Achieving Global Economic Stability

By M. Isi Eromosele

The world’s economies and financial systems are more interconnected today than ever before.

Given the importance of both inward and outward foreign direct investment for the global economy, world countries should warn against reactionary moves towards protectionism, both at home and abroad in response to recent periods of global economic instability and continue to work with international financial and trade organizations to promote responsible trade and investment practices.

The Importance of Global Economic Stability

All nations have a shared interest in the existence of a relatively open trade and investment environment supported by a regulatory framework in which all participants have confidence.

The recent financial crisis and subsequent downturn in global economic activity have exposed the need to review the current financial regulatory framework and adapt it to address the changed and unique needs of today’s global economy.

This review should include input from growing emerging markets, such as China, Brazil, India and Nigeria, among others.

As international investment has become increasingly important to the global economy, it is in every country’s interest to participate in the discussion and actively contribute to the development of measures to strengthen the global economy and maintain the effectiveness of its regulatory framework.

Ensuring stability requires a regulatory process that remains transparent and predictable. Furthermore, there should be a reciprocal responsibility on nations receiving international investments to ensure that investors who follow the rules are not discriminated against.

In order to contribute to the development of global solutions in this area, there should be close and continuing cooperation coordination between the G-20, the International Monetary Fund (IMF), the World Bank and other international financial institutions, governments and like-minded organizations to contribute to the stability of the global economy.

Global Economic Stability and Open Investment

The financial crisis that commenced in 2008 and the events that followed have shown that even advanced economies are not immune to economic instability. It has also demonstrated how events in one country or region can have a significant impact in others. As such, international cooperation is essential to the establishment and maintenance of economic and financial stability and several international institutions should work closely together to achieve this.

For example, the IMF should work with countries to implement sound and appropriate financial and investment strategies by:

• Reviewing member country’s economic and financial policies for compliance with domestic and external stability standards set by the IMF
• Providing counseling on fiscal, monetary and exchange rate policy best-practices
• Providing financial assistance, in the event that a member country experiences economic difficulties, so as to limit disruption to the domestic and global economies

An increase in global cooperation is vital for economic recovery and countries need to enhance collaboration across sectors, industries and disciplines.

Issues such as food and water security, employment and political dependability are closely linked with the economic stability of a country and should thus be addressed in tandem.

As such, the World Bank, in cooperation with the IMF should create an initiative that both assesses countries’ financial sectors and help formulate responses to each country’s particular risks and vulnerabilities.

One institution that could play a large role in aiding countries’ recovery is the International Finance Corporation by funding initiatives focused on easing unemployment, promoting open, competitive markets in developing countries and ensuring continued access to financing for banking sectors and businesses.

Promoting Global Prosperity And Domestic Growth

Diversification is the key to minimizing potential volatility in any country’s economic performance over time and therefore enhancing economic stability at home.

Diversification means not only broadening the number of economic sectors, but also enlarging the enterprise base, encouraging entrepreneurs and small businesses, and attracting increased international investment.

Country governments need to introduce a number of measures aimed at opening up their domestic economies and accelerating the pace of economic diversification while maintaining economic stability. These include:

• Boosting competitiveness through the development of infrastructure and improvements to the local business environment
• Creating an attractive investment climate for local and international investors
• Enhancing consumer protection by streamlining the provision of services
• Developing economic policies and legislation according to international best practices
• Identifying and actively promoting the specific industries in which the country believes it can establish itself as a leader at local, regional and global levels
• The imposition of no restrictions on profit transfer or repatriation of capital
• Maintaining an environment with no corporate or income taxes outside of a limited number of industries and very low, or non-existent import duties

M. Isi Eromosele is the President | Chief Executive Officer | Executive Creative Director of Oseme Group - Oseme Creative | Oseme Consulting | Oseme Finance

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