ECOSOC 6TH JULY 2007

Coordination Segment



Dialogue with the Executive Secretaries of the regional commissions on the theme “Regional aspects of the themes of hight level segment of the Economic and Social Council’s 2007 substantive session”.


Moderator: M. J.L. Machinea


Strenghtening efforts at all levels to promote pro-poor sustained economic growth: an African perspective
M. Abdoulie Janneh, Under Secretary General and Executive Secretary of the Economic Commission for Africa (ECA)

Development challenges in Africa:
Ø Stronger economic performance in Africa: 5.7% in 2006
Ø Fragile and insufficient growth for achieving the MDGs
Ø Some key challenges:
· poverty, employment, income inequality,
· commodity dependance
Ø Addressing the challenges. Efforts at three levels:
· National: improved macroeconomic management, structural reforms, enhanced resource mobilization
· Regional: provision of regional public goods including infrastructure, deeping intraregional trade
· Global: increasing ODA flows, debt relief, market access, reform of the international aid infrastructure.


Regional responses:
Ø 2004: African Union (AU) extraordinary summit in Ouagadougou on employment and poverty alleviation
Ø 2007: AU summit in Addis Abada on climate change and indistrualization
Ø Meetings of African Ministers of trade
Ø ECA Conference of African Ministers of finance, planning and economic development


ECA new vision to support the African development agenda:
Ø Two thematic pillars:
· promoting regional integration in support of the Afrcan vision and priorities
· meeting Africa’s special needs and emerging global challenges
Ø Enhanced partnerships
Ø Strenghtened subregional presence through the SROs
Ø Improved coordination of UN activities
Ø Emphasis on knowledge management and quality assurance
Ø Knowledge generation, sharing, networking:
· research and analytical work
· faciliting south-south linkages
Ø Consensus building and policy advocacy
· African development forum
· Big table
Ø Technical cooperation, advisory services:
· international trade negociations
· MDG-based assessment and planning
· Macroeconomic policy making
· Statistics

Accelerating Africa’s development:
Ø Outcome of the last session of the Commission (April 2007): a call for action:
· ownership and self-belief
· MDG-based comprehensive national development strategies
· Resource mobilization
· Investment in gender equality
· Climate change and development
· Implementation of ODA commitment
· Generating employment
Ø Economic diversification: a key to success
Ø Economic report on Africa 2007 on diversification shows:
· reduced macroeconomic instability: less vulnerability to terms of trade shocks
· increased economic growth
· higher employment creation
· reaping benefits from globalization, through increased trade flows

Conclusion:
These actions taken together should contribute to a growth framework in African countries that is both pro-poor and sustainable.

Second intervention
Macroeconomic policies to promote pro-poor growth strategy
ESCWA’s perspectives
Atif Kubursi, Acting Executive Secretary ESCWA

Pro-poor policies:
Ø growth patterns vary
Ø some growth episodes are associated with large inequality , concentrating the fruits of growth in the hands of elite and excluding the majority of the poor people
Ø such episodes of growth are not sustainable as the create adverse incentive and discourage invesments in physical capital, human capital and technology leading to stagnation in the future
Ø sustained growth requires the effective and wide participation of the majority of the citizens in a dynamic process guided by the state aimed at enabling to the poor people to improve their health and education so as to be able to acquire assets, information and legal standing, allowing them to become part of the socio-economic and political structure of the country
Ø the strategy of the carrying such process of empowerment of the poor is called pro-poor growth and is defined as that growth that reduces absolute poverty and hunger while simultaneously slimming down existing inequalities in distribution
Ø pro-poor macroeconomic policies have to aim at enhancing self-sustaining growth by maintaining full employment, and price stability and simultaneously, securing tangible reductions in both the absolute poverty and the inequalities in the distribution of incmoe
Ø taking care of GDP does not take care of the poor
Ø functional macroeconomics has failed to address poverty structurally and ideologically


The pro-poor strategy of ESCWA:
Ø The present episode of high growth in the region is dependent on one unsustainable trend: a huge surge inthe price of oil
Ø It is an episode of jobless growth that is not affecting the problem of unemployment, which is higher than any other region in the world and is reinforcing the existing huge gap in income distribution within and across regional countries
Ø The governments of the region would not be able to jump from the existing unsustainable path of growth to a sustainable path by using the traditional macroeconomic policies. Adherence to the traditional policies will consign the present episode of growth to a time-bound gain similar to what happened during the previous oil-boom of the 1970’s.

Arab unemployment rates are the highest in the world and Arab income inequality is equally high.

The objectives of the pro-poor strategy:
ESCWA has identified the followind elements needed for a comprehensive strategy aiming at using the oil-boom to cement the road for sustainable growth:
Ø Improvement of the investment climate: a major change in the economic environment is needed to allow the region to jump from the existing consumption-led path of growth to a higher sustainable invesment-led path.
Ø Empowerment of poor people: overcoming the tree deficits identified in the AHDR. First and foremost overcoming the “freedom deficit” of which most countries of the region suffer from requires a complete political reform that emphasises 3 objectives:
· the adoption of a bill of rights that guarantees civil liberties to all citizens
· the presence of institutional procedures through which citizens can choose the leaders of their government and express efective preferences about alternative policies
· the existence of institutions that have the power of check and balance and can constrain the power of the executive branch of the government
Second, overcoming the “deficit of knowledge”, narrowing the ever expending digital divide and making deliberate entry into the new economy. Dependency on rente from oil has left the Arab economy undiversified and poorly prepared for the 21th century.
Third, targeting the “empowerment of women” and arresting the feminization of poverty, unemployment and illiteracy.
Ø Regional cooperation: the ESCWA countries have lagged behind other region in the world in adopting a regional option to integrating their economies within the global economy.
Regional integration can promote economies of scale; increase intra-industry trade through further division of labour, investment coodination and product differenciation, and increase the region’s bargaining power in its trade relations with other regions of the world.


The macroeconomic tools: fiscal policy
Ø the combinationof fixed exchange of rate regime, a tax system that relies haevily on indirect taxes, a ballooning external debt and free capital mobility renders fiscal polcy in most of the countries of ESCWA quite ineffective
Ø A pro-poor fiscal reform should aim at enhancing the government legitimacy by paying more attention to equity. Theb tax system should be reformed by increasing the reliance on income progressive taxes, restructuring the poverty tax and introducing a wide spectrum of taxes to prevent avoidance
Ø A major reallocation of public expenditures should aim at alocating ressouces to build physical, social, intellectual infrastructure to help the poor and enable them to improve their health and education as well as their inclusion in the political structure of the country.
Ø Build a tax collection capacity to meet the fiscal requirements for growth and equity. It requires both the upgrading of the admnistratives capabilities and the introduction of stringent rules and disciplinary measures on tax evasion and corruption.
Ø At the regional level, expansion of joint-venture investments and intra-regional trade requires fiscal harmonization among the ESCWA countries. Removal of capital tax differences among the countries and abolition of tax obstacles to cross border activities are essential to such harmonization. Digital rules of origin should be established lest joining other trade areas creating obstacles for Greater Arab Free Trade Area.

Monetary policy:
Ø Monetary policy in ost of the countries of the region is either devoted to the sole objective of keeping inflation at a low rate, or is rendered quite ineffective because of the fixed exchange rate regime. It is rather striking that tight monetary policy is used in the region that suffers from a very high rate of unemployment.
Ø A pro-poor monetary policy should aim at lowering the real interest rates particularly in strategic and priority sectors for poverty reduction, and expansion of the money supply that accomodates growth and financial development and deepening. Interest rate policies should link to promoting investment and not singularly to maintain a fixed exchange rate.
Ø A pro-poor financial reform should promote the creation of wide-spread network of financial institutions that encourage a rise in the propensity to save the way for an axpended and more equitable flow of funds to impoverished locations and to small and resources-poor bisiness and micro-enterprises.
Ø A pro-poor financial intervention is the creation of development banks with the mandate to provide discounted, or subsidized, credit to select like agriculture, small-scale industries, and priority industrial establishment.
Ø Micro-credit programmes that target directly the poor and that are anchored on social cohesiveness and producive activities.
Exchange rate policy:
Ø The existing exchange rate arrangements in most ESCWA countries have the worst aspects of the two polar-type exchange rate regime. Pegging the local currencies to the US dollar renders monetary policy completely ineffective, as in a fixed exchange rate regime. Moreover, the continuous fluctuation of the US dollar has the potential for increasing costs associated with fluctuations in exchange rates, typical of a flexible exchange rate regime.
Ø No country in the ESCWA region is capable of moving to a free exchange rate regime and defending its currency under the present conditions of free capital movement, intensified international speculative activities and the absence of a globally monetary institutions capable of maintaining a stable world finiacial regime.
Ø Tying Arab exchange rates to the dollar has cost the region over $500 bilion in purchasing power losses given their high shares of imports from other currency areas.
Ø After considering all other options, it was found that monetary coordination among all the ESCWA countries aimed at adopting a unified exchange rate regime is most promising.
Ø The coordination could start by linking the various currencies in the region in a common bloc floating vis-à-vis the rest of the world. This will achieve double objectives; first, it will stabilize intra-regional trade by preempting relative shifts in the intra-regional exchange rate structure. Second, it will insulate the domestic economies from external developments, thereby permitting monrtary policy to concentrate on the problem of unemployment.
Ø The GCC countries have gone a long way towards creating a monetary union and a comon currency. Coordination between the GCC and the otehr countries is essential, however, to create a more cohesive regional monetary bloc.
Ø The monetary coordination could move gradually toward the ultimate goal of creating a common super national currency.


Third intervention:
Pro-poor economic policies and poverty in Eastern Europe and the CIS
Marek Belka, Executive Secretary of the UN Economic Commission for Europe, Under Secretary General of the UN

Economic overview of the ECE region: 56 countries of Europe, central Asia and North America:
Ø rapid economic growth and favourable prospects
Ø tremendous diversity: region has the someof the richest and poorest economies
Ø future growth will need to be in knowledge intensive industries-UNECE has a new program
Ø a major challenge from globalization is how to preserve the social welfare state

Solid real growth in the ECE: after a difficult decade (1990s), there is now solid growth in the transition economies, especially since 2002.

Poverty in the transition economies of the ECE:
Ø The collapse of central planning and dissolution of the URSS and Yugoslavia resulted in a decade long transitional recession
Ø GPD fell by:
· 20% in central Europe
· 30% in southeast Europe
· 50% in much of the FSU
Ø In addition to tha fall in income, much of the institutional structure supporting social services fell apart as well, resulting in rising unemployment, poverty and inequality.

Poverty, the vulnerable groups:
Ø rural areas
Ø unemployed
Ø ethnic minorities
Ø retired, elderly
Ø unskilled
Ø single parent households
Ø haelth problems

Poverty is significantly related to unemployment in the transition economies:
Ø Although unemployment has been declining; still very high in southeast Europe
Ø A significant percent of unemployment are a long-term due to large structural changes in sectoral output
Ø Unemployment likely to result in poverty since weak safety nets, tight eligibility, limited funds for active labor market policies:
· large informal sectors with no benefits
· women and youth have especially high unemployment
Ø Economic growth in the resource rich-CIS has not produced much employment growth

By some measures the transition economies appear to be pro-poor:
Ø it is ddifficult to assess the overall policy environment of a country in addressing basic needs
Ø the UNDP human development index (HDI) may provide a reasonable overall measure (literacy, life expectancy, etc)
Ø generally, most of the transition economies rank significantly higher by the HDI than by per capita income
Ø Thus, for their income level, they seem to be addressing basics needs reasonably well

Pro-poor versus pro-growth:
Ø not all growth policies are pro-poor, and not all pro-poor policies are pro-growth
Ø the pro-poor growth agenda attempts to promote those that are both
Ø but there are large policy areas where there is some trade-off
Ø generally, donors favor poverty reduction while national governments favor growth

Just how pro-poor are some current economic policies?
1) Tax competition amongst the middle-income countries
Ø In order to encourage investment and improve competitiveness, taxes have been cut, made less progressive; and social benefits, and government’s role has been cut back
· flat tax Baltics, Russia, Slovakia, Ukraine, Georgia, Romania, FYR of Macedonia, other considering
· There is tax competition throughout Europe, especially the lowering of corporate taxes
· Generally, the government sector is significantly lower in these low tax economies with less spent on social services, less investment in human capital and infrasturcture
· Although some of these economies have grown quite rapidly; it is less clear if tax policy is the key

2) PRGF in low income economies
Ø Macroeconomic policy in the poorest ECE members is formulated under the IMF Poverty Reduction and Growth Facility (1999)
· covers Albania, Caucasus, Kyrgyzstan, Moldova, Tajikistan, Uzbekistan
· provides concessionary lending
· Definitely a positive development, but is this framework working effectively?
· There has been progress in terms of the MDGs, but not that rapid
Ø Are the country programs pro-poor enough or just the old Washington Consensus policies repackaged?
Ø Research, assessment is needed

Policies to promoting pro-poor development:
Ø Social policies:
· improve the design of social safety nets
· improve access to education and health resources
Ø Structural policies:
· encourage creation of SMEs, self-employment
· improve access to finance for the poor
Ø Macroeconomic policies:
· reduce cyclical fluctuations by making fiscal policy more counter-cyclical
· diversify out of resource-intensive sectors in order to stimulate employment growth
· keep borders open; benefits of trade and migration, stick with economic reforms
Ø Political policies:
· resolve political conflicts; ensure the disenfranchised have a voice; civil society has a role to play
· address ethnic and gender discrimination


Fourth intervention:
Pro-poor sustained economic growth policies: Asia-Pacific perspectives
Kim Hak-Su, UN Under-Secretary-General and Executive Secretary of ESCAP










Macroeconomic policies, growth and equity:

Growth process: increases the poor’s incomes faster
More public on health and education: benefits the poor, increases their productivity
Labour-intensive sectors: engines of economic growth

Policies impacting on growth and equity:
· fiscal (to reduce inequalities)
· monetary
· trade
· structural adjustment
· human resources development
· sectoral: agriculture, construction and small and medium enterprises (promote sectors with employment opportunities)
· redistribution of land and other assets
· population
· pro-poor targeting

Achieving pro-poor-growth, policy recommendations:
Ø pro-poor growth strategies
Ø ensure that the rural poor benefit from growth
Ø invest in agricultural research and development, including rural infrastructure, rural education, health, water and sanitation
Ø remove barriers to service delivery
Ø role of ESCAP


PANEL DISCUSSION
“Toolkit for mainstreaming employment and decent work”

The panel discussion was moderated by the Vice-President of the council Mr. Hilario G. Davide, Jr.

The first panelist to take the floor was Ms. Maria Anjelica Ducci, Executive Director Office of the Director-General, ILO. Ms. Ducci introduced the toolkit to the members. She retraced the background of the toolkit to the 2006 ECOSOC Ministerial Declaration, where the members had expressed their support for the creation of full and productive employment and decent work for all, calling for a multilateral collaboration of the different UN agencies. The toolkit was hence conceptualized by the ILO in collaboration with Chief Executive Board (CEB) member organizations and approved by the CEB in April 2007. She stated that the purpose of the toolkit was to assist the agencies in assessing their activities’ impact on employment and decent work and provide measures on how to enhance employment and decent work outcomes. This toolkit would also help the agencies to identify tools and resources for mainstreaming employment and decent work, and would be essentially based on questionnaires. She identified the potential users, including but not limited to, agencies, governments and other national constituents, donors and the international development community, civil society and policy makers and practitioners. Finally, she stated that the toolkit would be used as an interactive platform among the different agencies.

Mr. Olav Kjorven, Assistant Administrator and director of the bureau for Development Policy (UNDP), made the subsequent statement. He declared that employment not only assured both the live-hood of the individual and his/her self-dignity but also represented the missing link between poverty and economic growth. Although, the toolkit for mainstreaming employment and decent work initially represented a bilateral collaboration between the UNDP and the ILO, he stressed the importance of including other agencies in its further development. He also mentioned a related initiative, the Commission on the legal empowerment of the poor, whose purpose was centered around policy recommendation and to bring about legal tools to help connect the poor with the national economy, with a particular attention given to the condition of women.

Afterwards, Mr. Themba Masuku, Director, Geneva Liaison office (FAO) talked about the contribution of the FAO to the development of the toolkit. He reaffirmed the organization’s commitment to gender equality and to the eradication of child labor, within the framework of the promotion of decent work. The toolkit would therefore be valuable to the FAO by helping it assess its programs in a systematic way. Concerning the implementation of the toolkit, he said that the FAO was considering staff training, and specifically in a multidisciplinary manner. Finally, Mr. Masuku stated that the FAO would like to work further with the ILO to create indicators and tools to assess the employment impact of its activities, which would allow linking them to the FAO’s main purpose, the achievement of MDG 1.

Finally, Ms. Susanne Weber-Mosdorf, Assistant Director General, SDE (WHO), agreed with Mr. Kjorven that employment was indeed the missing bond between poverty and economic growth. She mainly identified the areas where the WHO was involved within the framework of the toolkit. Ms. Weber talked about its capacities to help strengthen the health system. The toolkit would contribute to the primary prevention of occupational hazards; and here she mentioned yet another tool developed with the collaboration of the ILO, the chemical risk assessing toolkit. She stressed the need to establish strong links between occupational health and health in general, and urged the members to pay a particular attention to health workers, who are highly vulnerable due to the risks of violence, accidents and even death on the workplace.

Several countries took the floor to make some remarks and ask questions.
Portugal, on behalf of the EU, welcomed the initiative of the ILO for the creation of a toolkit for the promotion of productive and decent work. However, the representative expressed concerns on the usefulness and the efficiency of the toolkit on the country level.

The United Kingdome expressed similar concerns as the toolkit appeared to be rather time consuming and was based on a universal questionnaire, which did not take into consideration the differences in the level of development experienced by the countries and their specific disparities. He also raised the issue that although highly desired, increased employment was contrary to productivity.

Algeria appreciated the development of such a useful instrument but wished to remind the participants of the number of such tool already existing and hoped that this one would make an exception and do make an improvement on the practical field.

Nigeria agreed that employment was the missing link between poverty and economic development and stated that self-employment was also one way of eradicating poverty.

Norway appreciated the toolkit, which demonstrated the will and the ability of the agencies to work together. He then asked what would the plans to ensure that the toolkit would be actually used both on the agencies and countries levels.

The United States showed appreciation for the development of the toolkit by the agencies and especially commended one of its objectives concerning the promotion of entrepreneurship.

Lastly Tanzania stressed that the concept of decent work implied at an earlier stage that of education and training, and reiterated the country’s policy of poverty eradication based essentially on education and training.

Responding to the different remarks and questions raised, Mr. Kjorven acknowledged that the toolkit was still at an early stage of implementation and as such had not yet given specific results and concerning the increased employment and productivity issue, he responded that the problem could not be raised in many countries where labor constituted a major factor of production. On the use of the toolkit at the agencies and countries level, Ms. Ducci replied that the agencies first wanted to raise awareness about the toolkit at the organizational and UN level, to ensure that it did represent the views and objectives of the different institutions involved. Then the tool would be brought to the country level, where it should be tailored to fit its specific needs and aspirations. In conclusion, Mr. Masuku stated that the agencies were still learning with the toolkit as a new and innovative instrument.