by Michael Camdessus, former managing director of the IMF
Keynote speech at the conference on "Financing for Development: Regional Challenges and the Role of Regional Development Banks"
February 19, 2002
© Peterson Institute for International Economics
Introduction by C. Fred Bergsten, director, Institute for
To reflect the importance of the evening, our speaker is Michel Camdessus. When we thought about having these events—the conference today, on regional development banks and Monterrey, and tomorrow on new ideas for financing development—we asked ourselves, "if we had the entire world to choose from, who would be our choice for tonight's dinner speaker?" It so happened that I was having dinner with him in Paris a couple of weeks ago and convinced him to come join us. France is famous for its superb civil servants and Michel Camdessus is the cream of the cream. He was director of the French treasury, rising to the very top of the most elite part of their civil service. He then became Governor of Le Banc de France. Then of course Michel came to Washington in 1987 and he was managing director of that little financial institution down the street for a record 13 years and left only less than two years ago, after what I think both the creditors and the supporters would agree was an incredibly distinguished career as Managing Director of the Fund. At that point he deserved retirement, but was far from it. Michel is now the sherpa for the NEPAD having been appointed to that job by the G8. He is also Kofi Annan's special envoy for Monterrey and he is particularly here with us tonight in that capacity. He spent last week with Tony Blair and other heads of state in Senegal and then went to South Africa to talk about the "NEPAD strategy." In short he is still not only in the middle of but also on top of the very issues that we are discussing in this conference today and tomorrow. It is with particularly great pleasure that I present and introduce a close personal friend of many years, one of the most outstanding leaders, stewards, and guiding lights of international economics for the last three decades-Michel Camdessus.
Keynote speech by Michel Camdessus
How can you speak after that! First, Mr. Chairman, let me congratulate you and Nancy for having created the Center for Global Development and given so quickly such an important event, and for making it a place for gathering so many distinguished people.
Let me start by telling you that I am happy to be here, to see so many friends to whom I owe so much. It is particularly touching to be back in Washington for the first time after the tremendous blow that you suffered here in September, and let me tell my Washingtonian friends that even though I have been here for 13 years I never felt as Washingtonian as on that very day. And, indeed, all your faces and what you are was present on my mind, and having seen you devoting your lives to life in the world, to see that, and to imagine that people could sacrifice their life for death . . . But, indeed it's what you are and what you are doing which must continue to inspire us. This is why I am so delighted to share a few impressions I draw from this new temporary lease on public life, and getting from this to bizarre jobs that I have been given recently for only a few months. And, I will like to tell you that naively perhaps, I believe that there is something there to define a way for hope. After I discussed with my African counterparts in the NEPAD business, I perceive very interesting things, interesting by the intensity of commitment I read there. And indeed something very similar in this even more temporary business I have as an envoy of Kofi Annan to try to make a success out of Monterrey. So I will comment about Monterrey and NEPAD together. You must know that NEPAD is the "New Partnership for African Development." What I see in NEPAD is something like an experimental field, or launching pad for the broader worldwide partnership Monterrey should establish worldwide.
And so I will talk about both things with you. What I have to say is very very simple.
At this moment in time I believe that Monterrey must be a success. I believe that success is possible, and I believe that the name of the game is partnership. Success is a must. Why? Of course it is not obvious at all, when you look at the media you see that no reference is made about Monterrey being possibly a major event nor to be even any event; nobody even speaks of Monterrey. My objective a little bit later in time, which is indeed my job as a sherpa, is in Kananaskis, a place in the rocky mountains of Canada where the G8 will meet. On that also, expectations are relatively low. And then you have Johannesburg in August or September for what they call Rio-Plus-Ten, a new conference on sustainable development. Here you have high expectations and there is a degree of excitement about that. And personally I do share both expectations and excitement because a lot for human beings will be at stake. But let's imagine that Monterrey is a failure, then forget about anything from Kananaskis, and let's imagine that both Monterrey and Kananaskis are failures, then be prepared for disaster in Johannesburg. And of course I go repeating that to Heads of State, Government Ministers, Central Bank governors from the industrial countries, as this is the job of my division to work with Trevor Manuel.
Of course this idea of having a disaster in Johannesburg and not to be able to go there, impresses a few of them and allows us to enter into debate on some things which should be done in Monterrey. But I tell you ladies and gentlemen that is the time to make decisions about creative innovations to put on the table, since we have just a few weeks before Monterrey.
This is the first reason that Monterrey is a must, but there are more. We will be confronted there in very concrete terms by the financial challenges of development. Even more than any new reflection on development and globalization and so on, we will be confronted by these very issues and their new dimensions in the aftermath of September 11. Without entering any major geo-strategic considerations about which I am not competent to speak, it is clear that after the successful military reaction in Afghanistan against terrorism, America and its allies must engage in an equally bold second phase of their fight against terrorism. This involves addressing violence at its very roots all around the world—namely, unacceptable poverty in all its aspects, which makes millions of people into hopeless prey for all forms of populism and fanaticism. This fight, this second phase, will require global solidarity in the broadest possible coalition for development. Monterrey must be the occasion for that.
Success, then, is a must. And success is possible. And, let me add that in spite of all the atmosphere of doom and gloom in which we (not here, you never see doom and gloom in the US—but at least in Europe) find ourselves now, there are extraordinary opportunities for constructive change. We should not miss this opportunity.
Let me call your attention to a few of these major opportunities which apparently don't catch the attention of the media. First in Africa—did you read the unanimous policy statement of heads of state from Africa, brought to the G8 in Genoa? Not least important among the signers were Mr. Mbeki, Mr. Obasanjo, Mr. Mubarak, and Mr. Bouteflika. Of course nobody remembered that from Genoa. In Genoa, the media was more interested in the lamentable attitude of the police, which led to the killing of a young man. What was decided or discussed there, everybody has already forgotten. But these heads of state brought to the G8 a statement of policies, offering an opportunity for partnership. The G8 said "OK, let's go for partnership, but not a partnership without precise definition. Rather, one based on an extraordinarily strong statement on the policies Africa which could now implement." And, they were speaking on behalf of all African Union countries. You have possibly read the so-called "Monterrey Consensus" that was prepared by the Preparatory Commission in New York and adopted unanimously—developing countries and industrial countries together. These two documents say things which would have been totally inconceivable only ten years ago. They reflect a sea change in the economic policy and government approach of developing countries. A sea change.
As for the NEPAD document, it states that African leaders have learned from their own experience that peace, security, democracy, good government, human rights and sound economic management, sustainable budget deficits, creative monetary policy, and protection for infant industries are the basis for development. They say they will make a place to work individually and collectively to promote these principles in their countries, their regions, and the continent. And from this, they derive very vigorous attitudes about ownership of their policies, about globalization (which they see as an opportunity to take advantage of-not something to protect yourself against), about good governance, about participatory democracy, rejection of corruption, promotion of peace and regional integration, and so on. This reflects a strong political will to find a new way of doing business. "New way of doing business"—these are the very words I heard from the Vice President of South Africa Mr. Zuma. It is a new way to development and this of course is a reflection of the sense they have got now, that the primary responsibility for the future of Africa is in their own hands and not in the hands of donors or former colonial powers.
And, listen to this: "We recognize the need to pursue sound economic policies aimed at sustaining high rates of economic growth, full employment, poverty eradication, price stability, and sustainable fiscal and external balances to ensure that the benefits of growth reach all people, especially the poor. Governments should attach priority to avoiding inflationary distortions and abrupt economic fluctuations that negatively affect income distribution and resource allocation, along with prudent fiscal and monetary policy and an appropriate exchange rate regime, is required." Who said that? Was it Enrique addressing the annual meeting of the IDB? Was it an MD of the IMF addressing the annual meeting at the time of the so called "Washington Consensus" (which has never existed, by the way)? No. These are the words that I read in the document prepared by the Preparatory Commission for the Monterrey conference to be submitted there for the agreement of the world community. All the countries of the world—developing and developed—not only agree on these policies but see them as wise enough and good enough to own them and to pledge themselves to assist in their implementation. Believe me that when you have spent 13 years of your life to try to—let us say—convince one way or another (though only by good means) 123 countries to adopt these kinds of policies, and then when you see them telling you "we want to do that. We will do it anyway, but we will do it better if you help us," then you see that there is an opportunity.
And of course this opportunity, these two statements, which bring me back to another building block for change, and this is the statement the undertaking adopted in September 2000 on the occasion of the Millennium Summit in New York. There you remember that 170 Heads of State and government reiterated their pledge to make the so-called Millennium Development Goals their own objectives and goals. This was a restatement of many pledges they made and had forgotten during the 1990s.
I believe that if you take the three things together then you have something important. For me, I must say sorry for insisting so much on this, but the Millennium Development Goals are sacrosanct. We all gave our word. Forget about building a civilized human society if ignoring your word is not the first tenet of the constitution. I believe that more and more this is being understood by world leaders. We must create a kind of synergy among these three elements—the pledge of the Africans, the pledge that we will get from the Monterrey conference, and that old pledge that we had on the Millennium goals—to make things change somewhat.
Talking about the Millennium Development Goals, let me say that the quality of our policies of cooperation and the actions of our multilateral institutions should always be judged on the way in which they focus and implement the Millennium Development Goals. And, let's imagine that this new consensus on policies is implemented—let's have a dream that the NEPAD is solidly established, that the Millennium Development Goals are scrupulously implemented-what an extraordinary change! We will have developing countries really in the driver's seat for their future. An active partnership will develop in these many fields where joint action can accelerate the course of change. We will have an ameliorative process, which could develop among developing countries allowing the example of the best performers for development for economic performance for democracy and human rights, to influence the course of policies of the others. And last but not least, the private sector, both national and foreign, could at last play its full role as the key engine for development. This is indeed the essential factor.
Now, you would tell me, "you have been in the business for 15 years of trying to bring countries to take all these points in due consideration. How can you still believe that they will move this time?" Well it's true that you possibly need a degree of naiveté, perhaps—I don't know—or faith in human beings to believe it. But I believe also that with all the dangers of the present time, there are building blocks. But the name of the game is partnership. It's the name of the game for developing countries; it's the name of the game for us; and it's the name of the game for developing countries and industrial countries together. For developing countries it is crystal clear, I don't need to insist on that, and I must tell you what I see in my contacts with our interlocutors in the NEPAD business—you have there an implementation group of 15 countries—they know pretty well that the primary responsibility for success is with them. They know that they will only get support in our countries for a significant increase in aid if they demonstrate that they are decisively engaged in this new way. They hold the key to this significant change. So partnership is their primary responsibility. But we share it. Indeed when we talk about partnership in Africa or here in the developed countries, I see that too often we talk about the duty and responsibility of the others. Many in Africa are interested in NEPAD because this could bring some further financing, and many here are interested because this could bring better government in Africa and so on. We must demonstrate that the two things are so closely related that one does not happen without the other. For us there is a price tag attached, and indeed when one sees the difficulties we have in getting agreements in burden sharing for whatever the decision on whatever issue, then indeed one asks, "How will we ever be able to agree on something of the magnitude which is certainly behind these ideas of a global real partnership?"
At this time there is creation of wealth in the world as never before in history, so I think that at least we shouldn't be intimidated by these kinds of questions. And there are things we must do anyway-whatever the cost—although in fact the cost is very low. And here I am touching, as you can imagine, on the issue of institutional capacity building. We cannot ask the developing countries to improve their governance, and still be so bad in extending to them the institutional capacity building they need in a rational, effective, and efficient way. This is particularly true regarding the judiciary. If Monterrey were to deliver only one thing, it should be that. We must have on this issue—and Africans insist on getting more of this special capacity building and I would like them to ask us for that—we must respond in a real irreproachable way to this issue with quick, effective, capacity; to respond with flexibility to the diversity of national or cultural settings, to be able to really disseminate promptly the experiences by the best performers. So it is essential that in one way or another we put together a kind of forum of international institutions, but also of donors and recipients of assistance to draw the list of what has been done—in spite of all the good intentions and money which is invested but with a limited result—in order to have the framework where progress could be generated. This is possible, this is low cost, and it is immensely urgent. It's a kind of precondition for the real success of what could be decided.
But there is also the financing and the important issues of ODA and debt. I believe, seeing it from a distance, that HIPC is working well, but remembering from my time at the IMF the problems we had in getting 93 countries to contribute the trust fund of PRGF, I make my mental calculations and I believe that you shouldn't be very far from the moment you will have to replenish that when countries in conflict come. And I must tell you Monterrey should have that in mind because if this is not replenished, then you will not be able to respond to major cases still to come.
We should also follow constructively on the courageous ideas that Ms. Kreuger launched about funding for middle-income countries. We have worked on that for years and these ideas are familiar to many, but it was timely to bring them back to public attention. Work is urgently needed on that, and I believe Monterrey should invite thoughts and decisions on this issue. But you come to the money and what to do there? Well, the Secretary General says "we simply cannot allow the decline of ODA to continue, and the target of an extra 50 billion dollars can be taken as an immediate short-term target to be announced at Monterrey and achieved within two or three years. You know the origin and the legitimacy of this number of $50 billion. It's the money you need—and nobody has seriously challenged these figures probably because they come from the World Bank—to reach the Millennium Development Goals: $50 billion on a yearly basis. This means that, globally speaking, the OECD countries double their present contribution, and in so doing till reach only two thirds of the well-known 0.7 percent of GDP target. As you know, the number already had a high degree of legitimacy. But the Chancellor of the Exchequer—and I salute his courage—has given it another degree of legitimacy by endorsing it. Of course there is much hesitation in industrial countries to accept such a commitment, particularly in this great country—which at least can say that it has never been committed to the 0.7 percent. Many others as well who are very far from this objective are still hesitant. I am pleased to observe that this has triggered reflection within industrial countries. Several have accepted to establish a calendar to catch up and to move progressively toward the $50 billion target—though perhaps not in the two or three years that the Secretary General rightfully suggests. Still, they have entered into a discussion on that. I must say that in my country, I have the privilege to be the sherpa for both the Prime Minister and the President—and both of them will fight hard on this issue in the next few weeks. I obtained from both, each side separately, a promise to move on it as promptly as possible. Let's say that in a number of years—not too much more than the number suggested by the Secretary General—they can reverse the lamentable backward tendency which France has demonstrated during the last few years.
Lets encourage all countries to take the Secretary General's call seriously. You cannot pledge development goals and then deny the financing. But important as this $50 billion number may be, there's something even more important perhaps. In the framework of my work with NEPAD, I observe that there are a few major countries, which have difficulty with whatever number unless it is connected with a precise concrete objective in terms of health, education, reduction of poverty, and so on. But—and this is important—they show readiness to join the consensus for extra spending when we talk about fulfilling the Millennium Development Goals in countries which would, on their side, really deliver on sound policies. Well, you'll tell me that they don't take extraordinary risk because in the beginning the countries really delivering on the sound policies will not be that numerous. Okay. But let's take the risk. Let's imagine that the good example of the good performers will be made even better by the support they will get. This could broaden the number of good performers. And then all countries, and not only those committed to the 0.7 percent target, will be lead to increase their ODA and we could reach a moment when the two groups of countries—those who believe in the 0.7 percent, and those who believe in only fulfilling their Millennium Goal pledges—will increase their contribution to ODA in parallel. And this is a bet I think we should accept, and indeed provided that we make sure that these financing of the Millennium Development Goals is really well insured. As a matter of fact, for this to work we must establish jointly, developing countries and industrial countries, the partnership rules and the systems which would contribute to maintain us on this new path.
We must feel obliged to stick to our pledge whatever the circumstances. It's like Odysseus trying to resist the song of sirens by binding himself to the mast. We must be bound in some way to our pledge and have a system which checks that. In the same way developing countries should be bound to their own pledges. And there are a few very promising new initiatives in that direction. You know, for instance that African countries in the framework of NEPAD have agreed to develop among themselves systems of regional surveillance with the view of developing peer pressure mechanisms to ensure implementation of their policies. Indeed all of them recognize that they must do that with the support of institutions and particularly with the support of the African Development Bank. So the Africans are really trying to do that. We must help them—particularly we Europeans who know from experience of how long, how difficult, how painful, it is to enter into a system of regional surveillance. It's a long process to learn and I'm not sure that in Europe we have completely learned all of the textbook lessons. But nevertheless I can tell you that my own country wouldn't have done the Euro thing without peer pressure and regional surveillance. And I suspect a few others also. So it is in Africa as well.
You know that real partnership calls for symmetry. And why not? Shouldn't we accept to give more teeth to our mutual surveillance, particularly as it applies to the Millennium Development Goals. Why not? We should do that. If not we are not legitimate in asking the Africans to have peer pressure systems. Let's accept that our African partners criticize the way in which we deliver our ODA, and let's accept their suggestions to reform ODA. You have in the Millennium document a very good list of things for improving the effectiveness of our ODA. With peer pressure on both sides, and mutual surveillance established that way, I believe that the basic principle of partnership would be in place. Namely mutual accountability. We must develop that and bring it to fruition. We must establish a roundtable—an institution of dialogue between the two systems of peer pressure to be sure that if difficulties arise they are properly handled, and that if progress toward the goals is too slow, corrective measures will be implemented to speed it up, and that dialogue will continue which will help us mutually to improve our efforts.
I see that I have already spoken too long, and I have not touched yet a few of my favorite topics such as SDR; I suspect George (Soros) will discuss the beauties and merits of SDR allocation and their multiple guises. There are many other issues on which we should concentrate our attention, as well. If you take NEPAD, the Africans will tell you, tell us about financing the regional infrastructure which you will have to put in place. We would have to discuss conflict prevention and resolution. If we turn to Monterrey then we would have to talk about access to markets, we will have to talk about the bigger say developing countries should have in the management of the global economy, and indeed we should speak also about the follow-up mechanisms for the conference to be certain that we will be bound to its lessons and conclusions.
Let me only tell you that the millennium started with tremendous challenges. It started with horror. It started also with elements for hope. I see this between the pledges in New York to eradicate poverty, the planting of the seeds of a partnership between industrial countries and the poorest countries of the world in Genoa, and the prospects to broaden that to a worldwide partnership in Monterrey. I see these three events are milestones in the way for hope. So let's go that way as partners.