Developed countries pledge $5b in trade aid for poor nations

The Jakarta Post ,  Jakarta   |  Tue, 09/19/2006 8:20 AM  |  Business

Riyadi Suparno and Benget Simbolon Tnb., The Jakarta Post, Singapore, Jakarta

Finance and development ministers gathered in Singapore for the International Monetary Fund and World Bank annual meetings pledged Monday to assemble over US$5 billion a year in aid for trade and resume stalled trade talks by the end of the year.

The ministers grouped in the development committee of the bank and the IMF expressed concerns over the de facto suspension of the Doha trade negotiations, and called on major trading members of the World Trade Organization to resume the talks by the end of the year.

Sofjan Wanandi, president of the Indonesian Manufacturers Association, hailed the committee's commitment, saying the financial aid was important to help developing countries improve their infrastructure to enable them to compete in the free market.

""The money is of course not enough for developing countries. But I think it's good as an initial step,"" said Sofjan, who was invited by the IMF's finance committee to speak Sunday at a special discussion on globalization with business leaders from developing countries.

British Chancellor of the Exchequer Gordon Brown, who is also the chairman of the International Monetary and Financial Committee of the IMF, said more than $5 billion in aid for trade had been committed by donor countries to help developing countries build their infrastructure and capacity to trade.

According to Brown, European countries and the European Commission will increase their assistance to a total of 2 billion euros a year by 2010. Japan has promised $10 billion over three years and the U.S. a total of $2.7 billion a year by 2010.

""The UK calls for all countries to turn their commitment into concrete and credible financing, within a new `aid for trade' framework,"" Brown said.

Sofjan said developed countries realized there was opposition from developing countries to globalization due to the imbalances that have so far resulted from the system.

""Globalization is a reality, but it is increasingly seen by the people in developing countries as a bitter reality,"" he said.

He noted that since the Asian financial crisis in late 1997 it has become much harder for the Indonesian government to pursue a globalization strategy because of dwindling support at home.

""Criticism of the IMF's involvement in the recovery program became widespread. The high and unfairly distributed cost of the crisis, the slow economic recovery and increased poverty and unemployment were all seen as indications of the failure of the globalization strategy,"" he said.

That is why, he said, a number of efforts must be taken by the government, with support from international financial institutions, including the IMF, to ensure globalization becomes more acceptable to the public.

He said there was a need for governments to strengthen their role in the provision of physical and social infrastructure, including education, health and other public services, especially for lower income people.

""Therefore, improved public governance is key to correcting the image that globalization only benefits the privileged few,"" he said.

Negotiations of the Doha Development Round were suspended indefinitely following the United States' refusal to give even an indication that it might further cut farm subsidies.

Almost all ministers speaking at the development committee meeting Monday, including U.S. Secretary of Treasury Henry M. Paulson, Jr., supported the resumption of the trade talks.

""It is encouraging to see the international financial institutions voicing their strong support for an ambitious Doha Round outcome,"" Paulson said.

He said the U.S. had begun to implement its pledge to double its trading related commitments, with aid-for-trade accounts for roughly two thirds of the total funding in its Millennium Challenge Corporation Compacts.

Also speaking at the development committee meeting was Indonesian Finance Minister Sri Mulyani Indrawati, representing 11 Asian and Pacific countries. The minister also called for the speedy resumption of the trade talks, and said that ""aid for trade should not be seen as a substitute for the Doha Round"".

Aid for trade serves as an important complement to a completed Doha Development Round that promises more benefits to developing countries, as the name suggests, Sri Mulyani said.

Speaking to journalists earlier, Brown was upbeat the Doha Round would resume by the end of the year, as demanded by the development committee as well as the International Monetary and Financial Committee which he chairs.

Copyright © 2008 The Jakarta Post - PT Bina Media Tenggara. All Rights Reserved.