Mr. Chairman, [Mr. Riaz Muhammad Khan, Foreign Secretary of Pakistan]
Honourable Ministers,
Excellencies,
Ladies and Gentlemen,

At the start of the 62nd Session of the United Nations General Assembly, let me say what a pleasure it is to have this opportunity to address members of the Group of 77.

I would like to begin by thanking Ambassador Munir Akram of Pakistan for his dedicated leadership of the G77 over the last year, and I would also like to extend my congratulations to Ambassador John Ashe of Antigua and Barbuda on being elected as Chair of the G77 for the coming year. Let me also take this opportunity to applaud the efforts of the G77 and China at the recent High-level Committee on South-South Cooperation and on the resulting recommendation for the General Assembly to mark the 30th anniversary of the Buenos Aires Plan of Action with a U.N. Conference on South-South Cooperation. 

I would like to focus my remarks today on the development challenges and opportunities facing the South in terms of the current global economic environment and how this affects UNDP’s own support to programme countries.

I. The global economic context and prospects for development

A country’s development does, of course, first and foremost depend on its national efforts and development strategy. But the South’s development prospects are undoubtedly also affected and conditioned by the overall global economic context. This is particularly true of the smaller economies that are more dependent than the bigger ones on the global economic environment.

In the last few years the global context has been mostly favourable, despite ongoing weaknesses in the global rules of the game, rules that still overwhelmingly reflect the interests of the rich and powerful rather than the interests of all.  Global economic growth has been rapid, fuelled by fast growing developing countries themselves. Emerging market and developing economies grew at an average rate of 8.1% in 2006, far outstripping the global average of 5.5%. In addition, strong global demand drove commodity prices up, benefiting a wide range of developing countries.

Countries, firms, and households, in both the developed and large parts of the developing world, had easier access to finance. During the first part of this year, optimism reigned.  However, the very nature of the global economy and the different circumstances of small island developing states, of land-locked countries, and of countries in or emerging from conflict mean that many developing countries continue to not benefit from the overall buoyant global economy.

While the overall context has been favourable, the on-going turbulence in financial markets in the second part of 2007 is shifting the immediate economic outlook. The visible signs of problems so far remain restricted to financial markets, which are likely to continue to be affected for some time to come by credit concerns that have not yet run their course. But as I outlined in my speech to the UNDP Executive Board earlier this month, I do hope that what we have been experiencing over the last few weeks does not lead to a major contraction of the world economy. I am optimistic, particularly because the inflation rates that exist today make it much easier for monetary authorities to respond if there is a need.

In the past, when inflation was very high it was very hard to counteract inflationary tendencies, but today I think we do have that option in terms of the monetary authorities, and I think that will make it easier to address the possible problems. The current crisis may also be more limited this time due to the very resilience of many Southern economies.

But regardless of how this turmoil will be resolved, there are three observations that can be made at this stage that are relevant for all who care about development.

I. Regulatory challenges and its implications for developing countries

The first is that the source of the turmoil originated in developed countries, contrary, for example to what happened in 1997 during the Asian financial crisis. I make this observation not to lay blame, but to emphasize a critical point: recent developments in financial markets, driven by the emergence and widespread use of very complex financial products and structures, are posing new challenges to regulatory, auditing, and supervisory entities in the most sophisticated financial markets. Financial innovation and vibrant financial markets certainly bring benefits. But financial markets need to be properly regulated and supervised. Whether the current regulatory and financial supervision agencies in developed countries could have done more to avoid or mitigate the turbulence will be a point of debate for years to come. But it appears clear that the existing regulatory institutions and practices are having some trouble keeping pace with market developments. Market regulation is an on-going challenge in developed countries.

For developing countries, this has two implications. First, they must be alert to what is happening in the more advanced economies. They must be ready to react, and, if possible, to react in a coordinated way. Second, as financial markets develop inside developing countries, it is here that the regulatory capacity needs to be strengthened so that some of the weaknesses we see in more advanced countries are not repeated in developing countries.

II. Current global economic situation a reminder of our interdependence

I would also like to stress today how deep our mutual interdependence has become. This is not, of course, a novelty. There have been periods in the past where developing countries were affected by policies of developed countries, such as in the debt crisis of the 1980s. But this interdependence is particularly strong in financial markets today. When times are good, this aspect of globalization is mostly positive. Many developing countries, for example, have been able to access global capital markets to meet their financing needs. In fact, they have made great and often costly efforts to bolster their credibility and reputation in those markets. But policy choices and regulatory practices in a remote country may unsettle financial markets and affect the prospects of access to finance in developing countries.

As a result of the recent turbulence in financial markets, risk spreads in emerging markets went up from about 150 basis points in early June to around 250 basis points in September, while the fundamentals in these countries remained basically the same. This was partially driven by the decrease in the yields for risk-free securities that provide the basis for calculating the spread, not so much by a sell-off in emerging market debt. But it was still the case that debt servicing became more expensive in relative terms for emerging markets due to developments outside their control.

With such strong interdependence, the effectiveness of domestic policy is weakened, even for the strongest countries. This is when we are especially reminded of the importance of multilateral approaches to deal with issues that transcend national borders. No matter how strong the efforts of one country on its own, when there are issues of such interdependence, no single country will be able to entirely determine outcomes on its own.

III. The role of multilateralism in helping countries respond to global economic challenges

My third and final point on this, which is related to the two previous ones, is that it is clear that multilateral institutions will need to play a central role in helping countries to address challenges in the global economy that affect their development prospects. Certainly, international financial institutions have a critical role to play when times turn bad. But the United Nations, including UNDP, also has an important role to play in wider area of working with countries of the South to help strengthen the capacity of their institutions to respond to the global economic environment.

As the UN’s lead development organization, UNDP can work in partnership with our programme countries on these kind of big, cross-cutting and multi-sectoral themes:  the overall design of development strategies; the prioritization of needs and resource allocations; the development of institutions that can help make markets work for and deliver benefits to all; and the overall measurement of progress towards achieving national goals. UNDP’s support to national institutions that can deliver results to their people is in demand and I thank you for the confidence you express at the country level in my colleagues.

Indeed, UNDP’s work across our focus areas, namely, poverty reduction, crisis prevention and recovery, governance and environment and energy, is made up of interlinked dimensions all aimed at helping countries design and implement a development strategy that reflects specific national circumstances and national objectives with the support, where appropriate, of donor countries, international organisations,  and international and regional financial institutions.  UNDP’s efforts in its four areas must always aim at enhancing national capacity. Support to capacity development is UNDP’s single most important service to its partner countries and is especially important for Least Developed Countries. UNDP increasingly provides capacity development assistance through the linking of experiences and resources between developing countries through South-South Cooperation.

Indeed, the G77 and China has long been a supporter of innovative ideas for development through South-South Cooperation and UNDP will continue to use this modality through our country programmes and through our support to the Special Unit for South-South Cooperation housed in UNDP. Accordingly, UNDP is committed to supporting initiatives of the G77 such as the Consortium on Science and Technology for the South launched last year in Brazil; the meeting of experts to conclude the Development Platform of the South that took place here in New York earlier this month; the upcoming 13th Session of Intergovernmental Follow-up and Coordination Forum on South-South Cooperation in 2008; the mid-term review of the Second South Summit happening later this year; and the ministerial forum on water resources set to occur in the Sultanate of Oman in March 2008. Your support for and commitment to strengthening UNDP and the Special Unit for South-South Cooperation is gratefully acknowledged.

Within the overall global context I have mentioned, let me restate that UNDP is here to support the Group of 77 and China in our common aim of a more equitable 21st Century. We are pleased that as a global partner we can work with you in addressing common challenges.  Many people living in the global South continue to suffer from poverty, poor health, lack of infrastructure and inadequate access to clean, affordable energy services. In addition, the effects of climate change are already being felt in some developing countries and in terms of mitigation and adaptation, many countries that are already having difficulties sharing in the fruits of global growth will face substantial new costs and barriers to increased prosperity.

The global South is nonetheless emerging as a new driver of the world economy, with greater self-confidence and a greater determination to take charge of its own future. As the economic capacities have increased among developing countries, so too has cooperation in terms of mutual assistance and increased collaboration.  UNDP stands shoulder to shoulder with you in these efforts and in working to achieve your goals and advance human development for all.

Thank you very much.