UNITED NATIONS - Rich and poor nations edged closer to a deal on proposals for reforming the global financial system, but diplomats said there would have to be changes if a U.N. conference this week is to adopt them.

A three-day U.N. General Assembly meeting on the financial crisis and its impact on the developing world, originally scheduled for June 1-3, was postponed to June 24-26 when it became clear negotiators had no agreement on draft proposals.

Although the meeting has been billed as a summit, no Western leaders are expected to attend and only 14 presidents and prime ministers will show up. The other 112 countries taking part will send lower-level delegations.

Western envoys said that reflected dissatisfaction with the meeting's organizer, leftist General Assembly President Miguel D'Escoto of Nicaragua.

The main speakers will be Venezuelan President Hugo Chavez and Bolivian President Evo Morales, both of whom are expected to use the conference to rail against capitalism and free markets.

The run-up to the conference has highlighted differences between radicals who want to give the General Assembly much more say in tackling the financial crisis and major powers intent on keeping control in their own hands.

With less than two days to go before the conference gets under way at U.N. headquarters, diplomats told Reuters they were finally closing in on an agreement on a set of proposals they hope the conference will adopt.

Martin Khor, director of the South Centre, an intergovernmental research centre for developing countries, told reporters the basis for an agreed document was in place, though fundamental disagreements over how to tackle the crisis still divided rich and poor nations.

There are still major issues of contention on which there is no consensus at this moment, said Khor, a Malaysian economist who has been following the negotiations.

He said areas of disagreement on the draft reform proposals included the future role of the United Nations in the global financial system and calls for a follow-up mechanism to monitor fulfillment of promises made at this week's meeting.


The draft financial reform proposals are outlined in a 15-page document, obtained by Reuters. Diplomats from Western and developing countries said the document will be amended further once the conference begins.

Western diplomats said the new draft was a dramatic improvement over an initial version prepared by the office of D'Escoto, who was Nicaragua's foreign minister in the 1980s.

The initial draft contained language that had nothing to do with finance, the diplomats said.

Still, they were concerned about sections in the current draft, including a call for greater U.N. involvement with the International Monetary Fund, the World Bank and other international financial institutions.

It calls for enhancing collaboration and cooperation between the United Nations and economic bodies like the IMF.

Another issue that developed and developing nations disagree on is a recommendation for the General Assembly to create a council of economic experts to provide advice to member states on dealing with the economic crisis.

Some Western powers fear that such a council could lead to unwelcome economic meddling by the U.N.

Diplomats also criticized language in the draft urging tougher regulation of global financial markets. The text refers to deficiencies in national and international financial regulation and supervision, and calls for greater regulation of hedge funds and financial products like derivatives.

One senior diplomat from the Group of 77 bloc of developing nations complained that the draft proposals had been watered down to satisfy Western nations' concerns, though he predicted they would be adopted by consensus at the meeting.

Khor said it was important to have a discussion on the crisis that included developing nations besides the economic powerhouses like India, China and Brazil, which belong to the Group of 20 club of powerful developed and developing nations.

The majority of developing countries feel very left out, he said. They want to have more say.

(Editing by Chris Wilson)