Transcript

Dubai International Convention Centre
September 21, 2003

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Participants:

Gordon BROWN, Chancellor of the Exchequer (United Kingdom) and Chairman, International Monetary and Financial Committee

Horst KÖHLER, Managing Director of the International Monetary Fund

Thomas DAWSON, Director IMF External Relations Department (Moderator)

Proceedings:

MR. DAWSON: Good afternoon. Welcome to the closing IMFC press conference. The Chairman of the IMFC, Chancellor Gordon Brown, will have an introductory statement. Managing Director Horst Köhler here will also have some remarks and then we'll be happy to take your questions. Thank you.

I believe you do have a copy of the communiqué.

MR. BROWN: Ladies and gentlemen, thank you for being with us this afternoon. It's my pleasure to report on the successful outcome of the meeting of the International Monetary and Financial Committee today. Representatives of all the world's economies met, vigilant to current economic risks, conscious of continuing uncertainties, but positive about the opportunities ahead for a strengthening global economy, and determined that each continent do everything in its power to remove the barriers to growth, and resolve that a world that appeared to be divided over trade at Cancún can once again show itself united over global economic development at Dubai.

Our shared view is that the world economy is strengthening and that each continent should meet its responsibilities to ensure higher growth. I would direct you to the communiqué which says quite specifically that we believe that the world economy is strengthening and that we call on countries who have not so far made economic reforms that are necessary to strengthen economic growth to do so.

We say specifically that the vigorous pursuit of structural reforms and enhanced corporate governance and transparency are key to stronger, globally balanced growth. We also say as regards Europe that progress in structural reforms should be accelerated and deepened to strengthen work incentives, investment, and competition, and to address the fiscal pressures of population aging. We say of Japan that continued efforts will be necessary to strengthen the banking and financial sector. And we say of the United States, where the fiscal stance has substantially supported activity, fiscal policy will need to focus on strengthening sustainability over the medium term.

We also discussed our disappointment at the outcome of the trade talks at Cancún. We agreed, however, that the world should not submit either to protectionists or to defeatists. We say that we believe that by all recognizing the responsibility, progress on trade can be made. You will see in the communiqué that we say that the international community must urgently make progress on trade and development.

We say that ministers reaffirm their full political commitment to a multilateral, rule-based approach to trade liberalization, and to making substantial and concrete progress. Ministers, we say, were disappointed at the breakdown of trade negotiations in Cancún. We urge a speedy resumption of the Doha Round. We say it is vital for stronger global growth and for our development objectives. And we say we should focus on the issues of importance to all countries of open markets and fair access, and the reduction of trade-distorting subsidies in all areas, notably in agriculture.

The committee reiterates the crucial importance of removing the obstacles and moving forward without delay, calls on all countries to play their part, and stresses the importance of the IMF's initiative to provide assistance to countries to help them address the transitional impact of trade reforms and this will contribute to the Doha Round.

Indeed, as a measure of the importance which we attach to these issues, the committee agreed that the Managing Director of the IMF and the President of the World Bank, Jim Wolfensohn, would prepare a report on the critical importance to the development agenda of an early resumption of trade talks and the completion of the Doha Round. They agreed that with this report, the Managing Director and the President should send a letter with a copy of the report to all heads of state and all trade ministers as well as all finance ministers.

Now in our discussions this afternoon of debt relief and financing of the Millennium Development Goals we were determined to show that economic change round the world need not impoverish millions of people, but can enrich even the poorest communities. That globalization can be not just for some of the people, but be to the benefit of all.

So we also agreed that a review should take place into the topping up of debt relief for the poorest countries; that post-conflict countries should be invited to make themselves eligible for debt relief. And we discussed the needs of developing countries for health, education, and anti-poverty resources.

We also asked those countries that had not already done so, but had made promises to give debt relief to the poorest countries, to make good their promises of debt relief, and we have asked the Managing Director to report on where there are gaps in the provision of promised debt relief for our next meeting.

We emphasize the need to enhance market access and increase the level and effectiveness for donor resources for low-income countries. In order to achieve the Millennium Development Goals, we called upon the IMF to cooperate with the World Bank in work on aid effectiveness, absorptive capacity and results-based measurement mechanisms, and in examining the merits of various policy options and financing mechanisms to pay for the meeting of the Millennium Development Goals such as an international financing facility that we could mobilize the substantial additional resources that are needed over the medium term for our development objectives.

We said that developing and emerging market countries should also closely be involved and we should have a report on this by the next meeting.

Two other issues, ladies and gentlemen. On terrorist finance, we welcomed the fact that laws were being passed to attempt to root out the sources of terrorist finance. But we were agreed that countries that were finding it difficult to implement these laws should use the technical assistance that is available from the IMF, and that we should consider extending the pilot assistance programs for surveillance and support to other countries. We will have a report on this at the next meeting emphasizing our determination that there is no hiding place, no safe haven for those who finance terrorism.

On Iraq, we discussed the issues arising from the reconstruction proposals for Iraq, and the committee reaffirmed its support for a multilateral effort to reconstruct and redevelop Iraq. We welcome the constructive role being played by the IMF and we look forward to the Donors' Conference in Madrid next month based on a comprehensive needs assessment involving the World Bank and the IMF. The committee supports the IMF providing, subject to its policies, financial and other assistance to Iraq.

This was, therefore, a successful meeting which not only found the strengthening of the world economy and said that structural reforms should be brought in place so that we had stronger growth in future years, but also took steps with the measurements that I've announced, to bridge the gap between developed and developing countries by concentrating on debt relief, on poverty reduction, and on how we can finance the achievement of the Millennium Development Goals. In both areas, economic recovery, and in the promotion of action against poverty we agreed that early resumption of trade talks was of vital importance.

Finally, we wanted to thank not only the staff of the IMF and the Managing Director for his work, but also the authorities in Dubai and the United Arab Emirates for making possible these meetings, and for the tremendous hospitality that they've offered to all countries.

MR. KÖHLER: Well, I fully agree with the Chairman that this was a very successful meeting; successful because we got a better understanding of where we stand in the global economy, and the understanding is that there is a good prospect of a recovery and that the recovery will lead to sustained growth.

Secondly, I'm very satisfied that there was a confirmation that this international community within the IMF, its 184 members have a spirit of multilateral cooperation, which is very promising to solve obviously difficult issues like how to move forward now after Cancún to make the Doha Round a success, and how to work together to solve the imbalances in the global economy. And this multilateral spirit was underlined through the recognition that, in order to solve, in an orderly manner, the global imbalances, we need mainly two vehicles and two, say, actions, and these are to strengthen growth--domestic growth--in economies outside the U.S., and to have more flexibility of exchange rates work toward the equilibrium role.

So this is very encouraging, and I think that the IMF can also be very encouraged because the framework for surveillance we developed in recent years was not only fully endorsed, but also was appreciated, and we have defined where we should focus even more, and we should focus even more in particular on systemic issues. This means, in particular, that we look to spillovers from capital markets and also to systemic and regional countries and their impact on the global economy.

I am very satisfied, and I am now even more optimistic for the future.

MR. DAWSON: And now we will be happy to take some questions. QUESTION: I wonder if the Chancellor or perhaps Mr. Köhler could say more about the letter which is to be sent to heads of state and finance ministers, exactly what it will embrace, and also if Mr. Köhler could say a little more about how much assistance the IMF might provide to countries to help them address the impact of trade reforms, et cetera, and whether that will be through existing facilities of the IMF.

MR. KÖHLER: Regarding the letter, the idea is to have two elements in this letter to leaders and the heads of state.

First, again, to describe the well-known numbers about the benefits of free trade, liberalized trade for poor and advanced countries. This is well known, but we need to put it together in order to make clear what is at stake and that it is indeed possible, through more trade liberalization, to create a win-win situation for poor and for the advanced countries, but, secondly, also to put this assessment and the numbers in the context of broader issues and policy concepts, and this is, in particular, the issue of development and poverty.

It is clear that if we are not making progress with trade, then it will be almost impossible to achieve the Millennium Development Goals, first.

Second, this will make it even more impossible to fight things like drug trafficking and all of the crime, organized crime in the world.

So there is a broader context to make clear what is at stake, and I think to address the leaders, the top leaders, is important because, in the end, what we need is not only further technical arguments, what we need is effective leadership. That means that, in particular, all participants of these negotiations have to review their negotiating position and have to rethink how they can take further steps to a mutual agreement.

Related to the assistance of the IMF to trade liberalization, we think that within our existing facilities we look how it can be possible, proactively, to mitigate balance of payments problems coming out of trade liberalization. And I am very happy that the Ministers, the Governors, endorsed this initiative of the management of the IMF. But I think everybody should understand this is the utmost the IMF could do, aside from putting forward the arguments.

But in the end, it depends on political leadership, that the leaders detect it is political will, what is now needed to make progress, in particular, in the agricultural area.

MR. BROWN: Can I just emphasize that this was a unanimous view of the Committee that this report should be prepared and that the letter should be sent to heads of state and to Trade Ministers, as well as Finance Ministers. And I think it's a measure of the importance we attach to a speedy resumption of talks, that what is a unique and special initiative has been taken, which links together the World Bank and the IMF, in both putting the case for action on there, removing the barriers to trade, and telling Ministers that it is important to focus on the main issues.

I just draw your attention to the wording in the communiqué, urging the countries concerned with the trade negotiations to focus on the issues of importance to all countries of open markets and fair access and to say that focus should also be on the reduction of trade-distorting subsidies in all areas, notably in agriculture. We believed it was possible, with effort on all sides, to remove the existing obstacles and to move forward without delay, and that is why we are calling on all countries to play their part.

And we welcome the fact, indeed, the special offer that has been made by the IMF is, in my view, something that should help the resumption of talks, that where there are adjustments to take place, the IMF will make its facilities available to help countries in that transition, that period. And that, I believe, is an initiative that, in addition to our call to focus on the major issues, including trade-distorting subsidies in agriculture, that initiative is I think important to helping people see that the talks can be resumed as soon as possible.

So our disappointment at the breakdown of the trade negotiations was accompanied by our belief that, with effort on all sides, a speedy resumption could take place on all major issues of importance that could be dealt with, and that's why there is this unique and special initiative that has been taken by the Ministers, with the Managing Director and the President of the World Bank, who was also present for that discussion.

MR. DAWSON: Thank you.

MR. KÖHLER: I really would like to add something, and this is that one of the Governors said the breakdown of the talks in Cancún was not the failure of the IMF. I declared this a historical moment.

(Laughter.)

MR. DAWSON: Next question.

QUESTION: Just to dwell on that point, Mr. Brown, on agriculture. Can you give us more detail about how you see the IMF being involved in helping on--what is the term--trade-distorting subsidies? I mean, are we talking about IMF's support for French farmers here?

(Laughter.)

MR. BROWN: This requires a reading of the communiqué in detail. We're talking essentially about developing countries and the problems that they face in relation to trade. But we are also drawing attention to the fact that, first of all, we believe that some of the problems that emerged at the later stages in the Cancún negotiations, that is, the Singapore issues on competition and investment, we believe that these problems can be overcome, and all of the countries, at present, around the table believed that these obstacles could be removed.

And then the attention and focus on the important issue of trade-distorting subsidies in all areas, notably in agriculture, will have to lead to compromises by countries who are involved and continents that are involved in this. But again, there was a view amongst the Finance Ministers present, that progress could be made.

As far as the IMF's assistance, this is in relation to the developing countries and emerging markets.

QUESTION: There seem to be some suggestions coming from within Iraq of a possible immediate crisis of funding there. I wondered if, given the huge rifts that appeared over the war in Iraq, would you feel confident you're going to be able to get some sort of multilateral agreements on financing for Iraq, and what kind of amounts you would expect to be brought forward at the Madrid Donors' Conference?

MR. BROWN: But this is a matter for the Donors' Conference. It is not for us to speculate what people will put on the table in Madrid. The importance is that people attend the Madrid Conference, that it takes place next month.

Before the people who are at that conference will be a comprehensive needs assessment that has involved the World Bank, the IMF, and the United Nations, and will be drawn up for people who are present at that conference. And at that point people will make the judgment about resources.

As far as the IMF is concerned, it is true to say that we were aware of security issues affecting IMF/World Bank staff, and we acknowledge these and the Managing Director is, of course, right to take these into account. And we pay tribute to the work of the staff in every area of the world where they work in difficult and dangerous circumstances.

The Committee supported the IMF providing, subject to its policies, financial and other assistance to Iraq. So the international institutions are also encouraged to see what they can do.

And I may again say, that this was the unanimous view of this Committee. It has been possible for us to reach agreement involving all countries, including those who had doubts about the action, as well as those who supported the action. And therefore, this is a unanimous agreement and a statement made by the Committee, that we support the IMF providing, subject to its policies, financial and other assistance to Iraq.

MR. DAWSON: The Managing Director and the Chancellor will have a conflicting appointment in about 15 minutes, so we'll have maybe three more questions, if we could keep them brief.

QUESTION: There was one issue which was being considered as a serious issue, that of the voice of developing countries. But from the deliberations of the IMFC, we get an idea that the issue of increasing membership quota has not been discussed.

Do you think that raising alternative sources of financing and working with World Bank on raising funds for various member countries, there is some disconnect between increasing membership quotas or raising funds in some other fashion?

MR. BROWN: We have taken measures to increase the representation and capacity of developing countries and transition countries to participate more effectively in IMF work. You may know that the Chairman of the Development Committee now attends the International Monetary and Financial Committee and contributes to the meeting of the Committee. And there have been other measures taken.

We said that we welcome the IMF Executive Board's progress report on quotas, representation and voice. We are asking the IMF to examine these issues further, and we agreed that we will review progress on this at the next meeting. So these issues were dealt with, discussed today, and we look forward to the further discussion on the issues of representation at the next meeting.

But I must stress that none of these issues of governance prevented us from all agreeing unanimously that we must do more to bridge the gap between the developed and the developing countries. We discussed in detail the needs of debt relief and agreed on the measures that I announced to you. And we also discussed how together, that is rich and poor countries, we can meet the Millennium Development Goals, and agreed that by the strong helping the weak it would make the world economy more generally stronger.

And therefore, I would say to you that a very full discussion took place today, and there was again unanimous agreement that we had to do more to meet the Millennium Development Goals. And that's why the IMF and the World Bank have been asked to look at various proposals, not just on absorption and on value for money on aid, but also on financing facilities, including the International Finance Facility which we have proposed, which will be examined by the IMF and the World Bank, and the report will come to the next meeting.

QUESTION: There are two observations during these days here I would like to seek your comments on, both from you, Chancellor, and from you, Mr. Köhler.

First, there is no timeframe attached to the growth pact you talked about yesterday in your communiqué. Was that too much to aim for? And can it really work without a fixed timeframe?

And the second observation is that the IMF and the World Bank moved beyond their core responsibilities in trying to help to resolve the problems that we have at the moment; is that true?

MR. BROWN: Yes, the G-7 agreed yesterday that there be a growth strategy that involved all countries making substantial structural economic reforms. And if there has been a theme of the conditions for greater growth in the years to come, it has been that structural economic reform is important, not just to the growth rates of individual countries, and to reducing unemployment, but also to reducing the imbalance between the major world economies.

You say that no timetable was agreed. What we actually said was here are the reforms that are being carried out by individual member countries. And then we said here are reforms that are being announced and will happen.

In the case of the United Kingdom, for example, I said yesterday that our prebudget report, which is in only a few weeks' time, would announce major detailed reforms on the labor market and on work incentives. And we have also in place reforms in the planning system and in areas of competition policy and capital and product market reform.

Other countries who were present yesterday announced that they had either announced or would be announcing further structural reforms in their economy from a range of issues, including pensions, health care, labor markets, and competition policy. So there was an announcement yesterday that reforms are either taking place or about to be announced that are important to recovery.

Now today when we met, there was general approval for these announcements about sustained and vigorous structural reform. And as we said in our communiqué, the Committee emphasizes that all countries have an interest in seeing more balanced growth with orderly adjustment and sustained and vigorous structural reforms in many areas. And we drew attention to the statements that have been made by European Ministers promising structural reform.

There is no doubt not only about the urgency of that structural reform, but about the contribution structural economic reform can make, not just to growth in individual countries but to reducing the imbalances and therefore achieving greater long-term growth around the world.

MR. KÖHLER: I was even struck by the awareness of Governors from all over the world, that the global imbalances are something which should be a concern of all of them. They, more than ever, understood and expressed their recognition that we are now sitting in one boat, and that these structural reforms and an orderly solution of the global imbalances are in the interest of all.

I was very surprised about this strong understanding, and I expect from here that we will see good action, that this process of an orderly unwinding of imbalances will take place.

MR. DAWSON: And the last question right here.

QUESTION: On the subject of reform, a huge raft of reforms floated, as it were, by the Iraqi Finance Minister not actually directly here, but I'm sure you would have been aware of it, involves, for example, allowing 100 percent foreign ownership of Iraqi companies; allowing in banks from outside and so on. What are your reactions to that? And it occurs to me that Gordon Brown could actually answer this question with two hats on, since, as part of the Coalition Provisional Authority, presumably, as the British Finance Minister or Chancellor of the Exchequer, he would have had a say, since the CPA actually signed off on these reforms.

MR. BROWN: Well, I think we welcome announcements about reforms that will make for a better and more successful reconstruction of Iraq. I think the important thing, however, is to look forward to both the donors' conference and to further and more detailed announcements from within Iraq about what is going to happen. In the end, there was unanimity on our Committee that we wanted to see this reconstruction moving ahead; that in addition to the donors' conference, the IMF and the World Bank should be involved. Of course, this is subject to their policies, and we, therefore, look forward to further announcements from both the IMF and World Bank about what they could do.

So that is where it stands at the moment. It is too early for me to comment on individual announcements made by Iraqi representatives, but I think the important thing is that we are ready to back the process of reconstruction, and that does not just extend to the donors' conference but to the IMF and the World Bank's role that was supported by all members present.

MR. KÖHLER: I would like to add to this that I am really looking forward to look into this plan. I have not seen it. I have just heard about it. But even before I knew it, I take it as a huge step forward that there is a plan set up by Iraqi people, by representatives of the Council. So this is, for me, a remarkable step forward to bring order in this development and also to have the Iraqi people themselves involved to define an economic strategy for recovery and development.

MR. DAWSON: Thank you very much.

(Where upon the briefing was concluded.)