Development Committee Communiqué: Ministers Outlined Strategy to Restore Growth And Curb Poverty in East Asia

• Pages: 323-326

Page 323

The fifty-eighth meeting of the Development Committee was held in Washington, D.C. on October 5, 1998, under the chairmanship of Tarrin Nim-manahaeminda, Minister of Finance of Thailand.

Anwar Ibrahim. The Committee expressed its great appreciation to Anwar Ibrahim, who had served so ably as Chairman of the Committee.

Implications of the Asian Crisis. The Committee paid particular attention on this occasion to development priorities and the response of the World Bank Group.

Ministers recognized that the economic and social aftershocks of the crisis were more severe than earlier anticipated. The crisis had now spread beyond Indonesia, Korea, Thailand, and Malaysia, and its global ramifications had increased the vulnerability of all countries. Ministers therefore noted the need to support an early and sustained recovery in East Asia and contain the risks of crises elsewhere and to assist countries more generally to develop the prerequisites for sus-Page 324 tainable economic growth in a more integrated international financial and economic system.

Ministers agreed that a concerted strategy for restoring sustainable growth and reversing the dramatic increase in poverty in East Asia should include the following key elements:

- maintaining and accelerating progress on structural reforms, including governance structures required for the efficient working of markets;

- restructuring the banking system and corporate sectors and, in the short term, restoring credit to viable businesses;

- mobilizing necessary resources to finance growth;

- regenerating demand; and

- protecting the environment.

Crucial to all these elements is a focus on social concerns and the need to mitigate the most harmful effects of the crisis on the poor.

Ministers further noted that, if it were allowed to continue, financial turmoil could result in major setbacks to the global economy and particularly to the progress most developing countries had achieved in the 1990s. The Committee agreed that actions were needed to help restore confidence and prevent contagion in the event of market pressures. Emerging market countries should strengthen their policies and institutions at an early stage to minimize their vulnerability to adverse shifts in investor sentiment. Industrial countries should take early and decisive actions to help regain or maintain growth momentum and global financial stability. All countries should continue the process of market opening and resist protectionism. All countries and the international financial institutions need to attach high priority to the promotion of good governance and the elimination of corruption.

Ministers stressed that, given the magnitude of reversals in capital flows that East Asia and other regions had experienced, resumption of private flows was key to recovery. Ministers also emphasized the important catalytic role played by official flows from multilateral agencies and bilateral sources.

In this context, the Committee agreed that, beyond...