Inter Press Service » Eye on the IFIs http://www.ipsnews.net Turning the World Downside Up Thu, 02 Jul 2015 04:05:05 +0000 en-US hourly 1 http://wordpress.org/?v=4.1.5 Opinion: BRICS for Building a New World Order?http://www.ipsnews.net/2015/07/opinion-brics-for-building-a-new-world-order/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-brics-for-building-a-new-world-order http://www.ipsnews.net/2015/07/opinion-brics-for-building-a-new-world-order/#comments Wed, 01 Jul 2015 11:38:34 +0000 Daya Thussu http://www.ipsnews.net/?p=141375

Daya Thussu is Professor of International Communication at the University of Westminster in London.

By Daya Thussu
LONDON, Jul 1 2015 (IPS)

As the leaders of the BRICS five meet in the Russian city of Ufa for their annual summit Jul. 8–10, their agenda is likely to be dominated by economic and security concerns, triggered by the continuing economic crisis in the European Union and the security situation in the Middle East.

The seventh annual summit of the large emerging economies – Brazil, Russia, India, China and South Africa – also takes place with a background of escalating tensions between Russia and the West over Ukraine and the eastward expansion of the North Atlantic Treaty Organisation (NATO), as well as the growing economic power of Asia, in particular, China.

Daya Thussu

Daya Thussu

Nearly a decade and a half has passed since the BRIC acronym was coined in 2001 by Jim O’Neill, a Goldman Sachs executive, now a minister in David Cameron’s U.K. government, to refer to the four fast-growing emerging markets. South Africa was added in 2011, on China’s request, to expand BRIC to BRICS.

Although in operation as a formal group since 2006, and holding annual summits since 2009, the BRICS countries have escaped much comment in international media, partly because of the different political systems and socio-cultural norms, as well as stages of development, within this group of large and diverse nations.

The emergence of such groupings coincides with the relative economic decline of the West.

This has created the opportunity for emerging powers, such as China and India, to participate in global governance structures hitherto dominated by the United States and its Western allies.

That the centre of economic gravity is shifting away from the West is acknowledged in the view of the U.S. Administration of Barack Obama that the ‘pivot’ of U.S. foreign policy is moving to Asia.“The major countries of the global South have shown impressive economic growth in recent decades … [it is predicted that] by 2020 the combined economic output of China, India and Brazil will surpass the aggregated production of the United States, Britain, Canada, France, Germany and Italy”

And there is evidence of this shift. In the Fortune 500 ranking, the number of transnational corporations based in Brazil, Russia, India and China has grown from 27 in 2005 to more than 100 in 2015. China’s Huawei, a telecommunications equipment firm, is the world’s largest holder of international patents; Brazil’s Petrobras is the fourth largest oil company in the world, while the Tata group became the first Indian conglomerate to reach 100 billion dollars in revenues.

Since 2006, China has been the largest holder of foreign currency reserves, estimated in 2015 to be more than 3.8 trillion dollars. According to the International Monetary Fund (IMF), China’s gross domestic product (GDP) surpassed that of the United States in 2014, making it the world’s largest economy in purchasing-power parity terms.

More broadly, the major countries of the global South have shown impressive economic growth in recent decades, prompting the United Nations Development Programme to proclaim The Rise of the South (the title of its 2013 Human Development Report), which predicts that by 2020 the combined economic output of China, India and Brazil will surpass the aggregated production of the United States, Britain, Canada, France, Germany and Italy.

Though the individual relationships between BRICS countries and the United States differ markedly (Russia and China being generally anti-Washington while Brazil and South Africa relatively close to the United States and India moving from its traditional non-aligned position to a ‘multi-aligned’ one), the group was conceived as an alternative to American power and is the only major group of nations not to include the United States or any other G-7 nation.

Nevertheless, none of the five member nations are eager for confrontation with the United States – with the possible exception of Russia – the country with which they have their most important relationship. Indeed, China is one of the largest investors in the United States, while India, Brazil and South Africa demonstrate democratic affinities with the West: India’s IT industry is particularly dependent on its close ties with the United States and Europe.

Although the idea of BRIC was initiated in Russia, it is China that has emerged as the driving force behind this grouping. British author Martin Jacques has noted in his international bestseller When China Rules the World, that China operates “both within and outside the existing international system while at the same time, in effect, sponsoring a new China-centric international system which will exist alongside the present system and probably slowly begin to usurp it.”

One manifestation of this change is the establishment of a BRICS bank (the ‘New Development Bank’) to fund developmental projects, potentially to rival the Western-dominated Bretton Woods institutions, such as the World Bank and the IMF. Headquartered in Shanghai, China has made the largest contribution to setting it up and is likely that the bank will further enhance China’s domination of the BRICS group.

Beyond BRICS, Beijing has also established the Asian Infrastructure Investment Bank (AIIB), which already has 57 members, including Australia, Germany and Britain, and in which China will hold over 25 percent of voting rights. Two other BRICS nations – India and Russia – are the AIIB’s second and third largest shareholders.

Such changes have an impact on the media scene as well. As part of China’s ‘going out’ strategy, billions of dollars have been earmarked for external communication, including the expansion of Chinese broadcasting networks such as CCTV News and Xinhua’s English-language TV, CNC World.

Russia has also raised its international profile by entering the English-language news world in 2005 with the launch of the Russia Today (now called RT) network, which, apart from English, also broadcasts 24 hours a day, 7 days a week in Spanish and Arabic.

However, as a new book Mapping BRICS Media – which I co-edited with Kaarle Nordenstreng of the University of Tampere, Finland – shows, there is very little intra-BRICS media exchange and most of the BRICS nations continue to receive international news largely from Anglo-American media.

The growing economic cooperation between Moscow and Beijing – most notably in the 2014 multi-billion dollar gas deal – indicates a new Sino-Russian economic equation outside Western control.

Two key U.S.-led trade agreements being negotiated – the Transatlantic Trade and Investment Partnership (TTIP) and the Trans Pacific Partnership (TPP), and both excluding the BRICS nations – are partly a reaction to the perceived competition from nations such as China.

For its part, China appears to have used the BRICS grouping to allay fears that it is rising ‘with the rest’ and therefore less threatening to Western hegemony.

The BRICS summit takes place jointly with Shanghai Cooperation Organization (SCO) Heads of State Council meeting. The only other time that BRICS and the SCO combined their summits was also in Russia – in Ekaterinburg in 2009.

Apart from two BRICS members, China and Russia, the SCO includes Kazakhstan, Kyrgystan, Tajikistan and Uzbekistan. SCO has not expanded its membership since it was set up in 2001. India has an ‘observer’ status within SCO, though there is talk that it might be granted full membership at the Ufa summit.

Were that to happen, the ‘pivot’ would have moved a few notches further towards Asia.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Critics of World Bank-Funded Projects in the Line of Firehttp://www.ipsnews.net/2015/06/critics-of-world-bank-funded-projects-in-the-line-of-fire/?utm_source=rss&utm_medium=rss&utm_campaign=critics-of-world-bank-funded-projects-in-the-line-of-fire http://www.ipsnews.net/2015/06/critics-of-world-bank-funded-projects-in-the-line-of-fire/#comments Mon, 22 Jun 2015 23:16:41 +0000 Kanya DAlmeida http://www.ipsnews.net/?p=141252 The World Bank has increased financial support for the cotton sector in Uzbekistan, despite evidence that the industry is rooted in a system of forced labour. Credit: David Stanley/CC-BY-2.0

The World Bank has increased financial support for the cotton sector in Uzbekistan, despite evidence that the industry is rooted in a system of forced labour. Credit: David Stanley/CC-BY-2.0

By Kanya D'Almeida
UNITED NATIONS, Jun 22 2015 (IPS)

For an entire month beginning in February 2015, a group of between 40 and 50 residents of the Durgapur Village in the northern Indian state of Uttarakhand would gather at the site of a hydroelectric power project being carried out by the state-owned Tehri Hydro Development Corporation (THDC).

All day long the protestors, mostly women and their children, would sit in defiance of the initiative that they believed was an environmental and social danger to their community, singing folk songs that spoke of their fears and hopes.

“I had expected a very constructive conversation with the World Bank. Instead all I am hearing are non-responses." -- Jessica Evans, senior advocate on international financial institutions at Human Rights Watch
Their actions were well within the bounds of the law, but the reactions of THDC employees to their peaceful demonstration were troubling in the extreme.

According to one of the women involved, THDC contractors and labourers routinely harassed them by hurling abusive slurs – going so far as to call the women ‘prostitutes’ and make derogatory comments about their caste – and attempted to intimidate them by threatening “severe” consequences if they didn’t call off their picket.

In a country where activists and communities demanding their rights are routinely subjected to identical or worse treatment at the hands of both state and private actors, this tale may not seem at all out of the ordinary.

What sets it apart, however, is that this hydroelectric project was not simply a government-led scheme; it is financed by a 648-million-dollar loan from the World Bank.

Governed by a set of “do no harm” policies, both the Bank and its private sector lending arm, the International Finance Corporation (IFC) have – on paper at least – pledged to consult with and protect local communities impacted by its funding.

But according to a new report by Human Rights Watch, the Bank has not only systematically turned a blind eye to reports of human rights abuses associated with its projects, it also lacks necessary safeguards required to avoid further violations in the future.

When silence and negligence equals complicity

Based on research carried out over a two-year period between May 2013 and May 2015, in Cambodia, India, Uganda and Kyrgyzstan – the latter following allegations of rights abuses in Uzbekistan – the report entitled ‘At Your Own Risk: Reprisals Against Critics of World Bank Group Projects’ found that Bank officials consistently fail to respond in any meaningful way to allegations of severe reprisals against those who speak out against Bank-funded projects.

In some cases, the World Bank Group has even turned its back on local community members working with its own officials.

Addressing the press on a conference call on Jun. 22, the report’s author, Jessica Evans, highlighted an incident in which an interpreter for the Bank’s Inspection Panel was flung into prison just weeks after the oversight body concluded its review process.

Withholding all identifying details of the case for the security of the victim, Evans stated that, besides questioning government officials “behind closed doors”, the Bank has so far remained completely silent on the fate of an independent activist working to strengthen the Bank’s own process.

Such actions, or lack thereof, “make a mockery out of [the Bank’s] own stated commitments to participation and accountability,” the report concluded.

HRW has identified dozens of cases in which activists claim to have been targeted – harassed, abused, threatened or intimidated – for voicing their objections to aspects of Bank or IFC-funded initiatives for a range of social, environmental or economic reasons.

Because the bulk of communities in close proximity to major development schemes tend to be among the poorest or most vulnerable, and therefore lack the access or ability to formally lodge their complaints, the true number of people who have experienced such reprisals is “sure” to be much higher than the figures stated in the report, researchers revealed.

Evans told IPS, “On this issue of reprisals the World Bank’s silence and inaction has already crossed the line” into the realm of compliance.

She added that the Inspection Panel raised the issue of retaliation back in 2009, giving the Bank ample time to take necessary steps to address a chronic and pervasive problem.

Instead, it continues to engage with governments that have a poor human rights track record, while remaining apparently deaf to pressures and demands from civil society to strengthen mechanisms that will protect powerless and marginalized communities from violent backlash.

Take the case of Elena Urlaeva, who heads the Tashkent-based Human Rights Alliance of Uzbekistan, and who was arrested in a cotton field on May 31, 2015, while documenting evidence of the Uzbek government’s massive system of forced labour in cotton production.

According to HRW, Urlaeva was detained, abused and sexually violated during an extremely violent cavity probe. On the grounds that they were searching for a data card from her camera, male doctors and policemen conducted such a rough and invasive search that the ordeal left her bleeding.

She was forbidden from using the bathroom and eventually forced to go outside the station in the presence of male officers who called her a “bitch”, filmed her in the act of relieving herself and threatened to post the video online if she complained about her treatment.

Evans told IPS all of this occurred against a backdrop of the World Bank’s increased financial support of the cotton sector – already it has pledged over 450 million dollars to three major agricultural projects of the Uzbek government – despite evidence that the industry is rooted in a system of forced labour.

In the absence of any robust mechanism within the World Bank to make continued funding conditional on compliance with international human rights standards, there is a “real risk” that independent monitors and rights activists will continue to face situations as horrific as the one Urlaeva recently endured, Evans stressed.

A ‘disappointing’ reaction

Both the World Bank and the United Nations have tossed the issue of development-related rights abuses from one forum to another.

In his May 2015 report to the U.N. Human Rights Council (HRC), Special Rapporteur on extreme poverty and human rights Philip Alston stressed the urgency of “putting questions of resources and redistribution back into the human rights equation.”

He decried several member states’ attempts to keep international economics, finance and trade “quarantined” from the human rights framework, and blasted international financial institutions (IFIs) for contributing to this culture of impunity.

“The World Bank can simply refuse to engage with human rights in the context of its policies and programmes, IMF does the same, and the World Trade Organisation is little different,” Alston remarked, adding that these bodies throw the issue at the HRC, while the latter simply knocks the ball back into the financiers’ court.

It is becoming akin to a game of political ping-pong, with the ball representing the human rights of some of the most impoverished people in the world – at whom multi-million-dollar development projects are ostensibly targeted.

Gretchen Gordon, coordinator of Bank on Human Rights, a global coalition of social movements and grassroots organisations working to hold IFIs accountable to human rights obligations, told IPS, “You can’t have successful development without robust civil society participation in setting development priorities, designing projects, and monitoring implementation.”

If development banks and their member states neglect to take leadership and implement the necessary protocols and policies, she said, “they will continue to see increasing development failures, human rights abuses, and conflict.”

If the World Bank Group’s initial reaction to HRW’s comprehensive research is anything to go by, however, Bank on Human Rights and other watchdogs of its ilk have their work cut out for them.

Though HRW’s researchers invited the Bank and the IFC’s input with an in-depth list of questions back in April, they have received nothing but a rather “bland response” that failed to address the issue of reprisals at all and simply stated that the Bank “is not a human rights tribunal.”

“I had expected a very constructive conversation with the World Bank,” Evans said. “Instead all I am hearing are non-responses. We have proposed really pragmatic recommendations for how the Bank can work effectively in challenging environments, but we are a long way from that at the moment.”

Both the Bank’s Inspection Panel and the IFC’s Compliance Advisor Ombudsman (CAO) have greeted the report with enthusiasm, but they are independent bodies and remain largely powerless to effect change at the management level of the World Bank Group.

This power lies with the Bank’s president, Jim Yong Kim, who will have to “take the lead and send a clear message to his staff that the question of reprisals is a priority issue,” Evans concluded.

Edited by Kitty Stapp

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Opinion: No Place to Hide in Addishttp://www.ipsnews.net/2015/06/opinion-no-place-to-hide-in-addis/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-no-place-to-hide-in-addis http://www.ipsnews.net/2015/06/opinion-no-place-to-hide-in-addis/#comments Thu, 18 Jun 2015 16:16:38 +0000 Tamira Gunzburg http://www.ipsnews.net/?p=141200

Tamira Gunzburg is Brussels Director of The ONE Campaign.

By Tamira Gunzberg
BRUSSELS, Jun 18 2015 (IPS)

My colleagues just got back from Munich, where we held a summit bringing together over 250 young volunteers from across Europe. These youngsters campaigned in the run-up to and at the doorstep of the G7 Summit in Schloss Elmau, as one of the key moments in a year brimming with opportunities to tackle extreme poverty.

It’s inspiring to work with these young activists – their enthusiasm and creativity are humbling. But the other thing about young people is that they don’t let anyone pull the wool over their eyes. Euphemisms don’t stick; skirting the point doesn’t get you very far. They keep us on our toes and that is not a bad thing at all.

Courtesy of Tamira Gunzburg

Courtesy of Tamira Gunzburg

But some phenomena I am simply at a loss to explain. One such paradox is the fact that only a third of aid goes to the very poorest countries, and that aid to those countries has been declining. Yet in the so-called ‘Least Developed Countries’, 43 percent of the population still lives in extreme poverty, compared to 13 percent in other countries.

This begs so many questions it is dizzying. How are we going to eradicate extreme poverty if we don’t prioritise the countries that need aid the most? What is aid for if not helping the poorest?

Why are we cutting aid to the poorest countries when it is the middle income countries that are becoming more able to mobilise their own sources of financing for development? And why aren’t leaders doing anything to reverse this perverse trend?

Instead, EU development ministers in May recommitted to the existing promise of providing 0.7 percent of national income in aid, and up to 0.2 percent of national income in aid to the least developed countries – this time “within the timeframe” of the post-2015 agenda to be adopted in September.

But even if they achieved both targets by say, 2025, that would still mean a share of only 28.6 percent of total aid going to the poorest countries. In other words: business as usual. This is where any young person would detect the glaring no-brainer, and unapologetically probe “… but isn’t that too little, too late?”Ending extreme poverty by 2030 and leaving no one behind will become harder as we near the zero zone.

Whereas the Millennium Development Goals – global anti-poverty goals agreed in the year 2000 – allowed us to pick the ‘low-hanging fruit’ in terms of bringing down average levels of extreme poverty and child mortality, this year’s new set of ‘Global Goals’ is all about finishing the job.

Ending extreme poverty by 2030 and leaving no one behind will become harder as we near the zero zone. We need to frontload our efforts and put the poorest and most vulnerable at the centre of our approach from the get-go.

That is why donors must commit to spending at least half of their aid on the poorest countries, and to doing this by 2020, so that those countries have time to tackle the Global Goals in time for the 2030 deadline.

This is but one of the debates that are heating up in the final weeks before the Summit in Addis Ababa in July, where world leaders will come together to decide on how to finance development. Negotiations touch upon topics that go well beyond aid, and rightly so, in an attempt to unlock new sources of financing such as domestic resource mobilisation and private sector investment.

Sadly though, many of the discussions are still being held hostage by the impasse on aid commitments. Indeed, donor countries’ laborious reaffirmation of decade-old broken promises does not inspire confidence that they are committed to doing things differently this time.

What, then, can change the game at this point? For one, let’s kick things up a level and bring in the big bosses. We fully expect heads of state to be in attendance in Addis – but even before then, the leaders of all 28 EU Member States are getting together for their own summit at the end of June.

Here they have the authority to agree on a more ambitious commitment than the development ministers managed to broker last month. Announcing an EU-wide intent to direct at least half of collective aid to the least developed countries would send a strong political message that could spark a much-needed race to the top in the final sprint towards Addis.

Another sure way to guarantee the success of this Summit is to inject more political will into the discussions that go beyond aid. For example, several countries are coming together to harness the “Data Revolution” to ensure that we collect the statistics needed to track progress and achieve the new Global Goals.

Right now, the world’s governments do not have more than 70 percent of the data they need to measure progress. Clearly, we need to aim for more with the new Global Goals.

Further, it will be crucial to agree on minimum per capita spending levels on essential services to deliver, by 2020, a basic package for all. In order to fund these efforts, governments should increase domestic revenues towards ambitious revenue-to-GDP targets and halve the gap to those targets by 2020 by implementing fair tax policies, curbing corruption and stemming illicit flows.

The list is long and time is running out, but as our youth activists would unwaveringly note, there is still ample opportunity for leaders in both North and South to rise to the occasion and throw their weight behind ending extreme poverty. Pesky questions aside, leaders really should take note of these young voices, because it is quite literally their future world that leaders are shaping this year.

Edited by Kitty Stapp

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Opinion: Greece – A Sad Story of the European Establishmenthttp://www.ipsnews.net/2015/06/opinion-greece-a-sad-story-of-the-european-establishment/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-greece-a-sad-story-of-the-european-establishment http://www.ipsnews.net/2015/06/opinion-greece-a-sad-story-of-the-european-establishment/#comments Tue, 09 Jun 2015 11:40:11 +0000 Roberto Savio http://www.ipsnews.net/?p=141035

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, writes that the latest development in the tug of war which has been going on between Greece and a German-dominated Europe is the desire to punish an anti-establishment figure like Greek Prime Minister Alexis Tsipras and show that the radical left cannot run a country.

By Roberto Savio
ROME, Jun 9 2015 (IPS)

Only 50 years of Cold War (and the fact that German Chancellor Angela Merkel grew up in East Germany) can possibly explain the strange political power of the United States over Europe.

After a bilateral meeting between Merkel and U.S. President Barack Obama (so much for transparency and participation), the Jun. 7-8 G7 summit opened in Germany and we found out that there had been a trade-off.

Roberto Savio

Roberto Savio

Merkel agreed that Europe should continue the sanctions against Russia – and so the other members of the G7 duly agreed – and Obama toned down the U.S. position on Greece.

That position had been forcefully expressed by U.S. Treasury Secretary Jacob Lew a few days earlier to European leaders: solve the Greek problem, or this will have a global impact that we cannot afford. This had suddenly accelerated negotiations, with the hope then that everything would be solved before the G7 summit.

But Greece did not accept the plan of the President of the European Commission, Jean-Claude Juncker, which was suspiciously close to International Monetary Fund (IMF) positions.

At the G7 summit, Obama softened the U.S. position on Greece, and even said that “Athens must implement the necessary reforms.”

Obstinacy on sanctions against Russia ignores the fact that, in a very delicate economic moment, Europe has lost a considerable part of its exports because of Russia’s retaliatory block on European imports. It is also difficult to see what advantage there is for Europe in pushing Russia into the arms of China. We will soon be seeing joint naval exercise between the two countries, which will only escalate tensions.

But let us look at Greece given that its tug of war with Europe has now been going on for five years.

Let us recall briefly. Greece had been spending much more than it could by distributing public jobs under any government, by giving easy pensions to everyone, and so on. Then, in 2009, the centre-left Panhellenic Socialist Movement (PASOK) won the elections and we found out that the figures Athens had been giving Brussels were false.

The real deficit stood at almost 12.5 percent of gross domestic product (GDP), confirmation of what the European Union and its bodies had long suspected but which it had done nothing about.“Europe is now led by Germany and the Germans are convinced that what they did at home is valid everywhere. Together with the countries of northern Europe, they look on the people of southern Europe as unethical, people who want to enjoy life beyond their means”

To avoid going into the agonising details of the continuous negotiations between Greece and the European Union, I jump to the January elections this year which the left-wing Syriza party won and its leader Alexis Tsipras was named Prime Minister on a clear programme: stop the austerity programme imposed by the “Troika” – IMF, EU and the European Central Bank (ECB) – on behalf of the European countries, led by Germany, Netherlands, Austria and Finland.

Greece is on its knees. Officially, unemployment has gone from 11.9 percent in 2010 to 25.5 percent today, but it is widely considered to be around 30 percent. Among young people, it is close to 60 percent. GDP has gone into a 25 percent decline, Greek citizens have lost about 30 percent of their revenues and public spending has been slashed to the point that hospitals have great difficulty in functioning.

Yet, the request (order) of the “Troika” is simple – cut everything the deficit has been eliminated.

So, for example, cut pensions, which have been already been cut twice. In any case, this would reap a paltry 100 million euros but would cripple people who are living on less than 685 euro a month. Or, raise VAT on tourism, from the present 6.5 percent to 13.6 percent, which would be a deadly blow to Greece’s only important source of income.

This is the plan presented by Juncker, whose arrival as head of the European Commission was accompanied by a grandiose Marshall Plan for Europe, a plan which has since disappeared totally from the scene.

In an article a few days ago titled ‘Europe’s Last Act?”, Joseph E. Stiglitz, Nobel laureate in economics, argues that the idea of austerity as a uniform recipe for Europe is missing reality.

“The troika badly misjudged the macroeconomic effects of the program that they imposed. According to their published forecasts, they believed that, by cutting wages and accepting other austerity measures, Greek exports would increase and the economy would quickly return to growth. They also believed that the first debt restructuring would lead to debt sustainability.

“The troika’s forecasts have been wrong, and repeatedly so. And not by a little, but by an enormous amount. Greece’s voters were right to demand a change in course, and their government is right to refuse to sign on to a deeply flawed program.”

It is on austerity that the paths of the United States and the European Union divide.

The United States has embarked on investing for growth, despite pressure from the Republican party for austerity, and the U.S. economy is picking up again.

But Europe is now led by Germany and the Germans are convinced that what they did at home is valid everywhere. Together with the countries of northern Europe, they look on the people of southern Europe as unethical, people who want to enjoy life beyond their means. As The Economist put it in an article on the Greek crisis: “In German eyes this crisis is all about profligacy”.

It did not help that another very minor crisis – that of Cyprus between 2012 and 2013 – confirmed Germany’s view about the profligacy of the south of Europe. In the case of Cyprus, the “Troika” settled the crisis at a cost of 10 billion euros.

There is widespread agreement that the crisis of Greece, which represents just two percent of the total European budget, could have been settled at the beginning with a 50-60 billion euro loan. But only since Tsipras became prime minister, and with popular support started to refuse to accept the creditors’ plan, has Greece has become a very important issue.

There is now talk of a “Grexit”, or Greece’s exit from the European Union. This would have a cascade effect, and it would mean the end of Europe as a common dream, of a Europe based on solidarity and communality.

In the G7, Obama has insisted on investments and demand as a way out of the crisis. Merkel has again repeated that Europe does not need stimulus financed by debt, but stimulus coming from the reform of inefficient economies. At this point, perhaps “everything is always about something else”, as the late award-winning Sri Lankan journalist Tarzie Vittachi once told me.

An enlightening comment on the Greek situation has come from Hugo Dixon writing in The New York Times of Jun. 7. The Greek prime minister “will have to choose between saving his country and sticking to a bankrupt far-left ideology. If he is smart, he can secure a few more concessions from creditors and a goodish deal for Greece. If not, he will drag the country into the abyss.”

And then, it is interesting to note that one of the main reasons for being so hard with Syriza is that the citizens of Spain, Portugal and Ireland, who were the first to swallow the bitter pill of austerity, would revolt if they saw a different path for Greece, and it just happens that those countries have conservative governments.

The entire European political system reeled with shock at the victory of Syriza, and again a few days ago at the victories of the left-wing anti-establishment Podemos party in municipal elections in Spain.

For some reason, the very authoritarian and conservative government of Viktor Orbán in Hungary, the victory of the very conservative Andrzej Duda as president in Poland, as well as the rise of Matteo Salvini’s anti-European and anti-immigration Lega Nord party in Italy create no panic, not even if Salvini looks to Russian President Vladimir Putin and Marine Le Pen, leader of France’s right-wing Front National, as figures of reference.

So, the real issue now in the case of Greece is to punish an anti-establishment figure like Tsipras and show that the radical left cannot run a country.

Who really believes that there will masses of citizens in Madrid, Lisbon or Dublin taking to the streets to protest if Europe does a somersault of solidarity and idealism, and lowers its requests or dilutes them over more time? (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Climate Fund Rolls Out Amid Hopes It Stays “Green”http://www.ipsnews.net/2015/06/climate-fund-rolls-out-amid-hopes-it-stays-green/?utm_source=rss&utm_medium=rss&utm_campaign=climate-fund-rolls-out-amid-hopes-it-stays-green http://www.ipsnews.net/2015/06/climate-fund-rolls-out-amid-hopes-it-stays-green/#comments Wed, 03 Jun 2015 18:01:28 +0000 Kitty Stapp http://www.ipsnews.net/?p=140955 Civil society groups argue that fossil fuels should not be eligible for climate funding in any form. Credit: Bigstock

Civil society groups argue that fossil fuels should not be eligible for climate funding in any form. Credit: Bigstock

By Kitty Stapp
UNITED NATIONS, Jun 3 2015 (IPS)

After a difficult infancy, the Green Climate Fund is finally getting some legs. The big question now is what direction it will toddle off in.

Local ownership, sustainability and a firm commitment to clean energy are a few of the non-negotiable items if the Fund is to be a success, civil society groups stress."Allowing so-called climate financing for projects that are slightly less dirty than a hypothetical alternative is a sure way to game the system." -- Karen Orenstein

“The GCF board is aiming to have at least a few projects in the pipeline in time for COP21 [the high-level climate change summit in Paris in December] – to show the world that the fund is open for business and that developed countries are putting their money where their mouths are,” Karen Orenstein of Friends of the Earth told IPS. “Of course, this will be more credible once substantially more of the money pledged to the GCF is legally committed.

“It is essential that those first GCF projects set the appropriate precedent for future-financed activities. The GCF must showcase the best of what it has to offer,” she added.

“This means directly addressing the adaptation and mitigation needs of the vulnerable through environmentally-sound initiatives that promote human rights and benefit local economies, rather than Wall Street-type transactions that may theoretically have trickle-down benefit for the poor.”

The Fund is the United Nations’ premier mechanism for funding climate change-related mitigation and adaptation in developing countries.

At the Copenhagen climate summit in 2009, donors agreed to mobilise 100 billion dollars a year by 2020, in an undefined mix of public and private funding, to help developing countries. The GCF is to be a cornerstone of this mobilisation, using the money to fund an even split between mitigation and adaptation projects.

Actual funding has trickled in slowly. But delivery of a pledge by the government of Japan late last month for 1.5 billion dollars carried the Fund over the required 50 percent threshold to begin allocating resources for projects and programmes in developing countries.

The Fund aims to finalise its first set of projects for approval by the GCF Board at its 11th meeting in November.

It has also identified strategic priority areas and global investment opportunities that are not adequately supported by existing climate finance mechanisms, and can be used to maximise the GCF’s impact, especially investments in efficient and resilient cities, land‐use management and resilience of small islands.

“Projects must be genuinely country-driven, which means not only government-driven but also driven by communities, civil society and local private sector. And, of course, there must be no trace of support for dirty energy,” Orenstein said.

To date, 33 governments, including eight developing countries, have pledged close to 10.2 billion dollars equivalent, with 21 of them signing a part or all of their contribution agreement. But how to maintain and accelerate that funding in the long term remains to be seen.

In a new analysis, the World Resources Institute (WRI) notes that more than five years after Copenhagen, the sources, instruments, and channels that should count toward the 100-billion-a-year goal remain ambiguous.

It suggests four possible scenarios: developed country climate finance only; developed country finance plus leveraged private sector investment; developed country finance, multilateral development bank (MDB) climate finance (weighted by developed countries’ capital share) and the combined leveraged private sector investment; and all the first three sources, plus climate-related official development assistance (ODA) as compiled by the Organisation for Economic Co-operation and Development (OECD).

In terms of which is most likely to be adopted, as governments negotiate a comprehensive new climate change agreement for the post-2020 period, Michael Westphal, a senior associate on WRI’s Sustainable Finance team, told IPS that parties have not agreed yet on even what finance sources should count.

“Our scenario analysis is focused on assessing how likely is it that each scenario could reach 100 billion dollars, given different assumptions of growth and leverage,” he explained.

“One of the main conclusions, not surprisingly, is that the more sources that are included, the more realistic is it for the 100 billion dollars to be reached – i.e., it would require lower growth rates and assumptions about how much private finance is leveraged per public dollar.”

Supplemental funding could flow from new and innovative sources, such as the redirection of fossil fuel subsidies, carbon market revenues, financial transaction taxes, export credits, and debt relief, the analysis says.

The International Monetary Fund (IMF) estimates that pre-tax fossil fuel subsidies for OECD countries – long derided as irrational and destructive by environmental groups and many economists – amounted to 13.3 billion dollars in 2012.

Budgetary support and tax expenditures to fossil fuels totalled 76.4 billion dollars in 2011 for the OECD’s 34 member countries.

“On fossil fuel subsidies, the G20 has agreed to phase them out over the medium term, so we think it is likely to have progress on this front over the next five years,” Westphal told IPS.

“The IMF has written extensively about the costs of fossil fuel subsidies, so the issue is now a front burner issue for multilateral finance institutions.  As for ETS [emission trading system], governments would have to agree to divert some of the revenues from the allowances into their budgets for international climate finance.”

But even should the funding goal be reached, observers will be watching closely to see where the money goes.

Karen Orenstein has compared the push by some governments and financial institutions for “less dirty” fossil fuels to fight climate change to a doctor telling his cancer-ridden patient that “it’s fine to smoke, as long as the cigarettes are filtered.”

She notes that the list of activities that can currently be counted under the Common Principles (approved by multilateral development banks and the International Development Finance Club in March) as “climate mitigation finance” includes “energy-efficiency improvement in existing thermal power plants” and “thermal power plant retrofit to fuel switch from a more GHG-intensive fuel to a different, less GHG-intensive fuel type.”

“In the broad spectrum of fossil fuels, there is always going to be a project or fuel type that is relatively more or less dirty than another,” Orenstein says. “Allowing so-called climate financing for projects that are slightly less dirty than a hypothetical alternative is a sure way to game the system.”

Also on her watchlist? The GCF funding false solutions like so-called “climate smart” agriculture, biofuels, waste incineration, nuclear energy and big dams – many of which are included in the Common Principles.

Edited by Kanya D’Almeida

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Jamaican Gov’t Sees IMF Successes but No Benefits for the Poorhttp://www.ipsnews.net/2015/06/jamaican-govt-sees-imf-successes-but-no-benefits-for-the-poor/?utm_source=rss&utm_medium=rss&utm_campaign=jamaican-govt-sees-imf-successes-but-no-benefits-for-the-poor http://www.ipsnews.net/2015/06/jamaican-govt-sees-imf-successes-but-no-benefits-for-the-poor/#comments Tue, 02 Jun 2015 18:13:34 +0000 Zadie Neufville http://www.ipsnews.net/?p=140933 Seventy-year old Elise Young’s small box of mixed sweets and biscuits and the plastic bucket containing some ice and a handful of drinks is hardly enough to pay the 18-dollar electricity bill each month and buy food. Credit: Zadie Neufville/IPS

Seventy-year old Elise Young’s small box of mixed sweets and biscuits and the plastic bucket containing some ice and a handful of drinks is hardly enough to pay the 18-dollar electricity bill each month and buy food. Credit: Zadie Neufville/IPS

By Zadie Neufville
KINGSTON, Jun 2 2015 (IPS)

For Jamaicans like Roxan Brown, the Caribbean nation’s International Monetary Fund (IMF) successes don’t mean a thing. Seven consecutive tests have been passed but still, the mother of two can’t find work and relies instead on the kindness of friends and family.

The 32-year-old has been in several government-sponsored training programmes and has even filed for help under the Programme of Advancement Through Health and Education (PATH), a safety net set up to assist the poor. But she fails to qualify and can’t understand why.In the long history of Jamaica's on-again off-again relationship with the IMF, it is the poorest of this nation’s 2.8 million people who suffer the heaviest burden. With most earnings going to pay loans, there is nothing left for government assistance.

The single mother spends each day making phone calls, sending messages and making as many trips as she can afford, hopeful that one will result in a job. Roxan is desperate to help her son who graduated high school last year and has qualified for college. Her daughter is in secondary school and is preparing to sit exams.

Several miles away in the south coast village of Denbigh, the two elderly women sitting outside the May Pen Health Centre tell their stories of hardship. Five days a week, they scratch out a meagre living selling a few sweets, biscuits, some bottled water, drinks and fruits to make ends meet. Neither have pensions and none qualify for even the basic of government assistance under PATH.

Seventy-year old Elise Young’s small box of mixed sweets and biscuits and the plastic bucket containing some ice and a handful of drinks is hardy enough to pay the 18-dollar electricity bill each month and buy food.

“It’s very rough but I still have to live,” she said, noting that her daughter, who generally helps out with a few dollars a week, is now unemployed.

Next to her sits Iona Samuels, an on-again-off again vendor who sells a few dozen oranges and bananas to make ends meet. Iona is lucky: she lives rent-free, house-sitting for a friend who lives in Canada. Her on-again off-again business is due to the many times she is unable to restock the plastic crates that serve as her stall because she uses all the cash to buy food and pay water and light bills.

“Sometime I buy two dozen oranges and two dozen bananas and I only sell half. Sometimes I don’t make a profit because I have to sell them for what I pay for them and I have to eat and pay the bills,” she explains.

Iona admits that advancing age has slowed her ability to do more strenuous work. She is concerned that government has no programmes for  “the poor and vulnerable” people like her.

The good fortune that allows Iona to live rent-free also goes against her in her quest for government assistance with her daily expenses.

“I live in a house that is fully furnished, so I am unable to qualify for anything. There is no consideration that the house is not mine. It is my friend’s house. There is a gas stove, and a television so I don’t qualify for help,” Iona complains.

Iona Samuels (left) and her friend Pearl. Credit: Zadie Neufville/IPS

Iona Samuels (left) and her friend Pearl. Credit: Zadie Neufville/IPS

In the long history of Jamaica’s on-again off-again relationship with the IMF, it is the poorest of this nation’s 2.8 million people who suffer the heaviest burden. With most earnings going to pay loans, there is nothing left for government assistance.

Media reports cite information from the U.S.-based Centre for Economic Policy and Research, which states that three years into its latest IMF programming, Jamaica’s economy is suffocating, struggling to reach its current quarterly growth rate of between 0.1 and 0.5 percent.

After 20 years of improvement to the country’s poverty rate, the number of Jamaicans living below the poverty line has ballooned in recent years from 9.9 percent in 2007, to 12.3 in 2008, 16.5 percent in 2009 and 19.9 percent in 2012. And if the 2014 research by the local Adventist Church is correct, today there are 1.1 million Jamaicans living in poverty.

The most pressing problem is the country’s debt, which the government readily admits has severely hampered its economic growth. According to the World Bank website, Jamaica’s debt to GDP (Gross Domestic Product) ratio, estimated at 140 percent at the end of March 2015, is among the highest in the developing world.

For the Portia Simpson Miller-led administration that won the 2011 general elections on a ticket of being a friend of the poor, there is not much caring left, at least not under the IMF. The Planning Institute of Jamaica (PIOJ) reports that while the IMF programme is necessary, it is still not sufficient to unlock the kind of growth necessary to boost the economy and grow jobs.

According to the PIOJ,  “Economic recovery remains fragile” even as the country successfully completed the IMF assessments with improvements in most macro-economic indicators and outlook for growth.

The World Bank states on its website that, “For decades, Jamaica has struggled with low growth, high public debt and many external shocks that further weakened the economy. Over the last 30 years real per capita GDP increased at an average of just one percent per year, making Jamaica one of the slowest growing developing countries in the world.”

Simply put, Jamaica continues to spend far more than it earns. But while individual sectors continue to show improvements, manufacturers and the international community blame the cost of fuel, high energy costs and crime as impediments to growth.

Last year, Jamaica paid the IMF over 136 million dollars more than it received, and the country still owes the World Bank and Inter-American Development Bank over 650 million dollars through 2018. Even so, government continues to struggle to maintain social gains such as free healthcare and free primary and secondary education.

There are those who believe government is not doing enough to create jobs and that the available jobs are going to government supporters. There are those who blame the private sector, and they in turn point to a depreciating dollar, high cost of fuel and high-energy costs. And of course there is crime.

With unemployment rate at an alarming 14.2 percent and youth unemployment estimated at twice the national rate, things are not looking good for Roxan, who falls into that category.

Edited by Kitty Stapp

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Opinion: The Bumpy Road to an Asian Centuryhttp://www.ipsnews.net/2015/06/opinion-the-bumpy-road-to-an-asian-century/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-the-bumpy-road-to-an-asian-century http://www.ipsnews.net/2015/06/opinion-the-bumpy-road-to-an-asian-century/#comments Mon, 01 Jun 2015 08:06:03 +0000 Shyam Saran http://www.ipsnews.net/?p=140894 “Just as the world is moving towards multi-polarity, so is Asia … The economic fragmentation of the region and the competitive pursuit of security interests may well consign the Asian Century into a brief interlude rather than a millennial transformation”. Photo credit: Public domain via Wikimedia Commons

“Just as the world is moving towards multi-polarity, so is Asia … The economic fragmentation of the region and the competitive pursuit of security interests may well consign the Asian Century into a brief interlude rather than a millennial transformation”. Photo credit: Public domain via Wikimedia Commons

By Shyam Saran
NEW DELHI, Jun 1 2015 (IPS)

It has been apparent for some time that we are in the midst of a historic shift of the centre of gravity of the global economy from the trans-Atlantic to what is now becoming known as the Indo-Pacific.  

This is an emerging centre of economic dynamism and comprises what was earlier confined to the Asia-Pacific but now includes the South Asian region as well.

This is a region which now accounts for nearly 40 percent of world gross domestic product (GDP), which is likely to rise to 50 percent or more by 2050.  Its share of world trade is now 30 percent and growing.

Shyam Saran

Shyam Saran

This year, the region has become the largest source of foreign direct investment (FDI), surpassing the European Union (EU) and the United States. China has been the main driver of this historic shift, but other Asian economies have also made significant contributions.

As the Chinese economy begins to slow, India shows promise of regaining an accelerated growth trajectory under a new and decisive political leadership. This will help extend the scale and direction of this shift. Its geopolitical consequences will be profound.

It must be recognised that the economic transformation of Asia, in particular the spectacular growth of China, has been enabled by an unusually extended and liberal global economic environment, underpinned by the faith in globalisation and open markets.

It has also been enabled by a U.S.-led security architecture in the region which kept in check, though did not resolve, the long-standing political fault lines and regional conflicts over competing territorial claims and unresolved disputes.

This relatively benign and supportive economic and security environment is in danger of unravelling precisely at a time when the situation in the region is becoming more complex and challenging.  Paradoxically, this is partly a consequence of the very success of the region in achieving relative economic prosperity.“The danger is that instead of an inclusive and regionally integrated Asia, we may end up with exclusive and competing clusters, moving at different speeds, with different norms and standards. This may well undermine the very basis of Asia’s economic dynamism”

We are witnessing new trends in the region which, unless managed with prudence and foresight, may well sour the prospects of an Asian Century.

The relatively open and liberal trade and investment regime, in particular access to the large consuming markets of the United States, European Union and Japan, is now under serious threat.

Protectionist trends are already visible in these advanced economies as they struggle with prolonged economic stagnation which is the fall-out of the global financial and economic crisis of 2007-2008.

Instead of the consolidation and expansion of the open and inclusive economic architecture that had hitherto been the hallmark of the regional and global economy, we are witnessing its steady fragmentation.

In the Indo-Pacific region, there are competing regional trade arrangements and investment regimes, with no clarity on the contours of a new and emerging economic architecture.

The United States is spearheading its Trans-Pacific Partnership (TPP) which will include some Asian economies, but not India and China.

China has countered by proposing a free trade area encompassing the current Asia-Pacific Economic Cooperation (APEC) membership.  This will include China and the United States but not India and some of the Association of Southeast Asian Nations (ASEAN) economies.

The Regional Cooperation Economic Partnership (RCEP) would include all ASEAN countries plus China, Japan, Republic of Korea, India, Australia and New Zealand, but not the United States.

And finally, there is the East Asia Summit process (EAS) which includes all the above-mentioned countries but also the United States and Russia.

The danger is that instead of an inclusive and regionally integrated Asia, we may end up with exclusive and competing clusters, moving at different speeds, with different norms and standards.  This may well undermine the very basis of Asia’s economic dynamism.

In the security field, too, we are witnessing a growing salience of inter-state tensions and competitive military build-up.

The U.S.-led security architecture remains in place formally but its erstwhile predominance is diminished.

The gap between the military capabilities of China and the United State is closing steadily. As China’s security footprint expands beyond its shores, it will inevitably intersect with the existing deployment of the forces of the United States and its allies and partners.

Faced with an increasingly uncertain security environment and threatened by a more insistent assertion of territorial claims by China, the countries of the region, including Japan, Republic of Korea, members of ASEAN, Australia and India are building up their own defences, in particular maritime capabilities, and this itself is escalating tensions.

There is as yet no emerging regional security architecture which could help manage inter-state tensions in the region. This includes the growing possibilities of confrontation between the United States and China.

In the absence of such a regional security architecture, based on a broad political consensus and a mutually acceptable Code of Conduct, the region may well witness a heightening of tension and even conflict.  These developments would inevitably and adversely impact on the dense network of trade and investment relations that bind the countries of the region together and erode the very basis of their prosperity.

In this context, mention may be made of the Chinese One Belt One Road (OBOR) initiative which seeks to deploy China’s surplus capital to build a vast network of transport and infrastructural links not only across the Indo-Pacific but also straddling the Eurasian landmass.

The newly established Asian Infrastructure Investment Bank (AIIB) initiated and led by China would become a key financing instrument for the OBOR.  China has also recently come out with a new Defence White Paper, which puts forward a new strategy of Open Seas, shifting the emphasis from coastal and near sea defence to an expanding naval presence which matches China’s growing global profile and world-wide location of Chinese-controlled economic assets.

While China’s investment in regional infrastructure in Asia may be welcome, it will inevitably be accompanied by a security dimension which may heighten anxieties among countries in the Asian region and beyond.

It is apparent from the above analysis that it is no longer possible for any major power in the Indo-Pacific to unilaterally seek a position of overweening economic dominance or military pre-eminence of the kind that the United States enjoyed over much of the post-Second World War period.

Just as the world is moving towards multi-polarity, so is Asia.  It is now home to a cluster of major powers with significant economic and security capabilities and interests. The only practical means of avoiding a unilateral and potentially destructive pursuit of economic and security interests would be to put in place an inclusive economic architecture underpinned  by a similarly inclusive security architecture which provides mutual reassurance and shared opportunities for promoting prosperity.

The economic fragmentation of the region and the competitive pursuit of security interests may well consign the Asian Century into a brief interlude rather than a millennial transformation. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: Finance Like a Cancer Growshttp://www.ipsnews.net/2015/05/opinion-finance-like-a-cancer-grows/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-finance-like-a-cancer-grows http://www.ipsnews.net/2015/05/opinion-finance-like-a-cancer-grows/#comments Tue, 26 May 2015 07:18:16 +0000 Roberto Savio http://www.ipsnews.net/?p=140797 By Roberto Savio
ROME, May 26 2015 (IPS)

It is astonishing that every week we see action being taken in various part of the world against the financial sector, without any noticeable reaction of public opinion.

It is astonishing because at the same time we are experiencing a very serious crisis, with high unemployment, precarious jobs and an unprecedented growth of inequality, which can all be attributed, largely, to speculative finance.

Roberto Savio

Roberto Savio

This all began in 2008 with the mortgage crisis and the bursting of the derivatives bubble in the United States, followed by the bursting of the sovereign bonds bubble in Europe.

It is calculated that we will need to wait until at least 2020 to be able to go back to the levels of 2008 – so we are talking of a lost decade.

To bail out the banks, the world has collectively spent around 4 trillion dollars of taxpayers’ money. Just to make the point, Spain has dedicated more than its annual budget on education and health to bail out the banking sector … and the saga continues.

Last week, five major banks agreed to pay 5.6 billion to the U.S. authorities because of their manipulations in the currency market. The banks are household names: the American JPMorgan Chase and Citigroup, the British Barclays and the Royal Bank of Scotland, and the Swiss UBS.“To bail out the banks, the world has collectively spent around 4 trillion dollars of taxpayers’ money”

In the case of UBS, the U.S. Department of Justice took the unusual step of tearing up a non-prosecution agreement it had reached earlier, saying that it had taken that step because of the bank’s repeated offences. “UBS has a ‘rap sheet’ that cannot be ignored,” said Assistant U.S. Attorney General Leslie Caldwell.

This is a significant departure from the Justice Department’s guidelines issued in 2008, according to which collateral consequences have to be taken into account when indicting financial institutions.

“The collateral consequences consideration is designed to address the risk that a particular criminal charge might inflict disproportionate harm to shareholders, pension holders and employees who are not even alleged to be culpable or to have profited potentially from wrongdoing,” said Mark Filip, the Justice Department official who wrote the 2008 memo.

Referring to the case of accounting giant Arthur Andersen, which certified as valid the accounts of the Enron energy company that went into bankruptcy for faking its budget, Filip said that “Arthur Andersen was ultimately never convicted of anything, but the mere act of indicting it destroyed one of the cornerstones of the Midwest’s economy.”

This was in fact a declaration of impunity, which did not escape the managers of the financial system, under the telling title of “Too Big to Fail”.

Two weeks ago, a judge from the Federal District Court of Manhattan, Denise L. Cote, condemned two major banks – the Japanese Nomura Holdings and the British Royal Bank of Scotland – for misleading two mortgage public institutions, Fannie Mae [Federal National Mortgage Association] and Freddie Mac [Federal Home Loan Mortgage Corporation], by selling them mortgage bonds which contained countless errors and misrepresentations.

“The magnitude of falsity, conservatively measured, is enormous,” she wrote in her scathing decision.

Nomura Holdings and the Royal Bank of Scotland were just two of 18 banks that had been accused of manipulating the housing market. The other 16 settled out of court to pay nearly 18 billion dollars in penalties and avoid having their misdeeds aired in public.

Nomura Holdings and Royal Bank of Scotland refused any settlement and instead went to court against the U.S. government, arguing that it was the housing crash which caused their mortgage bonds to collapse. Judge Cote, however, wrote that it was precisely the banks’ criminal behaviour which had exacerbated the collapse in the mortgage market.

It is worth noting that, until now, the cumulative fines inflicted by the U.S. government on just five major banks since 2008 amount to a quarter of a trillion dollars. No one has yet gone to jail – fines have been paid and the question closed.

Now the question: is all this due to the misconduct of a few greedy managers or is it due to the new “ethics” of the financial sector?

By the way, let us not forget that it was revealed recently that 25 hedge fund managers took close to 14 billion dollars only last year and that the highest paid manager took for himself the unthinkable amount of 1.3 billion dollars, equal to the combined average salaries of 200,000 U.S. professionals.

Well, just a week ago, the respected University of Notre Dame was reported as having published a startling report, based on a survey of more than 1,200 hedge fund professionals, investment bankers, traders, portfolio managers from the United States and the United Kingdom, in which about one-third of those earning more than 500,000 dollars a year said that they “have witnessed or have first-hand knowledge of wrongdoing in their workplace.”

The report went on to say that “nearly one in five respondents feel financial services professionals must sometimes engage in unethical or illegal activity to be successful in the current financial environment” and in any case,  nearly half of the high income professionals consider authorities to be ”ineffective in detecting, investigating and prosecuting securities violations.”

A quarter of respondents stated that if they saw that there was no chance of being arrested for insider trading to earn a guaranteed 10 million dollars, they would do so.

And nearly one-third “believe compensation structures or bonus plans in place at their companies could incentivise employees to compromise ethics or violate the law.”  It should also be noted that the majority were worried their employer “would likely to retaliate if they reported wrongdoing in the workplace.” So, the bonus that goes to those in the financial sector every year practically amounts to a bribe for silence on misconduct.

At the same time, we have learned that in Guatemala the Governor of the Central Bank has been arrested for embezzling 10 million dollars. Of course, everything is a question of scale…but in sociology there is a mechanism called “demonstration effect”.

The example of Wall Street and the City will increasingly seep down once a new “ethic” is in place. It will propagate if it is not stopped … and this is not happening.

A final note. In the same week (how many things have happened in such a short space of time), the Federal Trade Commission of Columbia accused four respected cancer charities of misusing donations worth millions of dollars.

One of them, the Cancer Fund of America, declared that it spent 100 percent of proceeds on hospice care, transporting patients to chemotherapy sessions and buying medication for children. The Federal Trade Commission found in fact that less than three percent of donations was spent on cancer patients.

The “new ethic” is in reality a cancer, and it is metastasising rapidly. (END/COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: Lack of Trade Finance a Barrier for Developing Countrieshttp://www.ipsnews.net/2015/05/opinion-lack-of-trade-finance-a-barrier-for-developing-countries/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-lack-of-trade-finance-a-barrier-for-developing-countries http://www.ipsnews.net/2015/05/opinion-lack-of-trade-finance-a-barrier-for-developing-countries/#comments Sat, 02 May 2015 08:31:29 +0000 Roberto Azevedo http://www.ipsnews.net/?p=140122

In this column, Roberto Azevêdo, sixth Director-General of the World Trade Organization (WTO), argues that lack of capacity in the financial sector has a very significant impact on the trading potential of poor countries and calls for giving prominence to trade finance in the development debate at a time when the Sustainable Development Goals (SDGs) are being finalised.

By Roberto Azevêdo
GENEVA, May 2 2015 (IPS)

Up to 80 percent of global trade is supported by some form of financing or credit insurance. Yet in many countries there is a lack of capacity in the financial sector to support trade, and also a lack of access to the international financial system. Therefore the ability of these countries to use simple instruments such as letters of credit is limited.

The impact of these limitations on a country’s trading potential can be very, very significant.

WTO Director-General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

WTO Director-General Roberto Azevêdo. Credit: WTO/CC BY SA-2.0

After the financial crisis, the supply of trade finance has largely returned to normal levels in the major markets, but not everywhere and not for everyone.

The structural difficulties of poor countries in accessing trade finance have not disappeared – indeed the situation may well have declined due to the effects of the crisis.

There are indications that markets are even more selective now. Under increased regulatory scrutiny, many institutions have lowered their risk-appetites and are focusing more on their established customers. Some are deliberately decreasing their number of clients in a so-called “flight to quality”.

In this environment, the lower end of the market has been struggling to obtain affordable finance, with the smaller companies in the smaller, less-developed countries affected the most.

I was particularly struck by the fact that the financing gaps are the highest in the poorest countries, notably in Africa and Asia. And I was struck by the size of those gaps.

A survey by the African Development Bank of 300 banks operating in 45 African countries found that the market for trade finance was somewhere between 330 and 350 billion dollars.

It also found that this could be markedly higher if a significant share of the financing requested by traders had not been rejected.“The lower end of the market has been struggling to obtain affordable finance, with the smaller companies in the smaller, less-developed countries affected the most”

Based on such rejections, the estimate for the value of unmet demand for trade finance in Africa is between 110 and 120 billion dollars.

This gap represents one-third of the existing market.

The main reasons for the rejection of requests for financing were:

  • the lack of creditworthiness or poor credit history
  • the insufficient limits granted by endorsing banks to local African issuing banks
  • the small size of the balance sheets of African banks, and
  • insufficient U.S. dollar liquidity

Some of these constraints are structural, and can only be addressed in the medium to long term. The retreat of global banks from Africa, and from other poor countries, is one such issue.

The Asian Development Bank conducted a similar survey in Asia, looking at countries like Viet Nam, Cambodia, Bangladesh, Pakistan and India.

According to preliminary estimates, the unmet demand there is around 800 billion dollars.

Small and medium-sized enterprises are the most credit-constrained as 50 percent of their requests for trade finance are estimated to be rejected. This is compared with just seven percent for multinational corporations.

Moreover, two-thirds of the companies surveyed reported that they did not seek alternatives for rejected transactions.

Therefore, these gaps may be exacerbated by a lack of awareness and familiarity among companies – particularly smaller ones – about the many options which exist.

A large majority of firms stated that they would benefit from greater financial education.

These findings are particularly striking as Africa and developing Asia are two areas of the world in which trade has grown fastest in the past decade.

But the potential evolution of new production networks is faster than the ability of the local financial sectors to support them.

In this way the lack of development of the financial sector can be a significant barrier to trade.

It can prevent developing countries from integrating into the trading system and accessing further trade opportunities.

And it can therefore prevent them from leveraging trade as a powerful source of development.

So we need to respond to this problem.

The exchanges that we have here can form part of this response. We need to join together in order to advocate action in this area and to devise practical solutions.

Of course, there is no magic bullet. This is a complex issue. However, that should not discourage our efforts.

The trade finance facilitation programmes that I outlined earlier are one example of practical action that we can take.

Of course this only fills part of the gap, so our response needs to be more fundamental.

In July this year, the United Nations’ major ‘Financing for Development’ conference will take place in Addis Ababa. And I think it is essential that we put trade finance on the agenda there.

In this way we can ensure that this issue is given its proper prominence in the development debate, especially at a time when the all-important U.N. Sustainable Development Goals are being finalised.

Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: Pillar of Neoliberal Thinking is Vacillatinghttp://www.ipsnews.net/2015/04/opinion-pillar-of-neoliberal-thinking-is-vacillating/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-pillar-of-neoliberal-thinking-is-vacillating http://www.ipsnews.net/2015/04/opinion-pillar-of-neoliberal-thinking-is-vacillating/#comments Mon, 20 Apr 2015 14:27:03 +0000 Roberto Savio http://www.ipsnews.net/?p=140225

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that the latest figures from the IMF only confirm what many citizens already know – that the economic situation is worsening. However, he notes, what is new that there are now signs that the IMF has woken up to reality, indicating that “an important pillar of neoliberal thinking is vacillating”.

By Roberto Savio
ROME, Apr 20 2015 (IPS)

This month’s World Economic Outlook released by the International Monetary Fund (IMF) only confirms that consequences of the collapse of the financial system, which started six years ago, are serious. And they are accentuated by the aging of the population, not only in Europe but also in Asia, the slowing of productivity and weak private investment.

Roberto Savio

Roberto Savio

Average growth before the financial crisis in 2008 was around 2.4 percent. It fell to 1.3 percent between 2008 and 2014 and now the estimates are that it will stabilise at 1.6 percent until 2020, in what economists call the “new normal”. In other words, “normality” is now unemployment, anaemic growth and, obviously, a difficult political climate.

For the emerging countries, the overall picture does not look much better. It is expected that potential growth is expected to decline further, from an average of about 6.5 percent between 2008 and 2014 to 5.2 percent during the period 2015-2020.

The case of China is the best example. Growth is expected to fall from an average 8.3 percent in the last 10 years to somewhere around 6.8 percent. The result is that the Chinese contraction has worsened the balance of exports of raw materials everywhere.

The crisis is especially strong in Latin America, and in Brazil the fall in exports has contributed to worsening the country’s serious crisis and increasing the unpopularity of President Dilma Rousseff, already high because of economic mismanagement and the Petrobras scandal.“Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis”

This, by the way, opens up a reflection which is fundamental. From Marx to Keynes, redistribution theories were all basically built on stable or expanding economies.

Progressive parties were able to build their success during economic expansion but the Left has not developed much economic science on what to do in period of crisis. What it tends to do is mimic the receipts and proposals from the Right and, when the crisis is over, it has lost its identity and has declined in the eyes of the electorate.

From this perspective, the situation in Europe is exemplary. All those right-wing xenophobic parties which have sprouted up – even in countries long held to be models of democracy such as the Nordic countries – have developed since 2008, the beginning of the financial crisis. In the same period of time, all progressive parties have lost weight and credibility. And now that the IMF sees some improvement in the European economy, it is not the traditional progressive parties that are the beneficiaries.

The term that the IMF gives to the current economic moment is “new mediocrity” – which is a franker way of saying “new normal” – and it observes that in the coming five years, we will face serious problems for public policies like fiscal sustainability and job creation.

In fact, every day, the macroeconomic figures, which have become the best way to hide social realities, are becoming less and less realistic if we go back to microeconomics as we have done during the last 50 years.

The best example is the United Kingdom, which is the champion of liberalism. Each year it has cut public spending and now claims to have growth in employment, with 600,000 new jobs in the last year. The only problem is that if you look into the structure of those jobs, you will find that the large majority are part-time or underpaid, and employment in the public sector is at its lowest since 1999.

A clear indicator is the number of people who visit the food banks created to meet the needs of the indigent. In the world’s sixth largest economy, their numbers have grown from 20,000 before the crisis seven years ago to over one million last year. And the same has happened all over Europe, albeit to a lesser extent in the Nordic countries.

U.K. economists have published studies on how austerity has affected growth. According to the Office for Budgetary Responsibility, established by the U.K. government, austerity blocked economic growth by one percent between 2011 and 2012. But, according to Simon Wren-Lewis of Oxford University, the figure is actually about five percent (or 100 billion pounds).

In other words, fiscal austerity reduces growth, and this creates large deficits which call for more fiscal austerity. It is a trap that Nobel laureate Keynesian economists Joseph Stiglitz and Paul Krugman have described in detail to no avail. We are all following the “liberal order” of Germany, which think its reality should be the norm and that deviations should be punished.

Now, while we can all agree that much of this is obvious to the average citizen in terms of its impact on everyday life, what is important and new is that the IMF, the fiscal guardian which has imposed the Washington Consensus (basically a formula of austerity plus free market at any cost) all over the Third World with tragic results, has woken up to reality.

Don’t get me wrong – I’m not implying that the IMF is becoming a progressive organisation, but there are signs that an important pillar of neoliberal thinking is vacillating.

Of course, those responsible for the global crisis – bankers – have come out with impunity. The world has exacted over three trillion dollars from its citizens to put banks back on their feet. The over 140 billion dollars in fines that banks have paid since the beginning of the crisis is the quantitative measure of illegal and criminal activities.

The United Nations calculates that the financial crisis has created at least 200 million new poor, several hundred millions of unemployed, and many more precarious jobs, especially for young people. And, yet, nobody has paid, while prisons are full of people who are there for minor theft, the social impact of which is infinitesimal by comparison.

In 2014, James Morgan, the boss of Morgan Stanley, cashed in 22.5 million dollars, Lloyd Blanfein, the boss of Goldman Sachs, 24 million, James Dimon, the boss of J.P. Morgan, 20 million. The most exploited of all, Brian Moynihan of the Bank of America, a paltry 13 million. Nobody stops the growth of bankers.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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Opinion: A Long History of Predatory Practices Against Developing Countrieshttp://www.ipsnews.net/2015/04/opinion-a-long-history-of-predatory-practices-against-developing-countries/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-a-long-history-of-predatory-practices-against-developing-countries http://www.ipsnews.net/2015/04/opinion-a-long-history-of-predatory-practices-against-developing-countries/#comments Mon, 06 Apr 2015 19:11:12 +0000 Kinda Mohamadieh http://www.ipsnews.net/?p=139820

In this column, Kinda Mohamadieh, a researcher at the South Centre, argues that the predatory practices of ‘vulture funds’ and their systemic implications represent a threat to the development of indebted poor countries.

By Kinda Mohamadieh
GENEVA, Apr 6 2015 (IPS)

The world’s attention turned to the practices of vulture funds after the U.S. Supreme Court affirmed a lower court opinion in the NML Capital vs Argentina case, which forbids the country from making payments on its restructured debt.

Argentina had defaulted in 2001 and went through two rounds of negotiations to restructure its debt, both in 2005 and 2010. In June 2014, the court ordered Argentina to pay the ‘vulture funds’ that held out and did not accept the terms of the debt swaps.

Kinda Mohamadieh

Kinda Mohamadieh

The vulture funds had held out with the aim of achieving what amounts to a 1,600 percent return on their original investment. The funds concerned had purchased the Argentinian bonds in 2008 at 48 million dollars and the court ruling ordered Argentina to pay them 832 million dollars.

Nobel laureate Joseph Stiglitz noted that this was “the first time in history that a country was willing and able to pay its creditors, but was blocked by a judge from doing so”.

While this case brought the term ‘vulture funds’ into the public sphere, the predatory practices of these entities did not start with Argentina.

According to a former U.N. independent expert on the effects of foreign debt and other related financial obligations of states on the full enjoyment of all human rights, the term ‘vulture funds’ describes “private commercial entities that acquire, either by purchase, assignments or some other form of transaction, defaulted or distressed debts, and sometimes actual court judgments, with the aim of achieving higher returns.”

Basically, vulture funds are hedge funds whose modus operandi focuses on three main steps including: (1) purchasing distressed debt on the secondary market at deep discounts far less than its face value; (2) refusing to participate in restructuring agreements with the indebted state; and (3) pursuing full value of the debt often at face value plus interest, arrears and penalties, including through litigation, seizure of assets or penalties.“The African Development Bank has reported that at least twenty heavily indebted poor countries have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999”

Many developing countries have been exposed to the predatory practices of vulture funds, especially African and Latin American countries.

The African Development Bank has reported that at least twenty heavily indebted poor countries have been threatened with or have been subjected to legal actions by commercial creditors and vulture funds since 1999. These countries include Sierra Leone, Cote d’Ivoire, Burkina Faso, as well as Angola, Cameroon, Congo, Democratic Republic of the Congo, Ethiopia, Liberia, Madagascar, Mozambique, Niger, Sao Tome and Principe, Tanzania, and Uganda.

Peru was targeted by NML Capital in the year 2000. According to media reports, the fund spent almost four years in the courts to win a ruling that forced Peru to settle for almost 56 million dollars on distressed debt, which the fund had initially bought for 11.8 million dollars.

The African Development Bank has documented that up until the year 2007, 25 judgments in favour of vulture funds had yielded nearly one billion dollars. Out of this amount, 72 percent of the judgments have been against African countries. The reported number of outstanding cases against debtor countries has doubled since 2004.

According to the World Bank and the International Monetary Fund (IMF), 54 court cases were instituted against 12 heavily indebted poor countries between 1998 and 2008. The IMF estimates that in some cases claims by vulture funds constitute as much as 12 to 13 percent of a country’s gross domestic product.  The World Bank estimates that nearly one-third of countries that are eligible for debt relief and other poverty alleviation programmes are the targets of nearly 26 vulture funds.

Concerned about the extent of the threat posed by such predatory practices and their systemic implications, several international authorities and multilateral institutions have voiced their concern about the matter.

The African Development Bank has warned that by precluding debt relief and costing millions in legal expenses, these vulture funds undermine the development of the most vulnerable African countries.

In June 2014, the heads of state and government of the Group of 77 and China, in their declaration issued on the occasion of the ‘For a New World Order for Living Well’ summit held in Santa Cruz de la Sierra, Bolivia, reiterated the importance of “not allowing vulture funds to paralyse the debt restructuring efforts of developing countries” and stressed that “these funds should not supersede the state’s right to protect its people under international law.”

The IMF had cautioned that upholding the decision against Argentina would harm future sovereign debt restructuring attempts. In 2013, the IMF stated that “if upheld, [the Court of Appeals decision] would likely give hold-out creditors greater leverage and make the debt restructuring process more complicated”.

In 2007, G8 finance ministers had expressed concern about actions of some litigating creditors against heavily indebted poor countries, and agreed to work together to identify measures to tackle this problem based on the work of the Paris Club.

In September 2014, a resolution on the activities of vulture funds and the effects of foreign debt and other related international financial obligations of states on the full enjoyment of all human rights, particularly economic, social and cultural rights, was presented by Argentina and adopted at the 27th session of the U.N. Human Rights Council which took place in Geneva.

It is also worth noting that the 26th session of the Human Rights Council in June 2014 had adopted a resolution titled ‘Elaboration of an international legally binding instrument on Transnational Corporations and Other Business Enterprises with Respect to Human Rights’.

This resolution sets in place a process of negotiations towards an international legally binding instrument on transnational corporations and their liability in the area of human rights. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This column is based on a longer version published in published in the South Centre’s South Bulletin 83 of 12 February 2015.

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Opinion: Crisis Resolution and International Debt Workout Mechanismshttp://www.ipsnews.net/2015/03/opinion-crisis-resolution-and-international-debt-workout-mechanisms/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-crisis-resolution-and-international-debt-workout-mechanisms http://www.ipsnews.net/2015/03/opinion-crisis-resolution-and-international-debt-workout-mechanisms/#comments Mon, 30 Mar 2015 08:34:01 +0000 Yilmaz Akyuz http://www.ipsnews.net/?p=139924

In this column, Yilmaz Akyüz, chief economist at the South Centre in Geneva, looks at the role of international debt workout mechanisms in debt restructuring initiatives and argues, inter alia, that while the role of the IMF in crisis management and resolution is incontrovertible, it cannot be placed at the centre of these debt workout mechanisms because its members represent both debtors and creditors.

By Yilmaz Akyuz
GENEVA, Mar 30 2015 (IPS)

Debt restructuring is a component of crisis management and resolution, and needs to be treated in the context of the current economic conjuncture and vulnerabilities.

International debt workout mechanisms are not just about debt reduction, but include interim arrangements to provide relief to debtors, including temporary hold on debt payments and financing.

They should address liquidity as well as solvency crises but the difference is not always clear. Most start as liquidity crises and can lead to insolvency if not resolved quickly.

Yilmaz Akyuz

Yilmaz Akyuz

Liquidity crises also inflict serious social and economic damages as seen in the past two decades even when they do not entail sovereign defaults.

International mechanisms should apply to crises caused by external private debt as well as sovereign debt. Private external borrowing is often the reason for liquidity crises. Governments end up socialising private debt. They need mechanisms that facilitate resolution of crises caused by private borrowing.

Only one of the last eight major crises in emerging and developing economies was due to internationally-issued sovereign debt (Argentina). Mexican and Russian crises were due to locally-issued public debt; in Asia (Thailand, Korea and Indonesia) external debt was private; in Brazilian and Turkish crises too, private (bank) debt played a key role alongside some problems in the domestic public debt market.

We have had no major new crisis in the South with systemic implications for over a decade thanks to highly favourable global liquidity conditions and risk appetite, both before and after the Lehman Brothers bank collapse in 2008, due to policies in major advanced economies, notably the United States.

But this period, notably the past six years, has also seen considerable build-up of fragility and vulnerability to liquidity and solvency crises in many developing countries."There are problems with standard crisis intervention: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure”

Sovereign international debt problems may emerge in the so-called ‘frontier economies’ usually dependent on official lending. Many of them have gone into bond markets in recent years, taking advantage of exceptional global liquidity conditions and risk appetite. There are several first-time Eurobond issuers in sub-Saharan Africa and elsewhere.

In emerging economies, internationally-issued public debt as percentage of gross domestic product has declined significantly since the early 2000s. Much of the external debt of these economies is now under local law and in local currency.

However, there are numerous cases of build-up of private external debt in the foreign exchange markets issued under foreign law since 2008. Many of them may face contingent liabilities and are vulnerable to liquidity crises.

An external financial crisis often involves interruption of a country’s access to international financial markets, a sudden stop in capital inflows, exit of foreign investors from deposit, bond and equity markets and capital flight by residents. Reserves become depleted and currency and asset markets come under stress. Governments are often too late in recognising the gravity of the situation.

International Monetary Fund (IMF) lending is typically designed to bail out creditors to keep debtors current on their obligations to creditors, and to avoid exchange restrictions and maintain the capital account open.

The IMF imposes austerity on the debtor, expecting that it would make debt payable and sustainable and bring back private creditors. It has little leverage on creditors.

There are problems with standard crisis intervention: austerity can make debt even less payable; creditor bailouts create moral hazard and promote imprudent lending, and transform commercial debt into official debt, thereby making it more difficult to restructure; and risks are created for the financial integrity of the IMF.

Many of these problems were recognised after the Asian crisis of the 1990s, giving rise to the sovereign debt restructuring mechanism, originally designed very much along the lines advocated by the U.N. Conference on Trade and development (UNCTAD) throughout the 1980s and 1990s (though without due acknowledgement).

However, it was opposed by the United States and international financial markets and could not elicit strong support from debtor developing countries, notably in Latin America. It was first diluted and then abandoned.

The matter has come back to the attention of the international community with the Eurozone crisis and then with vulture-fund holdouts in Argentinian debt restructuring.

After pouring money into Argentina and Greece, whose debt turned out to be unpayable, the IMF has proposed a new framework to “limit the risk that Fund resources will simply be used to bail out private creditors” and to involve private creditors in crisis resolution. If debt sustainability looks uncertain, the IMF would require re-profiling (rollovers and maturity extension) before lending. This is left to negotiations between the debtor and the creditors.

However, there is no guarantee that this can bring a timely and orderly re-profiling. If no agreement is reached and the IMF does not lend without re-profiling, then it would effectively be telling the debtor to default. But it makes no proposal to protect the debtor against litigation and asset grab by creditors.

There is thus a need for statutory re-profiling involving temporary debt standstills and exchange controls. The decision should be taken by the country concerned and sanctioned by an internationally recognised independent body to impose stay on litigation.

Sanctioning standstills should automatically grant seniority to new loans, to be used for current account financing, not to pay creditors or finance capital outflows.

If financial meltdown is prevented through standstills and exchange controls, stay is imposed on litigation, adequate financing is provided and contractual provisions are improved, the likelihood of reaching a negotiated debt workout would be very high.

The role of the IMF in crisis management and resolution is incontrovertible. However, the IMF cannot be placed at the centre of international debt workout mechanisms. Even after a fundamental reform, the IMF board cannot act as a sanctioning body and arbitrator because of conflict of interest; its members represent debtors and creditors.

The United Nations successfully played an important role in crisis resolution in several instances in the past.

The Compensatory Financing Facility – introduced in the early 1960s to enable developing countries facing liquidity problems due to temporary shortfalls in primary export earnings to draw on the Fund beyond their normal drawing rights at concessional terms – resulted from a U.N. initiative.

A recent example concerns Iraq’s debt. After the occupation of Iraq and collapse of the Saddam Hussein regime, the U.N. Security Council adopted a resolution to implement stay on the enforcement of creditor rights to use litigation to collect unpaid sovereign debt.

This was engineered by the very same country, the United States, which now denies a role to the United Nations in debt and finance on the grounds that it lacks competence on such matters, which mainly belong to the IMF and the World Bank.

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

* This article is partly based on South Centre Research Paper 60 by Yilmaz Akyüz titled Internationalisation of Finance and Changing Vulnerabilities in Emerging and Developing Economies.

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Development and Taxes, a Vital Piece of the Post-2015 Puzzlehttp://www.ipsnews.net/2015/03/development-and-taxes-a-vital-piece-of-the-post-2015-puzzle/?utm_source=rss&utm_medium=rss&utm_campaign=development-and-taxes-a-vital-piece-of-the-post-2015-puzzle http://www.ipsnews.net/2015/03/development-and-taxes-a-vital-piece-of-the-post-2015-puzzle/#comments Fri, 20 Mar 2015 22:07:30 +0000 Lyndal Rowlands http://www.ipsnews.net/?p=139795 A fairer more cooperative global tax structure is needed to help achieve Post-2015 development goals. Credit: Eoghan OLionnain CC by SA 2.0 License https://creativecommons.org/licenses/by-sa/2.0/.

A fairer more cooperative global tax structure is needed to help achieve Post-2015 development goals. Credit: Eoghan OLionnain CC by SA 2.0 License https://creativecommons.org/licenses/by-sa/2.0/.

By Lyndal Rowlands
UNITED NATIONS, Mar 20 2015 (IPS)

Public funds are vitally important to achieving the Sustainable Development Goals (SDGs), making corporate tax avoidance trends a pressing issue for post-2015 Financing for Development discussions.

A draft agenda circulated this week for the Financing for Development (FfD) post-2015 Development Conference to be held in Addis Ababa in July places domestic public finances as a key action agenda item.“This is no longer an issue about developing countries versus rich countries. I think you have to get beyond geography and start thinking about this as a battle between wealthy elites and everybody else.” -- Nicholas Shaxson

The agenda acknowledges the need for greater tax cooperation considering “there are limits to how much governments can individually increase revenues in our interconnected world”.

Over 130 countries, represented by the Group of 77 (G-77), called for greater international tax cooperation to be included on the agenda, in recognition of the increasingly central role of tax systems in development.

These calls come in light of the Luxembourg Leaks and Swiss Leaks, which have revealed in recent months how some of the world’s biggest multinational corporations avoid paying billions of dollars of taxes through deals with ‘tax havens’ in wealthy countries.

Two reports out this week, from Oxfam and the Tax Justice Network, both look at the impacts of corporate tax avoidance on global inequality.

Catherine Olier, Oxfam’s European Union policy advisor, told IPS, “Corporate tax avoidance is actually a very important issue for developing countries because according to the International Monetary Fund, the poor countries are more reliant on corporate tax than rich countries.”

Olier said that considerable funds are needed to make the SDGs possible.

“If we look at what’s currently on the table in terms of Official Development Assistance (‘international aid’) or even leveraging money from the private sector, this is never going to be enough to finance the SDGs,” she said.

“Tax is definitely going to be the most sustainable and the most important source of financing,” Olier said.

Oxfam’s report called on European institutions, especially the European Commission, to “analyse the negative impacts one member state’s tax system can have on other European and developing countries, and provide public recommendations for change.”

Nicholas Shaxson from the Tax Justice Network told IPS that tax havens are predominantly wealthier countries, but that they negatively impact both rich and poor countries.

“This is no longer an issue about developing countries versus rich countries. I think you have to get beyond geography and start thinking about this as a battle between wealthy elites and everybody else,” he said. “That’s where the battle line is, that’s where the dividing line is.”

He added that corporate taxes were particularly important to developing countries, in part because it was more difficult to leverage tax revenue from a poorer constituency.

“In pure justice terms, in terms of a large wealthy multinational extracting natural resources or making profits in a developing country and not paying tax, I think that nearly everyone in the world would agree in their gut that there’s something wrong with that situation,” Shaxson said.

Shaxson is the author of the Tax Justice Network’s (TJN) report: Ten Reasons to Defend the Corporation Tax, published earlier this week.

The report argues that trillions of dollars of public spending is at risk, and that if current trends continue, corporate headline taxes will reach zero in the next two to three decades.

Meanwhile, Oxfam reported in January that the “combined wealth of the richest 1 percent will overtake that of the other 99 percent of people next year [2016] unless the current trend of rising inequality is checked.”

Oxfam is calling for a Ministerial Roundtable to be held at the FfD Conference to help facilitate the establishment of a U.N. inter-governmental body on tax cooperation.

Olier told IPS that while developing countries have expressed support for greater tax cooperation, there has so far been less support from Organisation for Economic Co-operation and Development (OECD) member countries, including European countries and the United States.

Follow Lyndal Rowlands on Twitter @LyndalRowlands

Edited by Kitty Stapp

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Opinion: Greece and the Germanisation of Europehttp://www.ipsnews.net/2015/03/opinion-greece-and-the-germanisation-of-europe/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-greece-and-the-germanisation-of-europe http://www.ipsnews.net/2015/03/opinion-greece-and-the-germanisation-of-europe/#comments Wed, 04 Mar 2015 15:02:38 +0000 guillermo-medina http://www.ipsnews.net/?p=139475

In this column, Guillermo Medina, a Spanish journalist and former Member of Parliament, analyses the negotiations between Greece and the Eurogroup and concludes that Germany, currently Europe’s dominant power, has achieved its basic goal: the consolidation of austerity as the fundamental dogma of the new European economic order. This, says the author, is a milestone in the political tussle in the European Union since the reunification of Germany between moving towards a Europeanised Germany or a Germanised Europe.

By Guillermo Medina
MADRID, Mar 4 2015 (IPS)

At last, on Tuesday Feb. 24, the Eurogroup (of eurozone finance ministers) approved the Greek government’s commitment to a programme of reforms in return for extending the country’s bailout deal.

The agreement marks the end of tense and protracted negotiations. It consists of a four-month extension for the second bailout programme worth 130 billion euros (over 145 billion dollars), in force since 2012 and which was due to expire on Feb. 28. The first bailout was for 110 billion euros, equivalent to 123 billion dollars.

Guillermo Medina

Guillermo Medina

During this period, the European Central Bank (ECB) will provide Greece with liquidity and the terms of a new bailout will be hammered out.

The eleventh-hour agreement was no doubt motivated partly by fears that a “Grexit” – Greek withdrawal from the eurozone monetary union – would have triggered a financial earthquake with unforeseeable consequences. The result is a very European-style compromise that averts catastrophe and gains time while avoiding facing the underlying problems.

In exchange for an extension of financial support from Greece’s partners and creditors, Prime Minister Alexis Tsipras will have to submit all his government’s measures during this period to Eurogroup inspection.

But the deal promises Greece more than just restrictions. The country will have to pay its debts to the last euro, but if, as seems probable, deadlines for primary surplus targets are extended, the country will have greater ability to pay (France has just secured this for itself).

In the final document, Greece promised to adopt a tax reform that would make the system fairer and more progressive, as well as reinforce the fight against corruption and tax evasion and reduce administrative spending.“Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future”

If the government pursues these goals, together with the fight against contraband, efficiently and with determination (as indeed it should, because they are part of its programme and target its domestic enemies), the income will be helpful for the application of its social and economic programmes.

In view of the successive positions that Greece has had to relinquish in the course of the negotiations, it appears that the country has achieved the little that could be achieved.

The negotiations between Greece and its European partners mark a milestone in the political tussle in the European Union since the reunification of Germany in 1990, between moving towards a Europeanised Germany or a Germanised Europe.

Germany has undeniably secured its basic goal: the enshrining of austerity as the fundamental dogma of the new European economic order, although political prudence and even self-interest have softened the application of the dogma, and may continue to do so in future.

Germany has openly tried to impose its convictions and its hegemony on Europe. Greece was only the immediate battlefield. Brussels and Berlin have been divided from the outset about how to solve the Greek crisis, but Germany prevailed.

However, the masters of Europe do not have any interest in “destroying” Greece, and so cutting off their nose to spite their face. They are satisfied with a demonstration of the asymmetry of power between the two sides, and the public contemplation of assured failure for whoever defies the status quo and supports any policy that deviates from the one true official line.

The problem with a Germanised Europe is not the preponderant role that Germany would play, but that it would impose a “Made in Germany” model of Europe that conforms to its own interests. That is how it would differ from a Europeanised Germany.

The Greek crisis has highlighted the ever-widening contrast between the values and ideals that we consider to be central to the European project, such as solidarity, mutual aid and social justice, and the new values that set aside basic aims like full employment, social welfare and equal opportunities.

It is paradoxical that Europe, which is apparently absent from or baffled by threats from the opposite shore of the Mediterranean, should take a harsh, tough attitude with a small partner overwhelmed by debt. It is also paradoxical that structural reforms are demanded of Greece, without admitting Europe’s own urgent need to redesign the eurozone and reframe the policies that have led to the poor performance of its monetary union.

The Greek crisis and the difficulties in overcoming it have a great deal to do with a design of the euro that benefits financial interests, particularly Germany’s.

The project neglected the harmonisation of tax policies and created a European Central Bank that lacked the powers that permit the U.S. Federal Reserve and the Bank of England to issue money and buy state debt.

As is well known, the ECB has made loans to European banks at very low interest rates, and they in turn have made loans to states, including Greece, at much higher interest. Government debts thus mounted up, and in order to pay they were forced to cut public spending.

Why does Europe persist in following failed policies while refusing to follow those that have lifted the United States out of recession? The only explanation is stubborn attachment to an ideological vision of economic policy that is devoid of pragmatism.

How can insistence on the path of error be explained at such a time? There may well be a quota of incompetence, but the basic reason is, as Nobel prize-winners Joseph Stiglitz and Paul Krugman affirm, that the goal of the policies imposed by the “Troika” (European Commission, ECB and International Monetary Fund) is to protect the interests of financial capital. And this is because the powers of political institutions, the media and academia, are dominated by financial capital, with German financial capital at the core.

Financial interests are essentially capable of shaping the decisions of European governance institutions. In the United States this subservience is less clear-cut, allowing hefty penalties to be imposed on certain banks, as well as the development of other economic strategies.

This is because independent mechanisms of control and oversight exist, the Federal Reserve has well-defined goals (whereas the ECB has spent years fighting the insistent threat of inflation), and there is democratic administration with the political will to resist.

In conclusion: the issue is to clarify what sort of Europe the citizens of Europe want, and what institutional changes are needed to achieve it.

And even more importantly, having seen the consecration of German hegemony over the Old World, what sort of German leadership would be compatible with a united Europe based on solidarity? Is this even possible? (END/IPS COLUMNIST SERVICE)

Translated by Valerie Dee/Edited by Phil Harris    

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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OPINION: The Corporate Takeover of Ukrainian Agriculturehttp://www.ipsnews.net/2015/01/opinion-the-corporate-takeover-of-ukrainian-agriculture/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-the-corporate-takeover-of-ukrainian-agriculture http://www.ipsnews.net/2015/01/opinion-the-corporate-takeover-of-ukrainian-agriculture/#comments Tue, 27 Jan 2015 13:20:34 +0000 Frederic Mousseau http://www.ipsnews.net/?p=138850

In this column, Frédéric Mousseau, Policy Director at the Oakland Institute, argues that the United States and the European Union are working hand in hand in a takeover of Ukrainian agriculture which – besides being a sign of Western governments’ involvement in the Ukraine conflict – is of dubious benefit for the country’s agriculture and farmers.

By Frederic Mousseau
OAKLAND, United States, Jan 27 2015 (IPS)

At the same time as the United States, Canada and the European Union announced a set of new sanctions against Russia in mid-December last year, Ukraine received 350 million dollars in U.S. military aid, coming on top of a one billion dollar aid package approved by the U.S. Congress in March 2014. 

Western governments’ further involvement in the Ukraine conflict signals their confidence in the cabinet appointed by the new government earlier in December 2014. This new government is unique given that three of its most important ministries were granted to foreign-born individuals who received Ukrainian citizenship just hours before their appointment.

Frédéric Mousseau

Frédéric Mousseau

The Ministry of Finance went to Natalie Jaresko, a U.S.-born and educated businesswoman who has been working in Ukraine since the mid-1990s, overseeing a private equity fund established by the U.S. government to invest in the country. Jaresko is also the CEO of Horizon Capital, an investment firm that administers various Western investments in the country.

As unusual as it may seem, this appointment is consistent with what looks more like a takeover of the Ukrainian economy by Western interests. In two reports – The Corporate Takeover of Ukrainian Agriculture and Walking on the West Side: The World Bank and the IMF in the Ukraine Conflict – the Oakland Institute has documented this takeover, particularly in the agricultural sector.

A major factor in the crisis that led to deadly protests and eventually to president Viktor Yanukovych’s removal from office in February 2014 was his rejection of a European Union (EU) Association agreement aimed at expanding trade and integrating Ukraine with the
EU – an agreement that was tied to a 17 billion dollar loan from the International Monetary Fund (IMF).

After the president’s departure and the installation of a pro-Western government, the IMF initiated a reform programme that was a condition of its loan with the goal of increasing private investment in the country.“The manoeuvring for control over the country’s [Ukraine’s] agricultural system is a pivotal factor in the struggle that has been taking place over the last year in the greatest East-West confrontation since the Cold War”

The package of measures includes reforming the public provision of water and energy, and, more important, attempts to address what the World Bank identified as the “structural roots” of the current economic crisis in Ukraine, notably the high cost of doing business in the country.

The Ukrainian agricultural sector has been a prime target for foreign private investment and is logically seen by the IMF and World Bank as a priority sector for reform. Both institutions praise the new government’s readiness to follow their advice.

For example, the foreign-driven agricultural reform roadmap provided to Ukraine includes facilitating the acquisition of agricultural land, cutting food and plant regulations and controls, and reducing corporate taxes and custom duties.

The stakes around Ukraine’s vast agricultural sector – the world’s third largest exporter of corn and fifth largest exporter of wheat – could not be higher. Ukraine is known for its ample fields of rich black soil, and the country boasts more than 32 million hectares of fertile, arable land – the equivalent of one-third of the entire arable land in the European Union.

The manoeuvring for control over the country’s agricultural system is a pivotal factor in the struggle that has been taking place over the last year in the greatest East-West confrontation since the Cold War.

The presence of foreign corporations in Ukrainian agriculture is growing quickly, with more than 1.6 million hectares signed over to foreign companies for agricultural purposes in recent years. While Monsanto, Cargill, and DuPont have been in Ukraine for quite some time, their investments in the country have grown significantly over the past few years.

Cargill is involved in the sale of pesticides, seeds and fertilisers and has recently expanded its agricultural investments to include grain storage, animal nutrition and a stake in UkrLandFarming, the largest agribusiness in the country.

Similarly, Monsanto has been in Ukraine for years but has doubled the size of its team over the last three years. In March 2014, just weeks after Yanukovych was deposed, the company invested 140 million dollars in building a new seed plant in Ukraine.

DuPont has also expanded its investments and announced in June 2013 that it too would be investing in a new seed plant in the country.

Western corporations have not just taken control of certain profitable agribusinesses and agricultural activities, they have now initiated a vertical integration of the agricultural sector and extended their grip on infrastructure and shipping.

For instance, Cargill now owns at least four grain elevators and two sunflower seed processing plants used for the production of sunflower oil. In December 2013, the company bought a “25% +1 share” in a grain terminal at the Black Sea port of Novorossiysk with a capacity of 3.5 million tons of grain per year. 

All aspects of Ukraine’s agricultural supply chain – from the production of seeds and other agricultural inputs to the actual shipment of commodities out of the country – are thus increasingly controlled by Western firms.

European institutions and the U.S. government have actively promoted this expansion. It started with the push for a change of government at a time when president Yanukovych was seen as pro-Russian interests. This was further pushed, starting in February 2014, through the promotion of a “pro-business” reform agenda, as described by the U.S. Secretary of Commerce Penny Pritzker when she met with Prime Minister Arsenly Yatsenyuk in October 2014.

The European Union and the United States are working hand in hand in the takeover of Ukrainian agriculture. Although Ukraine does not allow the production of genetically modified (GM) crops, the Association Agreement between Ukraine and the European Union, which ignited the conflict that ousted Yanukovych, includes a clause (Article 404) that commits both parties to cooperate to “extend the use of biotechnologies” within the country.

This clause is surprising given that most European consumers reject GM crops. However, it creates an opening to bring GM products into Europe, an opportunity sought after by large agro-seed companies such as Monsanto.

Opening up Ukraine to the cultivation of GM crops would go against the will of European citizens, and it is unclear how the change would benefit Ukrainians.

It is similarly unclear how Ukrainians will benefit from this wave of foreign investment in their agriculture, and what impact these investments will have on the seven million local farmers.

Once they eventually look away from the conflict in the Eastern “pro-Russian” part of the country, Ukrainians may wonder what remains of their country’s ability to control its food supply and manage the economy to their own benefit.

As for U.S. and European citizens, will they eventually awaken from the headlines and grand rhetoric about Russian aggression and human rights abuses and question their governments’ involvement in the Ukraine conflict? (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

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OPINION: Greece Gives EU the Chance to Rediscover Its Social Responsibilityhttp://www.ipsnews.net/2015/01/opinion-greece-gives-eu-the-chance-to-rediscover-its-social-responsibility/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-greece-gives-eu-the-chance-to-rediscover-its-social-responsibility http://www.ipsnews.net/2015/01/opinion-greece-gives-eu-the-chance-to-rediscover-its-social-responsibility/#comments Sat, 24 Jan 2015 14:30:34 +0000 Marianna Fotaki http://www.ipsnews.net/?p=138804 Alexis Tsipras (centre), Syriza’s charismatic 40-year-old leader, has been campaigning under the banner “Hope is on its way.” Credit: Mirko Isaia/cc by 2.0

Alexis Tsipras (centre), Syriza’s charismatic 40-year-old leader, has been campaigning under the banner “Hope is on its way.” Credit: Mirko Isaia/cc by 2.0

By Marianna Fotaki
COVENTRY, England, Jan 24 2015 (IPS)

The European Union should not be afraid of the leftist opposition party Syriza winning the Greek election, but see it as a chance to rediscover its founding principle – the social dimension that created it and without which it cannot survive.

Greece’s entire economy accounts for three per cent of the euro zone’s output but its national debt totals €360 billion or 175 per cent of the country’s GDP and poses a continuous threat to its survival.

Courtesy of Marianna Fotaki

Courtesy of Marianna Fotaki

While the crippling debt cannot realistically be paid back in full, the troika of the EU, European Central Bank, and IMF insist that the drastic cuts in public spending must continue.

But if Syriza is successful – as the polls suggest – it promises to renegotiate the terms of the bailout and ask for substantial debt forgiveness, which could change the terms of the debate about the future of the European project.

It would also mean the important, but as yet, unaddressed question of who should bear the costs and risks of the monetary union within and between the euro zone countries is likely to become the centrepiece of such negotiations.

The immense social cost of the austerity policies demanded by the troika has put in question the political and social objectives of an ‘ever closer union’ proclaimed in the EU founding documents.The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013.

Formally established through the Treaty of Rome in 1957, the European Economic Community between France, Germany, Italy and the Benelux countries tied closely the economies of erstwhile foes, rendering the possibility of another disastrous war unaffordable. Yet the ultimate goal of integration was to bring about ‘the constant improvements of the living and working conditions of their peoples’.

The European project has been exceptionally successful in achieving peaceful collaboration and prosperity by progressively extending these stated benefits to an increasing number of member countries, with the EU now being the world’s largest economy.

Since the economic crisis of 2007, however, GDP per capita and gross disposable household incomes have declined across the EU and have not yet returned to their pre-crisis levels in many countries. Unemployment is at record high levels, with Greece and Spain topping the numbers of long-term unemployed youth.

There are also deep inequalities within the euro zone. Strong economies that are major exporters have benefitted from free trade and the fixed exchange rate mechanism protecting their goods from price fluctuations, but the euro has hurt the least competitive economies by depriving them of a currency flexibility that could have been used to respond to the crisis.

Without substantial transfers between weaker and stronger economies, which accounts for only 1.13 per cent of the EU’s budget at present, there is no effective mechanism for risk sharing among the member states and for addressing the consequences of the crisis in the euro zone.

But the EU was founded on the premise of solidarity and not as a free trade zone only. Economic growth was regarded as a means for achieving desirable political and social goals through the process of painstaking institution building.

With 500 million citizens and a combined GDP of €12.9 trillion in 2012 shared among its 27 members the EU is better placed than ever to live up to its founding principles. The member states that benefitted from the common currency should lead in offering meaningful support rather than decimating their weaker members in a time of crisis by forcing austerity measures upon them.

This is not denying the responsibility for reckless borrowing resting with the successive Greek governments and their supporters. However, the logic of a collective punishment of the most vulnerable groups of the population must be rejected.

The old poor and the rapidly growing new poor comprise significant sections of Greek society: 20 per cent of children live in poverty, while Greece’s unemployment rate has topped 20 per cent for four consecutive years now and reached almost 27 per cent in 2013.

With youth unemployment above 50 per cent, many well-educated people have left the country. There is no access to free health care and the weak social safety net from before the crisis has all but disappeared. The dramatic welfare retrenchment combined with unemployment has led to austerity induced suicides and people searching for food in garbage cans in cities.

A continued commitment to the policies that have produced such outcomes in the name of increasing the EU’s competitiveness challenges the terms of the European Union’s founding principles. The creditors often rationalise this using a rhetoric that assumes tax-evading unproductive Greeks brought this predicament upon themselves – they are seen as the undeserving members of the euro zone.

Such reasoning creates an unhealthy political climate that gives rise to extremist nationalist movements in the EU such as the Greek criminal Golden Dawn party, which gained almost 10 per cent of votes in the last European Parliament elections.

Explaining the euro zone debt crisis as a morality tale is both deleterious and untrue. The problematic nature of such moralistic logic must be challenged: one cannot easily justify on ethical grounds forcing the working poor to bail out a banking system from which many wealthy people benefit, or transferring the consequences of reckless lending by commercial outlets to the public.

Nor can one explain the acquiescence of creditors to the machinations of the nepotistic self-serving corrupt elites dominating the state over the last 40 years that got Greece into the euro zone on false data and continue to rule it. As I have argued, the bailout money was given to the very people who are largely responsible for the crisis, while the general population of Greece is being made to suffer.

Greece’s voters are determined to stop the ruling classes from continuing their nefarious policies that have brought the country to the brink of catastrophe, but in the coming elections their real concern will be opposing the sacrifice of the futures of an entire generation.

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS-Inter Press Service.

Edited by Kitty Stapp

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OPINION: Banks, Inequality and Citizenshttp://www.ipsnews.net/2015/01/opinion-banks-inequality-and-citizens/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-banks-inequality-and-citizens http://www.ipsnews.net/2015/01/opinion-banks-inequality-and-citizens/#comments Thu, 22 Jan 2015 13:27:17 +0000 Roberto Savio http://www.ipsnews.net/?p=138778

In this column, Roberto Savio, founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News, argues that alarming figures on what has gone wrong in global society are being met with inaction. Citing data from Oxfam’s recent report on global wealth, he says that the rich are becoming richer – and the poor poorer – in a society where finance is no longer at the service of the economy or citizens.

By Roberto Savio
ROME, Jan 22 2015 (IPS)

Every day we receive striking data on major issues which should create tumult and action, but life goes on as if those data had nothing to do with people’s lives.

A good example concerns climate change. We know well that we are running out of time. It is nothing less than our planet that is at stake … but a few large energy companies are able to get away with their practices surrounded by the deafening silence of humankind.

Roberto Savio

Roberto Savio

Another example comes from the world of finance. Since the beginning of the financial crisis in 2009, banks have paid the staggering amount of 178 billion dollars in fines – U.S. banks have paid 115 billion, while European banks 63 billion. But, as analyst Sital Patel of Market Watch writes, these fines are now seen as a cost of doing business. In fact, no banker has yet been incriminated in a personal capacity.

Now we have other astonishing data from Oxfam – if nothing is done, in two years’ time the richest one percent of the world´s population will have a greater share of its wealth than the remaining 99 percent.

The richest are becoming richer at an unprecedented rate, and the poorest poorer. In just one year, the one percent went from possessing 44 percent of the world´s wealth to 48 percent last year. In 2016, therefore, it is estimated that this one percent will possess more than all the other 99 percent combined.

The top 89 billionaires have seen their wealth increase by 600 billion dollars in the last four years – a rise of five percent and equal to the combined budgets of 11 countries of the world with a population of 2.3 billion people.

In 2010, that figure was owned by 388 billionaires, and this striking and rapid concentration of wealth has, of course, a global impact. The so-called middle class is shrinking fast and in a number of countries youth unemployment stands at 40 percent, meaning that the destiny of today’s young people is clearly much worse than that of their parents.“In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production”

It will probably take some time before those figures become part of general awareness but it is a safe bet that they will not lead to any action, as with climate change. U.S. President Barack Obama is the only leader who has announced a tax increase on the rich, although he stands little chance of succeeding with his Republican-dominated Congress.

In a world where the value of solidarity has disappeared (Europe’s debate on austerity is a good example), apathy and atomisation have become the reality. We are going back to the times of Queen Victoria, substituting a rich aristocracy with money coming from trade and finance, not production. But up to a point: 34 percent of today’s billionaires inherited all or part of their wealth, and – interestingly – “inheritance tax is the most avoidable of levies”, as James Moore noted Jan. 20 in The Independent.

The “father of modern times”, late U.S. President Ronald Reagan, saw it clearly when he said that the rich produce richness, the poor produce poverty. So let the rich pay less taxes.

Well, in a just-released report, the U.S. Institute on Taxation and Economic Policy notes that in 2015 the poorest one-fifth of Americans will pay on average 10.9 percent of their income in taxes, the middle one-fifth 9.4 percent, and the top one percent just 5.4 percent.

Now, 20 percent of the richest billionaires are linked to the financial sector and it is worth recalling that this sector has grown more than the real economy, and has regulations only at national level. At global level, finance is the only activity which has international body of some kind of governance, as do labour, trade and communications, to name just a few.

Finance is no longer at the service of the economy and citizens. It has its own life. Financial transactions are now worth 40 trillion dollars a day, compared with the world’s economic output of one trillion.

At national level, there are now attempts half-hearted attempts to regulate finance. But let us look what is happening in United States. The new bland regulation is the Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly known as the Dodd-Frank, and it does not go as far as restoring the division between deposit banks, which was where citizens put their money and which could not be used for speculation, and investments banks, which speculate … and how!

This separation was abolished during the U.S. presidency of Bill Clinton, and is considered the end of banks at the service of the real economy. In any case, the lobbyists on Wall Street are intent on having the Dodd-Frank chipped away at, little by little.

There is some schizophrenia when we look at the relations between capital and politics. The U.S. Supreme Court has eliminated any limit to contributions from companies to political elections, declaring that the companies have the same rights as individuals. Of course, there are not many individuals who can shell out the same figures as a company, unless you’re one of the 89 billionaires!

Meanwhile, banks are not only responsible for the corruption of the political system, and for the illegal activities which have earned them billions of dollars, they are also responsible for funding only big investors, and leaving everybody else out from easy credit. The efforts of the Chairman of the European Central Bank,  Mario Draghi, to have banks give credit to small companies and individuals has gone largely nowhere.

But a new and imaginative initiative comes from the very stern Dutch bankers. All 90,000 bankers in the Netherlands are now required to take an oath: “I swear that I will endeavour to maintain and promote confidence in the financial sector. So help me God”.

This is not so much oriented towards the customer, and it is very self-serving; and it brings God in as the regulator of the Dutch banking system. Perhaps the Dutch bankers have been paying heed to the words of Goldman Sach’s CEO Lloyd Blankfein who said at the time of the financial crisis in 2009 that bankers were “doing God’s work”.

Well God will have to be actively involved. All the three biggest Dutch banks – Rabobank, ABN Amro and ING Groep – have been involved in scandals that have hurt consumers, or were nationalised during the financial crisis, costing taxpayers more than 140 billion dollars. In one case, Rabobank was fined one billion dollars.

New York’s Wall Street and London’s City are said to be open to the idea of introducing a similar oath.

It is probably only that kind of Higher Power which could turn the tide in this world of growing inequality and lack of ethics. (END/IPS COLUMNIST SERVICE)

Edited by Phil Harris   

The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, IPS – Inter Press Service. 

The author can be contacted at utopie@ips.org

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Haitians Worry World Bank-Assisted Mining Law Could Result in “Looting”http://www.ipsnews.net/2015/01/haitians-worry-world-bank-assisted-mining-law-could-result-in-looting/?utm_source=rss&utm_medium=rss&utm_campaign=haitians-worry-world-bank-assisted-mining-law-could-result-in-looting http://www.ipsnews.net/2015/01/haitians-worry-world-bank-assisted-mining-law-could-result-in-looting/#comments Tue, 13 Jan 2015 00:26:23 +0000 Carey L. Biron http://www.ipsnews.net/?p=138611 The road to Baradares in north central Haiti. The aim of the new draft mining law appears to be a massive expansion of Haiti’s mining sector. Credit: Lee Cohen/cc by 2.0

The road to Baradares in north central Haiti. The aim of the new draft mining law appears to be a massive expansion of Haiti’s mining sector. Credit: Lee Cohen/cc by 2.0

By Carey L. Biron
WASHINGTON, Jan 13 2015 (IPS)

With Haiti’s Parliament having dissolved on Tuesday, civil society groups are worried that the Haitian president may move to unilaterally put in place a contentious revision to the country’s decades-old mining law.

Starting in 2013, that draft was written with technical assistance from the World Bank. Last week, a half-dozen Haitian groups filed a formal appeal with the bank’s complaints office, expressing concern that the legislation had been crafted without the public consultation often required under the Washington-based development funder’s own policies.“The process has been very opaque, with a small group of experts from the World Bank and Haitian government officials drafting this law.” -- Sarah Singh

The aim of the new draft mining law appears to be a massive expansion of Haiti’s mining sector, paving the way for the entry of foreign companies already interested in the country’s significant gold and other deposits.

“Community leaders … are encouraging communities to think critically about ‘development’, and to not simply accept projects defined by outsiders,” Ellie Happel, an attorney in Port-au-Prince who has been involved in the complaint, told IPS.

“These projects often fail. And, in the case with gold mining, residents learn that these projects may threaten their very way of life.”

Haiti’s extractives permitting process is currently extensive and bureaucratic. Yet the new revisions would bypass parliamentary oversight altogether, halting even a requirement that agreement terms be made public, according to a draft leaked in July.

Critics worry that this streamlining, coupled with the Haitian government’s weakness in ensuring oversight, could result in social and environmental problems, particularly damaging to a largely agrarian economy. Further, there is question as to whether exploitation of this lucrative minerals wealth would benefit the country’s vast impoverished population.

“The World Bank’s involvement in developing the Draft Mining Law lends the law credibility, which is likely to encourage investment in the Haitian mining sector,” the complaint, filed with the bank’s Inspection Panel on Wednesday, states.

“[T]his increased investment in the mining sector will result in … contamination of vital waterways, impacts on the agriculture sector, and involuntary displacement of communities. Complainants are also concerned about the exclusion of Haitian people from the law reform process, particularly when contrasted with the reported regular participation of the private sector in drafting the new law.”

An opaque process

The complaint comes five years after a devastating earthquake struck Haiti, and as political instability is threatening reconstruction and development progress made in that catastrophe’s aftermath. Elections have been repeatedly put off for more than two years, and by Tuesday so many members of Parliament are slated to have finished their terms that the body would lack a quorum.

On Sunday Haitian President Michel Martelly indicated that a deal might be near. But the leftist opposition was reportedly not part of this agreement, and has repeatedly warned that the president is planning to rule by decree.

The Inspection Panel complaint, filed by six civil society groups operating under the umbrella Kolektif Jistis Min (the Justice in Mining Collective), contextualises its concerns against this backdrop of instability. “[T]he Haitian government may be poised to adopt the Draft Mining Law by decree, outside the democratic process,” it states.

Even if the political crisis is dealt with soon, concerns with the legislation’s drafting process will remain.

The Justice in Mining Collective, which represents around 50,000 Haitians, drew up the complaint after the draft mining law was leaked in July. No formal copy of the legislation has been made public, nor has the French-language draft law been translated into Haitian Creole, the most commonly spoken language.

“The process has been very opaque, with a small group of experts from the World Bank and Haitian government officials drafting this law,” Sarah Singh, the director of strategic support with Accountability Counsel, a legal advocacy group that consulted on the complaint and is representing some Haitian communities, told IPS.

“They’ve had two meetings that, to my knowledge, were invite-only and held in French, at which the majority of attendees were private investors and some big NGOs. Yet the bank’s response to complaints of this lack of consultation has been to say this is the government’s responsibility.”

The Justice in Mining Collective is suggesting that this lack of consultation runs counter to social and environmental guidelines that undergird all World Bank investments. These policies would also call for a broad environmental assessment across the sector, something local civil society is now demanding – to be followed by a major public debate around the assessment’s findings and the potential role large-scale mining could play in Haiti’s development.

Yet the World Bank is not actually investing in the Haitian mining sector, and it is not clear that the institution’s technical assistance is required to conform to the safeguards policies. In a November letter, the bank noted that its engagement on the Haitian mining law has been confined to sharing international best practices.

Yet Singh says she and others believe the safeguards do still apply, particularly given the scope of the new legislation’s impact.

“This will change the entire legal regime,” she says. “The idea that bank could do that and not have the safeguards apply seems hugely problematic.”

A World Bank spokesperson did confirm to IPS that the Inspection Panel has received the Haitian complaint. If the panel registers the request, she said, the bank’s management would have around a month to submit a response, following which the bank’s board would decide whether the complaint should be investigated.

Parliamentary moratorium

Certainly sensitivities around the Haitian extractives sector have increased in recent years.

Minerals prospecting in Haiti has expanded significantly over the past half-decade, though no company has yet moved beyond exploration. In 2012, when the government approved its first full mining permit in years, the Parliament balked, issuing a non-binding moratorium on all extraction until a sector-wide assessment could take place.

Meanwhile, Haitians have been looking across the border at some of the mining-related problems experienced in the Dominican Republic, including water pollution. Civil society groups have also been reaching out to other countries in the Global South, trying to understand the experiences of other communities around large-scale extractives operations.

Current views are also being informed by decades of historical experience in Haiti, as well. Since the country’s independence in the early 19th century, several foreign companies have engaged many years of gold mining.

That was a “negative, even catastrophic, experience,” according to a statement from the Justice in Mining Collective released following the leak of the draft mining law in July.

“Mining exploitation has never contributed to the development of Haiti. To the contrary, the history of gold exploitation is one marked by blood and suffering since the beginning,” the statement warned.

“When we consider the importance of and the potential consequences of mineral exploitation, we note this change in the law as a sort of scandal that may facilitate further looting, without even the people aware of the consequences.”

Edited by Kitty Stapp

The writer can be reached at cbiron@ips.org

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OPINION: No Nation Wants to Be Labeled “Least Developed”http://www.ipsnews.net/2015/01/opinion-no-nation-wants-to-be-labeled-least-developed/?utm_source=rss&utm_medium=rss&utm_campaign=opinion-no-nation-wants-to-be-labeled-least-developed http://www.ipsnews.net/2015/01/opinion-no-nation-wants-to-be-labeled-least-developed/#comments Sat, 10 Jan 2015 01:21:15 +0000 Ahmed Sareer http://www.ipsnews.net/?p=138573 A dhoni in the Maldives. Credit: Nevit Dilmen/cc by 3.0

A dhoni in the Maldives. Credit: Nevit Dilmen/cc by 3.0

By Ahmed Sareer
NEW YORK, Jan 10 2015 (IPS)

Since 1971, Maldives is one of only three countries that have graduated from the ranks of the world’s “least developed countries” (LDCs) – the other two being Botswana and Cape Verde.

The Maldives graduated on Jan. 1, 2011. The review of LDCs conducted in 1997 concluded that the Maldives was ready for immediate graduation.

Ambassador Sareer. UN Photo/Eskinder Debebe

Ambassador Sareer. UN Photo/Eskinder Debebe

The Maldives government argued that the U.N. criteria for graduation should include a “smooth transition period” in order to bring into place adequate adjustments necessary for full transition into middle-income country status.

The U.N. Resolution adopted on Dec. 20, 2004 endorsed and adopted these arguments. Under that resolution, the Maldives was set to graduate from the list of LDCs on Jan. 1, 2008.

Just six days after adoption of the resolution, the Indian Ocean tsunami struck the Maldives.

The Maldives economy, which had grown at an average of eight percent per annum for two consecutive years, was devastated by the tsunami: 62 percent of the GDP was destroyed; over seven percent of the population was internally displaced; social and economic infrastructure damaged or destroyed in over one quarter of the inhabited islands; 12 inhabited islands were turned into complete rubble.

Following the disaster, and on the request of the Maldives, the General Assembly decided to defer the graduation until 2011, with a smooth transition period until 2014.Donors often assess a country’s need by its developmental status at the U.N., which traps countries such as the Maldives in a vicious cycle being now termed as the “Middle Income Paradox”.

Graduation from LDC does not help a country to overcome the development challenges it faces. Graduation does not make a country less vulnerable to the consequences of its geography.

It is no secret that small island states being assessed for graduation, do not meet the threshold for economic vulnerability.

Small island states often achieve their high development status because of high and consistent investment in human resources, and the social sector as well as government administration.

This leaves limited financial resources for the country to prepare for natural disasters or to carry out mitigation and adaptation measures.

Countries often have to rely on multilateral and bilateral donors for assistance for environmental projects: donors that often assess a country’s need by its developmental status at the U.N., which traps countries such as the Maldives in a vicious cycle being now termed as the “Middle Income Paradox”.

However, all this is conveniently ignored or overlooked.

Graduation from LDC status need not be feared, nor does it need to be an obstacle in a country’s development path. We only fear what we don’t know.

The Maldives’ experience showed that due to the infancy of the graduation programme, the relatively low number of countries that have graduated, and the lack of coordinated commitment from bilateral partners, the graduation process has been far from smooth.

The General Assembly Resolution, which the Maldives helped to coordinate, adopted in December 2012 provided a smooth transition for countries graduated from the LDC list.

The resolution has put into place greater oversight ability for the U.N. and articulated the need for a strengthened consultative mechanism for the coordination of bilateral aid.

The Maldives has tried to make the path for subsequent graduates smoother. Yet, it is a fact that the graduation process still relies on flawed criteria.

While no country wants to be termed the “Least” on any group, it cannot be denied that inherent vulnerabilities and geo-physical realities of some of the countries that often extend beyond their national jurisdiction, need help that are specific and targeted, in order to improve the resilience of those countries.

It is for that reason that the Maldives lobbied extensively with the World Trade Organisation (WTO) to extend the application of TRIPS for all LDCs.

Following graduation, the Maldives also applied to join the EU’s Generalised System of Preferences but new regulations prevented Maldives from the scheme. This posed a significant loss to our fishing industry, which is the export sector in the economy.

The Maldives has been continually exploring the viability of a “small and vulnerable economy” category at the U.N., similar to that which exists in the World Trade Organisation.

Such a category will acknowledge the particular needs of countries arising from the smallness of their economies and inherent geographical realities.

Small island states have continually argued that special consideration needs to be given to SIDS that are slated for graduation. Yet, these voices of concern have fallen largely on deaf years.

But the needs of our people, the development we desire cannot wait to be recognised.

That is why the Maldives decided to take our development path into our own hands. This can be done by consistently employing good policies.

Development is the result of a combination of bold decisions and an ability to seize the opportunities. SIDS have shown to the world that we are not short of smart ideas. Rather than relying on others, we have to develop our own economies our way!

Edited by Kitty Stapp

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The Rise and Fall of the World’s Poorest Nationshttp://www.ipsnews.net/2015/01/the-rise-and-fall-of-the-worlds-poorest-nations/?utm_source=rss&utm_medium=rss&utm_campaign=the-rise-and-fall-of-the-worlds-poorest-nations http://www.ipsnews.net/2015/01/the-rise-and-fall-of-the-worlds-poorest-nations/#comments Wed, 07 Jan 2015 01:08:45 +0000 Thalif Deen http://www.ipsnews.net/?p=138541 Fish being brought in and processed at a market in Cambodia’s northwestern Battambang province. As an LDC, Cambodia exports products duty-free to the EU. Credit: Michelle Tolson/IPS

Fish being brought in and processed at a market in Cambodia’s northwestern Battambang province. As an LDC, Cambodia exports products duty-free to the EU. Credit: Michelle Tolson/IPS

By Thalif Deen
UNITED NATIONS, Jan 7 2015 (IPS)

The world’s 48 Least Developed Countries (LDCs) – a special category of developing nations created by the General Assembly in 1971 but refused recognition by the World Bank – have long been described as “poorest of the poor” in need of special international assistance for their economic survival.

But only three – Botswana, Cape Verde and the Maldives – have so far “graduated” from being classified as an LDC to a developing nation, based primarily on their improved social and economic performance."This mechanical setting of a target for graduation is impractical and has the potential of undesirable tension for development cooperation at national and global levels." -- Ambassador Anwarul Karim Chowdhury

At a U.N.-sponsored ministerial meeting of Asian and Pacific nations in Nepal last month, four more LDCs, namely Bangladesh, Bhutan, Cambodia and Laos, were singled out as countries on the “threshold of graduation” based on their recent economic and social indicators.

And as economies improve, some predict that at least six more countries – Tuvalu, Vanuatu, Kiribati, Samoa, Angola and Equatorial Guinea (two African nations dependent on oil incomes) – are likely to be forced out of the ranks of LDCs, possibly by 2020 or beyond.

But this outlook may be premature due to several factors, including the impact of the global economic recession, the long-term effects of the decline in oil prices, reduced purchasing power due to falling national currencies, and in the case of Africa, the spread of Ebola.

Ambassador Anwarul Karim Chowdhury, the first U.N. Under-Secretary-General and High Representative for LDCs, Landlocked Developing Countries, and Small Island Developing States (2002-2007), told IPS the 2011 LDCs Conference in Istanbul, Turkey, set an objective of graduating 50 percent of LDCs out of the group by the year 2020.

“But this mechanical setting of a target for graduation is impractical and has the potential of undesirable tension for development cooperation at national and global levels,” he pointed out.

The foremost objective of graduation should be to bring LDCs out of poverty and their structural handicaps, he noted.

“But given the current distressing situation in most of the LDCs in both areas, it would be unwise for either the LDCs or their development partners to go towards realising this target,” Chowdhury added.

The people of these countries, particularly civil society, should be involved in the process to ensure that common people of LDCs do not become the greatest victims, he said.

“This is a reality in LDCs which we should not lose sight of,” he declared.

According to the United Nations, LDCs represent the poorest and weakest members of the international community, comprising more than 880 million people and accounting for less than 2.0 per cent of global Gross Domestic Product (GDP).

Fighting poverty in the LDCs is a key component towards reaching the U.N.’s landmark 2015 Millennium Development Goals (MDGs).

LDCs currently benefit from a range of special support measures from bilateral donors and multilateral organisations, and special treatment under regional and multilateral trade agreements.

The benefits that will be lost or reduced due to LDC graduation include trade preferences, official development assistance (ODA) including development financing and technical cooperation, and other forms of assistance, such as travel support for participation at U.N. conferences and other meetings of multilateral bodies.

As a result, special attention needs to be given to these special measures for graduating LDCs.

Arjun Karki, president of Rural Reconstruction of Nepal and international coordinator of LDC Watch, a network of LDC non-governmental organisations (NGOs), told IPS the aim of the 2011 Istanbul Programme of Action was to enable at least 24 LDCs (half of the existing 48) to graduate by 2020, so the current proposals for graduation have not reached this level.

The majority of LDCs (34 out of 48) are in Africa and to date only two African nations, Angola and Equatorial Guinea, are expected to graduate by 2020.

In both these cases, graduation is solely based on their income criterion (of Gross National Income per capita having exceeded at least twice the upper threshold of 1,190 dollars) while they fare low in the human assets and economic vulnerability criteria.

He said LDCs can only graduate when both LDC governments and development partners take action and it is vital they both have the political will to achieve this.

Gyan Chandra Acharya, the current Under-Secretary-General and High Representative for LDCs, Landlocked Developing Countries and Small Island Developing States, told delegates at the ministerial meeting in Nepal “the path towards graduation should not be an end in itself but should be viewed as a launching pad towards meaningful and transformative changes in the economic structures and the life conditions of people in graduated and graduating LDCs.”

He said sustainable graduation agenda needs to be tied up with that of productive capacity development, structural transformation resilience building and sustainable improvement in human and social capital.

Some of the practices being considered include enhancing investment in the productive sector, upgrading technologies and increasing protection from external shocks, such as climate related events, economic crises and natural disasters, according to a statement released by his office.

Chowdhury told IPS basically, graduation is a positive effort which requires the sincere and wholehearted engagement of both LDCs and their development partners.

“However, fixing an arbitrary target and using a technical approach for graduation could undermine realization of a good objective,” he stressed.

He also warned the ongoing economic crisis in the industrialised countries influenced the setting of the Istanbul target. “As the first High Representative of the new U.N. office established in 2002 to champion the cause of the worlds most vulnerable countries, I had worked diligently to make a space for the smooth transition in the graduation process,” Chowdhury explained.

That arrangement, he said, had made the LDCs less uncomfortable to engage in the process.

“I recall fully the agonising interactions for the graduation of Cape Verde and the Maldives during my tenure,” he said.

The consultative mechanism set up during the smooth transition needs to be closely monitored by the High Representative personally to ensure that the concerns of the graduating LDC have the true support of the U.N. system, he cautioned.

“This was part of my regular firsthand contacts with all of the Cape Verde graduation process,” he added.

Chowdhury also said overcoming of the constraints in two of the three determinants for LDC status to be eligible for graduation requires the full understanding by all sides of the real situation of LDCs.

“It is a pity that the biggest development assistance provider, the World Bank, has refused to accept LDCs in its work as a special category of countries as identified by the United Nations,” he said. “And my repeated visits to and efforts with the Bank headquarters did not get any response for the inclusion of LDCs.”

Edited by Kitty Stapp

The writer can be contacted at thalifdeen@aol.com

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