1. The outlook for the world economy is a source of great concern to the ILO. In addition to the downside risks discussed in the World Economic Outlook there is now the new shock of SARS that threatens to slow growth in South-East and East Asia and beyond. If this materializes it would be another blow to the global economy since the strong performance in this region has been a significant factor in preventing global growth from falling even further than it has in the past two years. Moreover, the most recent economic indicators for the industrial countries have been disappointing. As a result, some private sector forecasters now fear that growth of the global economy in 2003 will be as low as 2 to 2.5 percent, significantly below than the WEO forecast of 3.3 percent.

2. In this light, there is increased urgency for the industrial countries to provide as much further policy stimulus as possible. This includes a further easing of monetary policy and greater tolerance of a temporary rise in fiscal deficits, especially when this results from the operation of automatic stabilisers. Similarly, the dynamic Asian economies need to take effective public health action to prevent the spread of SARS as well as to exploit the scope that most of them still have for monetary and fiscal stimulus.

3. The ILO appreciates the detailed analysis carried out by the IMF's WEO regarding the relationship between institutions and economic performance that provides a number of useful insights and assessments. It is an important and very welcome subject for consideration in the WEO. Such an analysis, however, would be further strengthened in future if the actual role played by specific institutions (e.g., constitutional structures, labour market institutions, financial institutions, etc.) are considered rather than the present predominant reliance on measures of governance based on perceptions. Such IMF research would also be strengthened by including consideration of institutional complementarities; i.e. institutions may be functional or dysfunctional depending on the way they are combined with others (e.g. synergies between different labour market institutions as well as between labour market institutions and financial and other institutions).

4. The ILO notes that the assessment of the positive role of institutions to promote economic performance in the WEO is somewhat reversed in the chapter on Labour Market institutions (Chapter IV) where the more classic IMF argument is reiterated suggesting that the significant reform (e.g., "deregulation" leading to "less generous" unemployment insurance, "lower" levels of unionisation, and "less" employment protection) of labour market institutions would be beneficial for countries as they are "associated with higher unemployment". The ILO would suggest, however, that labour market institutions might also be usefully assessed from a perspective of reform measures that would actually be targeted at strengthening the positive impact on economic performance of labour market institutions/policies that promote the generation of employment, provide greater employment and social protection, and strengthen the capacity of trade unions and employers' organisations.

5. Our review of the Appendices related to Chapter IV, would suggest that the WEO text takes a more negative and unambiguous position regarding the impact of benefit replacement rates and higher unionisation rates upon unemployment than is warranted by the data in Table 4.3. We have raised a number of specific concerns in our Comments regarding how the available data was interpreted and analysed. Nevertheless, the ILO believes that the IMF interest in labour market institutions in the WEO provides both the IMF and the ILO with new opportunities to develop enhanced economic analysis and dialogue concerning ways to strengthen the impact of labour market institutions on achieving both poverty reduction and economic and financial stability. It could thus help generate new interest and a better understanding of the role of labour market institutions within the international economic and financial community.

6. The world can ill-afford another serious economic downturn, particularly in view of its impact on developing countries and of the serious challenges that remain with respect to be attainment of the Millennium Development Goals. The present state of extreme uncertainty over growth prospects does not bode well for achieving the shared objective of the international community of making globalization work for all. It is thus timely to examine the existing pattern of globalization with a view to ensuring higher and more stable growth and making it less unbalanced and more inclusive. In this context you may be aware the World Commission on the Social Dimension of Globalization that was established by the ILO early last year is now in the final phase of its work and will be releasing its Report towards the end of this year. This Commission, co-chaired by the Presidents of Tanzania and of Finland, has the remit to make proposals on how globalization can be reshaped to yield greater benefit to more countries and to more of the deprived in the world. This is indeed a challenging task but one that can hardly be avoided. I take this opportunity to thank Mr. Wolfensohn and Mr. Kohler for having taken the time to hold personal dialogues with the Commission and for the technical inputs that the World Bank and the Fund have provided to its work.

7. Among the key issues that the Commission is considering is naturally that of global governance. I am therefore pleased that the Development Committee has before it a paper on the issue of enhancing the voice and participation of developing and transition countries in decision-making at the World Bank and the IMF. The fact that this issue is being discussed at all testifies to the enormous inequalities in income levels that exists within the family of nations today. I am sure all would share the hope that the problem will ultimately solve itself through a stronger convergence in the rates of growth between rich and poor nations. But in the very long interim period before this is likely to happen there is a strong moral and pragmatic case for doing whatever is possible to mitigate the problem. I therefore hope that all the feasible proposals contained in the paper to move towards this end will be adopted as soon as possible. But as the paper itself acknowledges this should be seen as the first step in an ongoing process to find deeper and more satisfactory solutions to the problem. The obstacles to changing the status quo that are pointed out in the paper are indeed daunting but this should not deter us from persevering with the task.

8. The ILO is engaged in playing its part in achieving the MDGs and it therefore welcomes the priority that the development Committee has attached to monitoring the policies and actions for its achievement. It also welcomes the concept of `institutional comparative advantage' espoused in the paper setting out a framework for this monitoring exercise. This will involve `individual international agencies leading the monitoring work in the specific areas of their respective mandates and expertise'. This is an eminently sensible approach that is also in keeping with necessary effort to achieve greater coherence within the multilateral system. The ILO looks forward to contributing to this process. From this perspective, we note that the list of key issues that has been identified as part of the initial monitoring exercise in developing countries does not explicitly include the issue of fundamental human and labour rights. While the paper rightly stresses the importance of raising the quality of governance it seems to overlook the fact that this can only be achieved when it is firmly grounded in the full respect for fundamental human and labour rights. The ILO also believes that respect for fundamental labour rights, and the social partnership that this fosters, has a key role to play in both promoting and maintaining good governance.

9. While we fully endorse the priority given, in the same paper, to the need for developed countries to increase market access for developing country exports and to provide more and better aid, we also note that this leaves out other important imbalances in the functioning of the global economy. Progress on issues such as the reform of the international financial system, the provision of global public goods, and the reform of the global governance are also important for easing the external constraints faced by developing countries.

10. Still on the subject of the framework for monitoring progress on achieving the MDGs we note the statement in the Note from the President of the World Bank that the agreed division of responsibilities with the UN involves `the UN taking the lead on monitoring progress in achieving the MDG outcomes and the Bank and the Fund taking the lead on monitoring of policies and actions needed to achieve the MDGs.' We trust that this division of responsibilities is not treated too rigidly since the distinction between outcomes and policies is to some extent an artificial one. The UN and its specialised agencies are also actively engaged in the promotion of policies and actions for the achievement of the MDGs and this should be taken into account in the collaboration between the UN and the Bank and the Fund on the MDGs.