DEVELOPMENT: Indonesia Spearheads South-South Summit

By Thalif Deen Reprint | | Print |

Thalif Deen

UNITED NATIONS, Aug 12 1998 (IPS) - Indonesia, while battling a financial crisis at home, is leading a Third World effort to hold a major U.N. conference of developing nations next year.

A South-South summit, timed to coincide with the U.N.’s Millennium General Assembly in September 1999, would help reassert the solidarity of the world’s 132 developing nations that comprise the Group of 77.

“This summit will be a turning point in the history of developing nations,” predicted Ambassador Makarim Wibisono of Indonesia, chairman of the Group of 77, described as the world’s largest single Third World body at the United Nations.

The central issue of the summit would be to define what developing nations can do collectively to improve development opportunities and defend their interests against rising protectionism, soaring debt burdens and falling currencies. The summit would specifically discuss financing for development in the context of the ongoing economic crises which has swept through Asia since July 1997.

As a prelude to the proposed gathering, Indonesia hosted a two- day meeting of Third World development experts to discuss the agenda and logistics of a summit next year. The expert group meeting ended Tuesday in Jakarta and the Indonesian government also will hosting a second meeting in Bali in early December to discuss regional and sub-regional economic cooperation.

With the continued decline in official development assistance (ODA), developing nations needed to strengthen their economic and trade links, both among themselves and among regional Third World organisations, Wibisono said.

South-South organisations already linking developing nations include: the Association of Southeast Asian Nations (ASEAN), the Andean Pact, the Gulf Cooperation Council (GCC), the Caribbean Community (CARICOM), Economic Cooperation Organisation (ECO), Mercosur and the South Asian Association for Regional Cooperation (SAARC).

“There are a number of avenues for regional cooperation which countries in Asia and other regions can explore to alleviate the present crisis and to avert future recurrences,” Wibisono told IPS. For instance, he said, the monetary linkages could be better controlled and monitored through regional arrangements.

According to World Bank figures, he said, private capital flows to developing nations rose from 46 billion dollars to 256 billion dollars during 1990-1997.

“Unfortunately, during the same period, official development financing (ODF) – described as ODA plus non-concessionary official flows – continued to decline: from 56 billion dollars to 44 billion dollars,” he pointed out.

The current crisis in Asia, he said, was perhaps the most serious of its kind, both in terms of scope and effects. “For the first time, the crisis emanating in the South has had a serious impact on financial markets in the North.”

Wibisono said there was still considerable debate over the principial causes and consequences of the currency turmoil in Asia which has virtually devastated the economies of at least three countries – Thailand, Indonesia and South Korea. The crisis marginally also has affected Malaysia, the Philippines and Singapore.

“The explanation frequently cited in the international media that it was caused by poor economic fundamentals is not very convincing,” he said. “After all, the countries affected by the crisis were all vibrant economies and contributors to the East Asian miracle.”

Wibisono said the major achievements of these countries were their sustained economic growth and eradication of poverty. “To now blame these countries, and declare that their fundamentals were not right, is not logical.”

Rather, the currency turmoil in East and Southeast Asia can be blamed on several factors, he said. One of them is the uncontrolled massive movements of international private capital flows in and out of countries – often with staggering speed.

“The sudden loss of confidence which took place indicates the volatility of the situation, which had serious consequences for the recipient countries,” Wibisono added.

He pointed out that the export-led growth in Asia was followed by a construction and property boom financed by short term loans easily obtainable in international markets. Structurally, the banking system was weak and lacked transparecny. This in turn contributed to the ballooning of loans and the severity of the crash.

The Indonesian envoy said that total financial bailouts from the International Monetary Fund (IMF) were in the region of about 118 billion dollars, possibly rising to about 160 billion dollars.

“But the bailout was accompanied by harsh terms and conditions, including economic, financial and corporate reforms, which could lead to slower growth and widespread suffering,” Wibisono said.