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from ITUC-CSI

Washington, 18 January 2009 (ITUC OnLine):  Commitments to strengthen social programmes for workers hit by the economic crisis and to increase action on core labour standards were made by World Bank President Robert Zoellick and IMF Managing Director Dominique Strauss-Kahn at the conclusion today of two days of meetings with an 85-member international trade union delegation led by the President and General Secretary of the ITUC, General Secretaries of Global Union Federations and the Trade Union Advisory Committee to the OECD, and leaders of national trade union organisations from Africa, Asia, Europe and the Americas.

IMF Managing Director Strauss-Kahn and senior Fund officials told the delegation that the Fund had not foreseen the amplitude of the current crisis, nor its impact on working people, and appreciated the experience and expertise of the labour movement, which for some years has been warning about the dangers for the global economy posed by unregulated exotic financial instruments.  ITUC General Secretary Guy Ryder reminded the IFIs that unions should be brought in as full partners to the processes currently taking place for establishing a new regulatory framework for the global financial system: “Unions want to ensure that the financial sector is at the service of the real economy, not the other way around.  Unions will not be satisfied with any new regulatory framework that does not achieve that goal.”

For his part, World Bank President Zoellick stated that the World Bank did not share the views of those who saw labour market deregulation as part of the solution to the crisis.  IMF officials said that they were encouraging the countries to which they provide emergency financial assistance to give a priority to preserving social safety nets, but members of the union delegation gave examples in their countries where some of the conditions or required “prior actions” for IMF loans had serious negative impacts on working people.

Ryder urged the IMF to ensure that all countries adopt anti-recession policies: “We have commended the IMF for calling for coordinated fiscal stimulus to counter the global economic crisis over the past year, but we pointed out that by encouraging most developing countries to practice ‘fiscal discipline’, the Fund deters them from participating in the stimulus effort.  Unions also think that the IMF should be doing more to call on those countries, including some wealthy G20 members, which are not taking on their full of share of supporting the global economic recovery that they do so.”

IFI officials agreed with the union delegation that the crisis could add to pressures undermining workers’ rights, and Zoellick promised to take further steps to ensure that Bank-funded projects and activities are in full compliance with the ILO’s core labour standards (CLS), thus confirming the Bank’s view that CLS are a floor that must be respected in all countries and in all circumstances.  World Bank officials announced their intention to include CLS in the Bank’s master procurement standards, and Ryder offered to work with the Bank in implementing them: “Trade unions have cooperated successfully with the International Finance Corporation [IFC- the World Bank's private-sector lending arm] in the objective of obtaining full compliance with the CLS requirement that IFC adopted in 2006, and we look forward to the other divisions of the World Bank taking similar steps in staff training, monitoring of projects and putting in place a complaints mechanism.”

However Ryder also cautioned the World Bank that it was not internally coherent in its support for fundamental workers’ rights as long as its highest circulation publication, Doing Business, continued to promote the idea that countries with the lowest level of labour regulations are the best in employing workers.  “The Bank’s own Independent Evaluation Group found no relation between Doing Business’s so-called ‘employing workers’ indicator, which gives highest marks to countries that regulate the least, and employment levels.  Additionally, Doing Business rewards notorious violators of workers’ rights.”  He noted that the 2009 edition of Doing Business gave its first and fourth highest rankings for ‘employing workers’ among the 25 countries of Eastern Europe-Central Asia to Georgia and Belarus, two countries where the ILO found the governments to have committed serious violations of core labour standards conventions.  “No minor adjustment will correct these flawed indicators”, said Ryder, adding, “Doing Business should get out of the business of labour standards”.

The international trade union delegation also put forward its “green jobs” agenda and urged the World Bank to support their strategy for meeting the combined challenges of climate change and global recession through employment-intensive carbon reduction projects.  Bank officials expressed interest in Global Unions’ approach and suggested further consultations on a country level and internationally.

The ITUC represents 168 million workers in 316 affiliated national organisations from 157 countries.

Philippine Star

WASHINGTON – The World Bank agreed Sunday to help developing countries strengthen their economies, bolster their financial systems and protect the poor against the financial turmoil in international markets.

Robert Zoellick, the bank’s president, said the contagion affecting the global economy “has been a man-made catastrophe and responses to overcome it lie in all our hands.”

He spoke as the US moved to shore up Wall Street and financial institutions and the 15 countries that use the euro agreed in Paris to temporarily guarantee bank refinancing to ease the credit squeeze.

Speaking at a joint news conference with Zoellick, Dominique Strauss-Kahn, the head of the International Monetary Fund, endorsed the European move and said he expected markets to react favorably, “although you never can be sure what will happen.”

Strauss-Kahn also called for quick implementation of the $700-billion US rescue plan, which includes the government acquiring part ownership in an array of banks.

Zoellick said that as the current crisis has unfolded, people in the United States and Europe reacted first with confusion, then anger, then fear.

“Those natural reactions will spread around the world as the impact spreads,” Zoellick said. “We need to take them seriously.”

He said any prolonged tightening of credit or a sustained global slowdown could cause serious setbacks to developing countries’ efforts to improve the lives of their populations. Such countries are already struggling with high prices for energy and food.

“The poorest and most vulnerable groups risk the most serious — and in some cases, permanent — damage,” Zoellick said. “One hundred million people have already been driven into poverty this year and that number will grow.”

Zoellick said the financial crisis underscored the need for “concerted global action now, not just to deal with the crisis but to put in place new architecture, new norms and new oversight to ensure that this crisis never happens again.”

He said the bank and the IMF must ensure that as governments turn their attention to domestic matters, they do not step back from their commitment to provide billions in aid to poor countries.

“Aid flows must be maintained,” Zoellick said. “Today’s meeting of ministers was unanimous in that regard.”

The head of the bank’s policy-setting committee, Mexican Finance Minister Agustin Carstens, said ministers were unanimous in their view “that the World Bank had to protect the poor and vulnerable in the context of the global financial crisis.” He said the Bank needs to be flexible to address the differing problems faced by poor countries and those with rapidly growing economies.

In remarks to the committee, Treasury Secretary Henry Paulson said global unity was needed, not isolationism and protectionism, which do not offer a way to contain the spreading damage. He expressed concern about the fallout on poor countries.

“Although we in the United States are taking many extraordinary measures to ease the crisis, we are not pursuing policies that would limit the flow of goods, services or capital, as such measures would only intensify the risks of a prolonged crisis,” he said.

US lawmakers, meanwhile, called for fast action — by the administration on a plan for the government to take direct stakes in certain banks, and by Congress on a new economic aid plan.

Sen. Chuck Schumer, chairman of the Joint Economic Committee, said an administration proposal to inject federal money directly into certain banks, in effect partially nationalizing the banking system, “is gaining steam.”

“I am hopeful that tomorrow, the Treasury will announce that they’re doing it. And they have to do it quickly … markets are waiting,” Schumer said.

Schumer and other Democratic leaders also backed plans by House Speaker Nancy Pelosi for a session after the Nov. 4 election to consider a $150-billion proposal to boost the economy.

The measure would extend jobless benefits, provide more money for food stamps and finance public works projects, such as rebuilding bridges and roads.

“Yes, we are going to do a stimulus” after the election, said Rep. Barney Frank, chairman of the House Financial Services Committee. The idea is “give the middle class and the average citizen the same kind of relief that we try to give the financial sector,” said Frank who, like Schumer, appeared on the Sunday talk shows.

President Bush says his administration is doing everything possible to halt the biggest market disruption since the Great Depression of the 1930s.

– AP

ILO Press Release

WASHINGTON (ILO News) ? The Director-General of the International Labour Office, Juan Somavia, has called for a series of urgent and coordinated financial, social, regulatory and development measures to avert a slide into recession and address the “grave” consequences of the global financial crisis (http://www.ilo.org/public/english/bureau/dgo/speeches/somavia/2008/imfc.pdf).

In a statement to the International Monetary Fund (IMF) and the World Bank meeting here, Mr. Somavia says, “The crisis of the international financial system has grave consequences for enterprises, workers and families around the world. Coming on top of still high food and fuel prices, its effects are provoking a slide into a recession that unless averted by prompt and coordinated government actions could be severe, long lasting and global.”

“We have abruptly moved from an era of changes to a change of era”, the statement says.

Mr. Somavia’s statement calls for immediate action to “get credit flowing again quickly through continued coordinated action by monetary authorities before more serious damage is done to the productive capacity and social fabric all around the world”.

The statement also urges that a “floor” be built through “maintaining and enhancing social protection for workers, ensuring that productive enterprises – in particular small businesses – can access credit, avoiding layoffs and wage cuts, and increasing official development assistance to least developed countries”.

“Those who had no responsibility for the crisis but are now and in the near future suffering job and income loss must be supported”, the statement says.

The statement also says, “we must start rebuilding the regulatory regime for global finance markets to reduce chronic volatility and instability. Money must work for people. The foundation of a new regime for market economies is the old ethic that good hard work deserves a fair reward. Our financial systems must support, not undermine, fairness in society and the importance of sustainable enterprises and decent and
productive work to stable, peaceful communities”.

“When deregulation is regarded as always the best policy in all circumstances it becomes an ideology not a tool”, the statement says.

It also calls for “financial policies that promote productive investment, restrain speculative behaviour, ensure transparency and rebuild credibility in the system”, adding that the mechanisms of the IMF “must apply with equal weight to big and powerful nations as well as smaller and weaker countries”.

In addition, it urges a rapid move from “recovery to sustainable development” to support “a fair globalization providing opportunities for all”.

“We were in a crisis before the financial crisis erupted”, the statement says. “It is a crisis of continuing and now increasing massive poverty worldwide and growing social inequalities in advanced, emerging and developing countries. An effective and coordinated effort to address the immediate financial crisis must be a first step towards increased cooperation and coherence in global policy-making.”

The statement also calls for construction of “a new stronger international institutional architecture that fosters a balanced and integrated approach to sustainable development. Developing integrated policies among relevant international organizations to generate Decent Work opportunities worldwide is one of the foundations of a sustainable recovery and a fair globalization”.

Maricel E. Burgonio
Manila Times

The International Monetary Fund (IMF) revised downward its economic-growth forecast for the Philippines for 2008 and further lowered it for 2009, adding that the US financial turmoil would further decelerate economic activities in the Philippines.

The IMF’s World Economic Outlook update projected the growth of the Philippines’ gross domestic product (GDP) at 4.4 percent this year, from the July forecast of 5.2 percent. Such growth is the lowest among the Philippines and four other member-countries of the Association of Southeast Asian Nations (Asean)—Indonesia, Malaysia, Thailand and Vietnam. But the forecast is within government’s lower-end GDP growth forecast of 4.4 percent to 4.9 percent for 2008.

For 2009, the IMF expects the GDP growth to further decline to 3.8 percent, which is below government’s forecast of between 4.1 percent and 5.1 percent. GDP is the total value of goods and services produced in a country in a year.

The economies of the five Asean countries, it said, are projected to grow 5.5 percent this year and 4.9 percent next year. In most countries, the IMF added, domestic demand is weakening rapidly and some policy tightening had taken place. Asean also groups Brunei, Cambodia, Laos, Myanmar and Singapore.

“A major policy dilemma for the region is how to respond to the weakening growth outlook and global financial turbulence, without losing sight of inflation risks,” it said.

Global growth is also expected to moderate to 3.9 percent in 2008, from 5 percent in 2007, and further weaken to 3 percent in 2009, its slowest pace since 2002.

Financial markets weakened in recent months, driven by increasing concerns about the global outlook and declining investor risk appetite, particularly in the context of the September market turbulence that saw big investment banks in the US filing for bankruptcy.

Domestic demand

The domestic demand, the IMF said, had softened, with rising food and fuel prices starting to weigh on consumption. Declining profit margins and weakening demand, it added, have prompted firms to scale back their investment plans.

The IMF said that financial stress could remain very high and that credit constraints from deleveraging could be deeper and more protracted.

“Additional credit losses are very likely as the global economy decelerates. In this setting, financial institutions’ ability to raise new capital will remain very challenged,” it added.

Inflation forecast

The IMF projected inflation to increase to 10.1 percent in 2008 and to decline to 7 percent in 2009.

These forecasts are within the Bangko Sentral ng Pilipinas’ 9 percent to 11 percent this year and 6 percent to 8 percent next year.

In Asia, monetary authorities have tightened interest rates as the first line of defense against rising inflation. The IMF, however, said that it may need to be complemented in some cases by greater exchange-rate flexibility or fiscal action.

“Fiscal restraint could help reduce inflation pressures, especially in countries where rising food and fuel subsidies, as well as public-wage increases, have weakened fiscal positions and contributed to price pressures,” it added.

Recovery in 2009

The IMF said gradual economic recovery is also expected in the latter part of 2009, when oil prices are seen to stabilize and boost consumption in oil-importing countries.

Also in 2009, the US housing sector is also expected to finally bottom out and emerging economies to provide a source of resilience as a result of strong productivity growth and improved policy frameworks.

The Philippines’ economic growth is driven mainly by exports earnings, which have been declining since the US mortgage crisis emerged this year.

ITUC OnLine

Brussels, 05 October 2008 (ITUC OnLine): With the spreading financial crisis likely to take centre stage at the upcoming annual meetings of the World Bank and IMF in Washington on 11-13 October, the global trade
union movement is urging the international financial institutions (IFIs) not to overlook the millions of low-income workers whose buying power has declined drastically because of food and fuel price hikes. By the World Bank’s estimate, the price surges will add 100 million to the number of extreme poor in the world, which the Bank recently adjusted upward to 1.4 billion before the food and financial crises.

“If vigorous action is not taken, the Millennium Development Goals such as halving global poverty by 2015 will not be attained. The IMF and World Bank must increase and expedite aid to the developing countries
suffering the consequences of the food, fuel, and now, the financial crisis,” said ITUC general secretary Guy Ryder. “Global Unions are pleased that the IFIs are responding to the crises with emergency aid, but they should reconsider previous IFI policies that have contributed to food security problems, for example, and change them accordingly.”

Ryder added, “The IFIs must ensure that none of those suffering from food price hikes suffer even more because of certain policy measures they put forward.” In its statement for the IFIs’ meetings (http://www.ituc-csi.org/IMG/pdf/No_34_statement_imfwb.pdf),  the ITUC and other Global Unions organizations point out that the elimination of subsidies to reduce prices of basic foodstuffs in favour
of greater “targeting” of aid, which the IFIs have proposed, can result in many of the needy losing access to assistance. The statement also recommends that the IFIs support increased minimum wages and the
protection of freedom of association so that workers can seek to prevent further deterioration of their real incomes through collective bargaining.

Need for adequate regulation, not more reckless deregulation

Although Global Unions have long called for the IMF to promote greater regulation of the global financial system, it was only this past month that IMF managing director Dominique Strauss-Kahn seemed to echo the
international trade union movement’s demands for better regulation. “This crisis is the result of regulatory failure… We must ensure it does not happen again,” he wrote in an article published in September.

Global Unions’ statement urges the IFIs’ member-country governments gathering in Washington next weekend to mandate the IMF to develop appropriate international regulatory frameworks of the financial sector and coordinate national regulatory reforms. The process must include consultations of organizations such as the ITUC, whose members are sustaining heavy job losses because of the financial debacle. Said the
ITUC’s Guy Ryder: “It would be unacceptable that the private financial sector, which put the world economy into the current mess, would have greater influence over the design of new regulations than those who are suffering the consequences of the inadequate regulation that the private institutions lobbied for.”

Global Unions have also demanded that the World Bank cease to use its Doing Business publication to encourage developing countries to deregulate their economies, citing its abuse in IFI country reports and
by many outside the IFIs eager to do away with any and all labour market regulation. “It is ironic that in the past four weeks the World Bank has been heavily promoting the 2009 edition of its bible of across-the-board deregulation, Doing Business, at the same time that the financial sector is collapsing in the US and other countries because of inadequate regulation,” said Ryder.

The ITUC has frequently noted that Doing Business (DB), which is the World Bank’s highest circulation publication, falsely claims that the deregulation it promotes results in higher economic growth and increased
job creation. Last June, the Bank’s own Independent Evaluation Group agreed with this assessment when it “found no statistically significant relationships between the … DB indicators and growth rates” and that, “no significant association emerged between … [the DB indicator on] employing workers and employment”. By giving the highest ratings to countries with the least labour regulations, DB has been used to pressure developing countries to do away with provisions such as minimum wages, recourse against unjust dismissal and mandated contributions to health care or old-age pensions, thus adding to the difficult situation already faced by many workers in these countries.

Observing that the IFIs will face exceptional global challenges at this year’s annual meetings, Global Unions are asking the IFIs to respond more fully to the needs and priorities of all of their member countries. Said Ryder, “The food and financial crises and other challenges like climate change will have stronger adverse effects on poorer countries. The IFIs must reform their governance structures so that developing countries have an equal voice in determining how to confront these problems.”

Commenting on the discussion on governance reform expected to take place at the World Bank during the meetings, Ryder added, “Nothing short of voting parity for developing countries is acceptable. The lender-borrower relationship that has defined decision-making in the IFIs is no longer appropriate given the global scale of these challenges.”

The ITUC represents 168 million workers in 155 countries and territories and has 311 national affiliates.

ITUC OnLine

Brussels, 05 October 2008 (ITUC OnLine): With the spreading financial crisis likely to take centre stage at the upcoming annual meetings of the World Bank and IMF in Washington on 11-13 October, the global trade

union movement is urging the international financial institutions (IFIs) not to overlook the millions of low-income workers whose buying power has declined drastically because of food and fuel price hikes. By the World Bank’s estimate, the price surges will add 100 million to the number of extreme poor in the world, which the Bank recently adjusted upward to 1.4 billion before the food and financial crises.

“If vigorous action is not taken, the Millennium Development Goals such as halving global poverty by 2015 will not be attained. The IMF and World Bank must increase and expedite aid to the developing countries suffering the consequences of the food, fuel, and now, the financial crisis,” said ITUC general secretary Guy Ryder. “Global Unions are pleased that the IFIs are responding to the crises with emergency aid, but they should reconsider previous IFI policies that have contributed to food security problems, for example, and change them accordingly.”

Ryder added, “The IFIs must ensure that none of those suffering from food price hikes suffer even more because of certain policy measures they put forward.” In its statement for the IFIs’ meetings (http://www.ituc-csi.org/IMG/pdf/No_34_statement_imfwb.pdf),  the ITUC and other Global Unions organizations point out that the elimination of subsidies to reduce prices of basic foodstuffs in favour
of greater “targeting” of aid, which the IFIs have proposed, can result in many of the needy losing access to assistance. The statement also recommends that the IFIs support increased minimum wages and the protection of freedom of association so that workers can seek to prevent further deterioration of their real incomes through collective bargaining.

Need for adequate regulation, not more reckless deregulation

Although Global Unions have long called for the IMF to promote greater regulation of the global financial system, it was only this past month that IMF managing director Dominique Strauss-Kahn seemed to echo the
international trade union movement’s demands for better regulation. “This crisis is the result of regulatory failure… We must ensure it does not happen again,” he wrote in an article published in September.

Global Unions’ statement urges the IFIs’ member-country governments gathering in Washington next weekend to mandate the IMF to develop appropriate international regulatory frameworks of the financial sector and coordinate national regulatory reforms. The process must include consultations of organizations such as the ITUC, whose members are sustaining heavy job losses because of the financial debacle. Said the
ITUC’s Guy Ryder: “It would be unacceptable that the private financial sector, which put the world economy into the current mess, would have greater influence over the design of new regulations than those who are suffering the consequences of the inadequate regulation that the private institutions lobbied for.”

Global Unions have also demanded that the World Bank cease to use its Doing Business publication to encourage developing countries to deregulate their economies, citing its abuse in IFI country reports and
by many outside the IFIs eager to do away with any and all labour market regulation. “It is ironic that in the past four weeks the World Bank has been heavily promoting the 2009 edition of its bible of across-the-board deregulation, Doing Business, at the same time that the financial sector is collapsing in the US and other countries because of inadequate regulation,” said Ryder.

The ITUC has frequently noted that Doing Business (DB), which is the World Bank’s highest circulation publication, falsely claims that the deregulation it promotes results in higher economic growth and increased
job creation. Last June, the Bank’s own Independent Evaluation Group agreed with this assessment when it “found no statistically significant relationships between the … DB indicators and growth rates” and that, “no significant association emerged between … [the DB indicator on] employing workers and employment”. By giving the highest ratings to countries with the least labour regulations, DB has been used to pressure developing countries to do away with provisions such as minimum wages, recourse against unjust dismissal and mandated contributions to health care or old-age pensions, thus adding to the difficult situation already faced by many workers in these countries.

Observing that the IFIs will face exceptional global challenges at this year’s annual meetings, Global Unions are asking the IFIs to respond more fully to the needs and priorities of all of their member countries. Said Ryder, “The food and financial crises and other challenges like climate change will have stronger adverse effects on poorer countries. The IFIs must reform their governance structures so that developing countries have an equal voice in determining how to confront these problems.”

Commenting on the discussion on governance reform expected to take place at the World Bank during the meetings, Ryder added, “Nothing short of voting parity for developing countries is acceptable. The lender-borrower relationship that has defined decision-making in the IFIs is no longer appropriate given the global scale of these challenges.”

The ITUC represents 168 million workers in 155 countries and territories and has 311 national affiliates.

ADB.org News

MANILA, PHILIPPINES – The Asian Development Bank (ADB) has issued the second draft of its Safeguard Policy Statement, which pulls together currently separate policies on involuntary resettlement, indigenous peoples, and the environment.

The second draft of the policy statement has been posted on ADB’s website from today for a 60-day public comment period. It will be available for comment until Thursday, 4 December 2008.

“ADB’s safeguards are central to achieving sustained development impact and poverty reduction. The policy update will make our safeguards more effective,” said Nessim Ahmad, Director, ADB Environment and Social Safeguards Division.

The existing separate policies have been under review to ensure they remain relevant to the changing needs of developing member countries.

ADB will hold consultation workshops at its Manila headquarters on 18, 19, and 20 November where stakeholders will have a further opportunity to give their input.

The second draft includes an enhanced scope of environment safeguards, measures to strengthen public consultation and community engagement, clarification on requirements for different investment modalities, emphasis on a phased approach to the use of country safeguard systems, and more attention to project monitoring and supervision.

The latest draft draws on feedback from 14 multi-stakeholder workshops held across the Asia-Pacific region, North America, Europe and Japan between November 2007 and April 2008 as well as written submissions from NGOs and other stakeholders on the consultation draft released in October 2007.

“The draft safeguard policy statement has benefited from a tremendous amount of constructive feedback and many detailed suggestions from stakeholders,” said Mr. Ahmad.

A draft policy paper is expected to be submitted for ADB Board consideration in early 2009.

Further information on the draft safeguard policy statement and the consultation schedule is available on the following website http://www.adb.org/Safeguards/about.asp

Kevin Carmichael
Globe and Mail

WATERLOO, ONT. — The credit crisis will spark a long-awaited overhaul of the International Monetary Fund by forcing nations such as the United States and Britain to acknowledge they lack moral authority to guide the world economy unchallenged, former prime minister Paul Martin predicts.

Richer countries, especially those in Europe, have jealously guarded their controlling stake in the Washington-based IMF, even as emerging markets such as China and India have become bigger players in the global economy.

One argument for refusing to align management of international financial institutions with a world in which China has usurped Britain and France in economic might is that the sophisticated policy makers of the developed countries are best placed to keep the global financial system out of trouble.

But the credit crisis, rooted in the collapse of the loosely regulated market for U.S. subprime mortgages, robs the leading developed economies of that argument, said Mr. Martin, who made a rare public appearance at
a conference on the IMF’s future hosted by the Centre for International Governance Innovation in Waterloo, Ont., on Saturday.

U.S. and European banks gobbled up complex securities linked to subprime home loans, paying little heed to the fact that the borrowers were at high risk to miss their payments. By the middle of last year, foreclosures were at record levels, causing the market for subprime loans to collapse and making all those complex securities virtually worthless.

The IMF estimates that fallout from the credit crisis could approach $1-trillion (U.S.), causing many observers to draw parallels with the Asian financial crisis a decade ago, a calamity that the United States
and other developed nations blamed on poor decisions by governments in Thailand and elsewhere.

In the latest crisis, U.S. and European policy makers were oblivious to the strains that U.S. subprime lending put on the financial system until it was too late. U.S. Treasury Secretary Henry Paulson and others are now scrambling to restore confidence in markets and forestall some of the world’s biggest economies from sliding into recession.

“The rich countries cannot claim any longer that they have a moral hold on virtue here,” Mr. Martin, who is using his status as a former leader of a developed country to lobby for institutional reform, said in an interview. “If the subprime crisis hasn’t opened people’s eyes, then nothing will.”

Many observers see a role for the 184-member-nation IMF in sorting out the current crisis and avoiding a repeat, perhaps as an “apex” regulator overseeing work of smaller regional bodies or gathering information from national banking regulators to identify threats to the financial system. But some say that for that to happen the IMF must return to relevancy.

The conference’s 40 participants agreed the IMF is at a crucial point in its history, and has only a few years to regain the confidence of developing countries before those nations establish competing institutions or opt to go it alone.

The IMF’s role as a lender of last resort has diminished because countries such as Argentina and Russia have paid off their debts. That leaves the fund’s staff with little leverage to convince governments to follow their policy advice.

Exacerbating the fund’s struggle for legitimacy is the old world order’s refusal to relinquish any material control to the emerging economic powers. A two-year debate on reallocating shares in the IMF ended in the spring with a formula that still left China with fewer votes than Saudi Arabia and Denmark. Belgium and the Netherlands retained more clout than India and Brazil.

The United States is the fund’s largest shareholder, controlling about 17 per cent of the shares, or quota, which gives the world’s largest economy an effective veto over all IMF decisions.

Fan He, a professor at the Chinese Academy of Social Sciences, told the conference that his country’s government is tiring of IMF advice that does little more than echo U.S. complaints about how the Communist
regime runs the world’s fastest-growing major economy. “If the fund doesn’t deliver, it will be marginalized, it will disappear,” he said. His government has compiled international reserves of almost $2-trillion, at least in part to help survive another Asian crisis without having to worry about loans from Western powers. “We have the confidence to live without the fund.”

That, too, was the view of representatives from Latin America, Central Asia and the Middle East. Conference organizers sought to limit the perspectives of the United States, Europe and Canada, arguing that those governments have little trouble influencing discussions on the subject.

“The debate has been about what the Group of Seven [industrialized nations] is prepared to give up,” said Ngaire Woods, director of the Global Economic Governance Program at Oxford University. “Instead, it should be about what the monetary co-operation would have to look like in order to engage the rest of the world.”

No confident answers emerged to that question. John Murray, deputy governor at the Bank of Canada, suggested the IMF might surrender some of its authority to regional groups that would offer “peer review” of
economic prescriptions devised by the PhDs in Washington. Others, including Randal Quarles, a former U.S. Treasury official, said the IMF’s standing would improve if it offered policy advice other than that based on orthodoxy or fad.

Developing countries didn’t escape criticism, including from some of their own. The governor of the Central Bank of Barbados, Marion Williams, said emerging market countries did little to block the changes in IMF governance that most at the conference ridiculed as inadequate. “How did this result happen? It is probably because the countries thathad leverage did not use it,” she said.

Iris C. Gonzales
Philippine Star

The International Monetary Fund (IMF) will be sending a review team to check on the country’s rice crisis as well as the government’s fiscal reform program.

The visit, which is scheduled on June 16 to 20, will be the third for the IMF since the Philippines had been out of the multilateral lender’s post-program monitoring starting April 2007.

The IMF last sent a team to the country in November last year also to check on the progress of fiscal reforms.

The Philippines has been able to exit from the IMF’s   post-program monitoring since April this year but the Fund continues to closely monitor the Philippines as an IMF-member country.

The government’s fragile fiscal position has been a perennial concern for IMF and international credit rating agencies as it would determine how much the Philippines can spend on more important needs such as infrastructure investments and social services.

This year, the government has decided to set aside its balanced budget goal and now expects to incur a deficit of P75 billion.

A ranking official said the IMF would also be looking into the country’s rice problem and the measures being taken to address the situation.

Officials said the team will be meeting with officials of the Department of Finance, Bangko Sentral ng Pilipinas, National Economic and Development Authority, the Department of Budget and Management and the National Food Authority (NFA).

The IMF will also be meeting with businessmen and economists to get their views on various economic policies.

The Philippines was able to exit from the IMF’s post-program monitoring in April 2007, earlier  than the original plan on the Philippines’ exit from  the PPM by 2008 due to progress in the government’s  fiscal reform program.

by Aileen Kwa
from Inter Press Service

GENEVA (IPS) – The high food prices that have sparked riots in many parts of the developing world — from Indonesia, India and Bangladesh to Cameroon, Cote d’Ivoire and Haiti — should come as no surprise. These are only the latest in a series of events many developing countries have suffered as a result of opening their borders and neglecting domestic agriculture.

A large number of developing countries have conscientiously implemented World Bank and International Monetary Fund (IMF) conditions and World Trade Organisation (WTO) commitments. They have applied the given structural adjustment policies — and have seen the damaging consequences to their domestic agricultural sector. The consequence has been the certain erosion of their capacity to produce their own food.

In the era of stronger state control in the 1970s and even the early 1980s, domestic food markets in the developing world were often in the hands of state marketing boards and cooperatives. Marketing boards would guarantee floor prices, and provide fertilisers and seeds. They also controlled import volumes, redistributed food where there were production shortfalls, and purchased commodities from cooperatives.

These marketing boards were not always run in the best possible way; there were many instances of corruption or inefficiency, but they did fulfil certain critical functions. Farmers were provided a market to sell their produce to, which meant they had a livelihood. Prices were stable even though they were often lower than what farmers would have liked. As a result of these policies, many developing countries were either net food exporters, or at least were nearly food self-sufficient.

All that has changed over the last 20 years. Investment support to farmers was done away with. Small farmers were told to produce for the international market, and their markets were opened to producers from outside. Rather than supporting staple crops, government support went to the export sector. Since all would specialise in the products where they had ‘comparative advantage’, gains were supposed to accrue all round.

But rather than producing winners, millions of the poorest subsistence farmers were knocked out of their own markets. Imports took over what was previously produced by local people. Over the last 20 years, the production capacity in many countries has severely diminished.

The Philippines has been one prime example of such policies. “During the 60s and 70s, we were self-sufficient,” Jowen Berber of Centro Saka, an NGO working on agrarian issues with farmers, told IPS. “That was the time that the government was heavily investing in rice — irrigation, infrastructure, marketing support and production support such as credits and inputs. But when the government stopped those incentives and subsidies, rice production slowly decreased.”

Berber said “the acreage of irrigated land has also been falling because the government has not been maintaining irrigation facilities. We also have a very high level of post-harvest losses in rice — up to 35 percent because our post-harvest facilities are very old.” Instead of supporting farmers with guaranteed prices as before, Berber said “the government now intervenes to buy less than 1 percent of the domestic rice that is produced. They are buying more imported rice than our own local rice.”

A study on import surges by David Pingpoh and Joean Senahoun, commissioned by the UN’s Food and Agriculture Organisation (FAO) in 2006, noted that the Cameroon government support to the rice sector was removed in 1994 through implementation of IMF and World Bank policies. The fertiliser market was privatised. Rice yields of poor farmers dropped as fertilisers became unaffordable. Tariffs were liberalised, and annual rice imports doubled from 152,000 tonnes to 301,000 tonnes between 1999 and 2004.

This opening rendered the country vulnerable to the policies of other countries. At the time, India was de-stocking its rice surplus, and rice imports from India increased from 7,900 tonnes in 2001 to 60,300 tonnes in 2002. As a result of this import surge, rice farmers were hard hit, and many left the sector. Land for rice cultivation dropped 31.2 percent between 1999 and 2004.

According to the FAO, Cote d’Ivoire also saw imports flooding in when the market was opened up. As a result of implementing commitments at the WTO, Cote d’Ivoire removed import restrictions on key agricultural goods, particularly rice. Duty on all agricultural products was set at a maximum of 15 percent, except for 25 tariff lines. As a result, rice imports increased at an annual rate of 6 percent from 470,000 tonnes to 715,000 tonnes between 1997 and 2004. Imports were mainly from Thailand, China and India. Domestic production dropped 40 percent over this period.

In Nepal, the civil society organisation ActionAid documents that rice import surges came in 1994, 1996 and 2000, with imports increasing by 175 percent, 55 percent and 800 percent respectively. From 24,500 tonnes imported in 1999, by the year 2000 imports had hit 195,000 tonnes. The porous borders between Nepal and India, and the Nepal-India Trade Treaty were widely seen as the cause of these surges. In certain areas of Nepal, domestic prices fell by nearly 20 percent. The southern belt bordering India saw a multitude of rice plants and rice mills shutting down.

Today, in the latest twist of events, food prices have increased due to global shortfalls. Food production has been redirected towards biofuel production. Drought in Australia has contributed to shortages on the world market. Speculators playing on commodity markets have further increased prices. Up to 37 countries have been gripped by protests and riots. In Cameroon, seven people were killed in the unrest in February. Food riots also took hold of Abidjan in the Cote d’Ivoire in March this year.

At meetings in Berne in Switzerland to address the global food crisis, UN Secretary-General Ban Ki-Moon, World Bank president Robert Zollick and WTO director-general Pascal Lamy again made a plea for more free trade the panacea. But farmers remain unconvinced that more of the same policies that have contributed to the last two decades of destruction of agriculture can help.

Reacting to the push by the WTO leadership, the World Bank and the UN to stitch up the Doha Round so that further liberalisation can assist in resolving the food crisis, Henri Saragih, international coordinator of the global network of peasant farmers La Via Campesina writes, “Protecting food has become a crime under free trade rules. Protectionism has become a dirty word. Meanwhile, countries have become addicted to cheap food imports, and now that prices are shooting up, hunger is raising its ugly head.”