Examination of Witnesses (Questions 393-399)
Dr Supachai Panitchpakdi
10 JULY 2008
Q393 Chairman: Dr
Supachai, thank you very much for coming to talk to us.
Dr Supachai: It is a pleasure.
Q394 Chairman: We have sent the topics
we would like to cover to you in advance and we have one or two
more, which I am sure you will be able to handle very easily,
which will be useful to us. The usual procedure is that a full
transcript of proceedings is taken. We offer you a copy of the
transcript before we publish so you know what is in it. Would
you like to make an opening statement or may we start asking questions?
Dr Supachai: Maybe it is better for you
to start putting the questions.
Q395 Chairman: My opening question
is really to ask you to put on the record a brief statement about
the role of UNCTAD, particularly in relation to the WTO negotiations.
Dr Supachai: UNCTAD is a UN organisation
that is responsible for UN development activities mainly in the
areas of trade, development and related issues, including investment,
competition rules and negotiations. UNCTAD's work is organised
around three main pillars. The first pillar is our work on research
and analysis. We like to think that we are the think-tank of the
UN on development economics, particularly with regard to globalisation
and the effects of globalisation. The second pillar is technical
assistance, which is not the main mandate of UNCTAD but is continually
expanding as a result of the demand. We try to link the first
and second pillars of our work. The third pillar is what we call
the intergovernmental machinery, which is the consensus-building
process of UNCTAD. As you know, UNCTAD is a subsidiary organ of
the General Assembly, and we report both to the Assembly and to
the Economic and Social Council. Because of this foundation we
have the unique privilege of having all the UN Member States attending
our meetings to seek consensus on whatever topics they choose
to debate. Before the creation of the World Trade Organisation
in 1994—as you know, UNCTAD has been around since 1964—UNCTAD
used to handle some areas of negotiation, for example, in the
commodities area, international commodity agreements were negotiated
under UNCTAD auspices, as was the General Scheme of Preference
(GSP), and in the areas of debt relief, we were the prime mover
of the idea behind the HIPC initiative and debt relief programmes.
We are the UN body that initially proposed the ODA target of 0.7
per cent of GDP. This is some of the work that we do.
Q396 Lord Haskins: I suppose one
of the great concerns of the world at the moment is the rising
cost of food alongside energy. There is a concern that may lead
to greater protectionism, and there are signs already that may
be happening. What is UNCTAD doing to help the less developed
countries cope with these problems of soaring inflation, particularly
in food and energy, because they are proportionately much more
affected than the developed world?
Dr Supachai: We produce a series of reports
every year, and one of our flagship reports is called the Trade
and Development Report. The Trade and Development Report from
1998 had a few chapters on agricultural development in Africa.
I cannot say we predicted that there would be a food crisis in
Africa, but what we said was that malnourishment in Africa is
part of the development crisis, and it will not go away easily.
In 1998 we detected the beginning of a downward trend in ODA for
agricultural development. In the past 10 years, ODA for agriculture
has declined from more than $3 billion per year to less than $700
million per year. I asked some of the donors what the reason was
for this decline, why they had reduced ODA for agriculture, and
they said it was because they had limited capacity to finance
all of this. Since the emergence of the MDGs, there has apparently
been a growing preference to allocate more funds to social infrastructure.
A lot of funds have been diverted away from what we call productive
capacity-building in agriculture towards social infrastructure—governance,
health and education. I agree with the necessity of funding social
infrastructure, but we predicted that the drop in financial support
for agriculture would result in less food production in Africa
and in the kind of crisis we are now confronting. In the 1980s
and 1990s most of the least developed countries, including those
in Africa, were told they might not possess the comparative advantages
needed to produce their own food because they did not have the
seeds or the irrigation systems, they suffered from droughts,
they lacked the governance, they had better rely on international
markets where cheap food product was available. The so-called
Washington Consensus that we tried to follow encouraged countries
to be more reliant on markets for their food. Twenty years ago,
Africa was a net food-exporting continent. It was only in the
past 20 years that Africa had begun to reduce its own production,
because of reductions in aid and in the interest from the government,
and had become more dependent on the imports. What is the role
of UNCTAD in this food crisis? As I said, we warned the world
that because of a drop in ODA, because of a lack of interest in
African agriculture and because of excessive reliance on the market
mechanism, there would be a crisis. We agreed with the FAO's warning
close to 10 years ago. At that time there were about 800 million
malnourished people in sub-Saharan Africa. The FAO tried to secure
some financial support to deal with malnourishment, to reduce
the 800 million in 10 years to 600 million. With no assistance,
no aid, no ODA, this 800 million has now increased to 860 million
people in Africa. We call this a development crisis, and it is
only the tip of the iceberg. Our contribution is to ensure that
the global community does not lose sight of the long-term development
strategy that needs to incorporate agriculture into national development
strategies. We are very concerned. I take part in the High Level
Task Force set up by the UN Secretary-General in April, and I
have observed that most countries are trying to do their best,
to alleviate the immediate problem, which is correct at the moment.
We need to emphasise humanitarian aid, seeds, and fertilisers
to help countries over the next harvest so that people will have
enough to eat until the next harvest, and maybe the harvest after
next. My own information and forecast from UNCTAD is that because
of the abundant water—the rains have been very good in Asia,
even in Bangladesh, India and South-East Asia—and because
of the support from government and the rising price of food commodities,
farmers are reacting very rapidly and there will be a bumper crop
this year. At the moment we are seeing the price of rice which
has going up 150 per cent this year, from less than $400 a tonne
to $1,100 a tonne. It has now fallen back to below $800 a tonne
and some farmers in Asia are already protesting about this. A
year from now I am sure that the international community will
have other more fashionable crises to deal with and they might
lose interest because they think they have fulfilled their humanitarian
goals. Our strategy is to try to alert. We have produced a report
which I could not bring with me today because I was in other meetings.
We have produced a report that proposed a medium to long-term
development strategy to help countries in Africa to mainstream
agricultural development into their national development strategies.
It is also partly to help convince national donors to be mindful
that without the right kind of allocations to infrastructure,
research, extension services and marketing network, Africa will
lurch from one crisis to another. We have also working to help
mobilise private investment into Africa for food production, which
is new because normally countries do not allow foreign investors
into their farm sectors. We have been talking to people in the
Middle East—to oil exporting countries with surplus funds,
tto sovereign wealth funds and I have tried to include the whole
region, the Gulf Cooperation Council (GCC)—to interest them
in investing the bulk of their oil revenues into agricultural
production in Africa, with a sharing of benefits. We have just
begun to do this work. I am negotiating on both sides—that
is, with potential investors and with countries with agricultural
capacity—and we hope to be an honest broker in this process.
From our side, we are trying to do more work on the so-called
food commodities, because UNCTAD is a focal point for commodity
issues in the UN system. We need more information on this, because
if you look at rice, there has been a 150 per cent increase in
price, with no shortage in rice production. There used to be a
balanced supply and demand for rice, but then some countries began
to be over-sensitive about the availability of rice domestically,
and to impose export bans, tariffs, quotas, and selective trading
bans. Because of that, there has been a good dealing of hoarding,
and speculators have jumped onto the bandwagon, moving monies
away from real estate into the futures market, and rice was targeted
in the early days. I would say that maybe half of the increase
in the price of rice has been due to speculation. This is currently
an uphill fight, because economists do not agree on the role of
speculation in the food price hike, but we are quite convinced
that there is some connection, and that it has become excessive.
If you have speculation in the futures market, that is fine, that
is normal, but when you have excessive speculation and a more
than 30 per cent increase in funds being channelled into the futures
market for food commodities in the past 18 months, this creates
the wrong kind of futures prices which have influenced the spot
prices. We are now trying to work on the science and technology
side. UNCTAD is the focal point in the UN system for science and
technology-related issues. We serve as secretariat to the United
Nations Commission on Science and Technology for Development (CSTD).We
would like the CSTD to work on biotechnology so they can help
African countries launch engaged in the first Green Revolution
for Africa. As you know, the Green Revolution has taken hold in
Asia since the 1960s and 1970s, but it never took hold in Africa,
due to a number of problems that could not be addressed at that
time, although there was a corn revolution there in the 1980s.
We would like to see new technology for food grains to provide
seeds. Seeds are the most important thing at the moment, aside
from water. Seeds will be important, because in Africa you have
the very trying conditions of drought, floods and insects; you
need hybrid seeds that can be resistant to all of them.
Q397 Lord Moser: Just going back
to your first comments in answer to the Chairman, I take it that
UNCTAD's focus is on helping developing countries in one way or
another.
Dr Supachai: Yes.
Q398 Lord Moser: In your view, do
the less developed countries get sufficient help from the developed
countries? Even in asking the question I find myself confused
about definitions. Some people talk about the developing countries,
some people talk about the less developed and then there is the
official definition of the least developed. Whatever definition
works for UNCTAD, what is your feeling about the present state
of play on the substance of support from the advanced to the developing
world?
Dr Supachai: Thank you for this question,
Lord Moser. UNCTAD has been assigned by the UN system to work
on the economics of the least developed countries. In fact, we
have a,sub-programme on LDCs, landlocked developing countries
(LLDCs), and small island developing States (SIDs); the latter
are mainly in the Caribbean and Central America. In WTO parlance,
all of these country groupings are "vulnerable economies".
UNCTAD is responsible for assistance to all of them, and we have
quite an extensive annual report on the LDCs' economies. This
is the only group, together with the LLDCs and SIDS that is defined
officially by the UN system. The UN's Committee for Development
Policy determines which countries are going to qualify for LDC
status and which will soon graduate from it. I used to joke that
we have done ever-increasing work on the LDCs but we should be
looking for a way to reduce the number of LDCs. In the 1960s there
were we only about 20 LDCs; now we have 49. Last year there were
50, but one country has just graduated, Cape Verde. The General
Assembly had recommended graduation for Maldives, but that was
before the tsunami washed away half of their economy in 2004.
Two more countries are on the verge of graduating. Cambodia is
doing well and expects to graduate by 2020. Bangladesh is also
on track for graduation. We do extensive work on economic planning
and policy recommendations for the LDCs. We help them mainly with
the negotiations, particularly under the WTO. The meetings of
trade ministers of the LDCs and other developing countries are
all supported by UNCTAD. We do the documentation and research,
we advise them on the policy options and negotiating positions
available to them. Commodities are very important for the LDCs.
Most of them are single commodity exporters. Cotton is one area
I worked on when I was at WTO, and now at UNCTAD we are doing
a lot of work on commodities to help the LDCs. My point on the
LDCs, if I could leave this with you, is that there is no lack
of interest or donors' funds for the LDCs at the moment. When
we convene expert group meetings, funds abound to help the LDC
experts attend. But when it comes to those who are a little bit
above the LDCs—what I would call the 100 or so middle-income
countries—then donors are more reluctant to finance experts,
as it is assumed that these countries can afford to pay for them
themselves.
Q399 Lord Moser: In your terminology,
Dr Supachai, they are already graduates?
Dr Supachai: Yes, they graduated long
ago. If you look at Honduras, El Salvador, Guatemala, these are
countries with an income per head close to $1,000, but there are
some island economies that are probably $2,000 per head—mainly
because they are small, with populations of a few hundred thousand.
They are not doing well because they have advanced in their economic
development, but because of the small size of their economies,
which is why the income per capita is high. I would like to see
not only the concentration of a system for LDCs alone, because
if we proceed along these lines, and if we see each other again,
I might have to report that we have 60 LDCs and not 49, because
the middle-income countries might drop into the lower ranks. This
is a real risk. The EU as a whole is less keen to provide support
to middle-income countries, but there are some countries, like
Spain, which have been supportive of research on middle income
countries' economies, and we are trying to do that. Otherwise
the work on LDCs has been more than adequate. The point that needs
to be made with the LDCs—and I have just talked to a group
of donor countries—is that we should not be giving monies
to the LDCs so that they are totally dependent on such handouts
forever. This is a great risk of total dependence on donations,
concessional financing and trade market access. Many countries
do not want to graduate from the LDC category and my aim is to
force them to graduate. This is the work that UNCTAD is doing,
based on our annual LDC report. We are trying to classify them
into different groups, what we call converging groups—that
is, they are converging on the right macroeconomic policy, and
with prospects for graduation, those who are showing the potential
for sustained growth and graduation in the near future, and those
who are the laggards and nowhere near graduation.
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