Access to global finance

Malta has just finished hosting the Commonwealth Heads of Government Meeting. The question of poverty was again the main theme, and delegates discussed its causes and actions to alleviate it.

On the side of CHOGM, the Commonwealth Business Forum discussed various ways wealth can be created, especially in the less developed countries.

I was invited to chair one of the sessions organised during the forum. It discussed access to finance in the globalised environment in which we are living.

Globalisation

Globalisation is said to be "the widening, deepening and speeding up of worldwide interconnectedness in all aspects of contemporary social life".

Globalisation should be all about efficiency. It is all about the removing of frontiers and distorting practices so that all economic resources could flow across national borders to their most profitable uses, and therefore to the maximum benefit of humankind.

These resources interact and generate economic activity manifested in products and services that can be distributed globally.

Flow of resources

But is the flow an efficient flow? Are financial, physical and human resources flowing in the most efficient directions to converge in points where the maximum benefit to humankind is achieved?

I say it is not. While physical and human resources should be the less mobile and financial resources should be flowing to combine with them, the opposite is happening. We are seeing physical and human resources moving towards capital.

This is causing the outcry of exploitation coming from poorer countries which have abundant resources and which see their assets being stripped to feed the industrial machine and the avaricious appetite of the developed world.

An interesting fact shown by one of the speakers during the session was that investment in resource-rich countries was made in activities to extract raw materials such as mining and oil exploration.

The rigidity of financial resources is the reason for the multitude of human beings that are leaving their countries in search of the other resources which will enable them to build a future for themselves and their families.

A mass migration was partly instigated by the industrialised countries which needed human resources to man their activities, and is pushing the tragic illegal migration phenomenon which is causing death to so many.

It is fomenting a reaction that will increase the cultural clash that many are fearing is becoming the major faultline of the global society in the future.

Adding value

We must therefore push financial resources to a greater mobility that would see it migrate to find the point of convergence for economic activity where other resources are present.

These financial resources should be applied in investment intended to develop indigenous resources in the various countries: such as education, health, infrastructure, communication and research. It should also project investment that would employ these resources and convert them to wealth, such as agriculture, industry, tourism, trade and other services.

The key to success of globalisation is the maximisation of added value in the location of the physical and human resource.

The objective

I appreciate that we should not be oversimplistic. There are other factors and forces that pull other ways, such as location of the final market and technological input. I also appreciate that there is a long time lag to bring about a globalised standard of human resources, macro-economic stability and openness, curtailed bureaucracy and transparency. Our declared objective must be to take the first steps on the long road.

The intra-national financial institutions must create the tools to accelerate the flow of capital to the underdeveloped world. These tools should not only be facilities to be utilised in the development of infrastructure and productive activities but should also be in the form of risk abatement which would make it much more palatable for private investment to follow.

In this way we will ensure that a better economic balance is achieved which should lead to more stability and a better life for a wider range of people.

jd@dbms.com.mt