Editorial: What agenda for world bankers in Washington?
Published by The Straits Times, Singapore on 2004-09-29
Some 10,000 finance ministers, bankers, business tycoons, lobbyists, academicians, journalists, social activists - not to mention the President of the United States - will show up at the annual meetings of the World Bank and the International Monetary Fund in Washington, starting later this week. For the most part, they will greet and eat. But lest the traditional conviviality be misleading, let it also be said that important decisions concerning the directions of the global economy will taken at the weeklong event. This year, the stickiest question is going to be about mobilizing new resources to eradicate world poverty and spur sustainable economic development, especially in the so-called failed states - countries that have been so hopelessly riddled with political corruption, social conflicts and governance failures that their prospects for prosperity range from zero to zilch. Nearly 50 of the 191 member-countries of the United Nations qualify as failed states, and no one quite knows what to do about the situation. Although the World Bank typically lends about US$20.1 billion each year for 245 development projects internationally, the global cohort of poverty is widening, with almost half the world's population of 6.1 billion living on the equivalent of less than US$1 a day. The 31 richest nations are giving less and less to poor countries each year because their own economies haven't completely recovered from the global recession; the aid figure for 2004 is expected to be under US$40 billion, down from US$75 billion some 25 years ago. Private-sector investment in the Third World's 135 countries is barely US$150 billion a year, of which US$53 billion goes to China alone. Commercial banks, already frightened by the US$3 trillion that the poor countries have accumulated in governmental and private debt, are understandably reluctant to pour more funds into developing economies.
So what to do? This is a question of particular interest to Singapore, which will host the Bank/IMF annual meetings in 2006. (These meetings typically are held every third year outside Washington.) What happens in Washington in the next few days is of special relevance to Singapore because the development business traditionally runs in three-year cycles. In other words, what delegates decide this year will bear fruit - or not - only by the time the Singapore meeting comes around. Why three years? It takes about 16 months for Bank/IMF decisions to filter through their respective bureaucracies and those of their 184 members. It takes another year for projects to be funded - fully or not - and then it's time for assessing the project's progress, which takes place in the third year. Because the Third World's economies have never been in slacker shape, the Singapore meeting in 2006 is likely to be a time for some very tough stock-taking of the whole development game.
That game is going to need some drastic overhauling in Washington. Take, for example, the question of debt relief. Should the debt of the Third World - whose nations claim that a global crash in commodities prices has dramatically lessened their export revenues - be forgiven entirely? Last week (correct) Britain tried to score some cheap brownie points by announcing that it would try and pay off 10 percent of some of the Third World's debt. That would be around US$180 million annually in relief for 32 poor countries who owe money to the World Bank and the African Development Bank. Mr Gordon Brown, the Chancellor of the Exchequer, said that relief from debt-service would free these countries to devote more resources to domestic development. Unfortunately, many Third World regimes are peopled with kleptocrats whose thinking rarely extends beyond feathering their own nests. And if export revenues are already unsteady, where are these poor countries going to get cash for domestic development? The World Bank says that annual international revenues from exports and trade amount to US$31 trillion - and that surely the poor nations deserve a greater share of the pie. Mr Brown contends that the debt owed to the IMF could be cut by a revaluation of the Fund's gold stocks, currently worth US$8.5 billion when valued at US$40 per ounce. The market price for gold is now more than US$400 an ounce. "The cancellation of debt owed to the IMF should be paid for by the better use of IMF gold," Mr. Brown said. Hopefully, other delegates in Washington this week will display a more sensible grasp of economics.
Senior Writer and Global-Affairs Columnist