UN & ISIS Malaysia Lecture Spotlights Asia's Policy Priorities in the Face of the Global Financial Crisis

Jan 15, 2009

Kuala Lumpur, 15 January 2009 - The United Nations Country Team in Malaysia and the Institute of Strategic and International Studies (ISIS) hosted a public lecture which highlighted the region's challenges, prospects and policy priorities in the face of the current global financial crisis and economic slowdown.

The lecture was delivered by eminent econnomist, Dr. K.S. Jomo, Assistant Secretary-General for Economic Development in the United Nations’ Department of Economic and Social Affairs (DESA), who is also a member of the United Nations Commission of Experts on Reform of the International Monetary and Financial System.

In his Opening Remarks, Kamal Malhotra, UN Resident Coordinator for Malaysia and UNDP Resident Representative for Malaysia, Singapore and Brunei Darussalam, cautioned that while no countries would be spared the painful effects of the current crisis, the poorest countries would be the hardest hit: "Indeed, today's financial crisis threatens to become tomorrow's humanitarian crisis.  In some countries such as the US, Iceland and Pakistan, the situation is particularly painful and serious. If we use the crisis as an opportunity which recognizes that at their core, financial and monetary arrangements should serve the purposes of development rather than be an end in themselves, we will hold in our hands the keys that can open the doors to a future of sustainable and equitable growth."

"The array of interconnected challenges we face globally also provide an opportunity to reemphasise and revitalize the UN’s MDG8, the global partnership for development, a key UN Millennium Development Goal.  The Doha Declaration on Financing for Development, which followed a major UN conference in Doha which concluded in early December 2008, reiterated the world’s commitment to the Monterrey Consensus and called for a global financial architecture that is equitable, sustainable and stable," he said.

Mr. Malhotra added that while Malaysia was in a relatively strong fiscal position, the country too would face significant economic challenges in its real in 2009 transmitted through plummeting commodity prices, reduced demand for its electronic and other manufacturing exports and reduced foreign direct investment.

"I would like to take this opportunity to stress that the United Nations Country Team in Malaysia and UNDP in particular, given its mandate, remain committed to assisting the government of Malaysia both in these difficult economic times and in meeting the rapidly changing needs of Malaysia as it seeks to make the transition from a commodity and manufacturing based economy to a higher value added knowledge economy. We will continue to strengthen our efforts to assist the country in responding to the current global crisis with sustainable solutions to its development challenges."

Speaking on behalf of ISIS, Y.Bhg. Tan Sri Mohamed Jawhar Hassan said that the current crisis has shaken the ideological and institutional foundations of the global financial and economic order.

"The biggest challenges for all of us are how best to control the damage from externally induced financial and economic problems, how best to stimulate economic growth and how best to meet our national development targets in a period of slower economic growth and an adverse external environment.

"Over and above this, our primary concern is how weaknesses in the global financial and economic architecture as well as in the monetary and financial systems of the West are addressed to avert or minimise the the threat of future crises," he said.

In his lecture, Dr. Jomo said while emerging markets in Asia had plunged by about fifty percent on average, which had a negative impact on average household income and wealth, the financial positions of many developing countries were in much better shape than during the previous financial crises in Asia and Latin America, due to strong foreign reserves and better fiscal balances. Dr. Jomo's lecture is available in pdf here.

"2009 will see a 10% drop in foreign direct investment, and a marked slowdown in export growth, especially in Asia. This in turn will result in a significant slowdown in industrial production. Slower growth will also undermine progress in fighting poverty and achieving the Millennium Development Goals (MDGs)," he said.

Dr. Jomo highlighted several policy priorities for countries in the region, home to the majority of world's poorest, including reflating the economy, fiscal and monetary measures aimed at spurring domestic demand and limiting the spread of the crisis across borders and to the real economy.

"To offset weakening foreign demand and contracted export earnings, public spending targeted at infrastructure, alternative energy, health and education is key to stimulating the domestic economy. At the same time, governments should look at investment and technology policies that can help to diversify the economy which is crucial for long-term development."

Dr. Jomo suggested that while the world was bracing for an unavoidable immediate global downturn, decisions made by policy makers at national, regional and international levels today would be decisive in determining the length and severity of the present recession.

"Developing countries must take steps today to ensure prudent financial regulation and capital account management techniques that can stem undesirable and excessive capital inflows and to avoid sudden, disruptive large outflows. Equally as important, affordable financing channelled toward productive long-term investments, for example through development banks, is essential."

The lecture, titled, "The Global Financial Crisis and the Economic Slowdown: Implications for S.E. Asia and the United Nations Response" was attended by over two hundred guests from foreign missions, government, business, and civil society.

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