Poor nations sink deeper into red ink. Rich nations must resume North-South talks, says UNCTAD chief

The economic crisis may be passing for the world's well-to-do countries. But, says Gamani Corea, conditions are deteriorating in developing countries. ``Almost all of [their] governments are under very severe stress,'' says the secretary-general of the United Nations Conference on Trade and Development (UNCTAD). ``In the last three or four years they have been forced to undertake adjustment programs, cut back investment projects, social programs, and imports.

``I fear that the economic contraction . . . will be translated into political and social tensions and difficulties with a time lag, even after the worst is over for the developing countries on the economic front.'' He describes the expansion in most of the poorer nations this year and that expected next year as ``minimal.''

In his 10th year at the top of UNCTAD, Dr. Corea is something of a spokesman for the world's poorer nations. Developing countries regard UNCTAD as ``their'' organization, expecting its research department and secretary-general to be sympathetic to their interests.

UNCTAD is disliked by many officials in the Reagan administration. To them, it seems unbalanced and unrealistic in its criticism of industrial countries and support for the developing nations.

Early in 1984 in a memorandum on the ``North-South dialogue'' -- the stalled, broad discussions and negotiations between the industrial countries and the developing countries -- the United States held that UNCTAD suffered from the same ills as the UN Educational, Scientific, and Cultural Organization, from which the US withdrew at the end of 1984.

UNCTAD, the memo charged, had a lack of accountability and transparency in the budget process, was too politicized (giving assistance to the Palestinians, for example), and advocated ``statist'' approaches to economic problems (e.g., compulsory transfer of technology and the redistribution of world shipping). Since then, the words of US officials have been somewhat less sharp, but they still call for ``reform.''

But the developing countries often feel mistreated and ignored by the richer nations. They believe the North-South dialogue has been wrongly interrupted by the North.

Corea, in an interview here, said political and social troubles in the poorer nations will force the industrial nations to renew the dialogue. He sees a danger of ``violence and riots, pressures on governments, attempts to overthrow them.''

``The world is going to have to pay attention,'' he says. ``My theory is that this same sequence is going to happen in more general North-South issues,'' he said. ``I hope not.''

He likens the situation to what happened with famine in Africa. The Food and Agriculture Organization, the World Food Council, and the United Nations had been warning governments about food shortages for years, he says. But there was little action until the need for relief ``was brought home to the people in the developed countries through the media, through television.''

Corea, a Sri Lankan with a master of arts in economics from Cambridge University and a doctorate in economics from Oxford, sees the ``faint beginning'' of a renewal in the North-South dialogue at meetings planned for next spring. The International Monetary Fund (IMF) and the World Bank intend to deal with issues of interest to the developing countries, such as debt and trade, at sessions of the Interim Committee and Development Committee.

Corea doesn't expect major decisions at those meetings. ``If it's the start of a process, that would be good,'' he says.

He would like to see the dialogue continue ``in more depth in the institutions like UNCTAD and other parts of the UN system.''

The United States and other industrial countries have insisted on these discussions taking place within the IMF-World Bank framework, where their weighted voting power has control, rather than in UNCTAD, where the one nation-one vote rule gives the developing countries a huge majority.

Corea knows that and is trying to protect UNCTAD's turf. He has been consulting with member governments about holding a ministerial meeting next fall on UNCTAD goals in trade, foreign aid or investment, commodity markets, and so on.

Trade, he maintains, is not a subject for in-depth consideration in the IMF and World Bank. Rather, it should be dealt with within the General Agreement on Tariffs and Trade (GATT), or, when developing-country aspects are involved, in UNCTAD, he says.

Corea denies that UNCTAD has been dominated by socialist thinking. ``We have not been getting into the issue of private vs. public sector, free market vs. controls -- that kind of issue,'' he says. ``This is an issue which has to be settled by the countries themselves in the light of their social, political, economic situations, and we [UNCTAD] don't have any doctrine to preach.''

Corea notes that most developing countries have a ``mixed economy,'' with both private and public sectors. ``It's simply because in many of them the entrepreneurial class, the investing class, is very small and weak. In many cases, the government has the concentration of energy and ability, the capacity to act. It therefore gets into economic areas more readily than in the more developed countries, apart even from the need to build up infrastructures,'' such as roads, airports, and railways.

Corea sees some shift toward more ``pragmatic'' thinking in developing countries where ``the bureaucratic system has proved to be overloaded and is creating inefficiencies.''

Talking about remedies for the developing-country debt crisis, Corea suggests a reduction in protectionism by the industrial countries. He wants rich nations to send more resources to the poor countries by strengthening the World Bank, the IMF, and other such multilateral institutions.

He calls for lower interest rates on developing-country debts and stretching repayments over a longer period, as has been done with Mexico. He holds that a mix of other debt-easing steps, such as a cap on interest rates and a facility within the IMF to compensate poor countries for higher interest rates, will be needed.

UNCTAD celebrated its 20th anniversary this fall. Commenting on this, Corea says it was not UNCTAD's view that the effort to help development ``should be by massive transfers from the rich countries to the poor countries by foreign-aid handouts and so on.''

Rather, UNCTAD's goal has been to create an economic framework in such areas as trade, finance, and commodities, which will enable the developing countries to participate to a greater degree in the world economy, and, eventually, ``stand on their own feet.''

UNCTAD has tried to stabilize commodities prices, but most economists would doubt that it has had much impact on them.

``If you measure UNCTAD by the yardstick of its own omissions, there's a lot that it did not succeed in doing,'' admits Corea. Nonetheless, he regards the organization as a useful forum in which the developing countries, industrial nations, and communist countries can discuss and negotiate common economic problems.

In the future, he expects growing cooperation among the developing countries themselves as the industrial might of some of them grows. And he sees a need for special attention to the poorest countries.

``UNCTAD can only succeed,'' he concludes, ``if there is a consensus on the part of all that a dynamic world economy requires growth and expansion in all its parts -- that the situation in the developing countries is of consequence to the situation in the industrialized countries, and that therefore it is in everyone's interest to see the momentum spread out right.

``If you don't have growth, then stability itself is in danger and difficult to sustain.''