|
Sunday, January 31, 1999
Mr. Chairman, Ladies and Gentlemen, It is a distinct pleasure to be able to address you today in this eminent forum. It is always extremely stimulating to have the opportunity to exchange ideas on the important issues that affect our common future. We meet this year in an atmosphere of concern, and fearful expectation. Our global village has caught fire, wherefrom we do not know. We have put out most of it. But there are still pockets that can threaten us all again, as we experienced just a few weeks ago. And we do not know where to start rebuilding or how. A common dialogue is most urgently needed today. Our world is at a cross-roads. Confusion pervades many circles. There is talk of rebuilding the international financial architecture, of changing the architect, of giving up the free movement of capital or even of goods and services. There is talk of a global recession, of greater instability in the world economy and marginalization. Doubts have appeared in the fundamental efficiency of financial markets; indeed, in the possibility of equitable growth around the world. And then there is the undeniable fact that whatever happened to the global system, whatever the reasons, there are more people today who suffer from poverty than two years ago. And, in the months ahead, many more appear to be at risk. In the emerging world there is a bitter sentiment of injustice. A sense that there must be something wrong with a system that wipes out years of hard won development because of changes in market sentiment. Years of progress are gone, because of developments elsewhere. Admittedly, in some emerging markets not all reforms are in place. But not all should be lost because of this. The time has come for us to rethink the direction our planet is taking. We must sort out our priorities so that we may remain focused on what ultimately is important. We have a shared responsibility to build a solidarity in prosperity. This is the only true solution to the development of our planet. This crisis has shown us that in the global economy that we are building, systemic problems can originate anywhere in the world. And when this happens, when events become too complex, when things move too fast, human beings are less able to comprehend. They are less able to cope. In these cases they tend to retrench, to disengage from whatever confuses them. What was riskless a few months ago is to be avoided today. The unknown, the unfamiliar becomes the enemy. And the enemy becomes the other investor, the other country, the other markets. This must not be how we address our problems on the eve of the twenty first century. Ladies and Gentlemen, The dramatic advances in computer technology and telecommunication, the great strides in global liberalization of capital flows have created a more efficient world. Leverage and the unhindered movement of capital in the world economy - particularly short term capital has integrated our markets in one global entity. But it has changed the nature of this entity. We live today in an inherently unstable world; One where financial markets will not always be right and where crises will not always be fully understandable. A world where it is no longer true that if an emerging market economy adopts sound policies, it is immune from speculative attacks. We need to engage our minds, our institutions, and our policies to recover this stability and ensure a sustained involvement of the developing world in the global economy. The world is moving towards understanding this new environment. International institutions, various groups of countries and experts have diagnosed the crisis. They have evaluated the volatility, contagions and devastation with various degrees of understanding. They have proposed a number of solutions to address the grave structural weakness that international markets have just discovered. But the solutions address mostly secondary reasons for the world's instability. Reasons that are important but not key to a true global solution. Some have argued that the crisis started because of unsound macroeconomic policies in emerging markets. Bad governance and lack of transparency compounded the problems. The solutions are obvious and we can only endorse them. Sound macro-policies, transparency in governance and effective supervision are the building blocks of sustainable development in free and open markets. However, these measures, commendable as they are, will still not make for a stable world. Sound macro-economies did not arrest the contagion and markets do not respond perfectly even to perfect information. But more so, the macro-policies of industrial countries affect critically the design of stabilization in open emerging economies. Inappropriate policies in industrial countries can and have led to major distortions in the allocation of global resources. This too contributed to the global crisis. It takes both a creditor and a debtor to make an unsound loan. Solutions that address the financing needs of countries in the grip of financial crises are also being put forward. A new and fast disbursing contingency facility in international institutions is being proposed. The private sector is asked to play a role in the resolution of these crises. We all agree on these principles, but we must also agree on workable solutions. Developing and developed markets must determine these features together. They must shape these measures jointly, for they will succeed only when implemented jointly. But even then, financial crises will not disappear. They will be less frequent if our global dialogue succeeds. But when they do happen again, we must have the sizeable resources we need to contain their cost in human suffering. All these solutions are only the first steps towards a new global architecture. But they are not enough. They still address the problems of tomorrow with the tools of today. They do not address the flaw in the design that will allow return of the global crisis even with these safeguards. At least three essential dimensions of reform must still be addressed in a way that caters for the concerns of the emerging world. Foremost is supervision of capital markets. Volatility in the global economy must be addressed through coordinated supervision across borders. We need to establish not only dialogue but coordination in supervision across financial markets. Off-shore investors such as Hedge Funds are a prime example of participants, exposures and transactions that must be supervised across borders. A second and parallel argument revolves around the international institutions of the new global architecture. While preserving their independence, these must be integrated into one coherent whole and not concentrated in one institution. Their contacts must extend beyond the occasional consultation into an integrated approach for the solution of both emerging and industrial countries problems. Finally the system we devise must allow for diversity. It must allow for countries that need to safeguard and restructure their economies, to do so in ways that are agreed multilaterally. There must not be a contradiction between the needs of the global economy and the welfare of our people. In the absence of effective safeguards, the world economy has seen the recent use - often by industrial countries - of tools for purposes they were not meant for. Anti-dumping has been one such tool. It must not be. Many developing countries -Egypt among them - have suffered from these practices with little recourse. True and effective safeguards must be introduced to protect our economies from tradeoffs that - in times of crisis - they cannot afford. These issues point to the main ingredient missing from the new global system: true dialogue. A dialogue where emerging market economies have a say, indeed have a stake, where developing countries have real power, a real voice in the future of the international financial architecture. The last two years have shown us that the developing world does have a say in the stability of the world economy. It must also have a say in building its future. Ladies and Gentlemen, The financial architecture of the global economy is essential for the future of this planet, but it is not directly essential for half of its population. It will address two-thirds of the world's output, but ignore two-thirds of the world's population. The true systemic instability rests with poverty, illiteracy, disease and the ever widening gap between rich and poor. For this, the international financial architecture must have a component that is not in private capital flows, not in financial markets, not in supervision, but in human suffering that needs resources whier financial markets will not provide. No amount of macro-discipline, of correct risk assessment, of stable exchange rates will address those ills that plague the majority of the inhabitants of this planet. These are issues that need real resources from those who can afford them to those who cannot. These are issues that need technology transfer, human capital development, transfer of know-how. These are issues that need involvement of industrial nations in the structural stability of emerging markets. Dear Friends, The economy of Egypt has weathered the storm that has gripped the world economy over the past two years. It has succeeded in doing so because it has integrated into global markets gradually at the pace of its own maturity. Early in this decade we chose to join the global economy. But we chose to join it on our terms. On terms that the people of Egypt accepted, drafted and implemented. Our reforms aimed at a gradual transformation of the Egyptian economy into an open, market-based, privatesector-driven system. Our gradualism was shaped by fundamental principles that guided our change. Principles that assert that for reforms to be sustainable they must not force unbearable hardships on our people. The reform program of Egypt promised at the outset that it would not trade the unbearable burden of sudden change for the promise of improvements in a distant future. It took care of our poor, the underprivileged and those who would be harmed by reform. Where austerity was too large a burden, measures were recast and sequences were changed. And when the burden was too heavy, and change couldn't wait, we called upon those who could, to provide for those who could not. Our reforms imposed many hardships on us. But we knew that these reforms would leave no one aside a helpless bystander. The poor and the underprivileged in Egypt owned our reform process because it cared for their welfare. Our welfare, while still distant in the early years of this decade, had come within our grasp. The principles of our reforms required that free markets be the norm of resource allocation in Egypt. They required that changes in economic management are foremost changes of institutions. Institutions that will guide our markets and preserve their integrity along parameters of global efficiency. The principles of effective governance were introduced to our institutions so that their supervision be effective, complete and in tune with world standards. Free markets were established in Egypt, and with them the seeds of their sustainability. Our banking system is sound, our capital markets are growing and both are building the institutions that will guide us in the twenty first century. Early in this decade we chose to integrate Egypt into the global economy. We continue to liberalize our trade with the world and capital flows are free from all restrictions. It is a course we have chosen irreversibly. It is a course that commits our reforms to the future, a course we can keep. And for this, we have restored lasting financial equilibria. We carry no net external debt, our budget is virtual balance, inflation is low and growth is high and sustainable. But this alone is not Egypt's destiny. We stand at the center of a troubled region. Egypt's role in the Middle East and Africa springs from its roots in their history, their geography and their politics since their early days of independence. We hold a clear vision for the future of our region. A vision centered around three basic concepts. The first is the relentless and unconditional pursuit of peace. Peace, not only as a moral obligation that all humans owe to their fellow man, but also as an absolute necessity for the welfare of any people. Peace as the essential ingredient for security, stability and the development of all the peoples of the region. For this we spare no effort, leave no option unexplored, in our quest for a comprehensive settlement for all the parties to the Arab-Israeli conflict. A settlement that is just and balanced, freely accepted by all and founded on universal norms of legality and legitimacy. A settlement where the rights of all parties are equal and none superior to the other. A peace where signed agreements are fully honored and implemented. The second concept guiding our policies in the region is the one of security. Peace is the essence of security. A security where the safety of each is but an element in the safety of the community. A community where none seeks military superiority, where weapons of mass destruction are phased out and where all conflicts are resolved through peaceful means. Lastly a concept of synergy guides our efforts at integrating peace, security and sustained economic development and cooperation. Lasting economic integration in our region of the world can only take root if it is first among the priorities of the peoples of the region. A first priority when peace has taken hold, and when all are secure in their future. A first priority because the welfare of each makes for the welfare of the community of the nations of our region. The Middle East is a region of great promise, one that must join the world economy. As one of its larger economies, Egypt has set the course and must show the way. We share our reforms with our neighbors. A free trade agreement between 19 Arab countries entered into effect in January of last year. We are building together the institutions that will underwrite it. An economic bloc of over 250 million people and 600 billion dollars in GDP is gradually taking shape. It must be an integral part of the world economy. But Egypt has African roots too. In December of last year the Egyptian parliament approved Egypt's membership in the Common Market for Eastern and Southern Africa: A free trade bloc representing over 20 African countries. With many promising African economies Egypt is committed to play its role to integrate Africa into the world economy. Ladies and Gentlemen, In these days of turmoil it is difficult to see the calm after the storm. But the tempest will pass and we must start today our first steps in the new century. We call on the developing countries of the world to join us in a common voice to engage in the dialogue that will shape our planet. We call on industrial countries to look beyond this crisis towards a future that will only prosper if we build it together. We call on them to look towards the millions whose welfare depends on this dialogue. In the waning days of this century the global economy was born. In the century to come we must all share in it because only then will we have built a better world for our peoples. Thank you very much |
|
||||||||
Print this page 
Mail this page 