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Last Updated:  Sunday, 23 February, 2003, 14:18 GMT
India proposes foreign exchange tax
Indian Prime Minister Atal Behari Vajpayee
Vajpayee calls for fundamental global financial reforms
India's prime minister has called for a tax on international currency transactions to protect the world's developing economies.

Atal Behari Vajpayee said speculators in the money markets had triggered recent financial crises in Mexico, Southeast Asia, Brazil and Argentina.

"I believe this (levy) is a reform whose time has come," he said on the eve of the 114-nation Non-Aligned Movement (NAM) summit in Malaysia

"It combines in one effective measure an instrument to protect weak economies from the volatility of capital, to enhance investor confidence through stability of capital markets and to generate valuable developmental resources."

The late James Tobin, a Nobel-prize winning economist, was the first to proposed a tax on currency speculators, which has since been called the Tobin Tax.

New economic order

Mr Vajpayee said recent estimated indicate that "even a token tax of a quarter percent could generate annual revenues of the order of $300bn."

He also urged "reform and reorientation" of the global financial system which, was skewed to the advantage of developed countries, to prevent severe disruption of developing countries' economies.

The economic growth of NAM countries was slower in the 1990s than in the 1970s, with lower personal incomes and rising unemployment, he said.

The NAM groups two-thirds of the world's nations - mainly from Asia, Africa, the Middle East and Latin America - who contribute about 20% of global economic growth.

NAM was formed during the Cold War as an alternative to the East and West power blocs.

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