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Non-aligned states urged to tax capital flows
By Kalinga Seneviratne
KUALA
LUMPUR - Indian Prime Minister Atal Bihari Vajpayee has
re-ignited the campaign for a "Tobin Tax" on
international capital flows after he called on the
114-member Non-Aligned Movement (NAM) at the weekend to
lead in reforming the international financial
architecture.
Vajpayee said that such a tax
"combines in one effective measure an instrument to
protect weak economies from the volatility of capital,
to enhance investor confidence through stability of
capital markets and to generate valuable developmental
resources. I believe this is a reform whose time has
come."
The Indian premier pointed out that
conservative estimates by recent studies have shown that
a token tax of a quarter percent on international
capital flows could generate annual revenue of about
US$300 billion. "If this were to form the corpus of a
global poverty alleviation fund, we can make dramatic
progress towards tackling the poverty problem in
developing countries," he pointed out.
The Tobin
Tax was first proposed in 1978 by James Tobin, a Nobel
US economist. He proposed a very small tax on foreign
exchange transactions to deter short-term currency
speculation. Developed countries, especially the US,
call this idea unworkable, but Vajpayee points out that
it actually is easier to implement than the stringent
measures spelled out in UN Security Council resolutions
1373 and 1456 - passed after September 11, 2001, to
monitor terrorist financial channels across the globe.
The Indian leader said that measures like this,
to which all countries are committed by the UN charter
to do, "would be of far greater magnitude than those
required for monitoring and taxing capital flows".
The three-day NAM business forum, which opened
on Sunday, is an initiative by host Malaysia to create
closer links between business persons and groups in
developing countries. It will be held parallel to all
NAM leaders' summit in the future.
In his
opening address, Malaysian Prime Minister Mahathir
Mohamad called on NAM business leaders to forge closer
links to help developing countries rid themselves of an
international order where "a select few dominates the
world". He suggested that NAM countries learn from
Malaysia's experience and adopt the "prosper thy
neighbor" policy under which richer countries help the
poorer ones improve their living standards, which will
in turn create markets in the poor countries for the
products of the richer countries. "Enriching poorer
nations including neighbors is not charity. It is
enlightened self-interest," said Mahathir.
The
leaders of South Africa, Indonesia and Thailand also
addressed the NAM business forum. South African
President Thabo Mbeki pointed out that levels of
inequalities within NAM nations are now worse than 40
years ago when NAM was founded. Yet, he said that
developing countries are better placed today to response
to these challenges, and can learn from the success
stories of fellow member countries. "This country,
Malaysia, stands out as one of these," he said. "Its
achievements underline that success is possible.
"None of us can argue that success depends
solely on cooperating with the rich countries of the
north," Mbeki added. A few months ago, he recalled, he
attended the summit of the Association of Southeast
Asian Nations (ASEAN) in Cambodia to forge closer
cooperation between that regional grouping and the
African Union. He also said that Southern African
countries have started to forge closer links with
Mercosur in South America. "All these represent a
conscious effort further to deepen South-South
cooperation on a systematic basis," he added.
Indonesian President Megawati Sukarnoputri said
that the reality most NAM countries live in could be
described as "politically preoccupied with disarray and
economically left behind". Yet, she argued, they should
not despair but try to build a new development paradigm.
This new paradigm should encourage the private sector to
play a crucial role, particularly in initiatives that
will build bridges of cooperation among NAM members, she
said. Governments, meantime, should focus on supporting
those initiatives.
Thai Prime Minister Thaksin
Shinawatra offered his country's "dual track" experience
in overcoming the 1997 financial crisis as a lesson for
other developing countries. "We must put aside
disagreement, but push forward actions and cooperation
based on trust. That is precisely the policy my
government has put on trial over the past two years in
Thailand with considerable degree of success," he said.
He said that his two-year-old government has
embarked on a dual-track approach of encouraging free
market capitalism and letting the business sector enjoy
their due profit with social responsibility, while
introducing government-assisted programs to create
wealth for those at the grassroots. Thaksin said that as
a result, Thailand experienced 5 percent economic growth
last year and will be paying off this year - two years
ahead of schedule - the loans given by the International
Monetary Fund during the financial crisis.
Echoing Vajpayee's call for reforms to the
international financial system, Thaksin called for the
establishment of an Asian regional bond market to make
use of international financial reserves of countries in
the region. Likewise, he said, "if we can do it in Asia,
let us foster similar cooperation within NAM."
The four national leaders and commerce ministers
from Africa and Asia, who spoke at a later session,
agreed that in the new international economic climate,
governments must support and facilitate business to grow
and network across borders. Many also pointed out that
success stories of the South need to be shared among NAM
countries, but that the international media do not
always give enough exposure to them.
Vajpayee
pointed out that for example, Bangladesh's microcredit
institutions and Tanzania's malaria-controlling bed nets
should get more exposure in other developing countries.
Because it does not happen, "other developing countries
are either re-inventing the wheel or importing
inappropriate technologies or services from advance
countries for the same applications", he said.
The NAM groups two-thirds of the world's nations
- mainly from Asia, Africa, the Middle East and Latin
America - who contribute about 20 percent of global
economic growth. NAM was formed during the Cold War as
an alternative to the East and West power blocs.
(Inter Press Service)
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