Looking ahead

Secretary-General of the OECD

©OECD Observer

It is a great honour to have been given the mandate to lead the OECD following Donald Johnston’s great legacy. We are facing a number of pressing challenges, of which I will mention just a few. Starting with the global economy, I would note that although the economic outlook for this and next year is rather positive, there is no room for complacency.

Current account imbalances have reached unprecedented levels. Although they have not yet caused great disruptions, it is clear that they can not continue indefinitely.

Growing demand and limited supply suggest that energy prices are not going to come down drastically any time soon.

Another pressing challenge is that economic convergence among member countries has halted or even reversed. There are great differences in economic performance throughout the OECD, and we must work together to close these gaps, not only in terms of growth rates, but also in terms of productivity and living standards.

We are confronted with the ageing of our populations and this in turn raises the importance of pensions and healthcare infrastructure. Moreover, when coupled with slowing or negative population growth it produces a need for enlightened migration and integration policies.

We have all seen the emergence of questionable criteria which restrict foreign direct investment even among OECD countries. We have to practice what we preach. Otherwise we will not be credible and we will lose our authority.

Finally, trade negotiations have made little progress. We risk missing the opportunity to open our markets further and to reap the benefits of trade. It is also the case that lack of progress may rekindle protectionist pressures.

The OECD is ideally placed to help us find answers to all these challenges. We need to build on our experience of working together to build strong, resilient economies. We can profit from our strong co-operation to move into new areas where I think we can also have a significant impact.

Reducing economic disparities and combating poverty is one of them. As established in our founding convention, this is a duty we must address not only for our member countries, but for the rest of the world. Poverty is the ultimate systemic threat. We must address it for ethical, moral and also for purely economic reasons.

Investment in human capital constitutes a strong pillar in this endeavour. Not only through better education and better job opportunities, but also through better quality of life and better health. Health must become one of our new priorities.

I have witnessed the impact that access to clean water can have on the poorest. In fact, advancing on the issue of water will help to move forward on almost all the Millennium Development Goals. Like poverty, it will require close collaboration between several of the OECD areas of expertise.

There is also the very real and very pressing issue of climate change, already rather visible in its consequences.

Finally, the energy challenge of dealing with oil at $70 per barrel, its impact on growth and inflation, possible alternatives (including nuclear energy) and a better balance between oil supply and demand should be the focus of our attention and that of our sister organisations, the IEA and the NEA.

Our governments are committed to undertaking structural reforms to strengthen growth, employment and public finances.

Implementing such reforms is not an easy task. There are several elements that inhibit their successful conclusion. Also, the results of reform usually materialise over the medium to long term, and do not have regard for political calendars.

The OECD should speak convincingly and loudly about the benefits of reform, while bearing in mind that there should be some compensatory mechanisms for those adversely affected by reform. The organisation is certainly well equipped to provide and disseminate such policy alternatives–adjusted to each country’s specific circumstances–based on the shared experiences of our 30 democracies.

To achieve all this, we need a clear and strong mandate from our member governments: to be at the centre of the globalisation process, and to co-ordinate closely with the other international organisations to avoid duplication, unnecessary competition and waste of resources. A mandate for relevance.

The question of non-members is therefore key. How to engage them? How to expand the scope of the OECD so that it remains relevant in the years to come?

There have been welcome advances with respect to the governance of the organisation. We are now ready to discuss the financial implications of enlargement. Once that has been resolved, we must determine whether potential members meet the necessary conditions for accession and whether we should start the process that would lead to accession.

It is important to deliver a clear message to potential members. This is the best way to encourage them to adopt OECD best practices. We also have to find ways to strengthen our engagement with other countries which are not necessarily on the accession path.

I want to thank all those who have entrusted me with the future of this exemplary organisation. With the support of the Council and that of the OECD’s dedicated and talented staff, I will do my utmost to continue its tradition of excellence, and build on its considerable authority and prestige.

*This article is adapted from Mr Gurría’s speech on the occasion of the handover ceremony at the OECD Council Meeting at Ministerial Level, May 24 2006. The unabridged version is available at www.oecd.org/secretarygeneral

©OECD Observer No 256, July 2006

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