Trade and Development Board, 66th session - Item 1: Opening address & Item 4: Annual Report of the Secretary-General
24 June 2019
Excellencies, Distinguished Guests, Ladies and Gentlemen,
I bid you welcome to this 66th session of the Trade and Development Board convened around the transversal theme of “Inequality: a drag on reducing poverty and achieving the Sustainable Development Goals.” Income and wealth inequalities – as many of you are aware – are important obstacles to translating economic growth into inclusive prosperity. Along the economic, social and environmental dimensions, the unequal division of our world into pockets of poverty and of plenty remains a major barrier, which UNCTAD continues to address through the gainful integration of developing countries in the world economy.
This year our TDB focuses on inequality just a few short weeks before the 2019 High Level Political Forum at ECOSOC meets in New York to tackle the related theme of “Empowering people and ensuring inclusiveness and equality." Our deliberations this week are meant to inform, enrich and provoke what I hope will be frank and sober stocktaking by Member States about why we are not making adequate progress towards achieving the SDGs.
In our high-level segment this year, we shall address the challenge of inequality from four different angles of UNCTAD’s mandate: 1) the means of implementation for reducing inequality, 2) the linkages between trade and inequality, 3) the widening digital divide facing developing countries, and 4) the growing inequalities among developing countries and how South-South Cooperation seeks to address them.
Revisiting the persistent and growing challenge of inequality to SDG achievement is fundamentally important to UNCTAD today. Nearly four years after making the triple promise of 2015, we must not ignore the hard truth that today the world is further behind on implementation than when we began, especially with respect to trade and development issues.
- Allow me to elaborate why the international community is today further behind than four years ago in making trade, finance, investment and technology work for development.
Amidst worrying economic signals, today is a dark hour for multilateralism and international cooperation. The last year has been marked by 1) rising international tensions over trade and technology, 2) slowing growth in global FDI flows threatening SDG investments, and 3) mounting concerns over swelling external debt burdens in developing countries.
Rising international tensions over trade and technology
Over the past year, amidst an unfolding “trade war” of more than $300 billion in tariff escalation between two of the world’s biggest economies, the discourse around international trade has moved further away from the development agenda than it has been in a generation. With declining trust in multilateral solutions, claims about the mutually beneficial gains from trade today increasingly ring hollow, replaced by the simpler notion that trade is a zero-sum game.
Analysis earlier this year from the UNCTAD Secretariat has shown that one of the biggest casualties of this “trade war” are developing countries. For example, ASEAN and its regional value chains risk losing substantially due to trade diversion from the “trade war”, given their tight integration into Trans-Pacific trade. The LDCs and small and vulnerable economies that are extremely dependent on external demand from the major economies are also bound to be affected by spillovers and ripple effects.
Recent analysis from the UNCTAD Secretariat has also shown that the “trade war” is primarily a struggle for dominance over the value chains of the future. While tariffs are not very effective in protecting domestic firms, they are very effective at limiting trade from the affected country, making them ideal weapons not for redressing dying industries or job losses, but rather for limiting a trading partner’s prospects for moving up the value chain. Consequently, due to the current “trade war”, transformative concepts that developing countries have longed rallied around, such as "industrial policy" and "technology transfer," are today being stripped of their development content and weaponized in what risks becoming a much longer term "technological cold war."
The risk from trade tensions goes well beyond the world's two largest economies. The UNCTAD Secretariat also estimated earlier this year that in Europe a no-deal Brexit would push the UK into recession, and wipe $35 billion/ year off EU exports, as Europe loses preferential access to UK markets. And according to our estimates a no-deal Brexit would also irreparably harm the trade competitiveness of non-EU countries, especially many LDCs.
Slowing growth in global FDI flows threatening SDG investment
The less favorable global trade and investment policy climate has also help drive a prolonged slow-down in FDI flows. The 2019 World Investment Report released just two weeks ago, documents that global FDI flows continued their slide in 2018, falling by 13 per cent to $1.3 trillion, for the third consecutive annual decline in a row.
Our analysis also shows that longer-term structural factors are at play in the FDI slowdown, raising the stakes for developing countries seeking external sources of SDG investment. The underlying FDI trend has been anemic since 2008. Net of one-off factors such as tax reforms, megadeals and volatile financial flows, global FDI inflows have now averaged only 1% growth per year for the last decade, compared with 8% in 2000–07, and more than 20% growth before 2000.
Mounting concerns over external debt burdens in developing countries
Average levels of external indebtedness are also today at an all-time high in developing countries, with both their public and private debt burdens growing more than one-third over the past decade. Amidst uncertain global financial conditions from Argentina to Ghana, from Ecuador to Zimbabwe, from Haiti to the Democratic Republic of Congo, developing countries are experiencing default, distress or fast-growing vulnerabilities.
With the devastating recent hurricane seasons in the Caribbean and the damage wreaked by Cyclone Idai on Mozambique, Malawi and Zimbabwe, addressing the confluence of climate and financial vulnerability is also more urgent than ever before.
In addition, the sizable investment needs in SDG-specific sectors are prompting developing countries to continue to increase their debt levels, despite the warning signs. In advance of this year’s Financing for Development Forum, the UNCTAD Secretariat calculated that the average fiscal gap for all developing countries, if both the SDGs and long-term debt sustainability are to be achieved, amounts to almost 10 percent of GDP.
- So, what is UNCTAD doing about this dire situation? Let me briefly report to UNCTAD Member States the steps that UNCTAD has been taking to address the worrying economic environmentover the past year:
Over the past year, despite the gloomy outlook, several avenues have opened for countering the declining trust in multilateralism and for furthering international cooperation on trade and development issues. Since the last Trade and Development Board, we have made progress on 1) promoting closer regional and South-South economic cooperation, 2) scaling up “smart partnership” with the private sector, 3) advancing the digital transformation in developing countries, and 4) adopting new ways of working across the UNCTAD Secretariat and with the wider UN family as a whole, particularly at country-level.
Promoting closer regional and South-South economic cooperation
In contrast to the backlash against trade integration witnessed in some developed markets, African countries have increased their commitment to closer integration and cooperation with UNCTAD support. Following agreement last year, the AfCFTA came into force on 30 May 2019 following ratification by member states. UNCTAD’s Regional Office in Africa has been spearheading our support to Phase II in the negotiations of the world’s largest free trade area, which are now focusing on issues like competition policy, investment and intellectual property rights.
Later this week I will launch the 2019 Economic Development in Africa report, which is focused precisely on how rules of origin adopted by the AfCFTA can help enhance intra-African trade. Later in July I will join many African leaders as they launch the operational instruments of the AfCFTA at the Extra-ordinary Summit of the African Union Heads of State and Government in Niamey, Niger.
Adding to the momentum of the AfCFTA, UNCTAD also organized the First African Forum for National Trade Facilitation Committees in Addis Ababa in December 2018, seeking to lower the trade costs of intra-African trade and to support African countries as they implement the WTO Trade Facilitation Agreement.
At the global level, UNCTAD also sought to support developing countries looking to counter the declining trust in multilateralism through intensifying our support to South-South Cooperation. This past year UNCTAD contributed to UN-wide efforts leading up to the BAPA+40 Second High-level United Nations Conference on South-South Cooperation, which took place in Buenos Aires, Argentina in March 2019. In advance of this Conference, a cross-divisional team led out of my office drafted a special report “Forging a path beyond borders: The Global South,” and organized a thematic consultation in Geneva on South-South Cooperation for trade and development.
These contributions fed into the negotiations of the BAPA+40 outcome and today we are working with the UN-wide network of South-South focal points to formulate the United Nations BAPA+40 follow-up strategy for supporting closer South-South Cooperation. Notably this work has generated much interest by Southern countries in several UNCTAD initiatives including, inter alia, the Generalized System of Trade Preferences between Developing Countries and UNCTAD support to South-South Cooperation on digital industrialization.
Scaling up “smart partnership” with the private sector
In October 2018 in Geneva UNCTAD hosted the largest World Investment Forum ever with 11 heads of state and government, over 50 ministers, 70 parliamentarians, 50 CEOs and more than 6000 participants all seeking new ways to spur private sector investment in their countries in pursuit of the SDGs.
The spirit of the WIF was also finally embraced in New York, when UNCTAD together with DESA co-organized the SDG Investment Fair on the sidelines of the ECOSOC Financing for Development Forum in April 2019. This inaugural SDG Investment Fair in New York led to the establishment of a new global CEO alliance – the Global Investors for Sustainable Development – that aims to help finance the Sustainable Development Goals with crucial private capital.
In addition, the UNCTAD Secretariat has helped support the adoption this year of the new United Nations Secretary-General’s SDG Financing Strategy and its Roadmap. We are also helping plan the High-Level Dialogue on Financing for Development planned at Head of State level for this coming September at the High-Level Political Forum at the General Assembly.
At a more grassroots level, UNCTAD’s smart partnership with AliBaba Business School, the eFounders initiative, continued to grow, graduating its 6th class of “netpreneurs” in June 2019. That brings the total number of eFounders fellowship programme graduates to 212 entrepreneurs from Asia and Africa, many of whom we continue to work with in other aspects of our digital commerce work, as we seek to catalyze the nascent digital commerce ecosystem in developing countries.
Advancing the digital transformation in developing countries
UNCTAD has continued to strengthen its support to the digital economy in developing countries over the recent year. The first regional African eCommerce Week was held in Nairobi in December 2018 in collaboration with the African Union and the European Union, and the fifth global eCommerce Week was organized in Geneva in April 2019. Both events demonstrated increasing recognition of the eCommerce Week as the leading forum for Ministers, senior government officials, CEOs and other business representatives, international organisations, development banks, academics and civil society to discuss the development opportunities and challenges associated with the evolving digital economy.
Over the past year, demand for UNCTAD’s support to E-Trade readiness also continued to grow, as we completed eTrade Readiness Assessments for 13 countries across 3 continents with 13 more requests for assessments in the pipeline. Also with the initiation of the eTrade Readiness Assessment for Iraq we have expanded our readiness assessments beyond LDCs and began to offer them to other developing countries as well. In addition, a number of countries who have completed these assessments have requested further support to the formulation of their national e-Trade and ICT strategies.
Adopting new ways of working with the wider UN family and across the UNCTAD Secretariat
1 January 2019 marked the official transfer of the UN Resident Coordinator system from UNDP to the UN Secretariat, and the strengthening of the UN Development Coordination Office as coordinator of the repositioned UN development system. During this transition period, UNCTAD has been playing an active role working with the transition team based in the United Nations Deputy Secretary-General’s office and with the other UN Sustainable Development Group member agencies to respond to the member state requests made in the May 2018 UNDS Repositioning Resolution of the General Assembly, A/RES/72/279.
Implementation has been led by strategic results groups of the UNSDG co-led at the Under Secretary-General level. UNCTAD together with UNFPA co-chaired the Strategic Financing Results Group, which helped design the new Funding Compact with Member States is working to put the UN’s global support to financing strategies to work at the country level. We have also actively contributed to the re-design and re-branding of the UN Development Assistance Frameworks as UN Sustainable Development Cooperation Frameworks, and to the drafting of the new UN System-Wide Strategic Document, as well as the newly proposed Management and Accountability Framework for UN entities. Through all of these deliberations we have sought to highlight entry points for non-resident agencies, like UNCTAD, into the work of the UN Country Teams and have sought to both preserve and leverage our strengths and advantages as a thought leader on trade and development issues for the UN Development System as a whole.
This work has also led to stronger collaboration with DESA and UNDP particularly through the Inter-Agency Task Force on Financing for Development, as well as through the United Nations G-20 Working Group. In addition, we contributed this past year to the launch of the new UN Network of Economists meant to bring closer collaboration between economists working in UNCTAD, DESA and the Regional Commissions.
UNCTAD’s role as lead agency of the CEB Cluster on Trade and Productive Capacity has also been re-emphasized during this transition year, as well. During the recent May 2019 ECOSOC Operational Activities Segment, which is now serving as the new strengthened accountability mechanism for the repositioned development system, UNCTAD organized one of the only and most well-attended side events with other cluster members and launched a new brochure alerting the new Country Teams to the important support that the Cluster offers to the economic pillar of UN work at country-level.
In addition to the work of the Cluster, demand for our technical cooperation tools continues to grow, and we are seeking to replicate what works best and respond to developing country needs. Developing countries themselves continued to be among the largest providers of voluntary contributions to UNCTAD technical cooperation activities, particularly through self-financed projects. Indeed, in 2018, more than 50% of the $40 million in voluntary contributions to UNCTAD came from developing countries and economies and transition.
In this time of tightening budgets, in order to make our technical cooperation more effective we are seeking to replicate successful integrated approaches to our technical cooperation, such as the multi-sectoral approach of our pioneering Angola programme developed with the support of the EU and involving collaboration among three divisions. This past year we have received expressions of interest for similar programmes of scope in other countries from Botswana to Bolivia, from Paraguay to Myanmar. With the provision of sufficient extrabudgetary funding we seek to further expand this type of integrated support going forward.
Similarly, we are seeking to replicate successful integrated approaches to collaboration with regional entities. For example, on trade facilitation, customs automation and transport, we are exploring ways of emulating our successful partnership with TradeMark East Africa in the East African Community with a similar partnership in Comesa with support from the European Union. We are also seeing our largest flagship DMFAS and ASYCUDA programmes continue to grow and expand, as well. For example, just last week we learned that ASYCUDA will finally expand to more than 100 countries with the recent generous agreement with Australia and New Zealand to support ASYCUDA projects in 5 Pacific Islands countries: Cook Islands, Kiribati, Nauru, Niue, Tonga and Tuvalu.
In addition, UNCTAD continued its efforts to strengthen horizontal coordination with an eye to moving further from division-based management to task-based management. Existing horizontal coordination mechanisms like UNCTAD’s Financing for Development task force, the Statistical Coordination Task Force, and the Gender Task Force continued their work, and a new coordination team was established in the lead-up to the BAPA+40 Conference, the South-South Cooperation Task Force. Later this week, we will launch two of the outputs of the Statistical Coordination Task Force’s work, namely UNCTAD’s new Statistical Quality Assurance Framework and the inaugural issue of the UNCTAD SDG Pulse, a report which gathers statistical data on the SDG indicators of which UNCTAD is custodian.
- Looking forward, as the challenges we face are great, our fitness for purpose and agility will guide our ability to navigate the fast-changing trade and development landscape.It is my firm belief that our management approach in the Secretariat is up to the task, and I call on Member States to work constructively together to maintain focus on the substantive issues before us as we head towards the UNCTAD 15 preparation process.
As my Deputy recently informed you during the informal management briefings, and as the Working Party sessions have confirmed, our current Regular Budget situation, like that of the United Nations as a whole, has not been immune to the declining trust in multilateralism, particularly among some of the larger contributors to the United Nations budget. This has limited our ability to fully align our Regular Budget resources with the demands of the Maafikiano, notably in the case of our need to strengthen our support to the Palestinian people. But I am confident in our ability to creatively weather this difficult time for multilateral cooperation, and to find new solutions to overcome these difficulties
You will recall from my Deputy’s presentation to Member States earlier this month, that our 2020 Regular Budget will amount to $67.7 million, reflecting a $683,000 reduction from 2019 levels, which has required the regrettable elimination of five posts. This intensification of pressure on our resources comes paradoxically at the same time that Member States continue to call for greater support and more ambitious results. This is a situation that clearly borders on untenable and puts enormous strain on staff morale, as well on Member State expectations.
Allow me, as Secretary-General of UNCTAD, to appeal to you for your support in weathering this difficult period. We have been piloting several initiatives to make up the difference the best that we can. I have deployed my Deputy on a “tour-de-capital” helping raise awareness of our funding issues among Member States, and within the Secretariat we have been exploring some “out of the box” initiatives to galvanize staff morale and engage in a new ways of working. These include the Innovation Challenge that I launched last fall, the Hive Talks that we have held with Civil Society, and the Town Square initiative that we have held with staff to engage them closely on staff-related issues.
Finally, with respect to monitoring and evaluation and managing for results I am pleased to confirm that our RBM training has now reached more than 70% of UNCTAD staff. We are also implementing a number of OIOS recommendations on both statistics and the inter-governmental support service.
It is our firm desire that all of our results-based management work, and monitoring and evaluation activities support and not detract from the substantive impact of our work programme and of the constructive deliberation of our Member States around the pressing trade and development challenges, which I have outlined in this statement. Only through maintaining fidelity to our thought leadership role on trade and development will we continue to punch above our weight in influencing the gainful integration of developing countries into the global economy amidst the current challenging multilateral landscape.
