March 12, 2014

A New International Economic Order

Essay : [A New International Economic Order]

English Essay on "A New International Economic Order"

A New International Economic Order

The search for a New International Economic Order (NIEO) since 1974 has meant that the responsibility for achieving a basic economic security and freedom, economic domination of any given country is not that of the people of that country alone. It must be shared by the international community at large. In one sense, Pakistan's vision of the NIECO has been a relatively simple affair. Basically, what we have been trying to achieve since Breton Woods, through the UN, UNCTAD, GAIT and the alike, is to translate into international economic relations the kind of objectives and policies, which have become the accepted norms for relations between groups within nation -states in all modern societies. It is high time the questions were raised how for are we likely to proceed in the new direction in the near future; the record in relation to the various provisions of NICO provides a dismal picture so far.

The relation between the rich and poor countries fall roughly into four categories; trade, flow of finance, technology and migration. South cooperation is among the envisaged pillars of the new order.

As for as trade is concerned, the search for economic security has floundered mainly on the instability of raw material prices. The 11th special session of the UN General Assembly in 1980, had as its main theme in question of assuring reasonable prices for primary producers. Commodity agreements are few and not fool proof. There is neither any stabilization fund nor even a yard stick to determine reasonable prices that could be stabilized.

The term of trade and share of trade are both against the poor countries. The World Bank has documented that, in Sri Lanka, the loss due to the terms of trade was so much that it reduced the per capita income growth by a half. It would have been 2.5 percent but it was reduced to 1.1 percent per year. And Africa now loses as much due to the decline in terms of trade as it gets by way of foreign assistance.

There are fundamental reasons for this phenomenon. Protectionism is rising and unilateral free trade and import liberalization is being forced on the poor countries by the International Monetary Fund (IMF).

When the IMF's and World Bank's own executive of Pakistan origin were placed in charge of the country's ministries of Finance, Economic Affairs and Planning, the country's smooth sailing with IMF was taken for granted.( Such lack of trust between the Fund and Pakistan as had existed for many months was also expected to become a thing of the past.

That nothing of the kind has happened will be clear from the announcement that the second tranche of $76 million would be released after the IMF receives the financial data for the month of December 96, and finds the data satisfactory after evaluation. This shows that Pakistan is still a long way from regaining the IMP's trust.

It was in fact emphasized that the IMF does not give help to encourage or subsidies bad monitory policy, the cause that created the problems in the case of Pakistan. Excessive public sector borrowing and inability to collect revenues had been the main problems.

Pakistan is now perceived as a habitual offender by the IMF. The general impression was that no matter who was in charge, the some habits, continued. Even in the time of Moeen Qureshi in 1993, the performance criteria were not met.( Whenever a loan is sanctioned, a disbursement schedule is prepared.

The demand for restructuring Pakistan's heavy external debt is getting stronger as the debt burden and the cast of servicing that debt keep on rising sharply. Economists, official and non-official are calling for a moratorium on repayments for three to five years and re-scheduling the debt servicing in a manner that does not hurt Pakistan's economic growth.

Such demands are not new in Pakistan, but the intensity and the steady rise in the number of person calling or the moratorium are, after the total debt has risen to 28-60 billion dollars -an increase of $ 1.53 billion within a year -even after the heavy debt servicing payment of $ 210 billion made last year. These sort of demands were rejected by governments in the past as counter-productive or the cumulative losses to the country would be greater than the total gains.

In the recent years, while the long-term debts have been rising slowly, the medium and short terms loans have grown fast. In fact short terms debts are on the increase as the government negotiates more and more loans from foreign banks and others by pledging the cotton and rice crops and even the earnings from foreign telephone calls. In addition, it is coming up with new bonds to raise more funds like the Yen bond.

No doubt the ratio of poorer countries share in the world industrial production in fact has risen from seven to 10 percent. But their share of the low income countries and all developing countries has fallen from 27 to 21 percent.

Similarly, inequalities has been increasing in an absence way in the last 30 years. With 45 to 47 percent of the world population, the share in the world income of the low income countries has gone down from eight to five percent. The difference between the US income and the poor 'countries income has risen from 40.1 to 48.1.

In the field of aid, the failure to achieve even the one percent of gross national product (GNP) of the developed countries is a' grim reminder of how for we really are from the actual realization of a new order.

In fact the aid which was 33 percent of the GNP of the developed countries in 1970 has come down to 06 percent in 1980. There is no significant trend towards multi lateralization of aid. The United States has blocked the seventh replenishment of IDA, amounting to 9000 million dollars', The amount proposed by the World Bank was 16000 million dollars.

There are many countries to day in Latin America and sub-Sahara Africa whose debt service is twice their export earnings, The functioning of the IMF is exposed by the fact that if forced the governments of Tunisia and Bolivia to raise food prices by 100 to 200 percent leading to riots. All 6000 people had to be shot dead in these countries to comply with the condition of IMF. At the same time, the rise in the value of dollar has added three to four billion on their debt burden.

While technology is believed to be transferred by the multinational corporations, the fact is that we pay heavily for the non-transfer of technology. In fact, one eighth of the export earnings goes to the multinational as direct or indirect cost of allowing them to operate within certain territories.

The ratio between the private outflow and the capital inflow that is what the MNCS take out of a country and what they put in has been 154: 100. In Latin American out flow was and 319 percent of the inflow. In the sixties it was 300 percent.

The multinationals export from the poor countries total up to the extent of 40 percent. What is transferred is bottling, processing and packaging. Hard technology is almost absent. Real prototypes, real formulae are seldom transferred except under very strong bargaining pressure.

Restrictions on migration have been increased during the last decades, all over Europe and the United States. This is despite the fact that the density of population is two persons per square Km in Australia and 621 people per square Km in Bangladesh. When Europe was in trouble in the 19th century, 60 million people moved out to empty continents.

Cooperation among the developing countries and collective action on their part have remained a far cry. The producers cartels, except the OPEC, have not materialized so far. Attempts have been made at producer's alliances on the pattern of the OPEC for trade in iron, bauxite and coffee. Unfortunately, these cartels could not succeed in the stabilization of their respective prices.

The International Bank for Agricultural Development which was supposed to be financed by OPEC countries, has not materialized. The proposed South Bank is also a non-starter.

There is no qualitative difference in the world economic scene of today from that of fifties. South-South Conference in 1982, have all proved largely frustrating exercises. More intensive initiatives towards the goal are called for.

No comments:

Post a Comment