Mr. Secretary-General, Your Majesty, Honourable Prime Ministers and Finance Ministers, Distinguished Delegates, Ladies and Gentlemen:
On behalf of the Government and the people of the Republic of Maldives, it gives me great pleasure to welcome you all to this meeting of the Commonwealth Finance Ministers. We are indeed privileged to host this meeting, not only because it brings to this country such a distinguished gathering but also because it was only three months ago that the Maldives became a full member of the Commonwealth.
It gives me special pleasure to welcome our Secretary-General, Sir Shridath Ramphal, to the Maldives for the second time this year. Indeed, the holding of this year’s Commonwealth Finance Ministers Meeting in this country is due in no small measure to his personal initiative and encouragement. I am sure that all of you will share my feelings when I thank Sir Shridath and his staff at the Secretariat, whose dedication and experience have been of enormous value to us in arranging this meeting.
I would also like to extend a very sincere welcome to His Majesty the Sultan of Brunei, who has graciously taken time off from his important duties to be with us on this occasion.
We have just listened to the opening remarks of the Secretary-General which serve as tangible confirmation of that trust we have in the Commonwealth. As ever, the Secretary-General has inspired and guided us towards our shared destination and, what is more, has encouraged us in both the morality and the practicality of what we seek, collectively, to establish.
Though our membership in the Commonwealth is only three years old, the atmosphere of mutual concern and purpose that prevails in the Organization justifies in good measure my country’s decision to become a member state. It is with much hope and expectation, therefore, that the Maldives will be participating for the first time at the Commonwealth Heads of Government Meeting at Nassau later this month.
For many of you the Maldives would provide a new, if not a unique, experience. You will have noticed that, in your short stay, you will be making much use of boats, rather than cars or any other mode of land transport, to travel to the different facilities. We are a small country of about 182,000 people in an archipelago of some 1,200 tiny coral islands, far away from the great centres of world industry. We are striving for development, as we must, to improve the living standards of our people. But I hope we retain some of the advantages of being unique that attract increasing numbers of visitors to our shores. I know most of you have to move on promptly to other major meetings, but I hope you will take the opportunity to see as much of our beautiful country as you can.
The Maldives, being a small nation trying hard to overcome severe hardships in many crucial areas, is happy that the Commonwealth is giving particular attention to the special problems relating to the development of small states, and rightly so, given that small states together constitute half of the total membership of the Organization. We closely observed the progress of the November 1983 Commonwealth Heads of Government Meeting in New Delhi, and we had good reason to take a keen interest in that part of the communiqué which reaffirmed members’ “commitment to the principles of interdependence, sovereignty and territorial integrity”. Similarly, we welcomed that part of the Goa Declaration on International Security which pronounced a notable concern at the “vulnerability of small states to external attack and interference in their affairs” and further expressed “a moral obligation to provide effectively for their territorial integrity.”
True to the very best traditions the Commonwealth, such sentiments were given substance by the decision to request the Secretary- General to institute a study of the special needs of small states within the Commonwealth. We were happy to be closely associated with that study, and to be able to spell out our vital concerns as a highly vulnerable small state. The report of the Commonwealth Consultative Group on the special needs of small states covering both the political and the economic aspects, will be considered by the Heads of Government at Nassau, but we have the opportunity here to look at the economic aspects and provide our thoughts to the Bahamas meeting.
Because so many of the problems of a political nature arise from economic incapacity, I believe it is imperative for the Commonwealth, in the overall interests of stability and progress, to exercise its collective influence in international fora to achieve a greater awareness of the particular needs of small states. Commonwealth Finance Ministers from their meeting here would be going to Seoul, where the World’s Finance Ministers will be gathering for the annual IMF/World Bank meetings. If the Commonwealth Finance Ministers could take to the world’s treasurers a clear message about the economic problems that beset small states, such a mission would be true to the highest ideals and purpose of the Commonwealth.
The special problems of the small island states are even more acute. These island states, which are characterised by high density of population and low per capita income, and whose economy mainly depends on a few primary products and tourism, are extremely vulnerable to changing external conditions. At this point, I would like to say something of the recent Maldivian economic experience, which in many ways resemble the problems of other small island states. The Maldives has a narrow resource base comprising of three main sectors fishing, tourism and shipping. The highly specialized nature of the economy makes the country vulnerable to external events. The decline in market prices for tuna, the slump in world cargo trade and the West European recession cut deeply into our export earnings during the last three years and worsened our balance-of-payments position.
The Seoul meetings will, of course, be primarily concerned with the wider aspect of the world economy and the need to strengthen the world’s principal financial institutions the International Monetary Fund and the World Bank. The Commonwealth Ministers would, therefore, need to give their collective consideration to these issues. I do not wish in any way to pre-empt your discussions, but let me highlight a few issues which cause me profound concern.
First of all, I am deeply disturbed over the prospect of a renewed recession which would dissipate the recent progress made in the world economy. The main question to consider is whether the world economy can risk such a prospect when the consequence could be grave, not only for the industrialised world, but also for the debtor countries, and consequently for the world’s banking system if serious default in debt service payments were to occur.
Secondly, even without the prospect of a renewed recession, the debt situation remains precarious. There are already great socio-economic pressures on some of the major indebted countries arising out of the prolonged strains in meeting the debt service obligations. There are calls for limiting debt service payments as a reasonable proportion of export earnings so that economic growth could be promoted through much needed imports. The prospects are not promising either for a further decline in interest rates or for a revival in private or official flows to reverse the negative flows currently taking place to developing countries. We face the incongruous situation in the world today where more capital is flowing from developing countries than are flowing in. Surely, this is a situation which could only stifle development. Therefore, urgent consideration is required, of ways to reduce the debt service burden through longer maturities and grace periods, interest relief and multi-year rescheduling.
Thirdly, the poorest developing countries, especially those in sub-Saharan Africa, face a continuing desperate and worsening situation. Early this year, more than 30 million people in sub-Saharan Africa were reported as either suffering from, or threatened with, starvation and 21 countries were facing severe food shortages. While the situation may have eased a little in some parts with the coming of the rains, the underlying problems remain. Even under the high case world economic scenario, the prospects are for a continuing decline in per capita incomes in these countries. Their debt problems are in many ways even more deep-seated. Measures taken so far are clearly not adequate. Increased concessional flows and debt cancellation and other forms of debt relief are urgently required. To these problems in Africa must be added the deteriorating situation in South Africa. I am happy to see the world waking up from its complacency over the continuing intolerable injustices in South Africa. These political problems have economic repercussions, as we can see from what has happened to the rand in recent times, which prove beyond doubt that economic pressures can be an important tool in the struggle against apartheid.
Fourthly, precisely at a time when the debt servicing difficulties of major debtor countries are re-emerging, and when the economic prospects of poorer countries are worsening, it is essential that the IMF pay greater attention to conditionalities attached to the Fund facilities, by being flexible to the adjustment needs of member countries. The poorer countries of sub-Saharan Africa are already experiencing net negative transfers. And without any adequate capital increase from the World Bank, there is now, as I have already observed a prospect of a net transfer taking place from developing countries to the World Bank. These institutions, therefore, need to greatly enhance their support for developing countries and should have adequate resources to perform their tasks.
The concerns I have raised above call for an urgent re-appraisal and reform of the world’s financial and trading system. With respect to the functioning of the international monetary system, I recognise that this work has already begun. Both the Group of Ten, representing industrial countries, and the Group of Twenty-Four, representing developing countries, have produced reports on the subject which will be given preliminary consideration by the Ministers of the Interim Committee at Seoul. I sincerely hope that these deliberations result in a more stable exchange rate system, improved IMF surveillance of the policies of major industrial countries, a resumption of SDR allocations and a strengthened role of the IMF in the financing of, and adjustment efforts, of its member countries. A positive step in this direction would be to reinstate the Trust Fund to provide direct balance-of-payments support to low income countries on highly concessional terms and long repayment periods.
But developing countries are not only concerned about the world’s monetary system. They have a wider concern about the world’s financial system which at present does not adequately meet their development finance needs. Ministers of the Development Committee at Seoul will be considering the World Bank’s future lending programme and the need for a capital increase. The World Bank, as the premier development finance agency, must have a greatly enhanced role in the world’s financial system, given the, unpredictability of other private non-concessional sources of finance. For the poorer countries concessional flows remain important, and donors must redouble their efforts to reach the 0.7 percent ODA to GNP target. In view of the proven effectiveness of aid channelled through multilateral agencies, a greater proportion of it needs to be channelled through them.
I do not need to remind you of the funding problems facing many of these agencies. Resumption of significant increases to the IDA, the World Bank’s concessional arm, must begin and, more immediately, the funding of the Asian Development Fund needs to be resolved. In addition to official development assistance, incentives should be given to developing countries by way of export credits, and the role of private investment should be further encouraged. An important step towards this would be the World Bank’s initiative to set up a Multilateral Investment Guarantee Agency to complement national schemes.
Finally, the world’s trading system is also going through a difficult period. Protectionist pressures are, if anything, intensifying. The whole system could disintegrate if urgent action is not taken. Long outstanding issues in the GATT programme need to be resolved and substantial progress is required on such issues as safeguards, non-tariff barriers, agriculture, textiles and garments. Since early 1984, there has been on-going discussions on the new round of multilateral trade negotiations. I believe the new round should have, as its central theme, the restoration of the confidence in the GATT system and finding solutions to the outstanding problems.
I end where I began. The international financial and trading system should provide adequately to the needs of small states. The international community has a special obligation to provide an external environment which could promote self reliant and stable development in strengthening their economic independence. The provision of special support for small states should be approached pragmatically, through securing better international recognition of their problems. While these states, like other developing countries, need increased financial flows because of the diseconomies and vulnerability arising from their smallness, they have a particular need for concessional flows, balance-of-payments support especially for export earning stabilization and disaster relief. The international financial institutions should apply flexible criteria when dealing with small states. For example, the World Bank’s graduation policy needs to be flexible in the case of small states. Small states also need to be freed from the tariff and non-tariff barriers to trade.
With all this in mind, the Government of the Maldives looks forward to actively participating in this year’s Finance Ministers and Heads of Government meetings. In opening this meeting, I re-affirm my belief that it can make an important contribution to the solution of many of the problems and difficulties that beset the world community at large and small states in particular. We in the Maldives have every confidence in the Commonwealth’s ability to move forward the dialogue on the major issues which I have alluded to. Mr. Secretary-General, Your Majesty, Honourable Prime Ministers and Finance Ministers, Distinguished Delegates:
I welcome you.