A wide range of countries should play an important role in shaping policies to cope with the current global financial crisis, according to senior United Nations development experts who warned that the impact of the turmoil on poor nations is being overlooked as “economic giants” deal with the emergency.
Supachai Panitchpakdi, Secretary-General of the UN Conference on Trade and Development (UNCTAD) today voiced concern for what he called “innocent bystanders” in the widening global financial crisis.
“The impact on developing countries will be much deeper than was anticipated,” he said during a meeting with UNCTAD’s governing body, the Trade and Development Board, in Geneva.
Certain sectors of their economies “are beginning to suffer, and this is only the beginning,” he cautioned, adding that volatile exchange-rate movements affecting some of these countries will not help.
“Trade will suffer, and the commodities boom that has helped developing countries for a number of years now is ending,” said Mr. Supachai.
He noted that a real issue will be whether any cash will be left for credit and development aid needed for efforts such as achieving the anti-poverty targets with a 2015 deadline, known as the Millennium Development Goals (MDGs), as well as to boost productive capacities and cope with issues like climate change.
Other issues that need to be addressed include the fate of smaller private banks, preventing “capital from fleeing from developing countries,” and regulating liberalized global markets to reduce volatility and risk, especially for small nations.
Mr. Supachai stressed that adapting the global financial system “must be a global effort,” that includes the participation of all countries and the UN.
The President of the Trade and Development Board, Debapriya Bhattacharya of Bangladesh, noted that the crisis “is complex and interrelated, it has yet to fully unfold, and the impacts are not yet completely clear.”
However, there will be repercussions for trade, the currencies, and the investment prospects of the world’s less-advanced nations, he told the meeting. “It’s not just the extent of the problem, but how to manage the pace of it.”
Heiner Flassbeck, Director of UNCTAD’s Division on Globalization and Development Strategies, described the current financial turmoil as “a global de-leveraging, a global going out of risky positions. That is all right on its own – in fact we have said for several years that this was going to happen – but it can go too fast. It must be slowed down by government intervention.”
He warned of a “huge slowdown in trade due to the global recession that is looming.
“The current malaise is that we have built a huge casino next to the real economy, and given too many people the means to play there, and now that casino has collapsed,” he told participants. “We need to realize, to learn the lesson, that this kind of casino is not productive, is not helpful. We must go back to balanced and real economic relations and to balanced relations between currencies.”
The current financial crisis will also feature high on the agenda when Secretary-General Ban Ki-moon convenes a meeting of his senior Chief Executives Board, which brings together the heads of the world body’s various entities, next week in New York.