on structural adjustment in the developing countries

The European Parliament,

-having regard to the Fourth Lomé Convention and in particular Articles 243 to 250 which constitute the legal basis for the Community's commitment in the structural adjustment sector,

-having regard to the guidelines of the 'revamped Mediterranean policy' with which the Community undertakes to support processes of adjustment in the area,

-having regard to the general policies for financial and technical cooperation in favour of the developing countries of Asia and Latin America for the period 1991-1995 which refer to the structural dimension of development,

-having regard to the resolution on conditions for implementing the structural adjustment policy under Lomé IV adopted by the ACP-EEC Joint Assembly on 20 February 1992 in Santo Domingo,

-having regard to the report by the Committee on Development and Cooperation (A3-0059/92),

A.whereas, currently, 13% of the world's population, the northern hemisphere, consumes 85% of the world's available resources (UNDP data),

B.whereas since 1983 the developing countries have been exporting capital to the North, returning more than 130 billion dollars; whereas, besides the financial crisis caused by debt, this is also the result of a reduction in real terms of the appropriations earmarked for development, together with a drop in the price of raw materials, which hits the mono-cultural structure of many developing countries,

C.whereas while in 1979 31 countries fell within the definition of 'least-developed countries' (LLDC), 10 years' later there were 42 countries in the same category, thus demonstrating the increase in the North/South divide and the structural injustice between the two hemispheres,

D.whereas the LLDC have seen their share of world exports fall from 1.5% in 1965 to 0.49% in 1989 (UNDP data),

E.whereas, according to the latest UN report on world development, 1 billion people are living below the minimum poverty threshold; whereas 500 million of these are to be found in southern Asia, 320 million in the rural areas of Sub-Saharan Africa and around 90 million in Latin America,

F.whereas among the causes of the current situation faced by the developing countries are the world debt crisis linked to a loan policy which fails adequately to assess the developing countries' actual ability to repay, the commercial protectionism of the industrialized countries, financial instability linked principally to the cost of the dollar, which reflects the US national monetary policy, the drop in the price of raw materials and the inability of the governments of certain developing countries to manage the funds granted to them; whereas these problems must be tackled together through the formulation of structural adjustment policies in order to avoid ineffective sectoralization,

G.whereas the Community, thanks to its new cooperation instruments, intends to form a 'European approach' to structural adjustment in the countries of the Third World, which will come between the Bretton Woods structural adjustment policies and the countries at which such policies are aimed,

H.whereas the volume of the structural adjustment programmes has now reached substantial figures with loan transactions amounting to US $20 billion during the 1988 financial year,

I.whereas the new climate of international cooperation between East and West makes it possible to release new financial resources to be used for the development of peoples rather than for world rearmament which, besides jeopardizing the safety of the planet, is in itself a waste of money,

J.whereas any realistic search for a final solution to the crisis suffered by the developing countries requires not only an economic approach but also, above all, a profoundly political approach, since it must comprise a review of the political and economic relationships between the northern and southern hemispheres,

1.Confirms that long-term development which is centred on the countries involved, is balanced and is compatible with their resources and the identity of their peoples must be the primary objective of structural adjustment policies, and should be pursued in particular through international financial stability, stability in the price of raw materials, the promotion of small-scale projects and the spread of appropriate technology;

2.Considers that the serious economic situation of the developing countries makes it imperative to look for methods of changing their economic and social structure in order to promote sustainable development; these methods must be compatible with the resources available to them and will require structural adjustment programmes drawn up with the help of international organizations (including the Community) and meeting certain requirements, i.e.:

(a)social compatibility: the social dimension of development must be central to this effort and to the process of setting up the structural adjustment programmes; the centrality of the individual in the process of development and an assessment of the social impact of structural adjustment policies must be given priority, not least because they are strategically important for the success of any structural adjustment policy;

(b)environmental compatibility: ecological interdependence and the dramatic experience, in the ecological sector, of the IBRD and IMF programmes, which in certain cases have seriously compromised the ecological situation in some Third World countries, make it imperative to carry out a preliminary environmental impact assessment of all the structural adjustment policies to be promoted in developing countries;

(c)political/institutional compatibility: structural adjustment policies by their very nature require heavy state involvement and can therefore only work properly if they are implemented by state bodies and institutions, which are the only organisations up to the task. Structural adjustment policies must therefore be applied gradually so that all those involved in the socio-economic life of the country can take part;

3.Confirms that encouraging participation by the people in the development process is a political and at the same time a strategic factor in the success of any structural adjustment policy; it is therefore necessary to reiterate at every level the fundamental right of peoples to full and effective coresponsibility in the choices and decisions which affect them;

4.Considers that no structural adjustment policy can be successful in the Third World if the international community does not take measures designed to deal at the same time with the problem of foreign debt and the drop in the price of the raw materials of the developing countries;

5.Is furthermore convinced that structural adjustment policies inherently contain a conflict between the objectives of 'long-term' self-integrated growth of the developing countries and their frequent need for 'short-term survival', which may be resolved if:

(a)in the medium term, the industrialized countries, with a strong political will, provide for the needs of the developing countries to find resources with which to meet their international financial commitments; to this end the international community must undertake drastically to reduce the developing countries' debt exposure, via debt cancellation, reduction of interest rates, rescheduling, etc; in this context firmly supports the Commission proposal to cancel the debt of the ACP countries to the Community, and expresses its deep disappointment at the contradictory attitude of the Council, which considered it necessary to reject this proposal, which was part of the nondiscriminatory spirit of Lomé; calls on the Council to reconsider its position;

(b)in the long term, there is a thoroughgoing revision of intergovernmental policies on development cooperation to make them effectively into an instrument to promote human beings rather than a mechanism to protect the interests of the donor country, which often pays no attention to meeting the real needs of the people of the developing countries; also calls on the international political community to ensure that the developing countries regain the power of co-decision regarding the price of their raw materials;

6.Is convinced that, in the southern hemisphere, structural adjustment policies may have a beneficial effect on morality in domestic political/ institutional life and help democratize the economy, given that they impose budget transparency, the removal of corruption and clear choices in expenditure policy; therefore calls on the developing countries, in the context of the promotion of recovery programmes:

(a)to collaborate in reviewing those economic/financial policies promoted by governments in the southern hemisphere to the detriment of their people, in particular the allocation of vast resources to armaments (which take up 5.3% of the GDP of developing countries, according to UN figures), which are often double the resources allocated to health or education;

(b)to take measures to stem the brain drain and the outflow of capital, which sometimes equals the entire national debt, as is the case in Mexico and the Philippines;

(c)to start a campaign against corruption, a real national scourge in some countries which, besides bureaucratizing the state machinery, obstructs correct decision-making procedures;

(d)to give overstaffed civil services other tasks, not least because the gradual nature of the reforms must not become an excuse for economic policies incapable of making any clear fundamental choices, however unpopular;

(e)to reform state enterprises which, because of their losses, constitute useless economic liabilities;

(f)to commit themselves to processes of thorough political and institutional democracy, since there can be no development without democracy; in particular measures such as freedom of the press, freedom to join unions, freedom of speech, etc. are vital if participatory development is to serve the whole population;

7.Confirms that international economic democracy is the precondition on which the success of structural adjustment policies depends; in fact, though it is important on the one hand that the developing countries set up a system to transform their economic, political, social and institutional structures in order to create the conditions to enter the international economic community as equals, it is also vital on the other hand that at the same time the industrialized counties create the conditions to allow the developing countries to take part in international economic decision-making. In the certainty that the structural adjustment policies are not separate sectoral policies but global interventions at different economic and political levels which must be coordinated, is convinced that they must proceed in tandem with:

(a)reform of certain economic mechanisms which involve the developing countries in the fundamental decisions of international economic policy. Therefore calls on the Community to make a firm commitment to the establishment of new rules for the operation of international markets, in particular capital markets, which offer greater guarantees of involvement and stability to the developing countries as highlighted in the above paragraphs. In particular:

(i)believes that the European Community must sponsor an international conference on the problem of debt, involving creditors and debtors, in order to arrive at a broad cancellation of the debt (not least because it is economically unrealistic to believe that the developing countries will be able to meet their financial commitments); to transform this debt into local currency baskets to finance regional development funds; to transfer to the indebted countries the advantages resulting from operations on the financial markets;

(ii)in noting that current arms spending is essentially equal to the level of foreign debt in the developing countries, believes that considerable cuts in the percentage of military spending from the budgets of the countries of North and South could be used to wipe out the foreign debt of the Third World and to boost economic growth in the Third World and in Eastern Europe. Reliable studies show that a cut of 20% in such expenditure would eliminate the debt in 6 to 7 years, besides bringing effective benefits for world development because of the greater investment which would be available;

(b)reform of certain political mechanisms which promote the genuine institutional participation of the developing countries within supranational organizations. To this end the following measures in particular are necessary:

(i)democratization of the internal workings of the Bretton Woods institutions (a greater role for the developing countries, expansion to include new countries, rethinking of the philosophy behind intervention in development processes, differentiation of the economic policies to be pursued in the developing countries depending on their individual situations) given that the role which they have assumed of recovering private international loans in the midst of the debt crisis has considerably altered their statutory objectives;

(ii)democratization of the UN (revision of the decision-making mechanisms with, in particular, amendment of the composition of the Security Council; conferring of coercive power on the decisions of the UN);

8.Notes the substantial overall failure of the 'first generation' structural adjustment policies proposed by the IBRD and the IMF in recent years in the developing countries, particularly in sub-Saharan Africa. Furthermore:

(a)notes that the principle of 'more exports, fewer imports' was the key policy of Bretton Woods for the improvement of the economies of the developing countries; a principle which did nothing but increase the developing countries' dependence on foreign states, reinforced their mono-cultural structure exposing them to the drop in the price of raw materials, and expose to international competition countries ill-prepared to support it;

(b)points out that the Bretton Woods structural adjustment policies have generally caused serious social conflict in the developing countries assisted, because they took no account of the social effects of the economic measures undertaken which particularly affected the less well-off social classes; such policies are in fact based on drastic salary cuts, the abolition of vital minimum subsidies, draconian devaluation of currency, cuts in social spending, etc.;

(c)points out the increase in infant mortality in some of the developing countries in which the Bretton Woods structural adjustment policies are applied, and in particular in Uganda and Brazil as reported by UNICEF, given the drastic cut in funds allocated to health expenditure;

(d)notes that, despite the 'case-by-case' approach, the 'first generation' structural adjustment policies of Bretton Woods in fact had the effect of promoting, at all levels, laissez faire policies and the opening up of the market, which took not the least account of the structural economic differences from country to country, proposing unsuitable monetarist measures;

(e)notes that, though the IBRD and the IMF have transferred considerable financial resources to the developing countries, since 1984 both the IBRD and the IMF have been net creditors of the indebted countries, since the annual flow of capital has been on average US $3 billion to the IMF and US $2 billion to the IBRD; while it is expected that in the next 3 years the IMF will lend US $600 million to the countries of the Sub-Saharan area;

9.Notes with satisfaction that the World Bank also admits that its structural adjustment programmes in Africa have been unable to reduce the harmful consequences of the economic crisis in Africa, since their main effect has been to lacerate its social fabric, and has thus committed itself to a thorough revision of these programmes which, in the case of Africa, has resulted in new positive flows of investment;

10.Notes, on the other hand, that the IMF persists in its policies of recovering loans regardless of the analysis of the effects of this recovery on the developing countries, and also notes that the 'standby' loans still being granted to the Third World are based on economic principles which do not take account of the disastrous experience suffered in the developing countries; therefore calls on the IMF, in the light of the obvious inadequacy of its structural adjustment proposals, to reconsider the very foundations of these policies, giving priority to the social, environmental and cultural effects which they produce;

11.Considers that, on the basis of the experience of the Bretton Woods structural adjustment policies, it is essential for the countries 'undergoing treatment' to abandon socially unsuitable policies to adopt and carry out structural adjustment programmes which tackle the problems of underdevelopment at their roots, and democratically; the Community must therefore:

(a)formulate its reconstruction programmes taking into consideration the human dimension of development, particularly if these programmes are to lead to long-term development;

(b)encourage projects financed in the developing countries towards development which can be managed in the countries themselves and which is compatible with the resources and the identities of the people concerned;

(c)closely involve in the process of economic reform all the 'vital forces' of the country, including the informal sector; the Community must also consult NGOs from both the Northern and Southern hemispheres as these organisations are genuine examples of international democracy which, because of their proven experience and sensitivity, are able to supply information on the socio-economic priorities to be followed; the political and economic structure of the developing countries in fact demonstrates that reforms centred only on financial balance and price structures do not succeed in producing sustainable economic change and long-term development;

(d)support the processes of democratization underway in the developing countries even where they create difficulties for those countries in fulfilling the economic and financial commitments entered into as part of structural adjustment policies;

12.Calls on the Community to analyse realistically the reasons for the failure of the Bretton Woods policies so that the same mistakes are not repeated; in particular:

(a)calls on the Commission to distance itself from the ideological approach of the institutions of Bretton Woods which see liberalization 'tout court' as the way to turn the fortunes of stricken economies, and by so doing preserve the indispensable role of the state in the developing countries, often called into question because of an almost total lack of consolidated institutional experience;

(b)calls on the Commission to limit the exaggerated role which the Bretton Woods' structural adjustment policies give to developing countries' exports in an attempt to restore the balance of payments, not least because this reinforces the monocultural structure of production in the developing countries, thus increasing their external dependence; the Community must instead look for ways to base the growth of the developing countries on the local production of goods necessary for the essential needs of the local population;

13.Considers that the instability of the international financial market caused by the dollar, which particularly affects the developing countries via the debt mechanisms, may be contained by granting European loans in ECU, and believes that this currency must play a greater role in North/South economic relations;

14.Is convinced of the need to give adjustment a regional dimension if appreciable results are to be achieved; to this end calls on the Commission to do its utmost to bring into full effect the provisions laid down in Lomé IV on decentralized and regional cooperation. Also considers that, in the context of talks on structural adjustment policies, the Commission could propose joint negotiations between regionally compatible countries, so as to promote regional South-South integration and intra-ACP integration both in production and in trade;

15.Welcomes the setting up within DG VIII of the Commission of a 'Structural Adjustment Unit' with the tasks of a think tank on the drawing up, analysis and implementation of structural adjustment policies in the developing countries;

16.Welcomes the existing cooperation between DG VIII and DG I which has led to the setting up of a structural adjustment policy unit within the Mediterranean Directorate of DG I; recommends ongoing consultation between these bodies to ensure that the various measures taken are compatible, even though the areas involved require different measures;

17.With regard to the criteria for eligibility of the ACP States to take part in the Community's structural adjustment programmes, having noted the Commission proposals, considers that:

(a)even those ACP countries which have not had experience of adjustment programmes with the BRID or the IMF must be automatically eligible, in view of the autonomy which must be a feature of Community action;

(b)the above criteria must also include a serious, proven and irreversible commitment on the part of the country to promote a process of internal democratization of political and institutional life, where this is clearly necessary, since economic growth must not be achieved to the detriment of political pluralism; to this end economic restructuring promoted with the help of the EC must not work to the sole advantage of elitist political classes, often dictatorships, sometimes tarnished by human rights violations; therefore calls on the Commission to put into full effect the provisions laid down in Lomé IV regarding the financing of projects to promote human rights in the ACP States;

18.Gives the use of counterpart funds an essential role with respect to the Community's approach towards adjustment in the developing countries; in particular:

(a)calls on the Commission, in using the counterpart funds, to respect the financial and budget disciplines established beforehand with the individual countries to which the adjustment measures are directed, since the volume of funding these represent in many developing countries (in comparison with the volume of money in circulation) could cause serious economic imbalance;

(b)considers that the counterpart funds could become fully effective if the Community is involved in defining the public expenditure and investment of the countries concerned, in order to assess their impact at source; believes, therefore, that the developing countries, and in particular the ACP States which are more involved in these operations, must create the instruments to involve the Community in the formulation of such decisions, only with regard to the restricted field of structural adjustment programmes;

(c)at the same time considers that the Community must endeavour to establish a strongly coordinated approach among the donor countries with regard to the use of the counterpart funds, given that the various external financial measures in the same country must be consistent;

19.Considers that structural adjustment policies require strong coordination between different sectoral policies which involve the developing countries in parallel, given that possible successes in self-development in the Third World must not be called into question by other conflicting policies in the same countries, particularly in the agricultural and commercial fields. To this end:

(a)calls on the Commission to involve the European Investment Bank in the formulation of structural adjustment policies, given the need to establish joint strategies for intervention in the developing countries;

(b)reiterates the serious need to reform the common agricultural policy at its roots, in order to remove any type of agricultural restriction vis-à-vis the poorest countries, thus encouraging access on to the Community market of their agricultural products, a primary source of income in many developing countries. Believes, however, that other industrialized countries such as the USA and Japan should also review their deeply protectionist trade policies;

20.Reiterates the institutional need for the Member States, particularly with a view to Political Union, to speak 'with one voice' within the international financial and political institutions (IMF and IBRD, UN, OECD, etc.); therefore calls on the Twelve to establish a single presence and speak with one voice in the international decision-making process;

21.Considers that the funding of the public and/or private sector of the developed countries on the international capital market (e.g. United States or Italy) also has financial and monetary implications for the developing countries, caused not least by sharp fluctuations in interest rates; the developed countries must not pursue self-centred financial and monetary policies at the expense of the developing countries;

22.Considers that the United States, as the world's most indebted nation and the prime motor of the world economy, must, without delay, introduce structural adjustment policies for its own economy as outlined above and considers furthermore that such policies must be compatible with the development processes taking place in other areas of the globe, in particular in the developing countries;

23.Calls on Japan to face up to its economic, political and moral responsibilities as an industrialized nation with regard to the developing countries by making a greater commitment to using its financial surplus to help the Third World instead of the American public deficit;

24.Calls on the Group of Seven, on the basis of the new climate of international cooperation, to ensure that the economic and social development of the Third World is identified as a new world priority to be pursued in the coming years, and invites them to this end to undertake to commit resources and political will to tackle the endemic economic problems of the developing countries at their roots.

25.Instructs its President to forward this resolution to the Commission, Council, the ACP-EEC Council of Ministers, the parliaments of the Member States and the ACP States, the governments of the United States and Japan, and to the Secretariats of the United Nations, the ACP, the EIB, the IMF, the World Bank and the NGO Liaison Committee;