Addressing the Backlash Against Globalisation, a Southern Perspective of the Problem - Remarks at the World Economic Forum, Davos 28 January 2001

1. In order to develop a response to the current backlash against globalisation we need to be clear on what we mean by globalisation and understand the reasons for the backlash against it.

2. By globalisation, which we see as an evolving and ongoing historical process, we mean the integration of national systems of production and finance. It is driven by policies of liberalisation in trade and finance.

It is embodied in an ensemble of international relations and institutions, at the apex of which are the multi-national corporations, multi-lateral trading and financial institutions like the IMF, the World Bank and the World Trading Organisations (WTO). Faster globalisation is reflected in the incredible growth in the size of cross-border flows of goods, services and capital.

3. The impact of globalisation is extremely uneven, both within and between nations. It implies rising inequalities within countries (because of the shift in labour demand); it leads to greater polarisation across countries (e.g. R & D, knowledge production remain concentrated in a small body of already industrialised countries and tends to reproduce their competitive advantages); and has resulted to greater vulnerability to macro-economic shocks (developing countries seem to be especially vulnerable) that lower growth and employment rates resulting in widening the gap with developed countries.

4. The concern of countries of the South is largely a response to this structural divide between the developed and developing countries and as a result globalisation is -

Perceived to be a system (meaning the institutions that typify it) in which the strong countries/nations advance their national interests to the detriment of the weak nations, especially in the area of trade;
Accused for having led to the worsening the conditions of life of the marginalized. It is blamed for the deep structural poverty in which half the world's population live on less than $2 per day and a fifth on less than $1;
Blamed for the untenable debt situation that has risen in many of the low income developing countries;
Blamed for the periodic financial crises that spread with great ferocity and seem to affect more seriously, developing countries like the recent Asian contagion; and
Said to have led to the profound fissure between economic inclusion and social exclusion that has emerged within and between nations.
5. The choice for countries of the South is not whether to engage with globalisation or not, but how to engage with it. It is essential for governments and people to engage with the process critically, to re-shape and re-direct its impact. The objective must be to enhance citizens' incorporation and access to the benefits of globalisation, while minimising polarisation and social exclusion, and mitigating these effects when and where they do occur.

6. There is also a concern that that the WTO (seen to be one of the key institution of globalisation) and industrialised countries are very susceptible to pressure from protectionist groupings like organised labour, the agricultural lobbies and manufacturers involved in the "grandfather" industries (steel, textiles and clothing).

7. In order to address the backlash there are a number of imperatives that we need to address. These are now briefly dealt with.

8. The first key challenge is the reform of international financial and trading institutions to take on board the concerns of the countries of the South. For example in regards to the WTO there is a need to re-examine their rules (governing intellectual property rights, dumping and countervailing measures, subsidies, etc.); the agreements governing market access may need to be renegotiated so as to benefit both developing countries and developed (perhaps they need to favour developing countries!); and the structures of governance require reform to give greater weight to the concerns of the countries of the South. In a sense this would lay a basis to address the profound imbalances in the structure of the global economy. In this regard we think the delay in restarting the Millennium Round of the WTO after the Seattle debacle is unnecessary and unfortunate!

9. Another challenge is that Governments of developed countries need to do more to expand access to their markets for developing countries' products by lowering tariff exemptions and also providing exemptions from the many non- tariff barriers. In this regard the developed countries need to provide support to developing countries to comply with their sanitary and phyto-sanitary measures governing their imports.

10. Another important challenge is how to ensure greater mobilisation of resources for development in countries of the South. Here there are two matters that require attention.

11. The first of these relate to the expansion of the Highly Indebted Poor Countries (HIPC) initiative so as to include more countries and a larger share of countries' debt. Debt relief should be granted more quickly and should be tied to development targets and outcomes in relation to poverty reduction, reform of institutions of governance.

12. The second relates to increasing the rate of flow of (private) foreign direct investments (FDI) to developing countries, especially to Africa (Net FDI inflows to Sub-Saharan Africa averaged less than 0.7% annually in the 1990s, compared with an average for all developing countries of over 1.2%).

13. Clearly to increase the flow of such foreign savings (as well savings of Africa's private investors, many of whom also prefer to hold their wealth outside the continent!) would require developing countries to lower risk perceptions of potential portfolio and direct investors, by improving credibility of public financial authorities and the soundness of public and private financial institutions.

14. Finally, there is a need for a renewed commitment to partnership between the international social partners that entails a shared responsibility to eradicate poverty, social exclusion and marginalisation. On the part of developing countries this means a commitment to create conditions of peace, stability and good governance.

Thank you.