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Global financial turbulence: options for developing countries Conference organized by South Centre, TWN, Consumers Association of Penang

MK Global financial crisis followed by unsustainable non-genuine green shoots of recovery. Paper on causes of GFC and architectural problems, national issues (RP 24) , post recession global imbalances (RP 26) impact of the crisis on LDCs RP 37 could lead to a new round of debt problems . Missing element in G20 agenda reform of IMF (reverse more power to IMF). Resumption of hot flows of short term capital into many developing countries leading to inflation, asset bubbles, appreciation of currency, lack of competitiveness of exports, surge of imports. Capital controls should be done as a routine. YA Global economic prospects over short and medium term. Risk of further instability and slowdown before recovery. Chances of averting this is slim because fragilities built into us AND eu DUE TO MISGUIDED POLICIES CANNOT BE EASILY UNDONE. hENCE, RECOVERY THERE IS GOING TO BE SLUGGISH, ERRATIC AND JOBLESS. Trong growth in developing economies is unsustainable, because it is driven by stimulus package in China spilling over into other developing economies, credit asset and commodity bubbles created by surge of speculative capital flows. Developing countries highly susceptible to instability in advanced economies. Increase of non resident capital flows (hot money) into China, of FDI in real estate. China current account surplus lower than Germany. China trying to shift to consumption led growth, but the shift is a slow process. Export growth down , impact of stimulus fading, growth is expected at 7-8 % . China cannot keep on exporting. If China slows down Bring down commodity prices Chinese demand shift from hard to soft commodities (grain meat) aggravating food problems Slowdown in exports to US hurt developing countries . Developing countries need to enhance domestic consumption and investment through redistribution. Currency appreciation since Lehmann collapse, faster in deficit countries such as Brazil India South Africa, much faster than China, Korea, etc. Credit cris, asset property bubbles. This coincides with the cycle in commodity prices. Inverse relation between dollar and commodity prices.

US creating inflation abroad in commodity markets. Mexico twin booms in 1970s. Brazil, Russia, South Africa are more vulnerable. YVR Need to strengthen IFIs, governance should be improved. Architecture G20 started in 1997 did not stop crisis. FSF (FSB) all institutional structures improved but not changed. G20 may undermine existing legitimate institutions (treaty based organizations) which may be implementing G20 decisions. Need to expand debate about use if financial sector, use of global institutions, to give equal importance to questions of development in addition to financial stability. A Conford Effects of financial contagion in terms of interest rates and prices felt globally. Regulation with microprudential focus do not address systemic macro prudential risks. Central place of reform agenda for banks is capital standards. rEVISION OF bASEL STANDARDS reflects inadequacy in the roles. Capital adequacy ratios highly misleading indicators of banks stability. Basel III increased levels of capital but still too low. Basel liquidity standards and relationship with macroprudential risks. Effects of liquitidity crisis on banks access to finances can transform to solvency crisis. Standards for liquidity managements are integral part of Basel III.