Transcript

Transcript of a Press Conference of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development (Group of 24)

April 23, 2004

IMF STAFF: Welcome to the press conference of the Chairman of the Ministers of the Group of 24. At the center of the head table, the Chairman of the Ministers of the G-24, Senator Conrad Enill, Minister from Trinidad and Tobago. At his right, the Chairman of the Deputies of the G-24, Ewart Williams, Governor of the Central Bank of Trinidad and Tobago. At his right is Mr. Ariel Buira, the G-24 Secretariat; and next to me, the first vice chairman, Mr. Paul Toungui. The Chairman of Ministers will have a few words at the beginning of the press conference.

Mr. ENILL: Thank you very much. It gives me great pleasure to be with you this afternoon at this closing press conference to report on the successful outcome of the meeting of the Ministers of the Intergovernmental Group of Twenty-Four on International Monetary Affairs and Development. As usual, we discussed the principal issues and challenges facing the international community. We have made available to you in the communique the conclusions of our deliberations this morning. I do not intend to go into great detail on the communique. I will certainly highlight several key issues that our Ministers underscored.

First, it is reassuring that the global economic recovery is gaining momentum, but the recovery can only be assured through a multilateral cooperative strategy. We, as developing countries, have been making much progress in achieving macroeconomic stabilization and implementing politically difficult structural reforms, but it is incumbent on advanced countries, as the largest economies in the world, to do their part by addressing their own underlying imbalances. There is a present need to tackle the large fiscal and current account deficits as well as key structural reforms in a number of countries. This would sustain global growth prospects and help avoid disorderly exchange rate adjustments and disruptive increases in international interest rates.

Second, despite improving global growth prospects, the international financial system remains vulnerable to crises brought about by massive and unstable capital flows. For this reason, the IMF needs to fulfill its obligation to help keep countries following sound policies, safe from contagion and maintain market confidence. This can be done through the establishment of a new facility designed for the prevention of capital account crises.

A third element of the global cooperative strategy is the prompt and serious resumption of the Doha Round of multilateral trade negotiations, as emphasized by this committee in Dubai. In this regard, advanced countries must deliver on their commitments to increase market access for developing country exports and drastically reduce impediments to agricultural trade so that the round can be concluded as scheduled in 2005.

A fourth part of the strategy is the need to sharply increase resources to help developing countries achieve the Millennium Development Goals. A necessary condition for the achievement of the MDGs is a doubling of the ODA flows. Also the international community should give careful consideration to the several creative financing options put forward, including the International Financing Facility. In addition, it is particularly disturbing that for the last several years there has been a substantial net transfer of resources from developing countries to multilateral development banks, which seems contrary to their mandates.

Fifth, and an integral part of our broad strategy, is ensuring that developing countries are more appropriately represented in the decision making process of the IMF and the World Bank. Two years have elapsed since the international community agreed in Monterrey to this objective with little progress. Therefore, there is an urgent need for a concrete timetable that would allow completion of our work by year 2006 annual meetings. The work will involve a revision of the quota formulas and a restructuring of the allocation of quotas to reflect the relative size of our economies as well as an increase in the basic votes to restore the original role of providing smaller members with an adequate voice. We are also concerned about the lack of transparency and accountability in the selection process of the heads of the Bretton Woods Institutions. We urge that the selection process should always be open, inclusive, and transparent, involving the full participation of all members. It is only through such a process that the legitimacy and accountability of our institutions can be fully realized. Thank you, and we will now take questions.

QUESTIONER: How do you feel about the evident presumption on the part of some members that the Managing Director will still be a European?

MR. ENILL: Our Ministers met this morning and deliberated on that particular issue, and our position is that the process by which the Managing Director should be selected continues to be one that we would articulate. There seems to be consensus around the candidate from Spain, and in our view that candidate has all the requirements, he is very competent, and we would in fact work with him if he is selected. We recognize, however, that like everything else, these are politically sensitive matters and require significant negotiations because there are sensitivities involved, and therefore we will still continue to press for and to demand where we can that the process is followed, but in this particular instance we think that the candidate that consensus seems to be building around is, quite frankly, a very good candidate and one that we can work with.

QUESTIONER: [Inaudible]

MR. WILLIAMS: As you are aware, I think at the IDB meeting the Latin American representatives expressed support for Mr. Rato. There is no doubt that Mr. Rato is someone with extremely strong credentials. He is someone with the kind of experience that the developing countries have been asking for, a practicing Minister of Finance, someone who is sympathetic to the challenges being faced by the developing world. However, we shouldn't let the personality cloud the main issue. The main issue, which is reflected in the communique, has to do with the process with which the Managing Director is elected, and we still think that that process needs to be addressed and corrected.

QUESTIONER: Isn't the question of choosing a Managing Director from the best candidate regardless of nationality moot now because the name of Mr. Rato has been proposed by members of the G-24, they are also among the proposers of the candidate; secondly, you point out that their countries are far short of the 0.7 percent aid official development assistance that they promised. Now, at present nobody is even talking about it. Has it now become outdated?

MR. BUIRA: Well, on the first point, you will recall that there was a report, a joint report of the Bank and the Fund Executive Boards that stressed that in the selection process of the Managing Director all Executive Directors should be informed in a timely manner regarding candidates, including their credentials and their knowledge of the institution, that all members of the Board should be consulted in the process of considering candidates that leads to the selection process, and that a plurality of candidates representing the diversity of members across all regions would be in the best interests of the Fund since the goal is to attract the best candidates regardless of nationality. So what the Minister had said and what the Ministers stated this morning is that the process has not been followed, although this was a process that was endorsed by both Executive Boards, and there is very much the strong demand that in the future this be followed.

Now, on the 0.7, no, it is not at all out of date. The fact that there is a proposal by Gordon Brown and by the government of France for the International Financing Facility that has been supported by a large number of developing country Ministers shows that this is the goal that many members of the international community would like to see achieved, and this is a way that they are putting forward for getting to this goal despite the budgetary problems that a number of industrial countries face.

MR. WILLIAMS: Following up on the question of the aid, the communique specifically underscores the importance for developing countries that the developed countries meet the target, but it goes further. It talks about the modalities of aid, it talks about timely aid, it talks about more cash aid, it talks about aid of the kind that developing countries can use, so I do not think it is correct to say that the issue has been put on the back burner.

MR. ENILL: Further to that, the fact is that at Monterrey the community agreed on a particular target, and to the extent that we are very concerned about the fact that those targets seem to have slipped and it is our intention to do what is required, then it is the view that this particular issue will have to be looked at and in fact will be resolved or else the goals may be in jeopardy, and I think all of us are committed to ensuring that we achieve the goals as we had set them out because the conditions by which those goals were set out still continue to be very, very important.

QUESTIONER: Can you please tell us your reaction to reports that were released this morning and yesterday on the Millennium Development Goals and the fact that poverty is down, half since 1981, but chances are that developing countries are not going to be able to meet any of the development goals except poverty?

MR. ENILL: Well, I think that is commendable, first of all, that we have at least demonstrated or there is a demonstration when you set targets, you can in fact achieve them. But one has to remember, and certainly my initial reaction to it is that while these goals were set up, there are conditions that existed that would have either mitigated against the achievement, and I am confident that as we move forward and as we look at where we have slipped and as we focus on those goals and understand the time frames within which we need to achieve them that we would continue to put the resources and the intellect to achieve the particular results. So my response to you is simply that we have achieved one, and therefore we have a way of saying as we move forward that they are all achievable basically if we follow the system.

MR. WILLIAMS: As the Minister indicated in his initial statement, there are preconditions to meeting the Multilateral Development Goals. One precondition is the trade issue. Notwithstanding all the adjustment efforts that they have made, countries are not going to meet these goals unless they are able to expand their trade and expand trade in the commodities for which they have comparative advantage, like agriculture, textiles, and light manufacturing. That precondition has not been fully met. We just discussed the issue of aid, and that is another precondition. There are preconditions having to do with the multilateral agencies, preconditions like the HIPC, like expanding debt relief, like ensuring that developing countries get to a sustainable external debt position, so clearly developing countries need to continue with their adjustment efforts, but in order to meet these goals, the other preconditions need to be met.

QUESTIONER: Just to return to this selection question of earlier, I just wanted to ask what kind of clear commitments you are expecting either from the G-7 or the IMFC, and do you think you will see some written commitments that will have some impact on the selection of the World Bank head in the very near future?

MR. BUIRA: That's loaded. Well, I have heard that the deal that is likely to be put forward is one by which the industrial countries would commit to respect the procedure in the future, that this is in the process of consultations that this may be emerging, but this is only guesswork or hearsay, so we will have to see how that works. But you can understand that after 126 member countries, two-thirds of the membership, questioned the procedure, it really poses a challenge for the new Managing Director and for the industrial countries, and it may be that one of the reasons why Mr. Rato is perhaps moving ahead of other European candidates is because he enjoys the support of a significant group of developing countries, the Latin Americans, because he had been helpful to Argentina in the resolution of its crisis, to Brazil in the prevention of contagion, and so forth, but there is an issue of legitimacy for a new man who comes in without broad support or with a procedure that is questioned by a large number of members. So maybe one of the ways of overcoming this is saying, okay, this is the last time that this happens. But we will have to see.

MR. ENILL: I think a new principle is what will continue to exist in spite of what happens or not, and the principle is that in matters of this nature, the process is very important because if you do the process right, then the question of support by the large majority is going to be in your favor, and therefore I think we continue to talk about the process, and that is the issue on which we are going to be championing in this particular activity. The process must be one by which there is transparency, and these are issues that the Bretton Woods Institutions ask of us at the level of individual countries and therefore we think that we would be able to argue consistency and application of principles as we move forward, as difficult as it may be.

QUESTIONER: What is the status of the IFF proposal by the British and what is G-24's position on it?

MR. BUIRA: You will see in the communique that the Ministers called for - let me find the exact wording - urge further work on - that the Ministers strongly support the proposed International Financing Facility to scale up and frontload resources to meet the Millennium Development Goals and urge donors to implement this proposal. There was a conference in Paris a few days back in which both the Finance Ministers of the U.K. and of France and a number of Ministers from developing countries, over 35 or so from Africa and a few others from other regions, discussed the proposal and came out with strong support for it, and this was endorsed this morning by the broader group of developing countries as a way of increasing the availability of aid to these countries.

QUESTIONER: This might seem like a silly question, but I wanted to ask you, why do you think the developed countries, particularly Europe and the United States, who contribute so much in terms of capital to these projects that people are working on would want to give up their control? I mean, what motivations would you - what reasons would you say to them to convince them why it would be in their interests or in the interests of their voters to give up the control that they essentially have on both the IMF and the World Bank? I really haven't quite understood that yet.

MR. ENILL: Well, the world has emerged today as one in which no one country basically can deal with all the problems that exist, and therefore the large countries of the world are also recognizing that to do specific things it requires the broader support of other players in the world. You know, you just have to go back to some of the recent initiatives in which the U.S. was involved, and really for them to be successful, they needed to get support from other countries as well, and I think that as we move forward the argument will be that this world is basically for all of us, and to the extent that we can sit down and understand and negotiate how we would deal with very futuristic issues, very difficult issues, because they impact all of us, I think we can convince them to share with the rest of the world some of the power that they have because they also require input from developing countries for things they have that they consider to be important. So the answer to your question is that I believe it is in all our interests to negotiate something that all of us can live with because the issues, if I think about terrorism as an activity, for example, that is one certainly in which the whole world must come together, and therefore I think that there are issues around which we can all negotiate based on our particular interests, and I do not think that is...

MR. BUIRA: If I may add a word, you saw, for instance, the meeting of the G-7 in Boca Raton to discuss the dollar, and the external imbalances of the U.S., but that was a little bit like Hamlet without the prince because you were leaving out major actors - China and several Asian countries were running substantial surpluses vis-a-vis the U.S. Now, to address the problems of the world economy today, you need to bring in everybody. The structure of the world economy has changed very significantly since the Bretton Woods conference and the institutions were set up. The developing and emerging market countries, sorry, and transition economies account for as large a share of the world economy as the G-7 today, and they have higher levels of international reserves, and they represent a very significant proportion of world trade, and they are certainly the most dynamic elements of the world economy, so you cannot determine the course of the world economy with 44 percent of world GDP. You need the other half. This is a very good reason to bring them in.

MR. WILLIAMS: But there is also the moral issue. There is also the issue of principle. We are either universal institutions or we are not. You cannot on the one hand say this is a participatory institution, that democracy should be the order of the day, that transparency and accountability should be the order of the day, and then on the other hand say that there should be sacred cows, so quite apart from the burden, but the issues, we are either universal institutions or we are not.

IMF STAFF: Thank you.