UN body proposes new world financial organisation
UNITED NATIONS, July -- The 24-member UN Committee for Development Planning (CDP), has proposed a new global regulatory body - a World Financial Organisation (WFO) -- to regulate and monitor international private capital flows.
"In the new situation where developing countries were becoming major players, there should be a more systemized forum than the private adhoc bodies already in existence," he said.
Islam also pointed out that a WFO would serve to bring together private creditors and borrowers at the onset of a crisis to discuss how to dellay, reschedule or stop payments on loans. It could also devise, in collaboration with private and international institutions, what kind of rules should govern lending and borrowing, as well as monitor the application of such rules at the national level and set up rules for international bankruptcy regimes.
In its report to ECOSOC, the CDP has reviewed the Asian financial crisis and the lessons it held for possible measures to deal with similar situations in the future, criteria and methodology for the identification of least developed countries, and old age security in developed and developing nations.
The Committee has recommended that reports of the annual IMF consultations carried out in member countries, especially borrowing countries, should be made public and available to the entire international community.
Islam said there should also be periodic reviews by independent experts of the major players in the international financial system, such as the International Monetary Fund (IMF), the World Bank, the Bank of International Settlements, and important banks of donor countries. An independent body of experts should evaluate how those bodies behaved in the recent financial crisis, he added.
Speaking on behalf of the Group of 77 and China, Bagas Hapsoro of Indonesia said the Group was more open to the proposal. He told IPS that a paragraph dealing with the ways a WFO could ensure that foreign private lenders were involved in crisis resolution was ''very close to our hearts''.
Asked what was lacking in the current international organisations, Bagas pointed out that two weeks before the crash of South-east Asian economies last July, the World Bank was predicting growth in Asia well into the next millennium.
Bagas said he understood the hostility of other members toward the plan, because ''they stand behind the IMF,'' but added that all nations must do more to explore the issue. ''To stop the discussion is very naive, I think we can find a middle ground.''
US delegate Seth Winnick criticised the proposal saying that the Bretton Woods institutions - the World Bank and International Monetary Fund (IMF) - were ''fully capable of meeting the challenge presented by the current financial crisis.''
Winnick said he questions the call to create another international actor when that role can be filled by existing international finacial institutions, including the Basel Committee on Banking Supervision.
"Let me make it clear that we are in now ay minimizing the extent of the current financial crisis, but suggesting that the solution is not the creation of a World Financial Organisation," Winnick a meeting of ECOSOC.
Johannes Wedenig, the Austrian delegate, speaking on behalf of the 15 European Union (EU) members, echoed Washington's opposition. Europe was ''convinced that the range of functions proposed for such a new organisation may, if necessary, be undertaken within existing structures,'' he said.
Hideki Ito, the Japanese delegate, also agreed. ''The proposed organisation overlaps with the functions of the existing organisations, to a large extent,'' he declared. (IPS)