Symposium in Jakarta: ''50 Years of UNCTAD: Trade as an Engine of Sustainable Growth and Development''
21 April 2014
Excellencies,
Distinguished Colleagues,
Friends,
It is my great pleasure to address this symposium commemorating the fiftieth anniversary of UNCTAD, hosted by the Government of Indonesia. As many of you will know, Indonesia held the first ever large-scale conference organised by and for developing countries, in 1955. The spirit of the Bandung conference marked the beginning of the rise of a confident south, and led to the creation of the Non-Aligned Movement, which met for the first time in 1961. Three short years later UNCTAD was established and the Group of 77 was formed. So our 50th anniversary is really a joint anniversary, and Indonesia is a particularly appropriate place in which to mark it.
The title of today's symposium, "Trade as an engine of sustainable growth and development" shows how far we have come in fifty years. In Bandung in 1955, trade was a source of unsustainable, systemic imbalances and asymmetries in the world economy. In those days, trade perpetuated a skewed and biased international division of labour. Former colonies relied primarily on the export of raw materials and were forced to import high-value-added manufactured goods from their former colonial masters. This core and periphery relationship maintained the sharp distinction between North and South and raised doubts that political independence alone could provide the former colonies with economic freedom.
The Bandung Conference called for the newly independent countries of the South to diversify their economic base and to develop their own manufacturing capacity. The African and Asian countries represented at Bandung called for not only modifying existing trade patterns and rules, but also for creating a special UN fund for economic development and an international finance corporation to regulate capital flows. In an early precursor to the spirit of UNCTAD, the Bandung Conference foresaw that trade needed to be treated in an integrated manner, if it was to become a path for sustainable growth and development.
Bandung also recognised the need for -- and power of - solidarity among developing countries. Indonesia's President Sukarno spoke passionately about "hurricanes of national awakening and reawakening" helping the developing world find its own paths to development. He just as passionately called for Third World unity. Following Bandung, this desire to promote solidarity among former colonies, and together claim their rightful place in international affairs, began to resonate across the existing multilateral landscape.
Just a few short years later, UNCTAD was founded in 1964. For the first time, the universal membership of the United Nations embraced an inclusive and forward-thinking development perspective. Since its creation, working with its member states, UNCTAD has strived to create a world economy that serves the interests of all. It has pursued this goal through its analytical research and innovative policy proposals; through its inter-governmental negotiations and consensus-building; and through technical cooperation with developing countries to support their efforts to benefit from globalization.
Independent UNCTAD thinking has contributed many useful and innovative policy ideas to the development discourse over the years. Preferential tariffs under the Generalized System of Preferences helped launch many of today's industrialised developing economies; the creation of the Least Developed Country category recognised the special needs of small or vulnerable economies; donor country targets for official development assistance supported the scaling up of aid flows; and the innovation of "special drawing rights" created a new form of international liquidity. Over our history, UNCTAD supported Paris Club debt renegotiations and devised sustainable debt mechanisms; we issued early warnings on financial crises and global capital flow spillovers; and today we are identifying new policies for south-south trade, to take note of the very different global environment that exists today compared to 50 years ago.
At a 50th birthday, it is traditional to celebrate a life lived to the fullest, and we certainly plan to do this during our anniversary week in June. But it is just as important to think about what the future will bring us. After all, the world has changed profoundly in these past fifty years. Reflecting this, UNCTAD's work has evolved from North-South relations and problems to have a greater focus on inter-dependence, not only inter-dependence between all the countries of the globe, but also across the different sectors that make up the global economy. Nonetheless, I would argue that the broader concerns and grievances of developing countries that animated discussions in 1964 are still with us today, albeit reflected in many new challenges.
In today's world, the divisions between North and South have blurred. A number of emerging countries have enjoyed unprecedented growth performance over the past decade and the share of the global population living in extreme poverty has declined dramatically. When UNCTAD looks at the big forces that sustain growth and development -- capital formation, economic diversification technological upgrading, etc., -- the real success stories, and many are located in the region we are in today, have designed strategic interventions that direct those forces towards creative and productive outcomes that help to lift all boats. Unconventional thinking about national, regional and global problems remains the hallmark of UNCTAD and, if anything, should be sharpened in light of recent experiences in the rising South.
At the same time, a number of least developed countries, landlocked developing countries and small-island developing states have remained at the margins of the world economy. Moreover, the greater interdependence that characterizes today's world implies that problems and challenges affecting these countries threaten the broader world economy as a whole. The obstacles facing the poorest countries - disease, conflict, inequality, poverty, biodiversity loss due to climate change - create externalities that also affect the developed countries and the strong performing developing countries, as well. Demand for the UN system to deliver global public goods that can help overcome these externalities has never been more important.
Coordinated international action is crucial to meet these truly global challenges. But we have to seriously ask, as our predecessors did in Bandung and at UNCTAD's first meeting in Geneva, are the structures designed to govern the global economy really fit for purpose? This is an appropriate year to do so; and not only because of the institutional anniversaries we are celebrating but also because negotiations on both development and climate are moving in to unchartered territory.
Today the world is more interconnected and interdependent than ever. Building a better and more effective system of multilateral cooperation is in the best interest of all countries. I fear that a combination of lack of trust and narrower interests are preventing the kind of rejuvenated multilateralism we urgently need.
How can UNCTAD contribute to building a more inclusive multilateral agenda? We have made the most difference when our research, our consensus building efforts and our technical cooperation activities have been pushing in the same direction. Bold ideas such as development of productive capacities, international support measures for LDCs, debt relief proposals, and policy space, to name a few, must be translated into policy action by member states, and require technical support to help them adapt to local conditions. Only a truly integrated framework can ensure a lasting relevance for UNCTAD. All of the above calls for a repositioning of UNCTAD to better respond to old and new developmental challenges. In doing so, we will need the full support of developing countries like Indonesia and not only in the UN setting but in new fora, such as the G20, where I believe UNCTAD can also help developing countries backstop their positions.
To accomplish a repositioning of UNCTAD - and indeed of the entire UN system - to ensure that we are fit for purpose will require the leadership and guidance of our member states. And I must highlight the role that Indonesia has played in this regard. Not only has Indonesia played an important role in managing UNCTAD, through the capable leadership of His Excellency Ambassador Triyono Wibowo, President of the Trade and Development Board, but the Government of Indonesia has also been extremely engaged in forging the post-2015 development agenda, which will provide guidance to the while UN system going forward. As you all know, the multilateral trading system received a boost of confidence here in Indonesia last December at the Bali Ministerial - the success of those negotiations are in no small measure thanks to the capable leadership and guidance of the Indonesian authorities. I am confident that given your engagement in the post-2015 debate, together we can succeed in giving the broader UN multilateral system a similar jumpstart as formal negotiations on the Sustainable Development Goals kick off this fall.
Finally, before I conclude, allow me to address some of the topics of this important symposium on trade as an engine for sustainable development. We know that export-led growth cannot be an option for all economies all of the time. This is particularly true for systemically large economies, like Indonesia. In recent years, a consensus has emerged that much greater attention should be given to expanding domestic demand. It is important to realize however, that this focus on domestic demand should not be at the expense of trade policies. Pursuing synergy between macroeconomic, trade and industrial policies can serve the processes of structural transformation and catching up. Producers in developing countries have the advantage of proximity to their own markets and those of their region. If many trade partners in the developing world were to expand their domestic demand simultaneously, they could become markets for each other's goods and services and thereby improve each other's exports and balance-of-payments.
Domestic demand in Indonesia, as in other countries in the region, such as India, the Philippines and Thailand, has supported output growth in the region as a whole thanks to a range of strategic policy measures. Indonesia, the largest economy in Southeast Asia expanded by 5.8 percent last year and its annual growth is expected to remain strong by global standards. However, if weaker commodity demand from China and Japan puts downward pressure on output, then the world's biggest exporter of palm oil, thermal coal, tin and nickel ore, could benefit from refining its demand policies.
While trade has been instrumental in lifting Indonesia's growth in the last fifteen years, it seems that the post-crisis landscape may not offer the same buoyant external environment as before. Not least, environmental concerns could mean that global consumers are less willing to use palm oil, and solar is increasingly a powerful competitor to coal. UNCTAD, along with other international agencies, is looking again at the role of industrial policy in the process of structural transformation and economic diversification, and we would be happy to engage further with Indonesian policy makers on refining our advice on this issue.
I am pleased to note that today's symposium tackles the issue of trade as an engine and enabler through the lens of small and medium enterprises and global value chains. These are important topics at the heart of UNCTAD's work. In Asian countries, small and medium enterprises contribute to more than 80% of output and jobs. Small and medium enterprises are indeed the key not only to inclusive growth, but are also critical for generating innovation and helping industries technologically upgrade up the value chain.
As countries seek to stimulate further domestic demand, the integration of small and medium enterprises into global value chains will not only create more jobs but will also allow a broader segment of the population to benefit from the interdependence of the global economy. UNCTAD research estimates that 80% of global trade -- more than US$20 trillion -- involves global value chains. As products or services move from conception to end user along the global value chain, there are more than enough opportunities for small businesses to get involved. In this regard, I look forward to learning the insights and policy recommendations that will emerge from today's symposium.
Ladies and Gentlemen,
Two years ago, Indonesia expressed concern that the "developing world must have a greater voice in economic decision-making" in order to develop fair trade policies and relieve global pressures on employment. Indonesia called on UNCTAD to strengthen cooperation and partnership for trade and development. And today, UNCTAD is doing just that.
In conclusion, let me emphasize that Indonesia has played a pivotal part not only in the creation of UNCTAD but throughout its fifty years of existence. We hope this beautiful country, and indeed all of our member states -will continue to support our efforts to build a more equitable, stable and efficient global economic system. We are looking back on our colourful past, but also forward to a relevant and engaged future. Since our founding UNCTAD has served as platform for the South to promote its collective economic interest. Solidary and unity of G-77 has been the crucial element which enabled UNCTAD to play that important role. Harnessing South-South cooperation to a broader vision of development action could offer UNCTAD an important opportunity to strengthen its voice on 21st century development challenges.
