— alternative to WB and IMF finally launched
by Najma Sadeque
On the other side of the Pacific and Atlantic, leaderships more loyal to their own countries than to personal Swiss bank accounts to stash stolen money, have been taking matters into their own hands. Pakistan, unfortunately, has taken scant note of curative financial and economic efforts elsewhere to learn from. But in September 2009, after four years of efforts, the Presidents of seven Latin American countries — Argentina, Brazil, Bolivia, Ecuador, Paraguay, Uruguay and Venezuela — signed an agreement for the creation of the Bank of the South, a development bank to finance projects in the region.
It will be an alternative borrowing source to International Monetary Fund (IMF), the World Bank and other regional development banks. The concept for such a bank was first suggested by Venezuelan president Hugo Chavez in 1998.
The Bank of the South will focus on agriculture, energy, health care, education and trade for member nations – all the sectors in which World Bank/IMF and later World Trade Organisation (WTO) kept us strangulated through consistent disadvantage. The Bank of the South is starting off with $2 billion each contributed by Venezuela. Brazil and Argentina, and the rest will come from the other member countries. All members will have equal voting rights a major difference from World Bank/IMF where the number of dollars determines the strength of the votes, and the US rules the most, followed by Europe.
The sixty odd years of the World Bank and IMF in the life of Pakistan and almost all the other ‘developing’ countries of the world have led to the very opposite of development — a fact there is no disagreement about except, of course, on the part of the holier-than-thou lenders.
These global Shylocks designed the unproven theories and devious mechanisms by which they facilitated the continued exploitation and transfer of raw materials, unfinished agricultural products and monetary wealth on a scale unprecedented during colonial times. And when there was nothing left to sell, the interest upon interest keeps compounding the debt long after it has been paid off, until finally these international moneylenders come in for the kill – by making us sell of national industries and other assets at knocked-down prices, and privatisation of utilities and other public goods.
They brainwashed or bribed our decision-makers, and countries like Pakistan have taken it lying down as the corrupt among our own leaders were used to ruin our economy and our lives, behaving more like sophisticated bandits than bankers. It’s known as white-collar crime.
But not all countries continued to suffer in silence or helpless protest. How warm the banks’ relationship became with Latin America can be judged from the fact that the World Bank representative was expelled by Ecuador in 2007. Venezuela is thinking of leaving World Bank/IMF too. Bolivia doesn’t even recognise the authority of International Centre for Settlement of Investment Disputes (ICSID), a World Bank subsidiary, any more.
The G20 leaders’ recent statement that it would bring about “a shift in the balance of voting in the IMF towards growing nations” came far too many years too late — after having caused what amounted to wholesale theft of resources and wealth, resulting in unwarranted deprivation and terrible suffering for the people of the South American continent.
Mr. Chavez also offered to help create a “South-South Bank” with African countries in the future, to fund projects between the two regions. Given our current hopeless situation, should we allow ourselves to be left behind, or should we make an effort to pull ourselves out of the begging-bowl and ten-percent-thieving syndrome?
Once the continents of South America and Africa are fully covered, shouldn’t the similarly suffering South Asian countries also get into the act for their own benefit? —- instead of the two main countries wasting our hard-earned foreign exchange and domestic sweat on needless wars leading to further impoverishment western arms exporters have a field day getting their money back faster than we can earn it.
Yet, the World Bank and IMF suffer from an over-confident about their self-perceived indispensability to the South countries whereby they feel Southerners do not merit the leadership the westerners have in these two financial institutions. Throughout, only US citizens have been allowed head the World Bank, and only Europeans permitted at the helm of IMF – an unwritten understanding between the two western blocs. They are free to continue with business as usual to their own peril — because the Latin Americans couldn’t care less any more. For, they have finally created an alternative for themselves where their own concerns will matter first and foremost.
Earlier, the Latin American countries started towards urgent and meaningful self-reliance by setting up compensatory exchange mechanisms that are helping in improved health care, energy security, education, and information, the areas in which we always ended up defeated by the horrendous structural adjustment policies.
Countries of South Asia could have and should have long ago set up a regional bank of their own. The sub-continent has always been a geographically-integrated area with overlapping cultures and economies. Only politics has divided the countries in ways that are mutually disadvantageous. Even if the colonials have gone, they live on with the same objectives under different guises through the World Bank, IMF and WTO.
Pakistan should also be aware that World Bank already has strong competition from a country China. Chinese banks have so far loaned 2 billion on dollars to developing countries, including in Africa for development of petroleum and natural gas. India has been giving out loans too. Both the billion-plus population countries China and India seek more raw materials, and lending money is one effective way of keeping such supplies coming in.
They will be further helped by dispensing with the dollar. Two-thirds of world reserves are in dollars, or at least was till 2007. One-fourth was in Euros and the remaining in other strong currencies like the yen and sterling.
While it is providential at the moment to have an alternative to the predatory and heartless World Bank/IMF duo, it would be wise for all borrowers to remain cautious and think in terms of the long term as well for any eventualities.
Times and sentiments can change. Poor, weaker countries could eventually find that they simply substituted dependence on one tough bank or industrialised region for another. Or when they have nothing more to offer, they may find themselves suddenly abandoned.
It’s time to initiate not only a regional bank but also perhaps a regional currency strictly for the region – keeping domestic currencies apart as well –until it has been tested and proved beneficial and stabilizing. It is likely to assist regional trade and include the more people friendly barter system without having to compete with the rest of the world, and which has made shipping costs too expensive with the soaring costs of energy. And none of it would have anything to do with World Bank/IMF, whose days may be numbered.
This article was published in the Financial Post on March 2, 2010