HM Treasury News Release
158/98 30 September 1998
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NEW GLOBAL STRUCTURES FOR THE NEW GLOBAL AGE
Attached is a copy of the Chancellor of the Exchequer, Gordon
Brown's speech today to the Commonwealth Finance Ministers
Meeting in Ottawa.
Speech by the Chancellor of the Exchequer to the Commonwealth
Finance Ministers meeting in Ottawa on 30 September 1998
NEW GLOBAL STRUCTURES FOR THE NEW GLOBAL AGE
INTRODUCTION
Our meeting here in Ottawa reaffirms the partnership between our
countries that is an indispensable foundation of international
stability and prosperity.
Never in all of economic history have so many depended so much on
genuine economic co-operation among all the nations of the world.
Our shared commitment to open trade and orderly progress has been
a driving force for growth in all our countries - even in
countries that not so long ago seemed likely to be permanently
left behind.
We must never forget that the path of open trade and open capital
markets that we have travelled in the last 30 or 40 years has
brought unprecedented growth, greater opportunity and the
prospect of better lives for millions across the world. But
there is still massive poverty in a world where millions are
denied opportunity, and the new economy has brought greater risks
of insecurity as well as new opportunities.
What began last year as a local and regional crises centred in a
handful of Asian countries, with its effects most sharply felt in
Asia, has spread from Asia to Europe and North and South America
becoming what is now a global problem affecting us all.
No sensible policy-maker wants to turn the clock back to
protectionism and insularity. But to move forward, we need
vigilant and active governments, acting together through reformed
international institutions, to ensure that the prosperity that
has been achieved by some can be extended to all.
Today's problems are problems of the modern age. They could not
have happened in the way they have when finance was confined
within sheltered and wholly national financial systems. So these
are new global problems which will require new global solutions.
So it is particularly appropriate for me to set out a new agenda
for reform at this meeting of Commonwealth nations, with finance
ministers representing all regions of the world from developing,
emerging markets and developed nations - and to do so the week
before the meetings of the IMF and the World Bank in Washington.
The key challenge now is to devise procedures and institutions
- nothing less than new international rules of the game - that
help deliver greater stability, and prosperity for all our
citizens in industrialised and industrialising economies alike.
THE CURRENT SITUATION
First the current situation.
With Japan and one quarter of the world in recession, growth in
world output and trade will weaken over the next year.
Asia's unprecedented slowdown is turning out to be deeper then
expected, but in some of the affected countries progress in
restoring economic stability is being made.
With some currency appreciation in both Thailand and Korea,
interest rates have been reduced to below pre-crisis levels.
And the latest trade data show that export volumes grew rapidly
in the first quarter.
The continued pursuit of transparent and credible policies,
through IMF programmes, has brought further signs of recovery.
But there is a long way to go and macroeconomic policy should now
be focussed, on creating the right conditions to support domestic
demand and export-led growth.
As the recent G7 statement has made clear, the G7 countries -
North America, Europe and Japan - as well as the IMF and the
World Bank, stand ready to support all emerging market countries
which are prepared to embark on strong sound policies which will
involve structural reform.
But when the balance of risks in the world economy has shifted
from inflation to slower growth, the G7 countries must now
assume greater responsibility.
The necessary improvement in trade balances in affected
countries could either come from domestic stagnation or
export-led growth. It is in our shared interests to achieve this
export led growth , but this will only be possible if, by
sustaining world demand, the industrialised world is the engine
for that growth.
As I said in Japan recently, all industrialised countries must
now bear their fair share of the burden of adjustment. No one
country can either escape its responsibility or be required to
bear the whole burden with all the risks in protectionist
sentiment that this would entail.
I believe that from our respective continents each G7 member
should now resolve to play our rightful role and take action to
ensure that our economies can both sustain growth and remain
open to trade:
in the UK we have taken the tough action on monetary
and fiscal policy which allows us to steer the course
of stability in an uncertain and unstable world and
will continue to promote domestic demand growth, open
trade, investment and employment opportunity for all;
in Europe too, as the statement following last
weekend's meeting of Europe's finance ministers and
central bank governors demonstrated, we will be
working to ensure that the euro promotes stability and
growth. And the European contribution will include a
commitment to employment creation within a policy of
structural reform;
and the vigilant action of the US Federal Reserve
yesterday is designed to sustain domestic demand
growth. I know that the US government believes that
maintaining free trade, free from protectionism, is an
important element of its response. I know also that
the administration is working very hard to ensure
ratification of the NAB and the IMF quota increase. We
should support and encourage them to step up their
efforts in these areas;
I know too from my recent visit to Japan that my
Japanese colleagues are focussed on their efforts to
stimulate domestic demand through fiscal and monetary
policy. And, to help restore market and consumer
confidence, the Japanese government must lay out a
clear timetable for action to restore health to the
banking and financial sector.
But vigilance today must be matched by a willingness to reform
the international financial system to secure greater stability
tomorrow.
THE UNDERLYING CAUSES OF THE EMERGING MARKETS CRISIS
Recent years have witnessed global capital flows on an
unprecedented scale. Net private capital flows to emerging
markets has risen from $31 billion in 1990 to $241 billion in
1996 (before falling back to $174 billion last year). Yet
massive flows one way one year can become massive flows the other
way the next. In Asia's case net inflows of $40 billion in 1996
turning to net outflows of over $30 billion in 1997 - a
turnaround, which in contrast to the Mexican crisis years, has
not been offset by a reallocation of flows to emerging markets
elsewhere. Instead a general flight to quality and safe-haven
buying has occurred.
And as global investors have been radically changing their
attitudes towards risk, borrowers in Latin America and the
Carribean have faced a steep rise in bond spreads. In many
countries in the region these have now risen to rates not seen
since the Mexican crisis in 1995. Stock markets have also fallen
sharply, down 30 to 40 per cent in b
Brazil and Argentina since early August. But the emerging market
contagion has been even wider than that - in South Africa the
rand has fallen to record lows.
Better risk management in future will lead to more stable capital
flows. But it is a matter of concern that many emerging market
economies are now being been caught up in the turmoil,
regardless of the strength of their macro-economic fundamentals.
What we are facing however is a temporary setback, to progress in
global trade and investment, not a permanent retreat indeed I
believe that the essential answer to the problems of the moment
is not less globalization, but more. In other words not new
national structures to separate and isolate economies, but
stronger international structures to make globalization work in
harder times as well as easy ones.
But we must understand we are in a new world.
Trying to turn the clock back by re-erecting national financial
barriers is neither realistic nor sensible.
International investment flows bring huge benefits to all
countries.
And we must build new operational rules and the institutional
architecture we need for the global financial system of the
coming century.
First, we must tackle the weaknesses in economic and financial
policy, and in corporate governance, which the crisis has exposed
in many emerging markets.
In many cases, excessive short-term foreign currency borrowing
occurred because of the perception of an absence of currency risk
due to exchange rate pegs, implicit and explicit government
guarantees and directed lending practices which compounded the
inefficient allocation of capital.
Borrowing was in many cases used to finance investment in
economically unsound projects and governance in the corporate and
financial sectors was often weak. In some cases, currencies
became uncompetitive, resulting in large current account
deficits. Moreover, when the financial crisis hit, fiscal policy
was, in retrospect, kept too tight.
However at the root of these problems was a destabilising lack
of transparency in economic policy-making right across key
economic and financial indicators which in turn led to confusion
and undermined market confidence.
Second, this was compounded by weak financial supervision, poor
corporate governance, and ineffective prudential regulation,
which has led some to raise questions about the speed and
desirability of capital liberalisation.
Recent events have demonstrated the dangers countries run when
they open their capital markets in this new global economy if
their financial systems are weak or vulnerable.
Third, recent months have exposed problems of transparency, poor
risk assessment and inadequate supervision in developed
countries' financial markets too indeed in the past week we have
witnessed
The vulnerability and riskiness of some highly leveraged,
secretive and speculative hedge funds. But we have also found
some major household financial institutions, with ordinary
household deposits backed up by implicit and explicit
guarantees, risking and then losing substantial sums first in
emerging markets and then through hedge funds , a combined
exposure which, in some cases, was not known in advance.
So the difficulties are not just a problem for emerging markets.
While all too many analyses of the current crisis focus
exclusively on the problems in debtor countries, it is a fact
that there have also been problems in creditor countries.
Fourth, the international community did not understand
sufficiently early the true nature of Asia's problems and how
best to tackle them.
In most cases these were not traditional sovereign debt problems
or fiscal problems but instead private sector debt and financial
sector problems. We did not have in place procedures and
mechanisms to identify problems before they become crises and to
manage crises once they began.
Fifth, this crisis is about people and not just about economic
statistics. Insufficient attention has been paid to the human
side of the crisis and our common responsibilities to put in
place help for the poor and the unemployed. We must never forget
that behind the headlines and the numbers flickering on dealers'
screens are men and women whose jobs, incomes and futures are
threatened by these events.
And when the response to the crisis will inevitably involve
difficulties and obstacles which will have to be overcome, we
have so far failed to build a shared understanding of the need
for reforms, securing a social consensus behind them, just as we
have failed to alleviate the impact of recession on the poor and
the unemployed.
Five weaknesses - weaknesses in economic and financial policies,
underdeveloped financial sectors in emerging markets, ineffective
supervision, poor crisis management, unacceptable social
protection - but together they expose an even more
fundamental common problem.
For fifty years we have had national policies for regulation,
supervision and crisis management for what were essentially
independent relatively sheltered national economies with
discrete national capital markets and limited and slow moving
international capital flows.
We are now in the era of interdependent and instantaneous
capital markets.
Individual economies can no longer shelter themselves from
massive fast moving and sometimes destabilising global financial
flows , and it is obvious that if we are to respond to this, we
need reform at both national and global levels.
First, national policies for supervision regulation and crisis
management will have to keep pace with the speed and scale of
global financial markets.
And second, as British Prime Minister Tony Blair said in New York
last week, a new global framework will have to offer, at an
international level, new and more sophisticated regimes for
transparency, supervision, crisis management and stability
similar to those which we have been developing at the national
level to deal with domestic instability.
So the challenge we face is not to weaken support for the IMF and
World Bank and other international institutions at a time when
the need for surveillance and coordination across the world is
more pressing but to strengthen them by building the operational
rules and institutional architecture for the new global
financial system.
AN AGENDA FOR REFORM
So let me now therefore set out my specific proposals.
First, to tackle national weaknesses in economic and financial
policy and governance in a global economy requires not only
sound policies but also sound procedures and institutional
arrangements.
So what are the "rules of the game" and what are the
institutional changes we need?
There is in my view only one answer to the uncertainty and
unpredictability of ever more rapid financial flows.
In today's global economy, governments need to deliver stability
by setting out clear objectives for fiscal and monetary policy
and having the openness and transparency necessary to give
credibility to the process.
Greater openness in procedures as well as in the dissemination of
information will not only reduce the likelihood of market
corrections by revealing potential weaknesses at an earlier stage
but will generate a better understanding of the reasoning behind
decisions and encourage better decisions and wider support for
the policies.
The international financial institutions have a vital role to
play in boosting the international credibility of national
policymaking by setting standards for policymaking, and
monitoring or policing those standards through regular
surveillance and endorsement of sound reforms. These new
disciplines are the key building blocks of the new international
financial architecture.
Last year we proposed at the annual meetings a code of good
practice for fiscal policy to introduce greater transparency and
new disciplines into the world financial system and ensure that
countries undertaking good policies are properly recognized.
Already the IMF has published this Fiscal Code and is now
preparing a guidance manual on how to implement the code.
The right next step for us to take is to extend the principle of
transparency and openness into monetary and financial information
and procedures. At the Spring Meetings in Washington this year,
I asked the Fund to look at the case for extending these
principles to develop a code of transparency on monetary and
financial policy.
A code which requires countries to provide a complete picture of
usable central bank reserves, including any forward liabilities,
foreign currency liabilities of the commercial banks and
indicators of the health of the financial sectors, with
suggestions for improving and speeding up publication of data on
international banking flows.
While I welcome the fact that the Fund board will be considering
the code of transparency on monetary and financial policy later
this year, I urge the Fund to take forward work on developing and
implementing the code as quickly as possible, in consultation
with the World Bank and the Bank for International Settlements.
There is a third set of procedures that should be formulated into
a code of practice to improve transparency in the corporate
sector since crises can arise as a result of private sector
imbalances and poor corporate governance, as in Indonesia.
This suggests we need more work to establish more stringent
international codes in areas like accounting standards,
insolvency regimes, corporate governance, securities markets and
other aspects of private sector behaviour.
Some of the work on developing a code of good practices on
corporate governance is already underway. For example, the OECD
is producing a report on standards and guidelines on corporate
governance which should be ready by spring of next year. But
again we need to develop and implement the code, as soon as
possible and put in place the procedures to ensure effective
implementation. This will require close collaboration with the
IMF, World Bank and the OECD.
These codes will help produce an environment in which financial
markets can operate better. They should reduce the risk of
future failures, and mean that when failures do occur the
financial system is robust enough to withstand them. But they
will also, I believe, do something more profound, but also vital
to success.
By improving public understanding of why and how decisions are
made, by improving the accountability of governments, companies
and international institutions. They will help build public
understanding and support for the policies that deliver economic
growth and prosperity. And as we all know, the existence of that
public support can be an essential ingredient in building the
market confidence needed for success.
But for these three codes to be effective we must ensure that
institutions are equipped to monitor and implement the new rules
of the game. As I have set out, this means an enhanced role for
the international financial institutions in implementing and
promoting the codes for fiscal transparency, and for monetary and
financial policy. Monitoring these codes is an essential part of
the Fund's surveillance work.
All three codes should be used by Fund and Bank staff during
Article IV consultations and Country Assistance Strategies. I
believe that the IMF and the World Bank should publish
assessments of how well all countries, both developed and
developing, are implementing the codes.
So far our approach has been a voluntary one. But countries that
want to be part of the global economic system cannot pick and mix
which good and bad policies they want to pursue. That is why we
should consider whether all countries should accept regular
surveillance of how they are meeting the codes.
Where possible the results of this surveillance should be made
public. We should consider the case for publishing in a timely
and systematic way all the key surveillance and programme
documents, Press Information Notices, Article IV reports, and
country assistance strategies should all be made public. In most
cases there is a strong argument for publishing letters of intent
thereby making it clear to the public what has been agreed
between the authorities and the IMF.
But the IMF and World Bank's surveillance will at times involve
confidential discussions, particularly when a country is heading
in a dangerous direction. In such circumstances it may well be
best for the Fund to give a private warning to the government.
But if the Fund is ignored and the situation gets worse the Fund
should make use of "tiered responses". For example the Fund
could warn a country that it would give it a public 'yellow card"
if policies were not changed within a reasonable time limit.
That is also why I believe proper implementation should be a
condition of IMF and World Bank support and why immediate action
to promote transparency in policy making, financial sector reform
and corporate governance should be key components in any reform
programme which the IMF and World Bank agree in the coming
months. And that is also why a soundly-based IMF programme
along these lines should be pre-condition for a any G7 national
support. Because through the effective implementation of the
codes we can extend good fiscal policy, monetary policy and
corporate governance throughout the world and help prevent crises
occurring.
We must also find ways to improve the IMF's own accountability,
to ensure that it performs its responsibilities in an open and
transparent way that enhances public confidence. We need a
systematic approach to internal and external evaluation of the
Fund's own activities, including a new full-time evaluation unit
inside the IMF but reporting directly to the Fund's shareholders,
and in public, on its performance.
financial sector reform in emerging markets
Second, the problem of weak supervision and lack of prudential
standards in supervision in emerging markets.
There are those who argue that instability is the inevitable
result of free capital movements across national boundaries,
while others blame speculators who exploit capital mobility for
short-term profit. What is clear is that short-term capital
flows can be destabilising and can disrupt markets when investors
are insufficiently informed and educated and institutions lack
credibility.
I do not believe that a permanent retreat to capital controls, as
an alternative to reform, is the answer. Doing so simply
damages the prospects for stability and growth.
I continue to favour an approach to capital account
liberalisation which is bold in concept, but cautious in
implementation.
But the need for caution in implementation is now clearer, and
more important, than ever. Orderly liberalisation will require
sound banking and financial systems and appropriate macroeconomic
policies, consistent with our monetary and financial policy code.
Without these important pre-conditions being in place, countries
will remain vulnerable to capital market volatility.
The IMF and World Bank must deepen our understanding of the
pre-conditions for successful capital market liberalisation by
emerging market economies. We need to make clear the risks of
moving too fast if these pre-conditions are not in place.
Equally, countries that seize upon unilateral actions as a
substitute for necessary reform and co-operation damage the
prospects for their own economies and the world system.
One useful contribution to this process is the Commonwealth code
of good practice for promoting private capital flows and coping
with capital market volatility, agreed last year and based on an
exchange of experiences amongst Commonwealth partners. The code
is based on sound principles of openness and transparency, good
governance and strong policy credibility, and the need for a
co-operative international approach between the official
community and private investors. It recognises both the
potential benefits and the potential risks associated with
private capital flows, and describes a range of policy options
which countries might use depending on their particular
circumstances.
But neither the IMF nor the World Bank alone are currently
equipped to carry out the surveillance and assist in the
development of emerging countries' financial systems to help them
build the capability for capital liberalisation, pointing out the
regulatory weaknesses and vulnerabilities which must first be
addressed.
That is why I proposed at the spring meetings an institutional
innovation, creating a joint department of the IMF and World Bank
to carry out this work. I know that some tentative steps in this
direction have already been agreed. But I remain convinced that
the bolder option is worth serious consideration. It could be
implemented quickly, and with goodwill from both institutions
could be made to work to improve advice and help to emerging
market countries pursuing reform.
supervision of global financial markets
But there is a second, broader, role which a joint department
could play in co-operation with other international regulators.
The events of recent months have pointed out inadequacies in our
understanding of the interrelationships between financial markets
between countries, particularly between developed and emerging
market economies, inadequacies in the quality of risk assessment
and gaps in the international regulatory system.
Events in Asia have demonstrated the dangers emerging market
countries run in this new global economy when their financial
systems are weak or vulnerable. But they have also demonstrated
that the stability of financial centres in developed countries
are also threatened by instability and speculation and have also
demonstrated the importance of better risk assessment.
Developing better standards and systems for financial supervision
and regulation within each country will help to combat this but
the international financial institutions have a vital role to
play.
There are important jobs being done by the international
regulatory organisations in setting standards for financial
supervision and regulation within each country. The Basle
committee has published a comprehensive set of core principles
for banking supervision. Implementation of these will strengthen
banking systems and is essential for promoting stability in the
global financial system.
I welcome its establishment of a liaison group and consultation
group to monitor their implementation within Basle participants.
This process needs to be strengthened and broadened. I encourage
all countries who have not yet adopted Basle minimum standards to
do so as a matter of urgency.
I urge the Fund and Bank to work closely together with the Basle
committee and other international financial regulators to
exchange information, ideas and experience - and to include
supervisors in Fund and Bank missions. They should also look at
setting target dates for implementation of Basle minimum
standards. And should consider asking each country to provide an
annual assessment of how far it meets the Basle principles.
I also welcome the Basle committee's work on improving
transparency and risk assessment. Events in the banking sector
in the last few weeks have emphasised in particular the
importance of its work on an improved supervisory framework for
banks' derivatives and trading activities, and on developing
codes for the management of credit and operational risks. I hope
these codes can be implemented as soon as possible.
Out of these developments comes the recognition that our
institutional response will need to go beyond the existing
surveillance role of the IMF and the necessary provision of
technical assistance and financial support by the Fund and Bank
to help countries restructure their financial systems.
We need regular and timely international surveillance of all
countries' financial systems and of international capital flows,
not just to point out weaknesses, but to ensure these weaknesses
are addressed and to identify systemic risks to the global
financial system. We need to incorporate the expertise of
national and international supervisors and regulators, who can
bring to the international system their experience of
strengthening financial sectors and dealing with systemic risk at
the national level.
This means developing a new international framework to bring
together the IMF, the World Bank, the Basle committee, and other
international regulatory groupings to focus on global financial
stability and supervision. I believe we need to consider far-
reaching reforms.
while there is no need for a wholly new and self-standing
institution, there is a clear need for much closer co-
ordination and coherence between, and reform of, existing
institutions. That is why we must urgently examine the scope
for a new and permanent Standing Committee for Global
Financial Regulation, bringing together not only the Fund
and Bank, but also Basle and other regulatory groupings on a
regular - perhaps monthly - basis. This would recognise
that the key challenge facing the global economy occurs in
areas where all these organisations have responsibility and
expertise. It would be charged with developing and
implementing a mechanism to ensure that the "rules of the
game" - the necessary international standards for financial
regulation and supervision - are put in place and properly
co-ordinated.
this Standing Committee for Global Financial Regulation
could also play an important role in strengthening the
incentives on the private sector to improve its risk
assessment. It could act as the focal point for better
information sharing between the international financial
institutions, governments, and the private sector - so that
the risks are fully revealed. Recent events have shown that
it is particularly important that we have greater
transparency of hedge funds, which wherever they are
formally registered can have an impact on global financial
markets. But recent events have also suggested that better
information may not be enough. We also need to consider
strengthening prudential regulation in both emerging and
industrialised countries and particularly for cross-border
activities. The Basle committee is looking at the scope for
revising its capital ratios as they apply to short-term
lending, and I encourage it to put forward proposals as a
matter of urgency.
the Standing Committee for Global Financial Regulation could
also help to find better ways to identify systemic risk. In
the UK, we published last year a Memorandum Of
Understanding, setting clear divisions of responsibilities
and establishing a regular system of meetings and
surveillance to ensure cooperation between our national
financial institutions to identify and address systemic risk
at an early stage. This sets out a clear framework for
regular cooperation between the Treasury - which is
responsible for ensuring the whole system works in the
public interest protecting the interests of taxpayers, the
Bank of England - which is responsible for the stability of
the system as a whole - and the new Financial Services
Authority - which is responsible for supervising and
monitoring financial institutions. But systemic risk is not
confined to national boundaries. What we need is an
international memorandum of understanding which would
establish the proper division or responsibility at the
international level. We need to explore how this could be
done to reduce the chance of crises occurring.
dealing with crises
Just as we need new international machinery for crisis prevention,
so we also need a better, more systematic approach - involving
public and private sectors - to dealing with crises when they do
occur. we need to ensure that the international community is able
to respond to short -term liquidity crises in countries that are
committed to reform, and to help such countries maintain access to
the capital markets.
In a crisis, the first need is always to act quickly to stabilise
the situation. But we have to find ways to do this without bailing
out private investors. We need private companies to take risks, but
with a proper assessment of those risks and to take responsibility
when things go wrong. And we need public institutions that help to
make clear what the risks are, and provide a framework when things
go wrong - a framework to which the private sector contributes as
well as the public sector.
There is action to be taken here at the national level. For
example, the avoidance of misconceived implicit or explicit
government guarantees of private liabilities, and the improvement
of national bankruptcy laws. Action on both is now underway in
several Asian countries.
At the international level, I would like to see the IMF indicate
that in the event of a crisis, and where a country adopts good
policies, it may be prepared to sanction temporary debt
standstills, by lending into arrears, in order to enable countries
to reach agreements with creditors on debt rescheduling. By making
this clear in advance, private lenders would know that in future
crises they would be expected to contribute to the solution as part
of any IMF-led rescue.
And there needs to be a mechanism for the Fund to liaise with
private sector creditors and national authorities to discuss the
handling of debt problems at times of potential crisis.
The IMF should remain at the centre of this framework, which should
include the new standing committee for global financial regulation
to co-ordinate the identification of systemic risk. We need to have
clearly defined procedures for deciding when and how to provide
liquidity support. And we will need to address many difficult and
complicated issues as a mater of urgency, not least the future
funding of the IMF.
a code of good practice on social policy
Fifth, we need to respond to the human dimension of the crisis. I
want today to set out my proposal for a code of good practice on
social policy. A proposal I will be putting to my colleagues in
Washington next week.
We need to set out guidelines for dealing with the social
consequences of the global economic problems. And we should not
see this just in narrow terms of creating social safety nets.
Rather we should be trying to create opportunities for all to
contribute as well as benefit, through training, education and in
other ways - in other words modern, active welfare systems.
Good economies, as many now acknowledge, depend on good social
relationships and therefore on the building of trust. And
countries and companies engaging in reform need a shared
understanding of the challenges they have to meet, whether it is by
dialogue, social partnership, policies that lead to a sense of
fairness because there is equality of opportunity or by other means
by which democratic participation is improved.
Creating national support for the policies needed for economic
growth depends on there being adequate systems for helping people
who are victims of economic crises. This is indeed a clear role
for government in the new fast changing global economy: not
guaranteeing that nothing will change, or leaving people
defenceless against change, but helping equip people to adapt to
and master change.
So we should aim to create decent working conditions everywhere.
All the international institutions should share in the task of
promoting core labour standards in all countries and decent levels
of social welfare and protection.
We need to promote the international development targets on
universal primary education and on reduction in infant and
maternal mortality rates, as well as provision of clean water and
sanitary conditions for all.
The World Bank should help governments in all affected countries in
Asia to get social support systems in place as soon as possible.
It is the poor and the unemployed who have most to lose if reform
fails, and it is because we are committed to putting their
interests at the heart of our response that we need this code of
good practice on social policy.
And the World Bank has a key role to play in developing and
promoting a social code, to ensure that governments have in place
policies to strengthen social systems and tackle the social impact
of sudden shocks to the financial system.
In the design of IMF programmes to help countries in crisis the IMF
and the World Bank must also ensure that the reforms they demand
are consistent with the code of good practice and, as far as
possible, preserve investment in the social, education and
employment programmes which are the foundation for growth. I hope
that, with the support of the development committee, the World Bank
working closely with the IMF will draw up such a code of good
practice on social policy as soon as possible.
CONCLUSION
Let me say in conclusion that in the new global economy, neither
the United Kingdom, you - our Commonwealth partners, nor any other
country can afford the easy illusion of isolationism. We are all
shaped by and must work together to shape the forces at work in our
global economy.
These four codes of good conduct for policy-making, codes agreed
by the international institutions, but accepted by national
governments and the radical institutional changes I have set out
today would, in my view, offer a new framework for economic
development.
This will give new hope to the poorest and most vulnerable
countries. But it needs to be combined with measures to reduce
unsustainable debt. I shall have more to say on this later today.
The HIPC process must be accelerated and we must do more beyond
HIPC for those countries facing unsustainable domestic debt. By
increasing the number of countries in the HIPC process to reach
decision point before 2000, speeding up debt relief to post-
conflict countries especially those with arrears to the
international financial institutions, and securing a wide-ranging
review of the HIPC initiative by the middle of 1999 to include
consideration of debt sustainability criteria. We are determined to
secure maximum progress by the millennium.
The questions I have dealt with today are sophisticated and
technical. But we must never forget that they are also human
questions. They involve the living standards of people as well as
the level of financial transactions. They involve not only the
value of capital or trade or investment, but the deepest values of
our societies.
The responsibility of all of us who lead in the era of
globalization is to meet the authentic problems of our times with
a vision, an intelligence, and an energy which will make the world
economy stronger, more stable, and more prosperous - ultimately
more open not just to the free flow of goods, but to the rising
tide of people's aspirations everywhere.
# = pounds sterling