Communiqué: Commonwealth Finance Ministers Meeting, Ottawa, Canada, 30 September - 1 October 1998

Communiqué

Commonwealth Finance Ministers met in Ottawa, Canada, from 30 September to 1 October 1998. The Meeting was chaired by the Hon Paul Martin, Minister of Finance of Canada. Ministers focused their discussions on the world economic situation and the implications of the global economic crisis, good governance and the elimination of corruption in economic management, the problems of heavily indebted poor countries, and development co-operation in the Commonwealth.

2. Ministers considered the Report of the Commonwealth Expert Group on Protecting Countries Against the Destabilising Effects of Volatile Capital Flows, and adopted the Ottawa Commonwealth Statement on the Global Economic Crisis. Ministers requested the Commonwealth Secretariat to continue to support international consensus building on issues addressed in the Statement.

3. Ministers expressed concern at recent developments since the European Union's submission of a WTO compatible regime for bananas, and hoped that every effort will be made to accommodate the legitimate interests of the ACP banana producers and facilitate the growth and diversification of their economies.

Resources for Development

4. Ministers agreed that donor countries should, as fiscal circumstances permit, increase Official Development Assistance (ODA) so as to contribute to developing countries' own efforts to attain poverty reduction goals, especially to halve, by the year 2015, the proportion of people living in extreme poverty, as agreed by Heads of Government in Edinburgh. Ministers recognised the critical role of the International

Development Association (IDA) as a key development instrument and called for adequate resources for IDA12 with equitable burden-sharing among creditors. They underscored the need to ensure that IDA allocations are based on both performance and need, recognising that in many countries, measures to strengthen capacities will lead to improved performance.

5. Ministers urged that the IMF's Enhanced Structural Adjustment Facility (ESAF) be funded adequately, including consideration of the possibility of gold sales, to make it self-sustaining. They emphasised the need for ESAF programmes to have greater national ownership, and for any social consequences to be addressed at an early stage in designing programmes. This would require greater collaboration between the IMF and the World Bank.

Debt Relief for Poor Countries

6. Ministers called on the International Financial Institutions (IFIs) to accelerate the implementation of the Heavily Indebted Poor Countries (HIPC) Initiative to meet the Mauritius Mandate targets adopted at their meeting in 1997. They called for the extension of the Initiative beyond December 1999. They agreed to press for the following objectives to be achieved expeditiously:

• ensure that 22 countries reach decision points by the end of 1999 and that substantial progress is made for other eligible countries to embark on the process;
• ensure that the IMF and the World Bank move rapidly to address the special needs of poor post-conflict countries, especially those with arrears to the IFIs; and
• secure a comprehensive review of the HIPC Initiative as soon as possible and no later than the middle of 1999, to ensure that the Initiative provides for a lasting exit from unsustainable debt burdens. The review should include consideration of debt sustainability criteria, covering both external and domestic debt, and have an external and independent input, including from the Commonwealth.

7. Ministers emphasised the need to promote a much closer link between the HIPC Initiative and poverty reduction, consistent with agreed global targets, and to strengthen the capacity of debtor countries to undertake debt sustainability analyses. They urged multilateral and bilateral creditors to provide financial support to ensure full and timely implementation of the Initiative, including contributions to any IDA managed trust fund for post-conflict countries, and to the HIPC trust fund to help the African Development Bank meet its share of HIPC costs. Ministers also encouraged Paris Club creditors to provide more than 80 per cent relief, where necessary, to ensure debt sustainability.

Good Governance and the Elimination of Corruption in Economic Management

8. Ministers welcomed the Interim Report of the Commonwealth Expert Group on Good Governance and the Elimination of Corruption in Economic Management. They emphasised the need to develop action-oriented and balanced proposals for combating corruption at national and international levels. They agreed that all countries should adopt 'zero-tolerance' for corruption.

9. Ministers agreed that the promotion of good governance in economic management was critical for combating corruption; effective anti-corruption strategies should incorporate systemic reforms and encompass both the public and private sectors. They recommended that each country should endeavour to develop its own national good governance strategy, with the main focus on the elimination of corruption, and that progress on actions taken be reported to Commonwealth Finance Ministers and Commonwealth Heads of Government in 1999.

10. The increasing globalisation of corruption required national measures to be supplemented by international action. Ministers emphasised the importance of improving the aid and procurement practices of multilateral and bilateral donors, with emphasis on greater transparency in consultation, two-sided accountability and strengthening the capacity of countries to implement anti-corruption reforms. Furthermore, aid policies should be examined and reformed, where necessary, to avoid any contribution to corruption, with particular reference to tied-aid, and suppliers' credits. The arms trade was also liable to corrupt practices.

11. Ministers agreed that the Expert Group's final Report, which would be considered by Law Ministers, Finance Ministers and Heads of Government in 1999, should make concrete recommendations for Commonwealth action to combat corruption. In particular, they requested the Expert Group to develop further its proposal for a global compact to combat corruption.

Code of Good Practice on Social Policy

12. Ministers agreed that the proposal for a Code of Good Practice on Social Policy, focusing on social issues in conjunction with economic reforms, should be further examined. They emphasised that any work on such a Code should not duplicate the work of other international institutions such as the UN, nor lead to additional conditionality or increased protectionism.

Development Co-operation Activities

13. Ministers expressed deep concern about the continuing decline in the resources of the Commonwealth Fund for Technical Co-operation (CFTC) - especially in the face of the growing demand for technical assistance - which was undermining the Commonwealth's most important multilateral instrument for development co-operation.

They encouraged member countries, where possible, to meet the Millbrook target of restoring the CFTC's resources to their 1991/92 level in real terms. They also encouraged member countries to contribute at least at the best level achieved since 1995/96. Ministers emphasised the importance of adhering to the CFTC Memorandum of Understanding's deadline of 31 December for pledges and their payment. They commended the Secretariat's moves to produce realistic plans of expenditure and encouraged continued rationalisation of the programmes of the CFTC.

14. Ministers endorsed the Commonwealth Code on Private Capital Flows, commending it as a guide to help member countries to adopt best practices for promoting these flows and coping with capital market volatility.

15. They welcomed the successful work of the Commonwealth Ministerial Mission on Small States in July 1998 and, in particular, the establishment of a joint Secretariat/World Bank Task Force on Small States. They expressed the hope that the Task Force would identify concrete ways of securing resources for vulnerable small states and assist their economic transition. They encouraged the Commonwealth Secretariat to refine further its Vulnerability Index, in consultation with the World Bank and other agencies, to enable its utilisation as an operational tool, and firmly expressed the view that those small states who are currently IDA-eligible should remain so.

16. Ministers endorsed the recommendations of the June 1998 Senior Finance and Law Officials meeting on money laundering. They welcomed the initiative of Eastern and Southern African countries to form a sub-regional task force to co-ordinate anti-money laundering strategies. A joint Commonwealth Secretariat/Financial Action Task Force mission would be undertaken to consult with regional organisations on its establishment. Ministers requested the Secretariat to establish a small technical working group, comprising experts from selected countries with large parallel economies, to examine to what extent they are vulnerable to money laundering and to consider what counter-measures may be necessary. Recognising the need for a multi-disciplinary approach for more effective national anti-money laundering strategies, they requested the Secretariat to prepare guidelines for the establishment of national co-ordination mechanisms. Ministers also commended the self-evaluation process as a useful tool for monitoring progress in implementing anti-money laundering measures.

17. Ministers welcomed the launch of the 'Tiona Fund' for Commonwealth Caribbean countries as the fourth regional fund established under the Commonwealth Private Investment Initiative (CPII). They hoped that the funds raised would be invested productively and in a timely way consistent with conditions in the world economy, and recommended that subsequent financing rounds be explored. They believed that it would be timely for the Secretariat to examine the feasibility of a new Commonwealth loan fund to promote trade and investment and to report on this to Finance Ministers in 1999.

18. Ministers noted with interest the establishment of the Commonwealth Investment Guarantee Agency and the progress it had made in underwriting political risk insurance. They encouraged the Agency to continue to broaden its activities to promote private investment in all parts of the developing Commonwealth.

19. They commended the work of the Commonwealth Business Council in enhancing intra-Commonwealth trade and investment links and, in particular, its efforts to engage the private sector in the consultative and policy-making processes of governments; integrate fully developing member countries into the multilateral trading system; encourage foreign direct investment in member countries; and strengthen private sector institutional infrastructure.

20. Ministers recognised the importance of early action to deal with the problem of the Millennium Bug. They agreed to establish a Commonwealth Facility to help countries to prepare for the year 2000. They urged interested member countries to contribute to the Facility, and welcomed Britain's offer of £250,000 to this end.

Appreciation

21. Ministers expressed their appreciation to the Government and people of Canada for their warm hospitality and for the excellent arrangements for the Meeting. They also expressed their appreciation to the Commonwealth Secretariat for its excellent preparatory work for the Meeting.

Next Meeting

22. Ministers accepted with pleasure an invitation to meet in the Cayman Islands in 1999.

Canadian Government Conference Centre
Ottawa, Canada

1 October 1998