By Arun Kumar, IANS
Washington : Calling the rising economies of China, India and Brazil “the new stakeholders” in globalisation, the World Bank has pledged to come to their aid “if the credit storm and liquidity drought sweeps their way”.
“The rising economies of China, India, Brazil, and others have strengthened and rebalanced the international economy, providing new poles of growth,” World Bank President Robert B. Zoellick said here Wednesday.
“They are the new stakeholders in globalisation,” he said speaking on “A Challenge of Economic Statecraft” at the Centre for Global Development ahead of next week’s spring meetings of the World Bank Group and the International Monetary Fund (IMF).
“The Bank Group will also be alert to ways we can assist these clients if the credit storm and liquidity drought sweeps their way,” said Zoellick calling for a “new deal” to combat world hunger and malnutrition through a combination of emergency aid and long-term efforts to boost agricultural productivity in developing countries.
“Doubters may shake their heads,” he said. “But consider the uncertainties of China’s and India’s prospects in 1993. Five years later, the world looked to China only to maintain currency stability amidst East Asia’s turmoil.”
“Today, China and India are engines, still facing complex and difficult problems, but driving motors of growth,” said Zoellick noting: “Goals that one day seem impossible, the next day can seem inevitable.”
“The question of the effects on the ‘real’ global economy is what links today’s financial agitation to our work on inclusive and sustainable globalisation and development, with its effects on those seeking better lives,” he said.
“The remarkable difference between this period of financial upheaval and those in the past is the performance of developed and developing countries,” Zoellick said. “Not only has the epicentre of the quake shifted, but, so far, the tremors have shaken markets differently.”
The historically tight borrowing spreads on emerging market debt have widened somewhat, but modestly in comparison to most every other credit product, he said.
“Of course, developing country financial markets will not be insulated, currency exchange rates have been in sharp flux, emerging market equity prices have suffered, and spreads for non-government debt have widened substantially, in line with their counterparts elsewhere,” Zoellick said.
“Most important, there is something strikingly different about this downswing: China, India, and other rising economic powers are offering alternative poles of growth for the global economy.
“This is not a ‘decoupling,’ because the interconnections of globalisation will transmit effects from the developed world’s financial problems and slowdown, it represents instead a welcome diversification of the sources of growth,” he said.
Noting that more than half of the growth in global demand for imports is now originating in developing countries, providing export opportunities for both developing and developed economies, Zoellick said: “This amounts to a rebalancing – not a decoupling.”
“It supports an inclusive and sustainable globalisation,” he said. “Just as diversification is beneficial for an investment portfolio, so it is for sources of growth in the world economy.”
The Bank Group, Zoellick said, will work with sovereign wealth funds to create what he called a “One Percent Solution” for equity investment in Africa – a continent with opportunities and the potential to become an alternative pole of growth as China, India and other countries are today.
He also outlined a plan to encourage emerging economies such as China, India and Brazil to invest about $30 billion in African nations through government-sponsored wealth funds.
Such sovereign wealth funds currently hold about $3 trillion in assets. They have come under scrutiny recently because of investments outside their own countries.
Zoellick also warned the time was “now or never” for breaking the Doha Round impasse and reaching a global trade deal. “This moment of decision is not only for the Doha Round. It is for trade itself.”
An accord would give developing countries, big and small, more opportunities to become more productive and lower prices through trade. It would also infuse confidence in an economic system stressed by financial anxiety, he said.
The trade talks are also a “critical test” for striking a global deal on climate change. “If negotiators of 150 economies cannot manage the political tradeoffs of the Doha Round to reap the clear benefits, it does not auger well for bringing developed and developing countries together on a new accord for climate change,” Zoellick said.