Developing countries like Pakistan are faced with intricate impediment in their trying to survive and thrive in a globalized economy. Countries like Pakistan have too many problems such as debt and low commodity prices, and too weak an infrastructure and capacity to develop industrial exports. At the same time they face the threats of local firms and farms being overrun by foreign products and companies as their countries liberalize. Even the stronger developing countries find great difficulties in being able to manage and balance the costs and benefits of globalization, as the recent financial crisis in East Asian countries has shown.
The challenge is whether developing countries can take advantage of the liberalization process, which to a large extent is being pushed on them externally, while at the same time avoiding or minimizing the disruptive consequences on their societies and economies. The ability to manage liberalization and globalization has been a crucial aspect of national policy-making since Uruguay Round of GAAT. At this point the danger is that most developing countries, under great pressure from agencies such as the WTO, the IMF and the World Bank will go further along with the trend and institute more and rapid liberalization policies, without a clear idea of the conditions needed to successfully address the associated risks.
Instead of rapid liberalization, a selective approach to liberalization is more appropriate. The aim of this would be to strike a careful balance between opening the domestic market to benefit consumers, and protecting it to take into account especially the interests of small producers.
In order to widen their policy options in the future and to strengthen their bargaining power, developing countries have to devise a survival kit of their own by adopting a range of coordination mechanisms and policy tools.
Developing countries should strengthen cooperation within themselves, with the support of UN agencies such as UNCTAD and UNDP. This cooperation should include an increase in trade, investment and communications links at the bilateral level and between regions, as well as joint projects involving several developing countries.
Equally or even more urgently required is cooperation in the area of policy coordination in reaching common positions. This is especially because policies that used to be taken at the national level as the prerogative of national governments are increasingly being made at forums, institutions and negotiations at both the international and regional levels. Without a more effective collective voice at such international forums, developing countries will find even more that their national policies on economic, social and cultural matters will be made and dominated by the more powerful Northern governments and the institutions they control.
At present, there are few institutions in the third world and their capacity is weak. Like-minded countries in developing world should consider initiatives to start or strengthen centres of research and coordination, including those that are independent or private, that can help them in their preparations for negotiations as well as strategic thinking and long-term planning. Greater collaboration among regional institutions like ASEAN, SAARC, SADC, etc. especially in sharing information and coordination of policies and positions, would be beneficial. But unfortunately all these inter-state forums could not perform up to their potential due mainly to chronic political differences among the member states. Saarc has suffered just because of this factor, as Pakistan and India have failed miserably to settle down the outstanding issue of Kashmir. So one obvious prerequisite for developing countries to survive and thrive in a globalized world is to rectify their mutual political differences. Until this is done forums like SAARC won’t give any fruit whatsoever.
In order for developing countries to avoid bleak prospects in the 21st century, they must get the space and opportunity to strengthen their economies and to develop their social infra-structure, while having environmentally sound practices. For this to happen, there has to be a much more favourable international environment, starting with the democratization of international relations and institutions, so that the developing southern countries can have an active role in decision-making.
The developing countries should have more rights of participation in decision-making processes in the IMF, World Bank and WTO, which should also be made more accountable to the UN, public and to the local and poor communities. These institutions have been under the control of the governments of developed countries due to the systems of decision-making and governance. There has long been a perception that as a result of such dominance, these three institutions have tended to have policies or rules that are biased towards the interests of the developed countries, while developing countries have either benefited less or suffered from the wrong policies and biased rules.
Trade-related intellectual property rights (TRIPs) are just one among a host of regulatory means which has done more harm than benefit to the developing South. There is thus a need to reform the decision-making processes so as to give developing countries their right to adequate participation; and to review and, where needed, to change the content of policies and rules so that they reflect the interests of developing countries that form the majority of the world.
The United Nations being the most universal and democratic international forum, it and its agencies should be given the opportunity and resources to maintain their identity and have their approach and development focus reaffirmed, and strengthen their programmes and activities. The strong trend of removing the resources and authority of the UN in global economic and social issues, in favour of the Bretton Woods institutions and the WTO, should be reversed. This trend runs a risk of bringing more inequality on the globe and thereby political instability throughout the world.
Every effort must be made to affirm the UN’s indispensable and valuable role in advocating the social and developmental dimension in the process of rapid global change. The world, especially the developing countries, requires that this dimension be kept alive and indeed strengthened greatly; otherwise there is a danger that a monolithic laissez-faire approach to globalization and to development will cause immense harm.
Only a great strengthening of the UN will allow it to play its compensatory role more significantly and effectively. For the South as well as the international community to make progress towards redressing the basic inequities in the international system, the UN must be able to make the leap from merely offsetting the social fallout of unequal structures and liberalization, to fighting against the basic causes of poverty, inequities, social tensions and unsustainable development. The more this is done, the more options and chances there will be for developing countries in future.
It is vital that the UN continues to promote developing countries’ rights and interests, an equitable world order and the realization of human and development rights as its central economic and social goals. There is a danger that some UN agencies (and the Secretariat itself) may be influenced by conservative political forces to join in the laissez-faire approach or merely be content to play a second-fiddle role of taking care of the adverse social effects of laissez-faire policies promoted by other agencies. The UN should therefore keep true to its mission of promoting appropriate development and justice for the world’s people, and always advocate for policies and programmes that promote this mission, otherwise the UN too would lose its credibility.
In considering their options in the globalized economy, developing countries have to seriously review the liberalization experience and make important conclusions on the balance and mix between the roles of the state and the market. Contrary to the structural adjustment model, both the market and the state have key roles to play. An unbridled economic role for the government in the name of distributive justice is often a recipe for disaster in the long run, but, on the other hand, market solutions are often ruthless to the poor. Moreover, government failure does not imply that a reliance only on markets will succeed.
We must guard against fundamentalism in belief in either state or market. While there are failures in state policies, there can also be serious market failures. What is important is to recognize both government and market failures and introduce correcting devices against both. The proper functioning of a market needs the support and guidance of the state, while conversely the state cannot do without the markets. Looking at the experience of the Southeast Asian economies, it can be concluded that the belief that markets know best, or that state intervention is counterproductive in the process of industrialization, is not borne out by their history.
Experience from the second half of the 20th century suggests that the guiding and supportive role of the State has been the very foundation of successful development in countries which are latecomers to industrialization. State intervention created the initial conditions for industrialization through State investment in infrastructure, development of human resources and agrarian reform. In the early stages of industrialization, a key role of the state is protection of infant industries through tariffs and other means. In the later stages of industrialization, the nature of state intervention in the market must change and become functional, institutional or strategic.
The review of structural adjustment policies and of the liberal “free-market” model in general, shows that a reconceptualization of development strategies is required and that alternate approaches are needed.
An important issue is whether developing countries will be allowed to learn lessons from and adopt key aspects of these alternative approaches. For this to happen, the policy conditions imposed through structural adjustment have to be loosened, and some of the multilateral disciplines exerted on developing countries through the WTO agreements have to be re-examined.
In the search for alternative options for developing countries, work also has to be increased on developing economic and development approaches that are based on the principles of sustainable development. The integration of environmental and economic concerns and in a socially equitable manner is perhaps the most important challenge for developing countries and for the world as a whole in the next few decades.
However, international discussions on the environment can only reach a satisfactory conclusion if they are conducted within an agreed equitable framework. The North, with its indisputable power, should not make the environmental issue a new instrument of domination over the South. It should be accepted by all that the North should carry the bulk of the burden and responsibilities for adjustment towards more ecologically sound forms of production. This is because most of the present global environmental problems are due mainly to the North, which also possesses the financial resources and the economic capacity to reduce their output and consumption levels.
In the 21st century, much more focus has to be placed on changing economic policies and behaviour in order that the patterns of consumption and production can be made environmentally sound. What needs to be discussed is not only the development model of the South but much more the economic model of the North and of course the international economic order..