risk of an unprecedented debt crisis on a global scale. In addition, Vitalice Meja pointed out that developing countries are currently paying the price of wrong policy advice by the IMF and the World Bank. Therefore, CIDSE supports UNCTAD’s call for a three year debt moratorium and advocates for the urgent creation of a comprehensive and binding international framework for sovereign debt. Such a framework should be based on equal partnership between creditors and borrowers, Meja underlined.

Financial regulation

The economic crisis has highlighted the need for much stronger international regulation of financial and economic activities. Mauricio Escanero emphasized that the design of international regulation mechanisms requires a holistic approach. Panelists agreed that, by being universally representative, the UN is the only legitimate framework to address questions of global regulation and lead the process of comprehensive systemic reform. Within the UN System a Global Economic Council where developing countries will be equally represented can provide an overarching structure to deal with questions of economic governance and financial regulation, René Grotenhuis suggested.

Outlining the complexity of issues related to financial regulation, Dutch Minister Koenders stressed that in order to guarantee the success of the long-term international reform agenda the efficiency of the UN System should be substantially strengthened and new alliances should be formed to make the follow up of the UN Conference on the Financial and Economic Crisis a success.