24 September 2003

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World Bank faults the rich countries

- too little spent helping the poor

The World Bank opened its annual meeting in Dubai yesterday with a blistering attack on rich countries for spending hundreds of billions more on their militaries and their farmers than on helping the poor.
"Our planet is not balanced," the bank's president, James Wolfensohn, told delegates from 184 countries. "Too few control too much, and too many have too little to hope for. Too much turmoil, too many wars. Too much suffering."
The failure of global trade talks this month in the Mexican resort of Cancun 0n highlighted the deep divide that must be overcome to create a stable future, Wolfensohn said in an opening address to the joint meeting of the World Bank and the International Monetary Fund in Dubai.
He criticized rich countries for providing just USD56 billion a year in development assistance to poor countries, compared with more than USD300 billion they spend on agricultural subsidies and USD600 billion spent on militaries. Nations have committed an additional USD16 billion in aid by 2006, but Wolfensohn said poor nations could easily use twice that amount.
At Cancun, rich nations balked at greater cuts in their farm subsidies and poor nations, saying that their farmers suffer from those subsidies, refused to proceed.
The US Treasury secretary, John Snow, and other top finance leaders have been lobbying for a quick resumption of the trade negotiations, arguing that breaking down barriers to global commerce would benefit all.
But rich nations need to do what they say they support, Wolfensohn said.
"It is inconsistent to preach the benefits of free trade and then maintain the highest subsidies and barriers for precisely those goods in which poor countries have a comparative advantage," he said.
Finance leaders are worried about the American budget deficit, approaching a record USD500 billion, but Snow called the spending "understandable" and pledged that Washington would bring it down through economic growth and responsible spending.
"It came about because of a recession and efforts to deal with a recession" Snow said.
He called it "Economics 101" that countries run deficits to tackle recessions but said the United States planned to slash its deficit in half over the next five years, to below two percent of gross domestic product.
The IMF's managing director, Horst Koehler, said increased US spending had provided a stimulus to the global economy but called on Washington "to establish a credible framework for a return to a balanced fiscal position."
Refusing to lay blame for global troubles entirely on the West, Wolfensohn called poor countries' spending of USD200 billion on militaries - more than they invest in education - "another major imbalance."
Nigeria's central bank governor, Joseph Sanusi, hailed Wolfensohn's speech but said developing countries wanted action, not words.
"When you have poverty and some people living in affluence, then you have conflicts," Sanusi said.
"There is a saying: the hungry dog and a dog that is full, they cannot play successfully."
The meeting, which concludes tomorrow, is the first such event held in an Arab country, and many delegates are calling that a good signal for the troubled region.
The host country, the United Arab Emirates, opened Tuesday's session with a call on the international community to help rebuild Iraq and bring peace in the Palestinian-Israeli conflict.
"The Arab world is a region of tremendous richness, diversity and potential," said the finance minister, Sheik Hamdan bin Rashid al-Maktoum.
"This part of the world will not be able to realise its full economic potential until a just and permanent solution to the regional conflict is found and the international community makes a serious effort." He cited "rays of hope" in Iraq, which is hoping to recover from decades of economic mismanagement under Saddam Hussein and United Nations sanctions that held back its crucial oil industry. Iraq has just announced a plan to establish a market-based economy with access to foreign investors in all segments but oil.
Help for North Korea urged
South Korea's finance minister yesterday urged the International Monetary Fund and the World Bank to help North Korea prepare for eventual membership, saying the move was necessary for the reclusive North to participate in the world economy, The Associated Press reported from Dubai.
Amid the standoff with the United States over nuclear weapons, the North has "already taken important steps toward a peaceful settlement," but it must eventually become part of the globalise economy "to be truly successful," said the finance minister, Kim Jin Pyo.
"Getting there will require help, both from the IMF and the World Bank," Kim said.
He also urged the two lenders to provide "technical assistance" that would prepare North Korea for membership. North Korea is not a member of the IMF or World Bank and therefore could not get any financial assistance from them for now. To gain membership, North Korea would first need to improve its relations with other members, an IMF official said.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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