Posted tagged ‘multilateral agencies’

AID FUNDS FOR AFRICA, ANYONE?

August 7, 2008

Erle Frayne Argonza

Magandang araw! Good day!

Aid commitments to the south by the more developed economies of the North have been among the news trends recently. There is, for instance, the commitment of $25 Billion per year for the whole African continent, a commitment that hopefully won’t fly in the air as mere political promise.

A relevant news concerns IMF-World Bank actions about the matter.

[30 July 2008, Quezon City, MetroManila. Thanks to DevEx database news.

 

IMF, World Bank & IFI Round-Up

Leaders of the Group of Eight rich nations are set to backtrack on their landmark pledge at the Gleneagles summit in 2005 to increase development aid to Africa to USD 25 billion a year. A draft communiqué obtained by the Financial Times, due to be issued at the group’s July summit in Hokkaido, Japan, shows leaders will commit to fulfilling “our commitments on [development aid] made at Gleneagles” – but fails to cite the target of USD 25 billion annually by 2010. This goal – which was repeated at last year’s G8 summit in Germany – was seen as an important boost for Africa. The ambitious plan was a cornerstone of former UK prime minister Tony Blair’s G8 presidency and championed by his successor, Gordon Brown.

Warning that rising food and oil prices pose a crisis for the world’s poor, Robert B. Zoellick, the President of the World Bank, is calling on President Bush and other leaders convening in Japan next week for the G8 summit meeting to make new aid commitments to avert starvation and instability in dozens of countries. Zoellick’s letter, obtained by NYT, came with a lengthy study of the impact of rising prices for food, fuel and commodities on the world’s poor. Zoellick said in his letter that the World Bank, the International Monetary Fund (IMF) and the World Food Program (WPF) had short-term needs of USD 10 billion. Zoellick’s letter calculates that, for the world’s 41 poorest countries, the combined impact of high food, fuel and other commodities is a ‘negative shock’ to their economies, reducing GDP by between 3 and 10 percent, causing ‘broken lives and stunted potential’ for millions.

The World Bank gave the go-ahead at a board meeting July 1 for the creation of a pair of global investment funds to back developing nations’ efforts to curb greenhouse gas emissions and adapt to the effects of climate change. The Climate Investment Funds, led by Japan, Britain and the US and to be administered by the World Bank, are expected to start with total initial funds of USD 5 billion and become operational by the end of the year, it said. The approval of the Clean Technology Fund and Strategic Climate Fund comes days before a summit of G8 in Hokkaido, Japan, on July 8 where climate change issues are on the agenda. ‘The G8 is likely to broadly support the establishment of the climate investment funds,’ Warren Evans, Director of the World Bank’s environment department, told reporters.

A new IMF study, looking at the impact of soaring oil and food costs, said many poor and developing countries will likely have to change their economic policies in response to soaring commodity prices, AFP reported. The IMF Food and Fuel Prices–Recent Developments, Macroeconomic Impact, and Policy Response report found that poor households are most affected by food price inflation and “warned that the share of undernourished (people) in developing countries could rise rapidly above the current 40 percent of total population.” Energy and food values are still rising and the IMF said its research suggests the “problem is worsening.”

The World Bank’s private sector arm has launched a new fund it hopes will unlock as much as USD 5 billion in infrastructure investment for the world’s poorest countries. As part of its drive to reach deeper into some of the most forbidding markets, the International Finance Corporation (IFC) will use a pot of USD 100 million to cover the initial costs of power, logistics, and transport, ports and communications projects. Once a project is shown to be viable, it will be tendered to other investors, the Financial Times (UK) reported. Working with an initial partner, the IFC fund – known as InfraVentures – will cover start-up costs such as feasibility studies and legal fees. Half of its resources will be devoted to sub-Saharan Africa, with the remainder spread across Latin America and Asia.

A NEW GLOBAL FINANCIAL ARCHITECTURE IS MOST EXIGENT

April 28, 2008

 

Erle Frayne D. Argonza

 

[Writ 23 March 2008, Quezon City, MetroManila]

 

From the early 1970s through the 1990s, the massive liberalization of the international financial system was executed with such dynamism, radically altering thus the international financial landscape. Look at the result of this gargantuan liberalization today: global economic catastrophe.

 

New Nationalism, in collaboration with old nationalists, socialists, and ideologies that articulate the interests of marginal sectors, argues for the immediate reform of the international financial system. It had to be admitted by everyone else that the system failed, it simply cannot be sustained under a regime of liberal capital, monetary and related financial policy regimes.

 

Both the USA and EU economies today are particularly affected by the failure of financial liberalization. The ‘virtual economy’ had taken over their respective domains, they were so badly de-industrialized notably the USA’s that there may no more be a semblance of once flourishing industrial economies there, their infrastructures are rotting and collapsing, and now the final death blow to their economic wellness had come as recession ravages like uncontrolled forest fire there.

 

On the international level, the problem can be addressed by convening at once the legitimate delegates of states, with market and civil society groups serving as observers. The task is to immediately reform the rotten international financial system, and concur a new global financial architecture. A ‘New Breton Woods’ would be apt as a label for this effort (to borrow from the economist Lyndon LaRouche).

 

The most urgent agenda is the re-examination of national currencies, return of the gold reserve standard or equivalent, institution of better regulatory mechanisms both of cross-border and  national levels, immediate economic recovery by provision of long-term low-interest rated financial instruments or ‘white knight’ finance, and clipping the predatory powers of greedy financiers such as hedge funds and ‘vulture funds’ operators.

 

A special topic would be the stock markets of each nation or region. It is now time to reform the stock markets, which have been used by greedy elements to loot national coffers and the public of direly needed financial resources. If the stock markets can’t be reformed, then the option for them is to face increasing ‘guerilla finance’ by groups that will seek to establish direct links between the market players who seek new capital funds and the potential investors from among the general public. In which case, if the latter succeeds, the stock market is out to die a painful dinosaur’s death, ditto for all those predatory stock traders whose role will become extinct overnight.   

 

The fundamental contention for the reform package, culled from the New Nationalism article, is reflected below.

 

Reform the international financial system.

 

The global financial system is indubitably a homestead of predatory financiers. Usury and global speculation, the masterpieces of financiers, are the enemies of nations. Usury in international finance is at an all-time high, raising questions about the legality and moral propriety of   current lending practices. Incidentally, the said financiers are the ones who exercise the clout within the International Monetary Fund and the World Bank, whose chiefs have always been CEOs from the bank headquarters of the financiers. The said banks have always acted out as the marketing agents of financial cartels, even as many nations that have followed the austere ‘structural adjustments’ imposed by them have been reduced to paupers.

 

It is high time for ‘white knights’ to appear in global finance, lending money accordingly for developmental and investment purposes at very low interest rates (lower than 1.5% annually) and at very long-term payments (25-50 years). Such institutions are now beginning to appear, but creditors remain cautious about their moves. Such institutions are autonomous from the power orbits of the Western financial cartels, are well niched in Asia (e.g. China), and appear to be creditor-friendly.

 

The reform though should go beyond the ‘white knight’ route. We must actively participate in Asia’s establishment of its own monetary fund and a single-currency regime, and take a leading role if opportunities allow. It may prove beneficial yet to re-institute a regime of gold reserve standard, which should back up the Asian currency. This same monetary fund will then serve as the regional ‘white knight’ that will provide credit to nations in need in the region and continent. The actions will also accelerate the economic cum political integration of the ASEAN and the economic integration for the entire East Asia, steps that will further stabilize the national economies and continuously sustain their respective growth. Meanwhile, a regional currency can stabilize soon enough upon its launching, that it would be a difficult job for criminal financiers to manipulate it, such as the success of the ‘Euro’ now exhibits to the globe.

 

Still another key intervention measure is the control of predatory speculation through a ‘Tobin tax’ on cross-border currency and related purchases (J. Tobin’s proposal in the early 70s). A tax of 0.75% alone on the current cross-border exchanges, which amounts to $300 Trillions annually, would generate $2.25 Trillions. The said money will then be used to fund the operations of international organizations such as the United Nations, UNDP and authentic international NGOs for social development purposes. The money can also be used by ‘white knight’ financing institutions of international scale. This set of actions will then induce reforms in the other institutions, with chain reaction effects leading to declining speculation in the long run, as the oligarchic  bankers/financiers adjust their rates to more competitive rates in the face of challenges coming from global ‘white knights’.