Wendall K. Jones
The financial services sector of The Bahamas is still under attack. Ever since the days of its blacklisting when the Free National Movement government was in power, the sector is still weathering from various international stresses. Here in The Bahamas there are challenges to pieces of legislation which have been put in place to regulate the sector and to bring it into conformity with the wishes of developing countries.
The following is an extract from the Overview written by Rubens Ricupero, Secretary-General of UNCTAD, which prefaces the UNCTAD Trade and Development Report 2001, the twin themes of which are Global Trends and Prospects and Financial Architecture.
“There are certainly a number of conceptual and technical difficulties in designing reasonably effective global mechanisms for achieving currency and financial stability.Such difficulties are familiar from the design of national systems. At the international level, there are additional political problems associated with striking the right balance between multilateral disciplines and national sovereignty. Indeed political constraints and conflicts appear to be the main reason why the international community has not been able to achieve significant progress in setting up effective global arrangements for the prevention and management of financial crises.In particular, the process has been driven by the interests of the major creditor countries, which hold most of the power in the multilateral financial institutions, as well as in bodies set up more recently with the explicit intention of reforming the international financial architecture.As a result of the issues of crucial importance to developing countries have been excluded from the reform agenda.
If reforms to the existing financial structures are to be credible, they must provide for much greater collective influence from developing countries and embody a genuine spirit of cooperation among all countries. This will require a major reformulation of the reform agenda.It will also require careful examination of the representation in the existing multilateral financial institutions and of their decision-making practices.
But it is equally important that developing countries themselves reach a consensus on how they want the reform process to move forward.While this consensus is lacking on several issues of the reform agenda, there are many commonly shared objectives, including: more balanced and symmetrical treatment of debtors and creditors regarding standards, codes, transparency and regulation; more stable exchange rates; more symmetrical surveillance; less intrusive conditionality; and above all, multilateral institutions and processes that are more democratic and participatory. Effective reform of the international monetary and financial system will ultimately depend on the willingness of developing countries to organize their efforts around such common objectives, and on acceptance by developed countries that accommodate these objectives will be an essential part of building a more inclusive system of global economic governance.
In the absence of collective arrangements for a stable international financial system, developing countries should avoid commitments which restrict their policy autonomy with respect to dealing with financial instability. Interest is now growing in regional arrangements to provide collective defence mechanisms against systemic failures and instability, and regional currencies are increasingly seen as viable alternatives to dollarization. The European experience has also been held up as a model for regional arrangements, including in areas such as intraregional currency bands, intervention mechanisms, regimes for capital movements, payments support and regional lender-of-last-resort facilities. Such arrangements among developing countries probably require the inclusion of a major reserve-currency country willing and able to assume a key role for this purpose.In this respect, recent initiatives in Asia, involving developing countries and Japan, could constitute an important step towards closer regional monetary integration.”
