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Worry Mounts About Crisis in Developing CountriesFriday, January 30, 2009 > 10:30:55
DAVOS, Switzerland -Countries on the edge of the world financial system have built up more than US$1 trillion in debt and many are seeing investment - and faith in market reforms - dry up, finance and government leaders said Wednesday at the World Economic Forum.
Billionaire financier George Soros warned of dangers to banking systems in what he called ``periphery'' markets such as Brazil, Eastern Europe and Iceland, where banks can't afford to give credit guarantees as in the U.S. or Britain.
``Periphery countries owe over $1 trillion,'' he told reporters at the forum in Davos, Switzerland. ``You have very serious trouble brewing in the periphery countries.''
The crisis already is sapping investment in developing nations.
Some 48 mining projects in the Republic of Congo are ``in various stages of abandonment,'' South Africa's Finance Minister Trevor Manuel cited as an example.
Turkish businessman Ferit Sahenk cited studies showing that private investment flows into emerging markets will drop significantly this year. ``It is not only unemployment. It is not only poverty. If this crisis goes longer, it will lead around the world to a social crisis that we should be keeping in mind,'' he said.
Egypt's trade minister, Rachid Mohammed Rachid, said the financial crisis has created ``a sense of frustration'' among emerging economies that enacted market reforms pushed by rich-country advisers.
``We've been trying to integrate for years, and all of a sudden we understand that being integrated means we suffer immediately when markets in the U.S. crash,'' he told the AP.
After years of job creation and growth in Egypt, Rachid warned that there will be layoffs this year, particular in the export and tourism sectors. ``Workers in the Gulf and elsewhere are being sent home, so remittances will eventually go down,'' he said.
World Bank managing director Ngozi Okonjo-Iweala said the discussions at Davos were too focused on rich countries.
``This crisis is not just about finance,'' she said. ``It is about people and in many of these developing countries there are millions and millions of people who are at the bottom end of the scale.''
She urged participants at Davos to explore the World Bank president's suggestion that 0.7 per cent of the stimulus packages being discussed by industrialized nations be used to help developing nations.