| Paul Martin | ||||||
Paul Martin, Canada’s finance minister and chairman of the G-20, won his bet that he could safely host simultaneous meetings of G-20 finance ministers and central bank governors, the International Monetary and Financial Committee of the IMF and the World Bank’s development committee in Ottawa.
There were at any time a 100 or more riot police visible between the Edwardian Fairmont Chateau Laurier, built by a hotel magnate who drowned in the Titanic, and a government conference centre that was formerly Ottawa’s central rail terminal. There were government snipers peeking from its rooftop.
Ultimately little happened outside. A water cannon was fired. A reporter was bit in the leg by a police dog. A few dozen arrests were made.
Martin sought to make his case that the machinery of international financial institutions was working once more. Or as he put it: “It is very important that the world not only get back to business but it demonstrates unequivocally that it is back in business and that the terrorists are not going to bring things to a halt.”
Still, as the war against terrorism continued in Afghanistan, in Ottawa financial leaders were trying to decide what weaponry was most appropriate to hit their main goals: the reconstruction of Afghanistan, blocking terrorist funding and crisis resolution.
There was no mention of the standards for rewarding poor countries that join the alliance, as president George W Bush has indicated will happen. “I don’t think anyone knows precisely what criteria are being used,” says Rey Pagtakhan, Canada’s secretary of state (Asia-Pacific).
The ripple effect was also on the mind of Afghan expert M Ishaq Nadiri, Jay Gould professor of economics at New York University. He told a conference on Afghanistan of Tomorrow: “A focus on the private sector will not only be more suited to the entrepreneurial nature of Afghanis, it will be much cheaper.”
The ripple effect from September 11 extending to Africa was also discussed. “It means the competition for development resources will be much more acute,” says Robert Fowler, selected by prime minister Jean Chrétien to be his personal representative to the G8’s New African Initiative working group, and also to head preparations for the G8 summit Canada is hosting next July. “We need to be more imaginative and creative in terms of finding the resources for development we need for Africa.”
US secretary of the Treasury Paul O’Neill said there was “an intensive effort under way to think about post-Taliban Afghanistan, and the kind of economic assistance that ought to be considered”.
The dilemma is how to juggle an incentive dangled with military intent while planning a humanitarian exercise fraught with complexities, not least of which is the creation of a new Afghani government. As the World Bank observes: “The key economic institutions of state – central bank, treasury, tax collection and customs, statistics, civil service, law and order, judicial system – are extremely weak or simply missing.”
An official says: “The World Bank is a lending institution, and you have got to have a government to lend to. It has been a while since Afghanistan has had one the world recognizes. Even when it did, it was in trouble. So there is a lot of cleaning up to do.”
In the meantime, he says there will be bilateral grant commitments. “There have been some from Canada, the US, Japan and others. But that is stopgap stuff. Whatever final arrangements are made are going to have to be done on a much more formal basis, and probably on a basis that also meets the needs of some of Afghanistan’s immediate neighbours such as Uzbekistan. So you are looking at a fairly long time frame.”
But time is very short, it seems, in the quest to track down terrorists’ money. Traversing legal and jurisdictional complexities to achieve results is made even more urgent now that intentions have been telegraphed. Martin says naming and shaming is a very important tool.
The IMFC will urge IMF members to implement measures including compliance with anti-terrorist UN financing rules and the establishment of financial intelligence units. However, the IMFC offered to assist only within its mandate and expertise. So it sounds as if the foot dragging has already begun.
No-one is pounding down the doors in a rush to be first in line to increase aid, either, for all the rhetoric.
“The notion of two worlds, the rich and poor, or the developed and developing world, collapsed with the World Trade Centre,” World Bank president James Wolfensohn observed.
“There’s no doubt that all countries have got to increase foreign aid,” Martin said. But with a budget imminent he also has to deal with the domestic fallout from the world economic slowdown, and only pledged to make progress to increasing the 0.25% of GDP it provides.
At the meeting’s end, Wolfensohn said: “We didn’t expect people to bring chequebooks to this meeting. I wish they had but they didn’t.” Maybe not, but they are willing to contemplate other people in the private sector stepping up when crises in the developing world do emerge.
“This is a debate that I think large numbers of people are now prepared to enter into,” said Gordon Brown, UK chancellor of the exchequer and IMFC chairman. “There is a possibility of greater progress in the interest of stability around the world and in the interest of crisis prevention for individual countries that are sometimes at risk.”
The G20 countries are going to send officials to discuss crisis resolution, including the idea of standstills or six-month freezes allowing private-sector and public-sector creditors time in which to renegotiate terms.
“They are not going to discuss a theoretical concept. They are going to examine and to report back to us at the next meeting how private-sector involvement and debt standstills can be brought into being,” says Martin.
O’Neill complicated matters by proposing a variant, giving countries temporary protection similar to the US Chapter 11 umbrella for troubled companies.
Still, at the conclusion of the meetings Martin said: “We came here to mobilize the fight against terrorism and to ensure that the prosperity enjoyed by the industrialized world is shared by all, especially the poorest of the poor, and we have made strides toward that goal.”
He also said: “It’s taken us 50 years to make a free market work in Canada, the US and Europe. We’ve got to put in place the same structures internationally that make it work at home.”
