Republic of South Africa

GA 2nd: Economic and Financial Matters

The Effect of the Global Economic Recession on Developing Nations
The recent global economic crisis has impacted economies of both developed and developing
nations worldwide. Rampant speculation in developed nations' banking systems, the dangerous
process of securitizing mortgage debt into so-called "toxic assets," and a declining housing
market came together to cause large recessions in developed nations. Smaller developing and
emerging nations were originally shielded from the crisis, but were brought into recession as
developed nations began to cut imports and the credit market slowed. 1
South Africa, along with many other developing nations, has been able to avoid the worst of the
global economic crisis. Our banks, like most on the African continent and in the developing
world, do not invest the securitized assets markets that brought about this recession. Keeping our
loans internally, instead of bundling and reselling them, as a worthwhile trait of our banks that
should be returned to those in developed nations. As a result, our nation was only in a recession
for three quarters 2, while developed nations such as the United States suffered from harsher
recessions of six quarters or longer. 3 Regulating securitization is a key measure to prevent future
crises such as this from occurring.
While developing nations may not have immediately suffered from the crisis, the
interconnectedness of the global economy did affect their economies. When larger nations cut
their imports, developing nations' unemployment rose substantially as their outputs dropped.
South Africa was able to combat the crisis with our infrastructure investment that took place as
we prepared for the World Cup. Our Deputy Finance Minister Nhlanhla Nene pointed to the
importance of this investment, stating that "The infrastructure projects provided [South Africa]
with a much-needed cushion during the global downturn, and will help us emerge as a stronger
and more competitive economy." 4 Our committee must focus on encouraging infrastructure
growth in all developing nations financed from both domestic and foreign investment.
In order to combat the rising poverty and unemployment that plague developing nations, South
Africa encourages the committee to increase support for micro-loan programs through the United
Nations Capital Development Fund. Providing the small amounts of capital required to start a
small village business to individuals will put people to work and help bring individuals out of
poverty. This direct investment in the people of developing nations must be paired with an
expansion of the banking systems in each nation to include more than just the wealthy. This will
provide more domestic capital for infrastructure enhancements and for more individual loans. Our
nation prospered greatly from our recent push for financial inclusion, which allowed us to raise
the supply of loanable funds to better meet demand. 4
The World Bank predicts that developing nations will take up a bigger share of the economy than
developed nations by 2015.5 When the committee comes together to improve developing
economies, their strength will provide new markets for developed nations, thus providing growth
to the entire world economy.
1.http://www.iob.co.za/resources/ShowItemArticle.asp?ResourceSectionId=4&ResourceSectionName=Pub
lications&ResourceId=5&ResourceName=IOB%20Talk&IssueId=34&articleid=134
2. http://online.wsj.com/article/SB125911270192363313.html
3. http://news.yahoo.com/s/afp/20100921/ts_alt_afp/useconomyrecessionend
4 .http://www.sagoodnews.co.za/economy/sas_careful_planning_reduced_impact_of_recession.html
5. http://www.businessweek.com/news/2010-09-27/emerging-nations-to-outgrow-rich-ones-by-2015-world-
bank-says.html
Republic of South Africa
GA 2nd: Economic and Financial Matters
Promoting Sustainable Development Through Alternative Energy Resources
In the past centuries our world has steadily become more and more industrialized, which has lead
to drastic increases in our energy usage. We amplify our reliance on non-renewable fossil fuels
every year, while the supply of these resources dwindle. Our environment has been damaged by
this growing dependence on fossil fuels, which manifests itself as rising temperatures, melting ice
caps, and increasing desertification. As more nations develop and begin to use fossil fuels (energy
growth is expected to increase by 44% from 2006 to 2030), it becomes even more crucial to
develop alternative energy sources to allow for sustainable growth.

All of the UN Millennium Development Goals, from eradicating extreme poverty to developing a
global platform for development, require the spread of affordable access to energy in order to be
achieved. Over 20% of the world has no access to electricity, and 40% have to rely on traditional
biomass for cooking.1 It is the duty of the United Nations to do our best to provide access to
clean, renewable energy to these people.

For rural populations in developing nations, decentralized renewable energy projects are the most
cost-effective way to provide energy. Villages can use a small solar array or micro-hydropower
generators in order to provide electricity to their people. The carbon savings produced by
investment in these resources can be used by developed countries under the Clean Development
Mechanism to meet their current carbon cap obligations under the Kyoto Protocol.2 Our nation
proposes a new Decentralized Renewable Energy Grant partnership, to be funded by contribution
of 0.02% of member-states GDP, in order to provide private investors risk-sharing in order to
invest in these decentralized programs.

The vast majority of the worlds energy is still provided by the centralized grid. Urban cities and
towns in developing nations are connecting to the grid rapidly. We must encourage more
investment in renewable energy to provide energy to nations. In order to do this, South Africa
proposes a worldwide "feed-in tariff system," a simple renewable energy incentive program that
our nation recently established and has worked very well in European states (Denmark, for
example, now produces 28% of its energy from renewable sources.)This system requires that grid
owners are required to open access to the grid to alternative energy producers and sets a purchase
price per kWh of the renewable-produced energy in order to ensure a reasonable return on
investment.3 Such a tariff system stimulates private companies, large and small, to invest more in
alternative energy sources.

Investing in renewable energy sources in both developed and developing countries will benefit
member-states in a multitude of ways. The environmental impact of using less fossil fuels will
increase quality of life throughout the world. Providing affordable energy to those in developing
nations will help defeat poverty, as social and economic conditions will dramatically improve
with energy access. The developing world is set to grow at a massive rate, and alternative fuels
will ensure that this quick growth won't hurt our valuable ecosystem by providing a sustainable
infrastructure.

1. http://www.thebreakthrough.org/blog/2009/05/eia_world_energy_use_will_rise.shtml
2. http://content.undp.org/go/cms-service/download/publication/?version=live&id=2793175
3. http://unfccc.int/kyoto_protocol/mechanisms/clean_development_mechanism/items/2718.php
4. http://www.boell.de/downloads/ecology/FIT_in_America_web.pdf
Republic of South Africa
GA 2nd: Economic and Financial Matters
Combating the European Debt Crisis
The European Union is a key player in our world economy. 20% of our trade flows through
the EU, who serves as our largest exporter of goods and services.1 During 2009, the European
economies entered into recession, and deficits and debts began to rise rapidly. Greece was
most heavily impacted, and the EU and International Monetary Fund was forced to issue a
€110 billion ($145 billion) loan bailout to the nation in order to prevent a Greek debt default.2
In order to receive the bailout, Greece was forced to agree to €30 billion ($39.5 billion) in
austerity cuts to lower their deficit, which had reached 15.1% of their GDP in 2009. 3 Other
countries in the EU have been initializing austerity cuts of their own in order to lower their
deficits and rising debt.

EU nations that use the Euro (known as Eurozone nations) agreed under the Maastricht
Treaty to limit their government debt to 60% of their annual GDP and their annual deficit to
3% of GDP. These targets are poorly regulated, and the average Eurozone nation's debt is
79% of GDP. In order to help enforce these debt limits, South Africa proposes a modified
version of a plan originating from the Council of Economic Analysis in Paris. Under this
plan, a Eurozone nation's existing debt up to 60% of GDP, and up to 3% of the current year's
deficit, is able to be combined with other Eurozone nations into EU "blue bonds." 4 This
would increase investment in troubled EU nations, since the EU would back these loans.
Countries would strive to reduce their debt/deficit to these sustainable levels since debt over
these levels would have to be loaned out by the individual country with higher interest rates.

The Greece debt crisis was inflamed by unregulated financial markets in the EU. Derivatives
trading, where a security is traded based on the price of an unrelated asset, is used to reduce
risk on a project, or to speculate on its success or failure.5 Stock brokers traded derivatives
based on the solvency of the Greek government on closed, non-transparent markets, which
increased uncertainty around the Greek debt.6 This type of trading can negatively affect all
member-states, and as such South Africa proposes an international push for strongly
regulated, transparent derivatives trading.

The strength of the European economy affects all member states. Our developing nations rely
on the large EU foreign aid budget, which is often the first cut in a financial crisis. It is in the
best interest of the UN to encourage lowering debt, while stressing the moral imperative of
continued foreign aid, and to promote the regulation of derivative trading.

1. http://europa.eu/abc/keyfigures/qualityoflife/index_en.htm
2. http://www.msnbc.msn.com/id/36896504
3. http://www.businessweek.com/news/2010-10-06/greek-2009-deficit-to-be-revised-to-15-1-kathimerini-
says.html
4. http://economix.blogs.nytimes.com/2010/05/13/preventing-future-debt-crises-in-europe/
5. http://www.investopedia.com/terms/d/derivative.asp
6. http://www.globalpost.com/dispatch/commerce/100319/greece-crisis-economy-regulation