Statement to the United Nations Conference on the World Financial and Economic Crisis and Its Impact on Development by Minister of State for Finance the Hon. Zhivargo Laing.
24-25 June 2009
Mr. President, Excellencies Prime Ministers, Ministers, Heads of Delegations, Ambassadors, Delegates,
I greet you on behalf of the Prime Minister of The Commonwealth of The Bahamas, the Right Hon. Hubert Alexander Ingraham.
We meet at an extraordinary time in history. Our challenges are great and our window of opportunity seems small. If we do not successfully address the issues that now confront us, we run the risk of making more real for too many millions of men, women and children across the globe the sad refrain in Paul Laurence Dunbar’s poem called Life where he writes, “A crust of bread and a corner to sleep in, A minute to smile and an hour to weep in, A pint of joy to peck of trouble, And never a laugh but the moans come double; And that is life!” This Conference may be a chance to prevent this from happening.
The Bahamas recognizes this Conference as a valuable opportunity to address the current financial and economic crisis in a very open and inclusive forum, a forum that could allow for broader consideration of the significant, complex and wide-ranging challenges facing the diverse group of countries that make up this United Nations.
The Bahamas believes that this Conference should mark only the beginning of a process, a clearly defined and agreed process, leading to the reform of the international economic and financial system. What we need is a system that will reduce global systemic risks and inefficiencies that arise from localized regulatory inadequacies, and a system that will promote greater equity in development among the economies of the world. This will help to secure an international environment within which all countries can successfully pursue sustainable development for the enhanced well being of their people.
IMPACT OF THE CRISIS ON THE BAHAMAS
The current financial and economic crisis has created serious macroeconomic, social and human development challenges for The Bahamas. Ours is a small, very open economy that is heavily dependent on the performance of more developed economies.
Tourism affects, directly and indirectly, all aspects of economic life in The Bahamas. We in The Bahamas, like many in our region, are facing arguably one of the most difficult tourism seasons on record. Beginning in the fourth quarter of 2008, major hotels and resorts have experienced record low occupancy levels. Advance hotel bookings remain soft and offer little sign that the situation will be reversed in the coming months.
As a consequence of a weak tourism sector, unemployment has increased. Hundreds of workers in the tourism sector have been laid off, others have had reduced work hours and yet others face the prospect of layoffs. The uncertainty about the present economic circumstance means that unemployment may remain a problem for some time, at least until the global economy is stabilized and returns to growth.
There has also been a slackening of direct foreign investment inflows, a result of both the soft prospects for expansion in the tourism sector but also because some investors are finding it difficult to raise funds in an international banking system where credit has tightened or has at least become difficult to access.
The Bahamas’ domestic financial system remains sound. Our international financial services sector, however, is being challenged by actions in some developed countries that have erroneously sought to place the blame for the current financial crisis on small offshore financial centres. Furthermore, other initiatives which bear down unevenly on offshore financial centres are also currently advancing.
The Bahamas remains firmly committed to cooperating and collaborating with others to secure the global financial system from abuse by criminal elements. We have acted to ensure that financial service providers in our jurisdiction are properly regulated so as to meet international best practice standards. Similarly, we are committed to meeting evolving standards of cooperation for the exchange of tax information. In this regard we trust that a universal commitment to the application of the policy of a level playing field will become more evident.
As would be expected, the current difficult domestic economic environment is having a negative effect on government revenue, and this at a time of increased need to assist those who have been dislocated by the crisis. Fortunately, The Bahamas has, through prudent fiscal management in the past, preserved sufficient headroom in its borrowing capacity to provide revenue support during this difficult period. Such a situation, however, we know cannot remain indefinitely.
RESPONSES TO THE CRISIS
The Government of The Bahamas is being proactive in addressing the financial and economic crisis and its fallout for the Bahamian economy as follows: (1) Ensuring the continued integrity of the domestic financial system through promoting adequate liquidity, capitalization and foreign reserves; (2) Supporting the economy through this period of downturn by accelerating capital works to generate jobs and economic activity; (3) Providing targeted relief to those disadvantaged by the crisis; and (4) Exercising fiscal restraint in order to ensure sustainability in the medium term so as to be able to respond to any eventuality that may occur.
So far, our efforts have resulted in a level of resiliency that we hope will endure through the entirety of the crisis. In any event, we stand ready to make necessary adjustments should the crisis persists or gets worse.
We believe that the challenges we face today present meaningful opportunities, if the appropriate international responses are implemented. Such international responses I speak to now briefly.
Assessment of the role and functions of the International Financial Institutions
There is a definite need to assess the role of international financial institutions with respect to addressing this ongoing crisis as well as any other that may arise in the future. That assessment must speak to the ability of those institutions to detect vulnerabilities in the global financial system as well as their ability to move quickly to ensure that such vulnerabilities are eliminated.
The Bahamas welcomes all efforts toward reform in this regard, including those by the International Monetary Fund to strengthen its surveillance capabilities. We similarly welcome efforts by the Financial Stability Forum to strengthen its effectiveness, with an expanded membership, in the interest of international financial stability.
The Bahamas is also of the view that all ongoing and future reform processes should yield concrete recommendations/outcomes for all countries, including small developing countries.
A Level Playing Field With Respect to Targeting and Treatment of Small Offshore Jurisdiction
It is interesting to note that while developing countries, in particular offshore finance centres, did not cause the present financial crisis, the most specific and immediate reform being proffered is the reform of these small centres. The Bahamas recognizes the value of international standards of transparency and exchange of information with respect to the provision of financial services.
While we welcome progress being made toward the establishment of a “level playing field” with respect to the setting and implementation of international standards of transparency and exchange of information, The Bahamas joins with others who have for some time now cautioned against the unfair and discriminatory actions taken by some of the developed countries and/or their limited membership organizations against small offshore jurisdictions in this regard. Such actions are not justified by the current crisis. Indeed, these actions may potentially damage the development prospects of small, vulnerable economies already grappling with the challenges brought on by the crisis.
ENHANCED GLOBAL COOPERATION & FAIRNESS
The Bahamas believes that developing countries should be given effective voice and representation with respect to norm-setting and decision-making in tax matters. We support the recommendation that this Conference converts the United Nations Committee of Experts on International Cooperation on Tax Matters into an intergovernmental subsidiary body of the ECOSOC. The time has come for the work of this Committee to carry broader political weight, given that it is the only truly global forum in this area.
A MORE TRANPARENT
INTERNATIONAL CREDIT RATING SYSTEM
Credit plays important roles in the growth and development of each of our nations and in that of the global economy as a whole. It also played a significant role in precipitating and prolonging the present crisis. Doubtless, it will also be an important ingredient in the eventual recovery of the global economy. Given all of this, The Bahamas agrees that there is urgent need for a more transparent international credit rating system, one that adequately and fairly assesses the credit status of both developed and developing countries.
A GREATER ROLE FOR THE UNITED NATIONS
There is clear need for a more expanded and deepened role for the United Nations in international economic governance consistent with the role envisioned in the UN charter, given its universal membership, its weight of legitimacy and its ability to facilitate an enhanced voice for all, especially small developing countries.
The Bahamas looks forward to participating in the discussions surrounding the various proposals being advanced in this regard.
The Bahamas has come to this conference to express unity with fellow-member states that are all grappling with the fallout of what has been accurately described as the worse global economic recession since The Great Depression.
We have also come to add our voice to those who call for real reform that will create a more robust global financial system and a more enduring world economy capable of lifting all peoples to higher standards of living.
We wish similarly to remind this assembly that the hardships facing many people in the developed world today as a result of this global crisis have been a way of life for millions more people in the developing world for years before this crisis and that this present situation threatens to plunge them that much further into a state of deprivation. This hour is even that much more urgent for them.
Finally, we have come to say that we believe that our actions here must be the beginning of a set of actions that will lead to the results we all seek and desire that is the realization of the Millennium Development Goals and progress beyond them. If we are successful, we may be able to turn Paul Laurence Dunbar’s sad refrain into the more hopeful expression found in his poem, “A crust and a corner that love makes precious, With a smile to warm and the tears to refresh us; And joy seems sweeter when cares come after, And a moan is the finest of foils for laughter, And that is life!” It is The Bahamas’ hope that God grants us success in this noble aim.