Developing concerns

The G-15 meeting in Cairo reflects the worries of developing countries in a time of crisis.

SUKUMAR MURALIDHARAN

BETWEEN Kuala Lumpur and Cairo, the Group of 15 developing countries has traversed a rocky road - from a phase of rhetorically coping with the global financial crisis, the G-15 has moved to a stage where it is face to face with the harsh consequences of the crisis. The East Asian financial meltdown was the recurring motif of the deliberations at the Kuala Lumpur summit in November 1997. But the social and political repercussions had not started working themselves out. Today, as the structural adjustment programmes sponsored by various Western donors take effect, Indonesia in particular is gripped by a wave of civil unrest. President Suharto was a reluctant participant at the Cairo summit, and events in his country cast a long shadow over the opening ceremony on May 11.

As the assembled dignitaries left Cairo for their customary retreat the next day, India's nuclear tests had overwhelmed all other concerns. For obvious reasons, it was not brought onto the active agenda for discussions. But curiously, the joint communique that was issued the next day represented a significant concession to the concerns India had been expressing during at least three successive summits with only partial assent from other G-15 members.

NOBERT SCHILLER/ AP
Argentinian Vice-President Carlos Ruckauf, Jamaican Prime Minister P.J. Patterson, Algerian President Liamine Zeroual, Egyptian President Hosni Mubarak, Malaysian Prime Minister Mahathir Mohammed, Brazilian Vice-President Marco Maciel, Indian Vice-President Krishan Kant and a Nigerian delegate at a closing press conference of the G-15 summit on May 13 in Cairo.

Vice-President Krishan Kant, who has now represented India at two successive G-15 summits, had suffered the mortification of seeing the country's concern over cross-border terrorism brushed off the agenda in Kuala Lumpur. He had greater success in Cairo, with the joint communique unequivocally condemning all forms of terrorism, their perpetrators and their sponsors.

The induction of Sri Lanka into the forum of developing countries was also read as a significant triumph for Indian diplomacy. Since the entry of Kenya in Kuala Lumpur made the G-15 a 16-member grouping, the next summit in Jamaica will feature 17 nations, though the nomenclature will remain unchanged.

It still remains unclear whether as a grouping, the G-15 will enjoy any greater influence in the councils of the advanced industrialised nations. "It takes two to tango," said Malaysian Prime Minister Mahathir Mohammad, as he wound up the deliberations in Kuala Lumpur last November. Although a tone of militant self-assertion had been set in the early part of the summit, the mood at the conclusion was far from upbeat. Formed as a forum of developing countries to frame equitable rules of engagement with the industrialised nations, the G-15 has had an indifferent record since its inception. Mahathir's plaint reflected some of the frustration induced by the sustained indifference of the rich industrial nations grouped under the G-7.

The customary year-end gathering of the G-15 was rescheduled this year, partly to work out a common agenda for the ministerial meeting of the World Trade Organisation in Geneva, due to open on May 18. Another major concern was to draw up a petition reflecting the shared interests of the developing countries, that could be placed before the G-7 summit that was to start on May 15.

Circumstances were not the most propitious as the leaders assembled in the Egyptian capital. There was no indication that the familiar malaise would be dispelled. Member-nations of the G-15 reflect a wide diversity of interests and have worked out very different patterns of engagement with the industrialised world. One of the principal aims of the G-15 - of articulating a unified perspective in world councils - remains unfulfilled simply because coherence of perspective could not be attained beyond rhetorical affirmations of common interest.

In the drama of the South-East Asian economic meltdown last year, the G-15 found a theme to unify its perceptions. Expectedly, the Asian currency crisis was the dominant motif of the gathering in Kuala Lumpur. India's own contribution to the discussions on the theme was indifferent. But as the host nation, Malaysia was able to push for an agenda of action on the issue in preference to various others.

NOBERT SCHILLER/ AP
Vice-President Krishan Kant (centre) responds to questions regarding India's nuclear tests during the G-15 summit on May 13. At left is Brazilian Vice-President Marco Maciel.

Between Kuala Lumpur and Cairo, many of the proposals remained unimplemented. An agreement to convene a meeting of G-15 Finance Ministers and central bank Governors was not pursued because of a lack of quorum. And an effort to work out a fresh perspective on international capital flows was abandoned. Early expressions of dissent with the assessment of the International Monetary Fund were abandoned in favour of entrusting the job to that very agency.

The Asian financial crisis occupies centrestage in the latest of the IMF's biannual assessments of the world economy (World Economic Outlook, May 1998). Among the prognoses is the rather gloomy one that "the advanced economies will all be negatively affected by developments in Asia." Although Japan has taken the first order of impact, with a "nascent recovery" having already stalled, further spillovers in the North American continent cannot be ruled out.

Yet the IMF's prescription does not depart from its familiar theology that far-reaching structural reforms of the fiscal and monetary system are called for. Indonesia and Thailand, it asserts, will need to "close insolvent institutions and recapitalise banks, combined with longer-term structural reforms to strengthen prudential standards and supervision."

This marks a dramatic upward movement in the standards of intrusive supervision that the IMF has adopted in recent times. In conjunction with the fiscal norms that are an inescapable part of structural adjustment programmes, these could be politically destabilising, as Indonesia has discovered. The G-15 communique makes a case for mitigating some of the rigours of a typical IMF-sponsored programme by insisting that the costs be shared among "private lenders, borrowers and governments" - a principle quite contrary to IMF theology, which accords top priority to the security of private sector capital flows.

The G-15 communique makes it clear that the social costs, including "massive unemployment" that have followed the financial crisis in East Asia, are unacceptable. It calls for higher flows of concessional capital to the developing world without "unnecessary additional conditionality". The road map it charts for the future includes a wide-ranging review of the international financial system in a joint forum of the developing and developed countries, so that short-term capital flows are sustained in a manner that can sustain growth.

The Cairo summit also reaffirmed the need for a transparent rule-based trading system under the WTO, where disguised protectionism under the guise of standards and anti-dumping provisions will have no place.

Inevitably, there has been much scepticism over the efficacy of the G-15 intervention just prior to the meeting of the G-7 and the WTO ministerial forum. Indications are that the G-7 will have little time for the demands articulated at the Cairo summit. Heady on the momentum of six years of unbroken growth, the U.S. is likely to insist on the primacy of market principles in the emerging global order. If current forecasts of normally reliable observers are anything to go by, circumstances could force a rethink in the near future.

Except for a dramatic market collapse last October, the U.S. economy has sailed through the Asian market turmoil with seemingly few perturbations. Asset prices, defying all common-sense calculations, have scaled new peaks with every trading day in the major bourses of North America. Current forecasts by most dispassionate observers indicate that the deflation - or market correction in currently fashionable terminology - may not be far. This could very easily feed through into other sectors of the economy, bringing the U.S. more in line with global market realities.

On current form, the U.S. may well respond with a renewed round of coercive economic diplomacy. Yet, other sections of the G-7 could perhaps be more amenable to listen to the voice of the developing world and work towards a new global consensus. Vice-President Krishan Kant's forecast that the G-15 has now acquired a new focus and a new momentum, may be less askew than the previous history of the forum may suggest.

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