Emerging markets send out strong signals

Written by fe Bureau | Mumbai | Updated: Jun 28 2009, 02:47am hrs
Emerging markets are recovering from the whirlwind of financial uncertainty, felt the delegates from 20 countries across the world as they deliberated at the fourth meeting of the Emerging Markets Forum held in Mumbai. Representatives from the worlds top financial institutions, top politicians and intelligentsia concluded that there is imperative to restructure the policy framework and the political set up in emerging countries to progress on all fronts.

Discussions took place across nine sessions spread over three days at the Forum meeting, the fourth in a series that started at Oxford in 2005. Emerging economies like India, Africa and Pakistan urged the International Monetary Fund (IMF), the World Bank and other lending institutions to be flexible in imposing conditions on developing countries so they can deal with the economic crisis, including adopting stimulus packages.

Agreeing that the IMF remains a key international organisation but needs to change to become more effective, delegates from India said that the key to making the IMF more effective is to increase the voice and vote of the emerging market economies.

Growing economies have learnt lessons from the current crisis and have engaged in simulative domestic monetary and fiscal policies in the face of softening global demand, felt a participant. Discussions on the global economy related to three dimensionsthe impact of the global financial crisis, international financial architecture and climate change. On the first, the Forum felt that the idea of decoupling is fundamentally flawed. Policy makers need to create buffers to soften the impact of the crisis, mainly in three areasforeign exchange reserves, financial stability and fiscal space. Protectionism needs to be avoided to sustain growth, and financial stability is critical. Developments such as the Financial Stability Board will allow emerging market economies to voice their views at an earlier stage, the Forum felt.

Climate change, again, is real and addressing it is in the interest of all economies. What is needed are low carbon growth strategies and increased participation of emerging market economies in the process. There is a need to create mechanisms for verification and fairness in measuring emissions. The composition of growth of emerging market economies needs to be re-evaluated in the green perspective. Schemes such as fuel subsidies need to be fundamentally re-examined. Technology transfers need attention and have so far been short of target. Initiatives need to come from the private sector by creating viable business opportunities. Carbon markets and policies beyond 2012 need to be determined to allow predictability necessary for businesses for investments in new technology. Also, emerging markets will need financial resources for mitigation and adaptation measures.

While pushing the government to improve its governance, the business community must also adopt and effectively implement a code of ethics, the Forum concluded.