DEVELOPING NATIONS AGAINST A HASTY HEEDING OF THE WORLD BANK'S SIREN

9:56 PM May 8, 1996

DEVELOPING NATIONS AGAINST A HASTY HEEDING OF THE WORLD BANK'S SIREN
The message of the Bank's annual Global Economic Prospects report, released here and Washington Tuesday is that nations slow to join the globalisation bandwagon will fall quickly behind.

But according to independent experts and a senior French government economist, this was only partially true.

"While developing countries cannot move ahead by closing economies and will have to open up, globalisation is not the only nor the first step to take," said Christian Chavagneux, economist at the Commission for General Planning, charged with setting France's long-term economic objectives. "The World Bank's idea is that it is the only and the first thing to do."

According to Chavagneux, internal conditions, particularly political, are equally important in charting the progress of developing countries. "For instance, there ought to be a competent government which seeks to and wants to implement a long-term development project with the support of the population."

"The problem also is that African economies notably are not ready to face the global market. Before opening up to the outside, the economies must seek internal competitiveness. Without being an actor, the State must be able to intervene to regulate or organise the market," said Yannick Jadot, in charge of the development NGO SOLAGRAL's programme on international trade.

In its report the Bank took note of what it said were disturbing disparities in the pace of integration of developing countries and threw spotlight on the policies adopted by those few, which have succeeded. Though developing nations as a whole have kept pace with the world rate of integration, the ratio of trade to gross domestic product (GDP) fell in 44 of 93 countries in the past 10 years.

Moreover, the distribution of foreign direct investment (FDI) was also skewed: eight developing countries accounted for two-thirds of foreign direct inflows in 1990-93, while half of all developing countries received little or none.

Regions that received particularly low FDI masses included South Asia, Sub-Saharan Africa, the Middle East and North Africa. The falls, said the Bank, reflected a loss in credit-worthiness due to such factors as macro-economic instability or political uncertainties.

Both Chavagneux and Jadot pointed out the intervention of the State in some of the Southeast Asian economic successes being hailed and projected as examples today for the rest. "The South East Asian model worked because of its particular context, where certain goods were very competitive coming from a country with very low wages. Yet not all economies can be based on the exportation of the same products," said Jadot.

At the same time, developing countries are faced with an unstable world market, he said. "The countries the most marginalised from the world economy have export goods, whose prices are unstable in the market. There is also the instability of imports, coming from such norms as environmental and social clauses. Interest rates are also unstable."

Chavagneux also noted that countries that follow the Bank's economic prescriptions are often heavily indebted. "That is the paradox of the international aid dynamics of financial institutions like the Bank and the International Monetary Fund," he said.

Gaining the confidence of the Bank, he said, has meant increasingly available and low-interest credit. Yet in the end, countries that have tried to fall in line behind the Bank find themselves left holding debt that is itself an obstacle to development.

He added that the international community has no mechanisms with which to help developing countries trying to adjust to the world economy. Industrialised countries are also often tempted to impose economic sanctions to regulate exports by developing countries, particularly in fields, where they can compete effectively, like textiles and agriculture.