United Nations Development programme

BFMUN 2011

Study Guide

Introductory Message from the Committee Chairs

NOOR FATIMA

Dear Delegates,

My name is Noor Fatima and I will be your chair for UNDP at the upcoming BFMUN 2011.UNDP is the United Nations' global development network, an organization advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. UNDP helps developing countries attract and use aid effectively. In all our activities, we encourage the protection of human rights, capacity development and the empowerment of women.I expect all my delegates to demonstrate effective communication and critical thinking as ambassadors of their country. These skills include public speaking,diplomacy, and quality research, negotiating, developing implementable solutions and technical writing.I am looking forward to hearing some REALLY heated arguments in my committee, because truth be told, that’s what makes it fun. I want you all to have a good time but I also want you to learn something about the important issues we will be discussing in our committee. Make sure you're prepared.Happy MUNing!

Regards,

Noor Fatima

NAJWA NADEEM

Hey, my name's Najwa Nadeem and I’ll be co-chairing UNDP at BFMUN this year. I'm doing my A levels at BSS as a senior. This is my first attempt as a chair since this the first time an MUN is held at Beaconhouse, Faisalabad.United Nations Development Program is an organisation advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. This committee provides a good opportunity to all those who have ideas to provide people with more economic opportunities and help improve life in developing nations. This is a relatively peaceful committee, but well researched stances and ability to analyze the topic from various angles can always bring out the drama at an MUN.There’s a belief that UNDP is for economics students only, however this is not the case. UNDP or any committee is open to debate from students of all backgrounds and it may surprise you how much you have to offer during actual talks.Looking forward to meet all delegates and wishing them best of luck.

RegardsNajwa Nadeem

Brief Introduction to United Nations Development Program:United Nations Development Programme is the UN's global development network, advocating for change and connecting countries to knowledge, experience and resources to help people build a better life. UNDP is based on the merging of the United Nations Expanded Programme of Technical Assistance, created in 1949, and the United Nations Special Fund, established in 1958. UNDP, as we know it now, was established in 1965 by the General Assembly of the United Nations. There are a total of 166 countries in which UNDP works and has 135 countries of fices worldwide. Working with governments and people on their own solutions to global and national development challenges, UNDP helps develop local capacity to bring about result s. UNDP provides policy advice and helps build institutional and human capacity that generates equitable growth. UNDP helps developing countries attract and use aid effectively. It works with the public and private sector partners to make the best possible use of aid resources in confronting the challenges and opportunities of freed by globalization. It is committed to promoting accountable governance at all levels of society and building coalitions for act ions on issues critical to sustainable human development. An Executive Board, representing both developed and developing countries governs UNDP. World leaders have pledged to achieve the Millennium Development Goals, including the overarching goal of cutting poverty in half by 2015. These Millennium Development Goals (MDGs) include eradicating extreme poverty and hunger, universal primary education, reduce chi ld mortality, improve maternal health, combat HIV/AIDS, malaria and other diseases, ensure environmental sustainability, develop a global partnership for

development and promote gender equality and women empowerment. UNDP's network links and coordinates global and national efforts to reach these goals.

UNDP’s work is concentrated in four major areas of focus, the first of which is democratic governance. More countries than ever before are working to build democratic governance. Their challenge is to develop institutions and processes that are more responsive to the needs of ordinary citizens, including the poor, and that promote development. UNDP helps countries strengthen electoral and legislative systems, improve access to just ice and public administration, and develop a greater capacity to deliver basic services to those most in need. Through its programmes, UNDP brings people together within nations and around the world, fostering partnerships and sharing ways to promote participation, accountability and effectiveness at all levels. Improving democratic governance mainly centers on access to information and E-governance, access to just ice and rule of law, anti-corruption, civic engagement, electoral systems and processes, human right s, local governance, parliamentary development, public administration and women’ s empowerment. Through these aspects, UNDP aims to provide legal empowerment to the poor by expanding poor people's access to the legal and institutional mechanisms that can help them break the cycle of exclusion and poverty. Focus areas include rights regarding property, labor and livelihood as well as access to justice and rule of law.

The second major area of focus for UNDP is poverty reduction and achievement of the MDGs. While economic growth is essential to human progress, it is not the only important factor in achieving the MDGs. UNDP supports countries in formulating, implementing and monitoring MDG-based national development strategies centered on inclusive growth and gender equality to ensure equitable, broad based human development. UNDP works closely with UN sister agencies and other organizations to ensure that the globalization process – international trade, investment regime and development finance – is inclusive and supportive of MDG achievement. Reaching the MDG target of halting and reversing the spread of HIV and AIDS by 2015 is also critical to achieving the other MDGs, particularly targets related to poverty, education, gender equality, and child and maternal mortality. As a founding co-sponsor of the Joint UN Programme on HIV/AIDS, UNDP is responding to the multisectoral challenges of the HIV and AIDS epidemic together with other UN agencies.

Thirdly, UNDP focuses on crisis prevention and recovery. Many countries are increasingly vulnerable to violent conflict s or natural disasters that can erase decades of development and further entrench poverty and inequality. Through it s global network, UNDP seeks out and shares innovative approaches to crisis prevention, early recovery and conflict resolution. Being on the ground in almost every developing country, UNDP helps to bridge the gap between emergency relief and long term development.

The fourth area which UNDP mainly focuses on is environment and energy for sustainable development. The poor are disproportionately affected by environmental degradation and lack of access to clean, affordable energy services. UNDP’s goal in this area is to strengthen national capacity to manage the environment in a sustainable manner while ensuring adequate protection of the poor. Energy and environmental issues are also global, as climate change, loss of biodiversity and ozone layer depletion cannot be addressed by countries acting alone. UNDP, through programmes such as the Equator Initiative and the Global Environment

Facility – a partnership with the UN Environment Programme and the World Bank – helps countries strengthen their capacity to address these challenges at the global, national and community level, seeking out and sharing best practices, providing innovative policy advice and linking partners through pilot projects. In all activities, UNDP encourages the protection of human rights and the empowerment of women, and all activities are undertaken in close collaboration with the Government, sister UN agencies and other development stakeholders.

Topic: Impact of the global economic crisis on development in the developing world.

Overview of the Issue

The Millennium Development Goals (MDGs) are a global monitoring framework to assess progress in reducing poverty and deprivation and are closely related to development. When they were set in 2000/2001, the MDGs were based on 1990 trends and were seen as realizable goals, given sufficient resources and commitment. Achieving them would secure a very basic level of wellbeing for almost a fifth of humanity. 2008 was marked by an unprecedented degree of global action on development in that significant progress

was made on the MDGs, particularly in countries where governmental commitment was backed by strong policies and public expenditure, such as Ghana and Vietnam. 120 million people were lifted out of poverty between 2000 and 2005, meaning the share of people living in poverty fell by 2.4% per year. The world was right on track to halve poverty by 2015. However, 1.4 billion people still live on less than $1.25 a day.

Globally, between 2000 and 2005:

2 million lives were saved by reducing child mortality

30 million additional children (aged 6-12 years) now go to school

30 million additional families now have access to drinking water

Boys and girls attend primary school in equal numbers .However, progress in this realm is uneven. The reduction in global poverty is largely due to rapid recent growth in the large Asian countries: China, India, Indonesia, and Vietnam. The world is still off track on a number of targets, especially relating to child mortality, maternal mortality and water. There are strong disparities across regions and countries. Indeed, most developing countries are projected not to meet most MDGs and Sub-Saharan Africa lags very much behind.

Progress on achieving the MDGs is shaped by the global economic environment, domestic policies, and for the poorest countries, how much and how well aid is delivered and used. The challenges remain formidable as ever and include high and volatile commodity prices, accelerating climate change, continuing threats of chronic poverty, growing inequality and poor governance and the particular problems faced by fragile and post conflict states.

The financial crisis and economic slowdown make this a precarious time for development. What began as a bursting of the U.S. housing market bubble has ballooned into a global financial and economic crisis, leading to the most severe global recession since the Great Depression of the 1930s. 2010 is, therefore, a critical year for the developing world as these economies attempt to emerge from the crisis they did not create and to move ahead with their development agenda. Developing economies may not have played a major role in the onset of the crisis, but they may have less resilient economic systems that can be highly affected by actions in global markets. Most industrialized countries have been able to finance their own rescue packages by borrowing domestically and in international capital markets, but many emerging market and developing economies have insufficient sources of capital and have turned to help from regional development banks, the IMF, the World Bank, and traditional donors such as the Group of Eight (G -8).

Low Income Countries (LICs) are particularly vulnerable given their high dependence on aid. According to IMF calculations, in about half of the 70 LICs, aid exceeds 20% of current public spending, and in 14 countries, this ratio surpasses 50%. Burundi, Rwanda, Afghanistan, and the DRC are among the larger recipients of aid where the ratio of aid to current public expenditure is estimated to have reached more than 80% in 2008 (IMF 2009). What compounds this conundrum is that is that this dependence is likely to increase and the likelihood of availability of aid is likely to decrease.

The prospects for achieving the MDGs appear bleak, as the global economic slowdown has undermined progress in developing countries, reduced per capita growth rates and caused severe budget problems. Initial predictions that the developing countries would be insulated from the worst of the financial turbulence have proved over optimistic. The impact on low income countries is now expected to be high, especially in Sub -Saharan Africa. The crisis is projected to increase the financing needs of low income countries by US$ 25 billion in 2009. The effects of the financial crisis are being felt in emerging and developing countries alike, though the impacts vary significantly across regions, countries and population

groups.

The effects are felt through several transmission channels, and include contagion from the financial crisis and from the impacts of global economic slowdown. Decreasing remittances reduced foreign investment and falling demand for goods and services are all expected to adversely affect developing economies and emerging markets. As well as compounding the development challenges faced by many countries, the effects of the financial crisis and economic slowdown may even put at risk the gains to date in relation to the Millennium Development Goals. The question that arises is, will the crisis have long term consequences for human development and MDG achievements in the developing world? If so, what are the mechanisms by which such impacts could take place, and what is the role for policy?

Which countries are most at risk?

The following types of countries are most likely to be at risk:

Countries with significant exports to crisis affected countries such as the USA and EU countries. Mexico, Central America is a good example;

Countries exporting products whose prices are affected. Zambia and other mineral exporters are examples. The tourism sector in Caribbean and African countries will be hit;

Countries dependent on remittances. With fewer bonuses, Indian workers in the city of London, for example, will have less to send back. There will be fewer migrants coming into developed countries where job opportunities will become scarcer. Philippines and Bangladesh also fall in this category;

Countries heavily dependent on foreign direct investment (FDI) to address their current account problems (e.g. South Africa cannot afford to reduce its interest rate, and it has already missed some important FDI deals);

Countries with sophisticated stock markets and banking sectors with weakly regulated markets for securities, example Singapore;

Countries with pressures on exchange rates and inflation rates. Pakistan has seen a devaluation as well as high inflation. Import values in other countries have already weakened the current account;

Countries with high government deficits. For example, India has a weak fiscal position which means that they cannot put schemes in place;

Countries dependent on aid, e.g. much of sub-Saharan Africa.

The Problem

The global financial meltdown will have serious repercussions for the developing world and these effects shall range over the entire width of the spectrum in that no sector, be it the economy, the society or the political sphere will have been spared from the debilitating effects of the crisis.

Economic challenges

While the effects will vary from country to country, the economic impacts could include:

1. International Trade and trade prices World trade was projected to shrink by 11% in 2009, its first decline since 1982. Poor nations are expected to see exports fall by over 6%. The crisis has resulted in weaker export revenues and lower investment and growth rates. Since the United States, the European Union, and China cumulatively count for nearly 70% of African trade, African exporters are suffering from the decrease in global demand. For example, total exports to the United States from 41 African countries declined by 63% each in the first half of 2009, compared to the same period of 2008.

While Africa accounts for less than 2% of global trade, many African and other developing economies depend on exports of primary commodities, whose prices on the world market have declined drastically due to the global crisis. Decreases in U.S. and global consumption are likely to continue to have a negativeeffect on most exports from the region. The decrease in the price of oil and mineral commodities, accompanied by the decreased external demand has proved to be quite detrimental to the region in that it is now exporting less and at lower prices than before.

Investor perceptions of risk have increased the impact of falling commodity prices for resource -richdeveloping countries that are also fragile or post-conflict states. Countries which depend in part on international tourist arrivals have also suffered a heavy setback because tourist arrivals declined worldwide by about 8% in the first four months of 2009 compared to 2008.

2. Trade barriers Global trade could drop even further if countries react to the economic crisis by enacting additional trade barriers. Developing economies face the further risk that the global recession will spark new attempts by developed countries to restrict imports and protect local producers. Some analysts fear that policies aimed at encouraging trade with Africa—such as AGOA, the European Union’s “Everything but Arms” program, or the Doha Development Round of the World Trade Organization —could be threatened by political pressures to become more isolationist. The tightening of international credit markets is also expected to render it more difficult for LICs to access trade finance. In prior financial crises, a drop in the availability of trade finance negatively impacted the operations of private firms in developing countries. Will the current crisis have a similar impact?

Trade with China

Because recent growth in Africa was driven in part by commodity exports to China, Africa is particularly vulnerable to fluctuations in China’s economic growth. Even with the impact of the crisis in the second half of 2008, total Sino-African trade for the year was reportedly $106.8 billion, a significant increase from 2007. This trade has spurred Chinese investment in large infrastructure projects in Africa, which in some cases are thought to have helped alleviate constraints on economic competitiveness. China is re-evaluating some resource extraction agreements, particularly in countries perceived as politically unstable, in light of the global slump. At the same time, recent statistics on China’s growth in the first months of 2009 showed robust, if somewhat reduced, economic growth. Furthermore, China’s domestic economic stimulus package reportedly relies heavily on infrastructure construction, which has kept demand steady for some primary inputs, such as oil, copper, tin, and lumber. Indeed, while Chinese private-sector engagement with Africa has apparently decreased as a result of the crisis, the Chinese government may need to continue to negotiate economic and resource-acquisition agreements with African countries. How can the international community facilitate this?

3. Investment Foreign direct investment (FDI) and equity investment will come under pressure. While 2007

was a record year for FDI to developing countries, equity finance is under pressure and corporate and project finance is already weakening. There are several examples such as South Africa and India.

Commercial lending has been negatively impacted. Banks in developed countries may not be able to lend as much as they have done in the past. Also investors have become increasingly attuned to the risk of emerging market countries defaulting on their debt, following the financial collapse of Iceland. This would limit investment in such countries as Argentina, Iceland, Pakistan and Ukraine.

4. Fiscal and Trade Balances The economic crisis is putting further pressure on current accounts and balance of payments. In recent years, debt forgiveness and improved fiscal positions contributed to greater economic stability. However, fiscal positions have already taken a turn for the worse due to the crisis. Fiscal deficits reflect both increased government spending aimed at expanding social safety nets and declining government revenues due to decreases in the collection of taxes and royalties on natural resource extraction, customs and tariffs on trade, and taxes and fees on tourist activity and other consumption. Many countries are expected to have difficulty financing their deficits. Several African governments had planned to raise long-term financing through the issuance of sovereign bonds. Because of the impact of the crisis on global liquidity, these plans have reportedly either been unsuccessful (South Africa), canceled (Ghana), or delayed (Kenya, Nigeria, Tanzania, and Uganda). While some oil exporters and middle-income countries have enacted fiscal stimulus packages, their capacity to do so is restrained in most developing countries, even with international assistance. Combined with the difficulty of raising financing, budgetary pressures have reportedly caused some major infrastructure projects, including government-funded projects and public-private partnerships, to come under strain.

5. Financial spillovers There could be financial spillovers for stock markets in emerging markets. The Russian stock market had to stop trading twice; the India stock market dropped by 8% in one day at the same time as stock markets in the USA and Brazil plunged. Stock markets across the world – developed and developing – have all dropped substantially since May 2008. We have seen share prices tumble between 12 and 19% in the USA, UK and Japan in just one week, while the MSCI emerging market index fell 23%. This includes stock markets in Brazil, South Africa, India and China. We need to better understand the nature of the financial linkages, how they occur and whether anything can be done to minimize spillovers.

6. Migrant Remittances and Lost employment Recorded remittances—or monies sent home by foreign workers overseas—to Africa totalled $18.59 billion in 2007, nearly rivalling foreign aid flows. Within the region, remittances are thought to account for 3.7% of GDP on average, although there is significant variation among countries. By total recorded flows, Nigeria and Kenya receive the highest value of remittances. Global remittance levels were projected to fall 5 -8% in 2009, from an estimated $305 billion in 2008, according to the World Bank. Remittance levels could fall further if continuing economic troubles cause destination countries to revise their immigration laws, making them more stringent which will inevitably lead to fewer economic migrants and thus lower volumes of remittances per migrant

7. Foreign Aid While only a handful of donors to date—including Italy, France, and Iceland—have reduced bilateral foreign assistance to the developing world due to the crisis, the global flow of foreign aid is likely to suffer in the medium term if the global downturn continues. A more significant decline in aid flows is expected to accompany other economic indicators due to the long-term planning process in donor countries. Some observers predicted that while aid levels in 2009 and 2010 would be largely unaffected by the crisis, they could drop in 2011 and 2012 as developed countries experience continued fiscal strains and political

pressures to balance budgets. Nonetheless, developing countries have requested donors to increase aid flows in order to help offset the impact of the crisis on their domestic economies. However, at the same time it is also crucial to address issues of transparency and accountability with regards to aid.

8. Problems with Prior Aid Commitments to African developing economies During the 2005 Group of Eight (G 8) Summit in Gleneagles, Scotland, members pledged to roughly double annual aid to Africa by 2010. Some countries—such as the United States— committed to a dollar-figure increase, while European countries committed to raising the percentage of national income spent on aid to Africa. According to the organization ONE, which monitors aid commitments and disbursements to Africa, the G-8 Gleneagles commitments amount to raising annual overseas development aid to Africa by $21.48 billion (in 2008 dollars) on top of what was already being spent in 2005, by 2010. The commitment by the United States was to raise annual aid to Africa to a total of $8.8 billion.

Most observers believe G-8 aid to Africa will not reach the levels promised at Gleneagles. This may be attributed mainly to shortfalls by France, Italy, and Germany; other G 8 members, including the United States, are believed to be on track to meet their commitments. In addition, reductions in projected national income in donor countries have negatively affected the real value of European commitments based on a percentage of GDP.

Social challenges

The crisis might have longer lasting MDG impacts into 2010–2015 via contracted social spending, albeit differently across countries. The economic crisis is expected to result in more crime, weaker health systems and more difficulties meeting the Millennium Development Goals (MDGs).

Moreover, negative spill-over effects from these countries — the trafficking of people, drugs, criminality and terrorism can be enormous. Social development could be adversely affected in the several ways.

1. Poverty Reduction Restricted growth opportunities are bound to result in escalating poverty. Multilateral organizations project that the economic crisis could increase poverty worldwide by at least 45 million people. In Africa, the world’s poorest region, the IMF estimated that the crisis would add 7 million people to the ranks of those living below US$1.25 a day in 2009, and a further 3 million in 2010. Indeed, while average GDP growth in Africa was expected to remain positive in 2009, per capita GDP was expected to contract in many African countries.

In Africa, the impact on poverty may be further compounded by the effects of the 2008 food crisis, which made many African families more vulnerable to sudden economic shocks, especially as domestic prices for fuel and food remain relatively high in many countries. Many African households teeter just above the international poverty line, and a small impact on average household income could translate into a large jump in poverty as measured by international standards.

Additionally, already insufficient social safety nets are expected to be further strained by a reduction in budget allocations for public services as government revenues drop. Some predict that the human costs of the economic crisis will be dire: for example, one World Bank analysis estimates that the crisis will directly cause 30,000-50,000 excess infant deaths in Africa alone, with most of these additional deaths likely to be poorer children, and overwhelmingly female.

2. Food Security and hunger eradication The economic crisis has adversely impacted hunger eradication in the developing world. The crisis is expected to compound existing challenges for African food security. The United Nations estimated last year that the proportion of undernourished people in Africa’s population rose to 29% in 2008, compared to 28% in 2004-2006, and that it would rise further in 2009. While inflation declined throughout Africa in the second half of 2008 with the slump in oil and food prices on the world market, global food prices have remained higher than they have been in a decade, nearly double historical levels.

Moreover, Africa’s insulated markets and factors such as poor transportation infrastructure have limited the pass-through of lower global prices to domestic markets. According to the Food and Agriculture Organization (FAO), food crises persist in at least 20 African countries. While high food prices may serve as an incentive for some crop producers, most analysts believe that they have a net negative effect on Africa’s poor. In light of the economic crisis, the global community must take greater steps to ensure hunger eradication.

3. Education

UNESCO’s Education Sector has monitored the impact of the crisis on the education sector of its Member States. Although signs of economic recovery have started to emerge, the aftershock of economic turmoil will be profound in social sectors and continue beyond 2010. The effects of the crisis on education have been increasingly felt. When UNESCO conducted case studies for 12 countries in August 2009 it found that several governments had been revising downwards their education budget to reflect the decline in revenue.

Impact of the crisis on public education finance and government responses:

Government revenues declined and budgets were cut in 2008 and 2009 in many countries, which resulted in cuts in budgets for education, even after borrowing from abroad.

Impact of the crisis on schools and households’ expenditure on education:

The effects of the crisis on education seem more visible at the community levels than is indicated by government budget statistics. The crisis has resulted in difficulties in meeting school costs at household level, increased absenteeism, school drop-outs and increased child labour. In some countries, educational quality and equity in public schools has been jeopardized and demand for education has decreased. In order to obtain information on how the global crisis has affected schools, teachers and households, a community-level survey was conducted in November 2009 in two of the most affected countries: Mongolia and the Democratic Republic of the Congo (DRC). The findings indicate that the global crisis is producing severe effects on education provision, at the expense of vulnerable populations. In the DRC, where most schools (around 70%) are privately owned and even public schools depend on student fees, the further decrease in household income has had a direct impact on school operations. The shift of students to cheaper and low quality schools has been reported in most schools. A number of households have sold family assets or reduced consumption of basic goods to supplement school fees. Some poor families had to make a choice and decide which children were entitled to schooling. Early childhood care and education and girls’ participation seem to have been severely affected. Many over-aged students did not return to classes in the new school year either due to the high costs of schooling or the need to engage in income-earning activities.

4. Health Although the economic and political consequences of the recession are being studied in exhaustive detail, the potential health consequences have received much less attention.

The effects on health are likely to be manifold. At a global level, health care is likely to decline further as aid dries up and government expenditure falls, with millions more forced into poverty and malnutrition, particularly women and children. This is likely to be further exacerbated by the collapse of business and banking institutions as world trade declines, on a background of raised food and fuel costs.

Excess deaths can also be expected, particularly in developing countries, as poorer patients defer medical treatment and health services deteriorate, with the greatest impact likely to be on the most vulnerable patients including children, the disabled, and the elderly. Disease control is also expected to suffer during the current crisis. There is growing concern that funding for treatment, research, and global control of malaria, tuberculosis, and HIV/AIDS is being cut back, and that other currently underfunded programs for serious infectious diseases would not get the investment they require. Resources for disease surveillance and laboratory capacity are also likely to be cut back during such tumultuous times, which may seriously impact on the timely identification and mitigation of emerging epidemics and pandemics.

As governments will be trying to reduce expenditure from their shrinking budgets, by reducing health workforce numbers and healthcare costs during a time when demand continues to increase, the strains on healthcare services will continue to intensify. Infant mortality rates have risen among low-income groups in many developing countries. According to the 2010 Global Monitoring Report, “260,000 more children under 5 could have been prevented from dying in 2015 in the absence of the crisis. Hence, in light of the economic downturn, special attention must be given to the health sector.

5. Limited and Faulty Data Infrequent and flawed economic and social data collection in nearly all developing countries has contributed to significant variations in estimates of the economic impact of the crisis. For example, the IMF estimate of 1.5% average growth in 2009 is significantly lower than the Organization for Economic Cooperation and Development (OECD) estimate of 2.8% growth, but higher than the 1% growth predicted by the World Bank and the 1.7% contraction predicted by the Economist Intelligence Unit. These discrepancies arise because of lack of appropriate government machinery, infrastructure and challenging political conditions such as war. Given these problems, some analysts rely on unusual indicators such as cell-phone and building material sales, rather than GDP, to probe the health of developing economies

6. Gender Inequality

In developing countries in which women are concentrated in export manufacturing industries, such as in Latin America and Asia, or in tourism in the Caribbean, the job losses for women, in wake of the economic recession, will be greater than for men. According to the ILO the economic crisis is expected to increase the number of unemployed women by up to 22 million in 2009. This is particularly worrisome, given the large percentage of female headed households. In regions such as Sub-Saharan Africa, women are mainly involved in subsistence agriculture or work in the informal sector. The effects of this crisis will hit this group differently than in Asia and Latin America. For the bulk of women in Sub-Saharan Africa, the crisis will become apparent with the decline in remittances, and any cuts to public sector spending on education, health, and other services. Less powerful ethnic groups and immigrants will suffer in many of the same ways as women because they are similarly situated in the paid economy.

Women’s jobs pay lower wages, in part because women tend to have a higher rate of part time employment, and are often not covered by social safety nets. Moreover, in countries without social safety nets, the impact on women is even more severe. Over half of all women in the world are in “vulnerable jobs,” that is, they are self-employed in the informal sector or work as unpaid family workers. Their livelihoods are thus extremely vulnerable during economic downturns. Female headed households are at greatest risk, with few if any savings to weather the crisis, and limited ownership of wealth and other assets, as compared to men.

Political Challenges

1. Stability Many believe fallout from the global economic crisis could have implications for the developing world’s political stability. The Economist Intelligence Unit recently contended that “as people lose confidence in the ability of government to restore [economic] stability, protests look increasingly likely…. There is growing concern about a possible global pandemic of unrest.” This may be particularly pertinent for post-conflict and “fragile” states, where institutions are especially weak, investors wary, and donors under pressure to pare down financial commitments as their own economies suffer.

Analysts’ assumptions are based in part on observations from mid-2008, when rising food prices sparked food riots across the African continent and were thought to have played a role in political unrest in several countries. As the number of impoverished and unemployed individuals escalates, long -standing potential instability may be ignited—particularly if local populations hold their governments responsible for their economic hardship, if political or military contenders for power use the economic crisis as a weapon against incumbents, or if observation of unrest in neighbouring countries acts as a vector of contagion. Tensions from the crisis may exacerbate pre-existing sources of instability in many developing countries, including ongoing or recently resolved conflicts, fragile institutions, xenophobia, and income inequality. However, such widespread riots are yet to be seen in the wake of the economic crisis.

2. Conflict

The economic crisis may force countries into a vicious cycle of low human development and conflict. It is important to pursue policies that reduce the risks of conflict outbreak, especially when countries are facing sharp economic slowdowns. International efforts on peacekeeping can play significant role in peace building. Aid and policy do not have direct effects upon conflict risk, but both directly affect the growth rate and the extent of dependence upon primary commodity exports, and these in turn affect the risk of conflict. Analysts find that a ten percent increase in foreign aid decreases the risk of civil conflict by about six percent. Policies that enhance human development reduce risks of conflict. The current global economic crisis may endanger political stability in developing countries.

Violent conflict is the most extreme outcome of a breakdown in stability. While conflict might be caused by many factors, low levels of human development increase the risks of conflict outbreaks and recurrence. Conflict, in turn, destroys the accumulated physical, social and human capital. The linkage between conflict and human development may form a self reinforcing cycle. The current economic crisis, in addition to the potential devastating economic and human development impacts that it may originate, also increases the risk of pushing some developing countries into a low human development – conflict trap. And consequently, policy measures to sustain human development would also have an additional indirect impact in lowering the risk of conflict.

Effect on Policy Making

The current macro economic and social challenges to development posed by the global financial crisis require a much better understanding of appropriate policy responses. Developing countries will also need to manage the implications of the current economic slowdown – after a period of strong and continued growth in developing countries, which has promoted interest in structural factors of growth, international macroeconomic management will now move up the policy agenda of developing countries.

There needs to be a better understanding of what can provide financial stability , how cross-border cooperation can help to provide the public good of international financial rules and systems, and what the most appropriate rules are with respect to development;

There needs to be an understanding of whether and how developing countries can minimize financial spillovers;

There will also be implications for development policy:

There will be limits to financial solutions if the problems lie in the real economy, but development finance institutions may be able to take some risks and support investment flows to developing countries, counteracting reductions in other financial flows.

Aid volumes will come under pressure, but there may also be implications for the composition of aid.

Policy Recommendations

1. Stimulus policies need to be carefully selected and globally coordinated

Despite the positive steps taken in a number of economies and the high priority status allocated to them, it is clear that developing countries do not have adequate domestic resources to fully offset the impacts of the crisis. This has left the majority of developing countries with limited options to adopt discretionary counter-cyclical fiscal measures. Moreover, even in countries where expansionary policies are feasible, the question remains as to whether low income countries should spend the reserves accumulated during the boom to mitigate a crisis that is not of their making. Effective fiscal stimulus packages must contain discretionary measures that are timely, targeted, and temporary (with clear exit options). Measures can be taken to stimulate domestic demand (offset declining exports), ease supply bottlenecks and to support businesses. The third world’s domestic measures need to be well coordinated with policies at the international level given that global economic recovery is a prerequisite for the developing world’s recovery from the crisis.

Moreover, from a development point of view, there is a need for clear commitment by developed countries to refrain from any protectionist inclinations and ensure that their demand for imports from developing countries picks up.

2. Preventing a development crisis and restoring high growth after the crisis

In order to prevent this economic crisis from degenerating into a development crisis, it is important that the developing world reforms its structural and institutional bottlenecks and coordinates its efforts with those of the developed world. Such efforts might include adequate commitments and timely delivery of financial aid and technical assistance as well as measures to insure adequate market access for third world products.

3. Structural reforms to restore economic potential of developing countries.

Progress with structural reforms in the developing world has been varies in that although the third world is becoming more open to trade and Foreign Direct Investment, structural transformation, and in particular industrialization, remains limited. Moreover, LICs continue to suffer at the hands of weak infrastructure and unhealthy business environment. It is important that developing countries be facilitated in turning the crisis into an opportunity to restore their economic potentials and accelerate their economic growth, which would in turn help in increasing human development. This requires a focus on key structural reforms such as enhancing competition in the financial sector, streamlining labour market regulations, developing financial markets and strengthening governance, promoting private sector development and promoting economic diversification. These reforms need to be accompanied by measures to establish social safety nets for the most vulnerable segments of the population. Encouraging private sector development to spur investment is one of the key medium term challenges and can be alleviated by ensuring adequate access to capital through securities exchange or venture capitalism. Improvements in the business environment, including enforcement of property rights and good governance, are important for raising competitiveness. Cooperation in the areas of financial supervision and crisis prevention between foreign parent banks and domestic branches are critically important in developing countries. Greater awareness of the risks associated with various forms of loans (including in foreign currency), also needs to be promoted.

4. Substantial financial needs to prevent developing countries from falling prey to this economic disaster, external financial resources are required.

While financial needs to mitigate the economic and social consequences of the crisis are substantial, they must be met. The third world cannot be left alone, or viewed as the last priority, when it comes to dealing with a crisis which originated in the developed world. Of course, higher financial assistance and other support will be challenging to mobilize in times of economic stress in donor countries. But the returns to helping developing countries recover are equally high. Moreover, helping LICs to overcome challenges posed by the crisis is not only a moral imperative for the advanced countries, but it is also consistent with their longer term interests in ensuring a stable and prosperous global economy. Hence the solution to the challenges posed by the crisis must be all encompassing and should rely on enhanced and more inclusive international cooperation.

5. Focus attention on key sectors to accelerate progress towards the MDGs.

The crisis has jeopardized the efforts of a number of countries to meet the MDGs. It has reinforced the need for more efficient spending, across more countries, and on more MDGs if targets are to be met. Maintaining expenditure levels alone may not be enough to achieve this: instead, the focus may need to be on maintaining trends in expenditure in important sectors such as health and education, coupled with interventions that will improve the efficiency with which expenditures are translated into MDG achievement.

6. Institute well-designed social protection.

Well designed social protection systems and safety nets are extremely important for developing countries. The present situation is an opportunity to introduce and develop such systems, which could comprise of combinations of cash and in-kind transfers, access to facilities for the down-trodden and means to address objectives such as long term sustainability. Public spending, in particular on social protection, will play a key role in promoting equality and in addressing chronic poverty which in turn will help in achieving MDGs in the current economic downturn. The redistributive potential of policies for health, education and social protection is of major significance. Improved access for the poor to public services (especially in the health and education sectors) and income transfer programs to sustain the poorest families are essential to changing the structure of opportunities and are crucial to development.

7. Maintain continuity and quality of services in health and education.

Health and education sectors often fall victim to expenditure reduction plans. Deterioration of these services might exacerbate the current crisis. The situation is well illustrated in the context of AIDS programs, where the questions of user fees, quality of health care and continuity of healthcare gain special significance .Reduction in government expenditures on AIDS or failure by the international community to honour commitments to sustain and scale-up access to antiretroviral treatment will lead to preventable deaths and disease. Such negligence could result in more people with HIV-related illnesses which would place unnecessary and avoidable burdens on the public health system.

8. Introduce – and maintain – effective monitoring mechanisms which shall seek to improve the quality of data and institute a system to generate data for ongoing analysis and predictions.

Monitoring of key indicators, such as nutritional status, health and incomes needs to be monitored and kept as close to real time as possible. Strengthening national statistical capacity is important in order to make possible the timely provision of reliable statistics which are essential for the implementation and follow up of the MDGs Indicators framework.

9. Maintain a longer term perspective

The economic crisis had been preceded by the food and the fuel crisis and accelerating signs of environmental degradation. All these problems pose serious problems towards human development by having unearthed hereto forth neglected fundamental questions regarding food production and distribution and sustainable measures aimed at stemming the climate change.

10. Possible domestic policy responses in developing countries

Apart from global, international efforts domestic policies shall also prove crucial in accelerating progress on the MDGs. A single set of policies cannot account for the needs of all countries as it shall effectively lack consideration of every country’s individual opportunities and liabilities. Case-by-case analyses should therefore be conducted in an attempt to design the right policies and financial responses to reduce the vulnerability of certain developing countries and their populations to external shocks. Weak governance is one of the major obstacles to achieving the Millennium Development Goals. Without a reinforced commitment to fully respecting human rights, democratic principles, rule of law and good governance, efforts to assist developing countries and their populations affected by the global crisis will fall short. The principles of sound democratic governance hold that the state be responsive and accountable and should facilitate civil society participation in efforts to alleviate the impacts of the financial crisis.

11. Broadening the Scope of the MDG framework

The current situation can be used to increase awareness regarding the missing dimensions of the MDG framework, by including goals and targets on human rights, empowerment, good governance, security issues, citizen participation, food security, socioeconomic inequality and social exclusion. However, broadening the scope of the current MDGs, by adding more goals or more monitoring indicators may be counter-productive. Although the situation needs adjusting, it is unclear whether new targets would be the best answer. The risk of increasing the complexity of an already complicated international situation may be too high. Any addition to the MDG framework should be cautiously balanced against the risk of losing partner countries' commitment to let the MDGs feature prominently in their national development agendas. The goals are often seen at country level as developed country constructs. Listening to the voices of developing countries may entail a stronger focus on clear local indicators that reflect the on-the ground situation bringing into question the sweeping global targets. Increasing developing country ‘ownership’ of the MDGs is a major factor in accelerating development up to and beyond 2015.

12. Global goals and targets

Another relevant issue concerns global public goods. Examples are biodiversity, water and climate patterns. Global public goods are considered preconditions for the development of countries and their populations. Protecting and managing sustainably the natural resource base is essential to successful poverty reduction strategies. Should more focus be placed on key global public goods, such as minimizing the extent of climate change or providing greater security in the international development agenda? The aspects of development are gradually changing and, as barriers between countries continue to lower, the influence of global factors seems likely to have a greater weight in determining the progress of the poor. However, is such a macro framework negotiable?

13. Possible immediate policy response to reduce the likelihood of a global financial crises with global repercussions

Developing countries could be encouraged to use temporary capital account restrictions and debt standstills in order to generate large and sustained outflows of capital. These could be supported by the IMF, where necessary, through lending into arrears. Any additional financing the developing countries may need in order to respond positively to shocks from the crisis should not have strict condition, and should be non-debt creating and/or at low-cost.

14. Early warnings of financial risks

There is a need to significantly improve the effectiveness, even-handedness and the quality of the IMF surveillance over macroeconomic, financial and exchange rate policies. Improvements are also needed to provide early warning for risks of macroeconomic and financial instability.

15. Crisis intervention and resolution

Sustainability analyses in official debt restructuring exercises could be taken from the IMF and given to an independent body of experts. Although the above policy responses focus heavily on economic rehabilitation, it is important for the delegates to apply the aforementioned techniques in coming up with suitable responses to effectively deal with the social and political problems highlighted above, which might include the institution of a possible social security system and negotiations among the stakeholders at the global and domestic level to prevent any outbreak of violence. Delegates shall also be expected to put forth solutions aimed at increasing productivity and improving food distribution channels apart from proposals aimed at increasing provision to health and education services.

International Efforts to address the impact of the crisis on the Developing world

Developed Countries

At the Group of 20 (G-20) summit in London in April 2009, member states agreed to inject $1 trillion into the world economy in order to combat the effects of the global crisis. This included a commitment to support growth in emerging market and developing countries. For example, the G-20 committed to increase lending resources available to the IMF by $250 billion through immediate contributions from some IMF member countries, and to use additional resources from agreed sales of IMF gold to provide $6 billion in additional financing for poor countries over the next two to three years. At the July 2009 G-8 summit in L’Aquila, Italy, members declared that they were “determined to assist developing countries in coping with the impact of the economic crisis” and committed to fulfilling the Gleneagles commitments on aid and improving aid effectiveness, and strengthening global initiatives to achieve the MDGs and other anti-poverty goals. Led by the United States, the G-8 agreed to mobilize $20 billion over the next three years for agricultural development assistance in additional to prior commitments of emergency and humanitarian food aid. The United States committed to doubling U.S. agricultural development assistance to more than $1 billion in 2010, providing at least $3.5 billion over the next three years. However, some observers view these pledges as unlikely to be fully upheld.

International Financial Institutions

The World Bank, African Development Bank (AfDB), and the IMF have all stepped up lending to the region since the onset of the financial crisis and reformed several of their existing loan and assistance programs, or created new facilities, to target their efforts towards the current crisis and improving human development in the concerned areas in this new economic climate. These include, for example, the IMF’s Exogenous Shocks Facility, the World Bank’s new Financial Crisis Response Fast-Track Facility and Infrastructure Crisis Facility, and the AfDB’s new Emergency Liquidity Facility and Trade Finance Initiative. These are aimed at offsetting budget shortfalls, increasing liquidity, and providing financing for infrastructure and trade finance—all of which are considered by many analysts to be crucial to the Third world’s eventual economic recovery.

World Bank

To ramp up assistance to the World Bank’s poorest member countries, World Bank member countries approved the Financial Crisis Response Fast-Track Facility, which shall allow the Bank to front-load $2 billion of the $42 billion of assistance available under its International Development Association’s 2007 financial replenishment. The World Bank’s private sector arm, the International Finance Corporation (IFC), has expanded or launched five new facilities aimed at supporting the private sector in affected emerging market and developing countries worldwide. The IFC expects financing for these new facilities to total roughly $31 billion between 2009 and 2011. Beneficiary countries of World Bank targeted lending include developing countries such as South Africa, Mauritius, the Democratic Republic of Congo, Comoros, Ghana, Kenya, and Zambia. In addition, the World Bank’s new Infrastructure Crisis Facility (IFC) is making $300 million available to provide top-up financing for viable, privately funded infrastructure projects experiencing financial distress, or which are no longer able to reach financial closure. The Bank is also stepping up knowledge assistance to help countries prepare contingency plans for responding to the

crisis in ways which are not detrimental to their developmental objectives. This package of assistance supplements the Bank’s $1.2 billion Global Food Crisis Response Program (GFRP), launched in response to the 2008 food crisis.

The African Development Bank

The African Development Bank Group (AfDB) announced four new crisis-response initiatives in March 2009: a $1.5 billion Emergency Liquidity Facility (ELF); a $1 billion Trade Finance Initiative (TFI); a framework for accelerated transfer of African Development Fund resources to eligible countries; and enhanced policy advisory support. In addition to various ongoing and new projects addressing infrastructure, governance, macroeconomic policy, skills development, humanitarian relief, and other areas, the AfDB has approved several loans in recent months designed primarily to offset the impact of the global economic crisis which are important because in order for a country to improve its human development it is important for it to first stabilize its economic conditions.. Recent loans explicitly linked to fallout from the crisis include a $1.5 billion loan for Botswana designed to help address a budget deficit estimated at 13.5% of GDP. It is important to replicate such efforts for developing countries around the globe.

THE IMF

The IMF has also accelerated long-standing efforts to revamp its lending and policy support programmes for low-income countries. Among recent reforms in the wake of the economic crisis is the creation of $250 billion worth of IMF special drawing rights (SDRs), equi-proportional (all countries receive an amount relative to their IMF quota share) allocation to all member countries and the approval of a second SDR allocation (around $33.9 billion) specifically for underrepresented countries.

African Governments

African governments established a Committee of Ten African Finance Ministers and Central and Regional Bank Governors (C-10) at an AfDB organized meeting in Tunis in November 2008. Finance ministers and central bank governors have met several times since then to discuss the impact of the crisis and possible policy responses which shall focus on the rehabilitation of the economic and social atmosphere of the Third world. Some countries have set up economic monitoring units and deployed limited fiscal and monetary resources which include fiscal stimulus packages, expansionary monetary policy and bond financing of public expenditures. Nevertheless, governments of most developing countries have little capacity to fund policy interventions to address the crisis. Effective economic governance and thus increasing human development continues to be lacking in many countries, and responses are projected to be restrained by the relative unavailability of foreign reserves, insufficient budgetary margins for enacting fiscal stimulus packages, incredulously high levels of corruption and restrictions on incurring further external debt in countries that have benefited from international debt relief.

Questions a Resolution MUST answer

This committee needs to keep all the above mentioned points in mind while working its way towards a feasible resolution. The resolution should preferably include (but is not limited to) the following points:

i. How to prevent the damaging political effects of the crisis falling especially hard on the many weak or struggling democracies in the world, thereby producing a reversal of democracy’s gains of recent decades?

ii. Since the crisis originated in the developed world’s economies, is it the responsibility of the developed world to protect developing countries from incurring heavy burdens and to ensure development remains undeterred in the developing world? If so, how is the developed world to address this increased responsibility without sacrificing its own prosperity and objectives?

iii. Will there be a commitment by developed countries to refrain from any protectionist inclinations and to agree to not enact further trade barriers in response to the economic crisis?

iv. What are the key actions needed to help pull the developing world out of the crisis and to promote growth and MDG achievement? What will be the roles of the developing countries, the international community, and financial institutions?

v. What policies will provide financial stability and ensure cross-border cooperation?

vi. What policies need to be instituted to ensure that social and political issues receive adequate attention and are not overwhelmed by economic concerns?

vii. How can issues of weak governance, bureaucracy and corruption in the distribution of aid be improved?

viii. Should the increased focus on development due to the economic crisis be used as an opportunity to broaden the scope of the MDGs?

ix. Is a global framework, with a set of international financial rules and systems, which tackles systemic global issues negotiable?

x. Are existing IMF and World Bank schemes sufficient or is there a need for fundamental reforms in the IMF to reduce the likelihood of financial crises with global repercussions and ensuring better crisis intervention? Do the IMF and World Bank need to reform their Structural Adjustment Programs which accompany almost every aid package and are essentially characterized by reduced developmental expenditure?

References and Suggested Readings

http://www.un.org/en/index.shtml www.undp.org http://www.globalissues.org/ http://globalpolicy.org/ http://siteresources.worldbank.org/DEVCOMMINT/Documentation/22553960/

DC20100008(E)GMR2010Overview.pdf http://www.carnegieendowment.org/publications/index.cfm?fa=view&id=23031 http://ec.europa.eu/development/icenter/repository/

COMM_NATIVE_SEC_2009_0445_4_MDGS_EN .PDF

http://www.odi.org.uk/work/themes/details.asp?id=36&title=global-financial-crisis

http://www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Africa%20in%20the%20wake%20of%20the%20crisis%20%20English%20%20Jan%2020_corrected%20March%2023%202010%20A.pdf

http://www.fas.org/sgp/crs/row/R40778.pdf http://www.ilo.org/public/english/region/afpro/addisababa/pdf/implementation_gjp.pdf

Research Tips

Delegates are expected to go over the study guide thoroughly as it will prove to be an effective starting point for their research. Also, the links provided might prove to be extremely helpful in analyzing the problem at hand and coming up with pragmatic, implementable solutions.

Delegates are advised to look up past UN resolutions regarding the topic areas and UN action to help alleviate the situation, in an attempt to get a clearer idea of the picture. To further cement their stance, delegates could also look up positions of various blocs and important stakeholders for these are not problems which are isolated in nature and affect only a few. Instead, they are problems of global import and require the entire global community to come together and cooperate if any solution is to be reached. This exercise will further help the delegates to appreciate the problems of countries other than their own and give them a well rounded perspective on the problem, which will help in drafting a comprehensive resolution.

Best of Luck!