2003/02/24

Non-Aligned Nations Must Lead Financial Reform

Inter Press Service (IPS)

"Tobin Tax" and increased South-South cooperation are demanded by leaders of the Non-Aligned Movement.

KUALA LUMPUR, Feb 23 (IPS) - Indian Prime Minister Atal Bihari Vajpayee has re-ignited the campaign for a 'Tobin Tax' on international capital flows, after he called on the Non-Aligned Movement (NAM) Sunday to lead in reforming the international financial architecture. ''We know that unstable capital flows can severely disrupt developing economies. There is less ready acceptance of the idea that such flows should be regulated by an international levy. I believe this is a reform whose time has come' Vajpayee told the NAM Business Forum.

He 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 300 billion U.S. dollars. ''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 prize-winning U.S. economist. He proposed a very small tax on foreign exchange transactions to deter short-term currency speculation. Developed countries, especially the United States, call this idea unworkable, but Vajpayee points out that it actually is easier to implement than the stringent measures spelled out in U.N. Security Council resolutions 1373 and 1456 -- passed after Sep. 11 to monitor terrorist financial channels across the globe. The Indian leader said that measures like this, to which all countries are committed by the U.N. 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 here 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 neighbour' policy, under which richer countries help the poorer ones improve their living standards, which will in turn create markets in the poor countries for richer-country products. Enriching poorer nations including neighbours is not charity. It is enlightened self-interest, said Mahathir. The leaders of South Africa, Indonesia and Thailand also addressed the NAM business forum.