International Meetings (Hansard, 4 November 1997)

§ Mr. Gordon Brown

I attended the Commonwealth Finance Ministers Meeting in Mauritius on the 15–17 September. I then attended the first meeting of Asian and European Finance Ministers on 19 September in Bangkok. This was followed by a series of meetings in Hong Kong. The G7 was held on 20 September with the G10 Finance Ministers and central bank governors meeting on 21 September. The IMF's interim committee meeting was also held on 21 September, and was followed by the IMF/World Bank annual meeting on 23 September. I also attended the IMF/World Bank Development Committee with my right hon. Friend the Secretary of State for International Development on 22 September.

My over-arching priorities for these meetings were the reduction of developing country debt and the promotion of the benefits of openness and transparency in economic policy.

I announced the UK's "Debt 2000" initiative at the Commonwealth Finance Ministers meeting. This initiative, which has now been dubbed the "Mauritius mandate", is designed to resolve the debt problems of poor countries once and for all and set them on a path to sustainable growth. It proposes that every poor country eligible for debt relief should have at least embarked on the process of securing the full relief they need by the year 2000. This will contribute to the international target of halving the proportion of the world's population living in absolute poverty by 2015.

I stressed that the success of this mandate depends not only on the commitment of the creditor countries but also on solid action by the debtors. Debtor countries must adopt and maintain sound economic policies which are necessary for sustainable economic development. Each country is unique and no one policy will be right for every country. But accountable economic decision-making and a focus on productive expenditure, including basic health and education, will be vital aspects of their economic programmes. My right hon. Friend, the Minister for International Development announced that the UK is willing to cancel the remaining aid debt due to the UK from poorer Commonwealth countries. These countries could be relieved of the need to repay as much as £132 million.

I encourage other creditors to provide the maximum possible relief to ensure a robust exit from unsustainable debt to those countries who focus on transparency and productive expenditure. I expressed my desire for these countries to receive the necessary debt relief in less than the maximum six years that is presently envisaged under the rules of the initiative. The Mauritius mandate was well received and was supported by other Commonwealth Ministers.

I also launched a new initiative on openness in economic decision making at the interim committee. My central proposal was that the IMF should develop a code of good practice for promoting openness in fiscal and monetary policy. I believe that this should focus on basic principles that apply to all IMF members. As such, I 105W proposed that the IMF should, as a matter of course, comment on such practices in their IV consultations with all member countries. I also suggested that this code could be used operationally in the design of IMF programmes for financial assistance. These proposals attracted considerable interest and the fund is now developing such a code on the fiscal side.

I stressed that long-term stability in monetary and fiscal policy is necessary to achieve sustainable growth. But, the role of government must also be to equip individuals and companies to succeed in the ever more competitive global market-place. Part of this entails ensuring that policies which provide economic stability are combined with institutions and procedures which create the confidence that stability will be maintained. It was agreed that greater openness and transparency would enhance policy credibility and limit the potential for corruption.

In keeping with this, I announced that the UK would publish a full set of annual accounts and a quarterly report on the region exchange reserves detailing the UK's outstanding forward position.

Another key feature of the discussions at these meetings was capital flows. It was agreed that private capital flows can bring substantial benefits and as such, the report of the Commonwealth working group on private capital flows was endorsed by the Ministers. The importance of sound macroeconomic policies and financial systems, strong regulatory and supervisory frameworks and political stability were recognised as essential for encouraging inward investment.

There was general agreement that the international financial institutions also have a key role to play in putting in place multilateral arrangements and mechanisms for promoting and coping with private capital flows. More specifically for the Commonwealth, Ministers agreed on the key elements of a code of good practice for national policies that attract and sustain private capital flows. The secretariat was asked to develop these elements into a full code as soon as possible.

The interim committee adopted the statement on "The Liberalisation of Capital Movements Under an Amendment of the Fund's Articles" and considered that an amendment of the fund's articles will provide the most effective means of promoting an orderly liberalisation of capital movements consistent with the fund's role in the international monetary system. The proposed amendment to the articles will also ensure that liberalisation can be phased in at a country's chosen pace and that controls can be reintroduced on a temporary basis.

The first ever meeting of Asian and European Finance Ministers represented an important addition to the Asia-Europe Meetings (or ASEM) process which began only last year, and reflected the growing co-operation between two regions whose economic and financial interests are rapidly converging.

The meeting began with an exchange of views on the macroeconomic outlook and developments in foreign exchange markets. I offered my full support to the programmes of adjustment which Thailand and the Philippines have agreed with the IMF, and stressed how crucial it would be to adhere to these programmes. Asian 106W partners were keen to learn more about the implications of EMU, and we agreed that every opportunity would be taken to keep them fully informed on latest developments.

In the second session on financial sector issues, I stressed the need for close co-operation, and the importance for both Asia and Europe of sharing and learning from each other—especially through a greater openness, in the trade in financial services and a welcoming attitude to foreign capital. We agreed a number of useful initiatives, including closer co-operation on financial supervision and the fight against money laundering.

The Government places great importance on the ASEM process, and the Prime Minister very much looks forward to welcoming Asian and European Heads to London next April as host of the second ASEM summit. The G7 meeting considered recent developments in south-east Asia in the context of surveillance. We were informed of international efforts to assist Thailand and expected the Thai authorities not only to implement the Fund program but also to continue to co-operate with the other international financial institutions. We agreed on the importance of minimising contagion and will continue to monitor closely developments in south-east Asia. In accordance with this, the importance of increased transparency within and supervision of financial systems was stressed. We also discussed recent developments in exchange and financial markets and agreed to monitor developments in these markets and cooperate as necessary.

My colleagues were interested in the plans that we have for our presidency of the G7 and G8 next year. I informed them that employability will be one of the main themes of the UK presidency.

The G10 meeting welcomed the broad endorsement given to the concerted strategy to promote financial stability in emerging market economies that has been developed in collaboration with representatives of these economies. The finalisation of the Basle core principles of effective banking supervision was welcomed and the importance of their endorsement and implementation by national authorities was stressed.

I was nominated as Chairman of the Group of Ten for the coming year. At the interim committee, I welcomed the agreements in the executive board on the eleventh review of quotas which provides a 45 per cent. increase for the fund—$;90 billion—and the special equity allocation of 21.4 billion SDRs which was formally approved at the meetings.

Both the Secretary of State for International Development and I attended the Development Committee meeting where we stressed that corruption and weak governance undermine macroeconomic stability, private sector activity and sustainable development objectives, and may erode international support for development objectives, and may erode international support for development cooperation. We supported calls for criminalisation of bribery and the abolition of tax deductibility of bribes, and for the fund to examine the effects of corruption in governance on countries macroeconomic performance.

A package to alleviate the Multilateral Investment Guarantee Agency's resource constraints was agreed.

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At the joint IMF/World Bank annual meeting I outlined the changes we have made to both monetary and fiscal policies in the UK. I outlined the benefits of giving operational independence to the Bank of England and the benefits clear rules, a new discipline, openness and accountability will bring to fiscal policy. I explained that our task is to secure high and sustainable levels of growth and employment in the UK as well as in the rest of the world.

I stressed the importance of our dependence upon each other and the importance of international cooperation to maintain an open economy. Although we are committed to a constructive partnership with Europe, we must remain open and outward looking to the rest of the world. And above all, regional concerns must never replace international commitments.

Copies of my speeches and the communiqués of these meetings have been put in the Library of the House. There was no G7 communiqué.