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Monday, May 11, 1998
Excellencies Heads of State and Government, Distinguished Heads of Delegations, Delegates, Ladies and Gentlemen, On behalf of the people of Egypt, I would like to welcome you to the Eighth Summit of the Group of 15. Our people, who share with you a rich heritage and an ambitious vision for a better future, are profoundly inspired by this gathering. They are proud to be partners with you in a historic struggle for peace and progress . Allow me first to express our gratitude and appreciation to our friend, Prime Minister Mahatir Muhammad, for the excellent contribution he made to our cause during his Presidency. This Eighth Summit of the G-15, held for the third time in an African capital after Dakar and Harare, is a positive omen. For it is taking place in a continent that has recovered its impetus for growth. It comes at a time in the history of Africa where growth in income has sustainably exceeded the growth in population in many African countries. The African continent is on the threshold of its rebirth. It is striving to find its path to the global economy. After years of stringent stabilization programs, it is ready to reap the rewards. The challenges ahead remain formidable, and the obstacles are many, but the will for progress is there and the spirit to meet these challenges has been reborn. Our meeting today carries thus a special significance. It comes at a time when the developing world has moved to the forefront of the global economy: Africa and Latin America have renewed their confidence and promise, and the Asian crisis has recast the discussion of the architecture of the international financial system. The Asian crisis has reminded us of the deep interdependence of the world economy. Marginalization is no longer an option. Not for the developed countries to impose and not for the third world to suffer from. The inadequacies of individual countries or of the international financial system should serve us to draw the appropriate lessons. The lessons that will shape our dialogue amongst ourselves and our dialogues with the developed world and the international financial institutions. The Asian crisis is but a passing pause in the impressive record of rapid growth of the Asian economies. Asian countries should be proud of the enormous success of their economies in recent decades. This crisis will pass. Stronger and more robust economies will emerge. They will continue to be based, as they have been, on high savings and investment rates, and a sustained development of human capital and technology. However, this episode has shown us the weaknesses of our global system. We have an obligation to learn from this crisis. We have a duty to examine it with candor and courage. I draw six fundamental lessons from the events of the past months in the global economy. First: The dramatic improvements and advances in the global financial system have enabled us to materially improve the efficiency of the flows of capital and payments. On the other hand, those advances have enhanced the ability of the system to rapidly transmit problems in one part of the globe to another. The development of our national institutions is an essential element for reaping the benefits of globalization. They must have the strength and regulatory sophistication to deal with international financial flows. The liberalization of our markets must be gradual and must be fitted to the conditions of each of our countries. It must be preceded by the strengthening of our domestic institutions to meet the challenges of an open economy. Second: Particularly troublesome over the past several months has been the so called contagion effect of weakness in one economy, spreading to others. As investors perceive, rightly or wrongly, similar weaknesses, capital flight spreads across borders. This imposes on governments constraints on the range of policy options and their timing. Dialogue among nations, especially in the South, is no longer a luxury that we can afford to ignore. It has become a must; an essential part of proper economic policy design. In this respect, a forum such as the G-15 gains in importance. We have built a trust among our nations. We have established a voice for the South. This voice needs to be strong and it must be heard. The structured exchange of information that the G-15 can provide must be utilized. Information on financial policies, capital inflows and exchange and interest rate policies must be the essence of our cooperation. It must be an integral part of effective national economic management in our countries. Third: In our open economies, the design of an appropriate response to avoid domestic or external imbalances must take into consideration the effects of policies followed by industrial countries. Advanced economies must formulate their economic policies to avoid the occurrence of excessive and distortive fluctuations in capital and trade flows in the global economy. A structured dialogue between the South and leading industrial countries has become essential for the proper management of the world economy. In this regard, the G-15 stand at the forefront of this dialogue. I have contacted the Prime Minister of the United Kingdom so that the forthcoming meeting of the G-8 hear our voice and heed the advice we bring from the South. Fourth: The main mechanisms of transmission come through capital flows into our economies. For this, capital account liberalization must be gradual. It must depend on the progress achieved in building the institutions that will protect the stability of our financial systems. Measures to limit disruptive short-term capital flows can and should be considered as part and parcel of our stabilization programs. Fifth: The financial recovery and stabilization programs sponsored by the international community should take into consideration the immense social cost of the adjustments imposed on the developing countries. This cost can needlessly jeopardize the impact of years of balanced growth on the standards of living of the peoples of these countries. These achievements must be preserved. The adjustments in stabilization programs to address these issues of social equity and welfare must be introduced and pursued more vigorously. We must also caution against overloading the adjustment programs of those countries with measures not immediately relevant to the ongoing crisis. They may be desirable in the long run, but they make the adjustment much harder. Sixth: The need for appropriate regulatory and supervisory standards across all countries has become apparent. To this end, the Basel Committee has done excellent work in setting out core principles for effective banking supervision. It has begun efforts to promote these standards more broadly. International organizations in charge of securities markets, and the insurance industry, need to contribute more to an improved understanding of sound financial sector supervision. The presence and active participation of our countries in these international institutions are an essential part of our integration in the global economy. These are some of the lessons we draw from the recent developments in the world economy. The conclusions we reach set the principles of our dialogue among countries of the South, and with the North. These lessons have brought forth the principles for the governance of the world economy. Ones we should adhere to and demand that they govern financial relations on our planet. The Asian crisis has affected the world economy in its entirety. Developed and developing countries alike must avoid at all cost the resurgence of protectionist measures and competitive devaluations. The recovery of Asia, and indeed of the world, will only come through domestic-demand-led growth in the major industrial economies. In the United States, growth is expected to continue at a sustained pace. As Europe moves towards monetary union, it is important that policies in its region be directed at increasing the flexibility and dynamism of its economy. In Asia a sustained recovery would be very much strengthened by a recovery of the core countries of the region. Ladies and Gentlemen, In 1991, Egypt embarked on a fundamental restructuring of its economy. It established, with caution and gradually, the parameters of its integration in the global economy. Today, Egypt stands among the countries that prove that the South can prosper. The economy of Egypt has laid the foundations for sustained growth, and a steady improvement in the standards of living of its people. With virtually no budget deficit, inflation close to world levels, a net creditor position to the outside world and a surplus in its balance of payments, Egypt has started its journey to prosperity. The Egypt of the last days of the twentieth century is seeking, not only high rates of growth in its income, but also high quality growth. One that touches all Egyptians and one that is sustained year after year. We have built the institutions that will help us face the uncertainties of the world economy. And, through our dialogue, we build the experience to deal with its problems. Ladies and Gentlemen, A few days from now, we will be celebrating the fiftieth anniversary of the Multilateral Trading System. The Second Ministerial Meeting of the World Trade Organization that will follow, comes at a crucial juncture of the world economy. It provides the international economic community with the opportunity to make good use of the lessons we have learned from recent months. The financial architecture of the world economy rests on a foundation of free trade, on a rule-based trading system and on commitments by the developed world to developing countries. True free trade precludes that at times of crises, protectionist pressures re-emerge. True free trade means that trade barriers under the guise of social equity, labor welfare or environmental concerns do not unravel what tariff reductions must do. Such barriers ultimately weaken the international trading system and leave the world economy vulnerable to more crises such as the one we are still living. At a time when developing countries have accepted the discipline of multilateral trade liberalization, industrial countries cannot choose to postpone their adjustment to it. They cannot hinder the process of global redistribution of economic activity that it entails. This process must be shared equally. Pressures for continued protectionism do not gain greater legitimacy because they originate in richer countries. The World Trade Organization has established a multilaterally approved mechanism of dispute resolution. The integrity of the world economy requires that this mechanism be adhered to. It requires that no country resort to unilateral trade sanctions or extra-territorial laws. Finally, the last round of multilateral trade negotiations recognized the uneven burden of adjustment to free trade. It carried in its agreements commitments, from developed countries, of assistance and support to less developed nations. This assistance has not come forth. It is part and parcel of our global agreements. It cannot be postponed without endangering the very premise of our global system: that burden is to be shared and benefits divided among all nations. Dear Friends, Our countries have chosen the private sector to carry the responsibility of translating our policies and reforms into sustained economic growth and prosperity. This coalition of private business is a new member in our group. It is a force that will bind us even closer. We must promote their cooperation, support their efforts and extend their reach into each of our countries. Their dialogue, their joint ventures are our strength. They bring forth the strength of our economies and their vision. They will usher the age of technology into our countries. A technology we all strive for, not as users and recipients but as initiators, leading with ingenuity and vision, as true participants in the global information age. We are at the doorstep of a new millenium. In its last days this one has left us a legacy of wisdom and experience. The global economy is not for some to grow with and for others to fall behind. It is true that industrial countries are of systemic importance. But gradually emerging economies are becoming part of the system. They carried world growth during the recessions of the mid Nineties and they will carry world growth again. They slowed the recovery of the late Nineties and they also can do it again. They are part of the system. Emerging economies, with their dynamism, their ambitions and the promise they offer for their peoples, must speak out. They must be heard. In this Eighth Summit of the G-15 we are this voice. Let us put it to good use. Thank you very much. |
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