Multi-Stakeholder Consultation on Financing for Development 2004/ 2005

1. New Rules for Global Finance Multi-Stakeholder Consultation on Financing for Development 2004/ 2005 Rules for Global Finance that promote sustained development www.new-rules.org

2. New Rules for Global Finance Promoting Sustained Development • About New Rules for Global Finance Coalition • International Financial Architecture • Ties to Development • Progress so far • Financing for Development Agenda & Process • Analysis of Problems • Unstable and Insufficient Capital Flows • Distribution of Capital • Institutional Oversight • Seeking Solutions: Systemic Issues Consultative Process www.new-rules.org

3. New Rules for Global Finance About the New Rules Coalition • Started in 1999 in response to the Asian crisis with the objectives of developing reform proposals for the global financial architecture and preventing future financial crises. • Members of the New Rules Coalition are academics, activists, and policy makers from developed and developing countries, from religious, labor, development, and environmental perspectives • New Rulesemploys inclusive dialogues to mobilize its expert and experienced members to analyze existing financial institutions and policies and to propose alternatives that will bring about more equitable and environmentally responsible results. • New Rules has been actively engaged in the Financing for Development Conference and its Follow-up process www.new-rules.org

4. New Rules for Global Finance International Financial Architecture and Development • The wave of currency and banking crises that swept through developing countries in the 1990s made it clear that fundamental reforms were required in the international financial system. • Besides the objective of achieving financial stability, an equally important goal is the provision of adequate capital flows (private+ public) to developing countries. A development -oriented reform of the financial system would not only benefit developing countries. Strong growth in developing and emerging market economies provides growing markets for developed country exporters and profitable opportunities for developed countries investors. www.new-rules.org

5. New Rules for Global Finance What progress so far Progress to date on these issues has suffered serious problems Reforms have focused excessively on making changes to financial sectors in developing countries. Far less attention has been given to international institutions and developed country financial markets. The design and implementation of financial system reforms have been uneven and asymmetrical in several key aspects, e.g., problematic governance in key institutions. www.new-rules.org

6. New Rules for Global Finance Financing for Development (FfD) • In this regard the Monterrey Consensus provided for the first time • an agreedcomprehensive and balanced international agenda and an on-going process, which should be used to guide and evaluate reform efforts. • The sections of the Consensus on systemic issues are particularly relevant to the reform of the international monetary and financial system in support of development. • New Rules will organize in close cooperation with the Financing for Development Office (FFDO) a series of multi-stakeholder consultations to examine issues, exchange information and promote best practices in the area of systemic issues www.new-rules.org

7. New Rules for Global Finance Key Problems: Unstable and Insufficient Capital Flows For too many developing and emerging market countries, international financial capital flows at times have been too volatile and at others have been too insufficient to promote sustained development. This is the case for FDI, portfolio, bank loans, and even official sources of capital. www.new-rules.org

8. New Rules for Global Finance International Capital: Important But Not Dependable Compares GDP of emerging market and developing countries including selected advanced economies and capital flows of Emerging market and developing countries including selected advanced economies. www.new-rules.org

9. New Rules for Global Finance International Capital: Important But Not Dependable www.new-rules.org

10. New Rules for Global Finance International Capital: Important But Not Dependable www.new-rules.org

11. New Rules for Global Finance International Capital: Important But Not Dependable Developing Asia for capital flows defined to also include Hong Kong SAR, Korea, Singapore, and Taiwan Province of China www.new-rules.org

12. New Rules for Global Finance Some types of flows are more volatile than others Latin America was chosen because of incomplete data for other areas. www.new-rules.org

13. New Rules for Global Finance Flows to some areas are more volatile than others Net private portfolio flows include the purchase of private equity shares (amounting to less than 10% of firm) and debt securities debt (e.g. bonds). Measured in US$ billions. www.new-rules.org

14. New Rules for Global Finance Some types of flows are too persistent Total foreign indebtedness in billions of US$ www.new-rules.org

15. New Rules for Global Finance Persistent debt and its legacy Principle and interest payments on total foreign indebtedness in billions of US$ www.new-rules.org

16. New Rules for Global Finance The Problem: Distribution of Capital Private international capital, the largest source of funds for development, has a skewed distribution pattern. www.new-rules.org

17. New Rules for Global Finance Capital flows are concentrated www.new-rules.org

18. New Rules for Global Finance Even FDI is concentrated www.new-rules.org

19. New Rules for Global Finance The current status of international finance and development • The current financial system is characterized by instability and highly uneven distribution of capital. • The current patterns of financial flows impede development and worsen poverty, whether one looks at financial crises or more recent financial droughts. • Developed, emerging market, and developing countries all require adequate, long term, patient capital to sustain growth capable of reducing poverty. • Stable and sufficient supplies of capital are needed, and so too, are stable economic environments to attract and retain those supplies. www.new-rules.org

20. New Rules for Global Finance The Problem: Institutional Oversight of Financial Stability • Besides the WB and IMF, major policies are being formulated in ad hoc fora such as the Bank for International Settlements (BIS) and the Financial Stability Forum (FSF). • These bodies are organized and led by the developed countries, with some participation by “systemically significant” countries. • Private standard setting bodies, such as those for auditing and accounting, and public standard setting bodies such as those for securities and insurance are also formulating international policies. www.new-rules.org

21. New Rules for Global Finance Next Steps Therefore, • The multi-stakeholder consultations on Systemic Issues will focus attention on institutions and policies that can result in sustained development. • Changing the rules and the rule-making processes is likely to require a different mix of decision-makers. www.new-rules.org

22. New Rules for Global Finance Core topics of the multi-stakeholder consultations • Effective and equitable representation of all countries in the design and implementation of financial system reforms • The impact of the current reform agenda of international financial institutions, in particular “Standards and Codes”, on systemic stability and poverty reduction • Evaluation of alternative policies, such as counter-cyclical prudential regulation, designed to protect countries’ financial sectors and support growth and poverty reduction www.new-rules.org

23. New Rules for Global Finance Number and location of meetings • Washington D.C., to ensure maximum participation from country representatives and staff of World Bank and IMF • Two regional meetings to take place in developing countries ( Latin America and Africa), with participation of the private sector, civil society as well as participants from official institutions and governments • New York, to ensure maximum input and recommendations from UN member states delegations, to produce an integrating and concluding multi-stakeholder session www.new-rules.org

24. New Rules for Global Finance Information on the Consultations • Expert consultants will develop papers for each meeting • All papers will be available to the public to provide for maximum discussion and debate for the consultations • New Rules will provide a report of the principal conclusions from each meeting and a concluding publication on the outcomes and recommendations of the consultations • The New Rules Coalition and the FFDO will welcome proposals, queries and comments from interested entities and individuals from around the world www.new-rules.org

25. New Rules for Global Finance Thank you www.new-rules.org