Al-Ahram Weekly   Al-Ahram Weekly
2 - 8 December 1999
Issue No. 458
Published in Cairo by AL-AHRAM established in 1875 Issues navigation Current Issue Previous Issue Back Issues

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Developing strategies

By Aziza Sami

Mounir Zahran
Mounir Zahran

As the new gospel of globalisation spreads, academics, politicians and administrators in developing countries are increasingly being left with the feeling that if they do not look towards their own economies, and act together to counter common concerns, developing nations will not only face ever greater marginalisation, but will actually become the risk-bearers of the new global order.

In this context, the brain-storming session by G15 representatives held in Cairo days before the Seattle talks under the title "Globalisation and its Economic and Social Impacts -- A Southern Perspective", gained added significance. Sponsored by Egypt, currently the head of the G15 and the host of the group's next summit in the year 2000, the conference was intended to set an agenda for the developing nations of Africa, Asia and Latin America before what is widely expected to be a tumultuous round of talks.

Organised by the Ministry of Foreign Affairs and Cairo University's Centre for the Study of Developing Countries (CSDC), the Cairo meeting brought together government representatives as well as academics.

Kenyan representatives NN Wambagu and RN Mule touched upon the concerns of every single government in developing nations when they identified "the challenge to achieve a competitive, efficient, equitable and pervasive development". While the industrialised nations seek access to ever more markets while at the same time protecting their domestic industries, developing countries are left to address the problems of how trade liberalisation is affecting "poverty and income distribution, education, taxation and protection for poor and vulnerable groups".

Although developing nations are asked to open up their economies to trade, their economic structures more often than not impede them from benefiting from the ongoing "globalisation" and its main agents which are trade, multinational corporations and capital markets.

Globalisation, as witnessed so far, is a continuation by other means, of the western multilateral trading system that reached its apogee in the 19th century, said Ambassador Mounir Zahran, President Hosni Mubarak's representative at the G15. Zahran, a former head of Egypt's delegation to the WTO in Geneva, argued that the current global trading system continues to propagate the imbalances that have characterised international trade for over a century.

Developing countries still produce primary goods and provide an easily exploited labour force. They continue to be dependent on limited overseas markets, and suffer substantial imbalances in the payments of rents and royalties. Developed countries, on the other hand, Zahran argued, retain almost total independence from the developing countries with which they trade. They enjoy diverse sources of supply and the allegiance of those who control the world's major financial institutions allows them to exercise "disproportionate and decisive influence in international financial agencies and bodies".

"The challenge in countering globalisation," says Zahran, "is not, therefore, to stop global market expansion, but to find rules sufficiently equitable to assist developing countries in benefiting from the ongoing process."

Agriculture is expected to be the focus of some of the most heated sessions in Seattle, with attention directed on the conflicting interests of the EU, the US and Japan. But at least this will be a battle between contestants of more or less equal clout. Sandwiched in-between will be the developing countries, whose production structures will, if anything, place them at an even greater disadvantage when agricultural markets are liberalised, according to Ramzi Zaki, professor of economics at Kuwait University's Faculty of Administrative Sciences.

"Developing countries' agricultural exports are hampered by a low elasticity of demand, coupled with non-tariff restrictions imposed by the advanced economies," says Zaki. He challenges the premise that trade has been the driving force behind growth in developed countries, suggesting that the opposite is just as likely to be true.

"Linking the future of development to orientation abroad, i.e. production for export, might be an appropriate development strategy under certain conditions but is completely inappropriate when it ignores the requirements of the local market."

Developing nations, Zaki argues, must, then, not only negotiate at the multilateral trading table but need, as well, to implement their own reform agendas. They must redress budget deficits, act to improve low savings rates, imbalances in exchange rates and in trade. The debilitating foreign debt crisis suffered by many developing countries must be resolved, and the multitude of problems related to labour, infrastructural capacity and export potential addressed.

In the current round of talks, therefore, it is imperative that developing nations seek an extension, and not an end, as is demanded by the advanced nations, of GATT prescribed transition periods.

G15 countries should themselves accept the fact that globalisation does not automatically mean the "retreat of the state from its basic function in ensuing its citizens' welfare through sound macro-economic policies", said CSDC director Mostafa Kamel El-Sayyid. The state has a role in protecting markets and national banking sectors as well as ensuring the diversification of sources of foreign capital, and export destinations, he added.

The current round of talks must give priority to redressing growing trade deficits by the developing countries says Rubens Ricupero, secretary-general of the UN Conference on Trade and Development (UNCTAD).

"For the 130 developing countries which do not have the dubious privilege of being among the 29 emerging markets, more reform measures will have no relevance" says Ricupero. "What they and the emerging markets need is abundant infrastructure finance from world and regional development banks and official development aid, particularly the 48 least developed countries receiving less than one per cent of FDI's. They also need prompt debt relief."

The Asian financial crisis, Ricupero points out, underlined the fact that developing countries need to ensure long-term lending equity flows and direct investments rather than risky short-term capital flows.

"The worst danger comes from the feel good factor," warned Ricupero, "from complacency and blind, naive optimism."

H. Prasad, economic advisor to the Indian Ministry of Commerce, said that a reform of "the global financial structure" which takes account the interests of developing nations must be realized.

"Globalisation has raised a number of issues related to the structural transformation of developing countries" said Prasad. "These issues will require the formulation of polices which are in line with developing countries' priorities and which will maximise the benefits accruing to them from globalisation."

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