Info Service on Finance and Development (Nov17/04)
16 November 2017
Third World Network
IGE on FfD focuses on resource mobilisation
Published in SUNS #8573 dated 13 November 2017
Geneva, 10 Nov (Kanaga Raja) - The first session of the Intergovernmental
Group of Experts (IGE) on Financing for Development at the UN Conference
on Trade and Development (UNCTAD) has focussed on the challenges faced
by developing countries and international community with regard to
mobilising domestic public resources, as well as on international
According to an UNCTAD Secretariat Note prepared for the session,
the discussion topics and guiding questions for this first session
(1) Domestic public resources: What can be done to enhance the mobilisation
of domestic public resources for development in developing countries?
(2) International development cooperation: How can international development
cooperation maximise its contribution to achieving the Sustainable
The opening plenary was held on 8 November with statements by the
Deputy Secretary-General of UNCTAD, the Director of the UNCTAD Division
on Globalisation and Development Strategies, as well as by the various
ADOPTION OF THE AGENDA
At the opening plenary, under the second item of the adoption of the
agenda and organisation of work, the Chair of this IGE, Mr Jaime Miranda,
Deputy Minister of Foreign Affairs of El Salvador, asked if there
was agreement on the organisation of work as he had earlier indicated,
at which point two delegations requested the floor, namely the JUSCANZ
group of countries and the European Union.
The United States, on behalf of the JUSCANZ group (comprising Australia,
Canada, Iceland, Israel, Japan, Liechtenstein, New Zealand, Norway,
Switzerland, and the United States) said that the JUSCANZ group of
countries looked forward to the next three days (the IGE is taking
place from 8-10 November) and hoped that experts in the room will
have fruitful and productive exchanges.
In principle, the group said, expert meetings such as this one should
require little involvement from Geneva-based regional groups, and
it therefore regretted having to delay the start of this meeting.
The JUSCANZ expressed its concern with the IGE's agenda and programme,
and said the terms of reference for this IGE was carefully negotiated
over many months and agreed by all member states at the 5 April meeting
of the Trade and Development Board (TDB).
"It was our hope, and I think the expectation of all member states,
that the secretariat would organise this IGE consistent with the terms
of reference that we established."
Indeed, paragraph 3 of the provisional agenda states that the IGE
will "be held in accordance with the terms of reference,"
the US said, adding that a quick review of the full programme reveals
that this meeting's topics are not consistent with the terms of reference.
"It is not our intention to politicise this meeting, but as member
states, the JUSCANZ countries, and indeed all member states, have
a duty to make sure that the secretariat faithfully follows member
With this in mind and without impeding the experts' ability to discuss
issues they deem important, the JUSCANZ said, it expects the draft
policy recommendations from the IGE will reflect experts' suggestions
in line with UNCTAD's mandate - as the terms of reference require.
"In this regard, the JUSCANZ countries reserve judgement on,
and potential endorsement of, the policy recommendations developed
over the next three days until they are brought before the Trade and
Development Board or other governing bodies."
The European Union appreciated the convening of this IGE on financing
for development as a result of the establishment of this group by
the Nairobi Maafikiano mandate (adopted last July at the UNCTAD-14
The IGE, the EU said, should indeed be a forum for the exchange and
discussion of experts of all member states.
Echoing the views of the JUSCANZ group, the EU underlined that it
expects the IGE to remain within the mandate set up by all the UNCTAD
membership in the Maafikiano and the terms of reference of this group,
put UNCTAD expertise and comparative advantages to the best use and
not to duplicate ongoing work in the UN system.
On the policy focus, the EU reiterated that it expects a balanced,
nuanced and frank discussion of the various issues at stake drawn
from the Addis Ababa Action Agenda (AAAA) to chapters on domestic
resource mobilisation and international development cooperation.
The EU said that it was surprised to find out after it had received
the final programme of this meeting quite late that the decision on
topics was rather selective in its understanding as well.
Some of the issues set out in the respective chapters of the AAAA
are referred to while some others such as the fight against corruption
in para 25 of the AAAA or national control mechanisms in para 30 (of
the AAAA), or the role of gender in para 53 (of the AAAA) have not
received any attention.
"We look forward to have these issues covered at a later stage,"
The EU also said that it is its understanding that this meeting will
produce expert-driven recommendations for the TDB's consideration
which are produced as the programme outlines at each session respectively.
Tanzania, on behalf of the G77 and China, intervened to thank the
secretariat for preparing this meeting, saying that it is one of the
most important issues for the Group.
It reminded the partners that UNCTAD's specific strength lies in its
role as the UN focal point for the integrated treatment of trade and
development and its inter-related issues. This includes finance, investment,
technology and sustainable development.
The G77 and China pointed out that the terms of reference which were
negotiated carefully were very broad.
"And I would like to inform partners that I don't think it would
be right to micro-manage the secretariat when they prepare their background
"When you say finance, when you talk of illicit flows, when you
talk of ODA, these are all broad issues and background document will
definitely touch maybe on issues that partners will not appreciate
or will not be comfortable with them, but it's very difficult. I can
imagine how challenging it is to touch on the issue of illicit flows
without touching on these sensitive issues," said Tanzania.
It pointed out that this is the first session of the IGE and that
it believes there will be three more sessions before the UNCTAD-15
So all other issues which were part of the terms of reference will
be addressed sequentially. This is the first session and this is the
first issue that the secretariat thought would be of importance to
us, it said.
"I urge our partners that we work closely and we have the team
spirit so that we can reach a successful outcome at the end of this
meeting," said the G77 and China.
In the absence of any objections, the agenda was then adopted by the
Chair of the session.
OPENING STATEMENTS AT IGE PLENARY
This was followed by some introductory remarks by Ms Isabelle Durant,
Deputy Secretary-General of UNCTAD, as well as opening remarks by
Richard Kozul-Wright, Director of the UNCTAD Division on Globalisation
and Development Strategies, who provided a broader context to the
discussions taking place during the session from an UNCTAD perspective.
In her statement, Deputy Secretary-General Durant noted that at UNCTAD
14 (held in July last year in Nairobi, Kenya), Member States agreed
on a vision for UNCTAD to implement the Addis Ababa and 2030 Agendas.
Together with Agenda 2030, the Financing for Development (FfD) process
is a core part of the UN development pillar, she said.
The FfD Agenda encompasses many issues of core concern for developing
countries, in partnership with advanced economies, and this was reaffirmed
at Addis Ababa in 2015, but has its roots in the 2002 Monterrey Consensus
and the 2008 Doha Declaration.
"Indeed, these financing questions date back to the founding
of UNCTAD itself, and have been a core concern of our Member States
for more than 50 years."
According to Ms Durant, from UNCTAD's perspective, the first session
of this expert group could not be more timely.
"We face considerable challenges in establishing a multilateral
approach to delivering effective development finance, necessary to
underwrite the implementation the Sustainable Development Goals."
The global macroeconomic environment remains unfavourable to any efforts
to scale up development finance.
And, although the global economic outlook is more optimistic since
the start of 2017, questions remain about the longer-term sustainability
of this growth.
Indeed, many observers argue, including here at UNCTAD, that the structural
problems laid bare by the Global Financial Crisis of 2007-08, remain
unresolved. Developing countries face multiple challenges in this
climate, including a net outflow of capital and low commodity prices.
Moreover, Ms Durant said, their recent integration into volatile financial
markets - with an associated higher risk exposure - means these external
shocks threaten the sustainability of these countries' recent borrowing,
and thus their ability to mobilise domestic resources for long-term
Indeed, improving developing countries' external debt sustainability
and preventing financial crises is a core concern of the Addis Ababa
Action Agenda. At the same time, multilateralism is under more strain
than at any point in the post-War period.
In this context, she said, it is all the more important that the Addis
Ababa Action Agenda orients development finance towards sustainable
and inclusive development objectives.
It recognizes the need for an ambitious and holistic approach to development
finance, "beyond business as usual".
To leave "business as usual" behind, the Addis Ababa Action
Agenda underlines the need to improve the quality and availability
of data, as well as methodological approaches on specific issues,
such as: illicit financial flows; and data on blended financing instruments
in relation to ODA (official development assistance), said Ms Durant.
"The urgency of combatting illicit financial flows, for example,
was recently underlined by the publication of the Paradise Papers,"
"We cannot tackle this issue of domestic resource mobilization
properly without addressing the systemic factors that allow illicit
financial flows to continue. Overall, it is clear that developing
countries and donors, individually or in smaller groups, will not
be able to meet the enormous financing requirements implied by the
"To mobilize resources on this scale, we will need a strong multilateral
system. This IGE is ideally placed to embed UNCTAD's intergovernmental
machinery in the financing for development process in the United Nations
system, thereby strengthening multilateral links and cooperation within
the UN system, on issues of development finance," she said.
She added that given UNCTAD's unique role in the UN development system,
as a Member State conference dedicated to development issues, the
IGE also presents an excellent opportunity to strengthen the voice
of developing countries in this process.
In his opening remarks, Richard Kozul-Wright said that the Monterrey
Consensus was a punchy document of less than 20 pages with a 2 page
introduction that "demanded" a new partnership between developed
and developing countries to deliver on agreed development goals.
The AAAA is over 60 pages, whose introduction alone runs to 10 pages
and is more or less content to operate within, what it calls, a revitalized
"It would, given the current troubles facing multilateralism,
be easy to offer a skeptical interpretation of this etymological evolution
but that would be unfair," he said.
There are strong grounds to assume that this reflects a recognition
of the seriousness of the inter-related challenges facing the international
community and a heightened ambition to tackle them.
As 2015 unfolded, it became increasingly clear that a series of discussions,
negotiations and choices at the multilateral level would have lasting
implications not only for the policy agenda of developing countries,
but for the future of the international system as a whole.
Negotiating processes on sovereign debt restructuring, quota reform
at the IMF, the Sustainable Development Goals (SDGs), financing for
development (FfD) and curbing rising global temperatures, all, in
one way or another, acknowledged that the growth model of the previous
three decades was unstable, unsustainable and unfair.
"Moreover, and unlike the FFD text adopted in Doha at the end
of 2008, there was no avoiding the consequences of the most damaging
economic crisis in 80 years on the financing challenge."
Recognising, at least implicitly, that the current growth model is
broken, the international community continues to search for a new
path, which would lead to more stable, sustainable and inclusive outcomes.
This suggests -- as recognised in the AAAA -- the need to go beyond
business as usual towards a holistic and transformative approach to
rebalancing existing economic and social structures, which can only
be accomplished if adequate and reliable financing is available to
undertake the required investments, in both the public and private
Preliminary estimates of the additional financing needs of developing
countries over the next decade or so vary, but there is broad agreement
that the figure, whether in the hundreds of billions or trillions
of dollars per year until 2030, greatly exceeds the current financing
options available to most of them, Kozul-Wright noted.
However, the challenge facing the international community goes beyond
the scaling up of resources. The pro- cyclical and speculative biases
of financial markets, the instability of unregulated capital flows
and the financialization of corporate governance have created an economic
environment which is systemically unequal, fragile and prone to damaging
"Talk of an enabling international environment which ignores
these features will not get us very far in getting finance back to
the business of supporting long-term productive investment, all the
more so as [a] stable monetary and financial system is a prerequisite
for making trade, technology and TNCs work for inclusive growth and
Behind this discussion, of course, is the frail legacy of the Bretton
Woods Conference. The principle objectives of that initiative were
to get war-torn economies back on their feet and design a post-war
international economic order that would prevent the recurrence of
the opportunistic actions and damaging contagion that had led to the
breakdown of international trade and finance in the 1930s and its
Building on the generosity of the Marshall Plan and with considerable
debt forgiveness, the institutional rules and arrangements established
at Bretton Woods helped to combine global macroeconomic stability
with sufficient space for national governments to manage a period
of unprecedented growth of output and international trade, often described
as a "golden age".
These arrangements eventually buckled under a series of distributional
pressures and economic shocks in the 1970s, giving way from the early
1980s to hyper-globalization.
This was, and is, characterized by an extensive deregulation of markets
-- particularly financial and currency markets -- in both advanced
and developing countries, the steady attrition of the public realm,
and the extension of the profit motive to all walks of economic life
Hyper-globalization has also been accompanied by a radical break in
the governance of the post-war international framework, whereby bodies
once designed to foster sovereignty are now recast to curtail it while
inter-governmental negotiations have been weakened, or side-lined,
by more informal cross-border governance arrangements built around
selective membership, corporate networks and public-private partnerships.
Under these developments, said Kozul-Wright, the co-dependence between
finance and the real economy and between the state and the market,
which characterized the successful growth models that emerged after
WWII, has given way to one in which unchecked financial markets and
mounting financial leverage drive the real economy.
This shift has led to a change of investment behaviour, which has
become tied to asset and credit cycles, and, at the firm level, to
the channelling of profits towards short-term financial investments.
Under these pressures, the mushrooming of mostly short-term cross-border
capital flows over the past two decades has done little to help return
capital formation worldwide to the levels of the 1970s, let alone
those envisaged in the 2030 Development Agenda.
For many developing countries, the international trade and finance
system that has evolved since the breakdown of the Bretton-Woods system
has not only broken with previous policy flexibilities, it has also
failed to provide sufficient financial resources to build productive
capacities in support of their long-term growth and structural transformation
Furthermore, it has heightened the magnitude of external shocks, including
from policy shifts in the developed world.
Kozul-Wright thanked the media for releasing the Paradise Papers in
a timely fashion for this meeting: illicit capital flows and tax avoidance
and evasion are a massive threat to meeting the SDGs, and not only
in developing countries.
The financial arrangements giving rise to weak demand, rising debt
levels and unruly capital flows are now weighing heavily on growth
prospects in the advanced economies.
With governments seeking to adjust to the debt overhang through austerity
measures, the threat from deflationary pressures has so far been contained
thanks to unprecedented monetary action but without generating inclusive
recoveries; and there is growing concern that an entire decade, or
longer, may be lost to secular stagnation.
At the same time, the highly favourable external environment for developing
countries that emerged after the dot com crisis has clearly shifted.
Reversals of capital flows, a precipitous drop in commodity prices,
unfavourable movements in exchange rates are taking place against
a backdrop of insufficient global demand that has halted the growth
of international trade and dampened growth prospects, with a number
of emerging economies having already experienced recession.
"The idea that these economies had decoupled from developments
in the advanced economies was never a persuasive thesis. It should
now be clear that policy makers everywhere must operate in an interdependent
and unbalanced global economy, and if storm clouds gather we will
sink or swim together."
Kozul-Wright pointed out that this does not, however, mean returning
to the earlier Bretton Woods system, even if this were possible.
The post-war global deal was never completed in areas of particular
interest to developing countries, and the flexibilities allowed to
countries were often established on an ad hoc basis rather than as
a formal part of the rules themselves.
Developing countries have consistently called not only for greater
and more predictable multilateral resources to support their development
efforts, but for more flexibility to tailor policies to local needs
and conditions, and for greater coherence and coordination across
the overlapping international trade, financial and production systems.
"Building these aims into the multilateral architecture was,
and remains, an essential motivation behind the FFD initiative."
Reform is not only in the interest of developing countries. The financial
crisis has made it clear that the advanced countries also need policy
space to manage changing circumstances, and that they can no longer
guarantee a stable global economy or deal with new and inter-related
threats to future prosperity by themselves.
Moreover, if they are to avoid damaging deflationary adjustments,
return to robust growth, and ensure that the international trading
system remains open, they also have a direct interest in strengthening
international coordination and support, and in an inclusive manner.
It is therefore imperative for international measures to be designed
in such a way that they complement or strengthen state capacities
to deliver on national objectives and meet the needs of their constituencies,
If reforms to the existing multilateral architecture are to be credible
and effective, they must provide for much greater collective influence
from developing countries and embody a much stronger sense of cooperation
among all countries.
This will require a willingness to examine rebalancing challenges
from a more integrated perspective. It will also require careful examination
of the structure of representation in the existing multilateral trade
and financial institutions and their decision-making practices.
This is where UNCTAD has tried to make a difference over the years.
Already in the Final Act that founded UNCTAD back in 1964 and established
its mandate, the challenge of financing development was identified
as the basis for continuing reviews and action (para 48) with specific
reference made to the terms and conditions of aid, external debt problems,
increasing the flow of financial resources to developing countries,
compensatory finance and supplementary financial measures, said Kozul-Wright.
"All these issues have been part of UNCTAD's work since then
and new issues within this mandate have been addressed as the financing
challenge has evolved with UNCTAD often being ahead of the curve."
The Chair of the IGE then made a presentation on behalf of his country
El Salvador, and this was followed by statements by the G77 and China,
the Arab Group and the African Group.
In its statement, Tanzania, on behalf of the G77 and China, said the
establishment of the intergovernmental group of experts was one of
the most important outcomes of UNCTAD-XIV which better places the
organization in the context of the 2030 Agenda and the Financing for
Development process, as well as helps to revitalize the intergovernmental
In this context, it believes that the IGE is a way to strengthen the
links between Geneva and New York and "we expect it to become
a regular input that UNCTAD can present to the ECOSOC forum on financing
for development follow-up."
UNCTAD's specific strength lies in its role as the UN focal point
for the integrated treatment of trade and development and inter-related
issues in finance, investment, technology, investment and sustainable
development, and in its long-standing experience in promoting such
an integrated perspective on development issues, including development
"We believe that this IGE is a unique opportunity to bring this
expertise and perspective to bear on the many challenges developing
countries and the international community face in mobilising national,
international, public and private resources to promote developmental
transformation effectively, fairly and inclusively, in particular
in the context of a difficult global economic environment and deficient
global economic governance structures," said the G77 and China.
Illicit financial flows are complex matters that requires cooperation
among different agencies at the domestic level and among different
actors at international level, it said, adding that it would also
like to highlight and support UNCTAD's work with UNODC (UN Office
on Drugs and Crime) and other organisations to develop the methodology
to produce a transparent, comprehensive and reliable estimate of illicit
"With regards to taxation in general, we note that modernized,
improved and progressive tax and collection systems are key to mobilize
domestic resources. We also note that substantial improvements in
developing countries might need to take into account spillover effects
between national taxation systems and the global reach of the activities
of some economic actors, such as multinational enterprises."
With regards to official development assistance (ODA), Tanzania urged
donors to fulfill their respective ODA commitments, including the
commitment by many developed countries to achieve the target of 0.7
per cent of ODA/GNI and 0.15 to 0.20 per cent of ODA/GNI to LDCs.
With regards to development banks, said Tanzania, their role in the
promotion of sustainable development should be emphasized. They are
able to operate in credit market segments in which commercial banks
are not fully engaged, thus overcoming market failures.
They also play a key role in providing countercyclical lending. This
is particularly important to supporting macroeconomic stability in
developing countries, which are more exposed to pro-cyclical exogenous
shocks, dynamics and vulnerabilities, it said.
Furthermore, increases in the capital base of multilateral development
banks should be considered as a way to improve their important contribution
to financing and implementing sustainable development, said the G77
Egypt, on behalf of the Arab Group, said that holding this IGE session
is the first step towards implementing the agreement reached by member
states at UNCTAD-14.
This consensus was embodied in the Maafikiano document adopted at
the conference, and which came up with a vision for the work of UNCTAD
and a road map for its action over the next four years.
The IGE meeting today (8 November), in the Arab Group's view, embodies
a basic tool for UNCTAD to realise its development mandate through
its intergovernmental bodies. These mechanisms are multilateral frameworks
that allow experts from various development fields to share opinions
and ideas and present valuable studies that allow UNCTAD and member
states to be enriched with technical advice that will contribute to
planning and adopting strategies for inclusive national development.
The Arab Group said it is convinced that the mandate of this group
of experts is particularly important in the current stage where UNCTAD
is to play a pivotal role in implementing the major developmental
This watershed period requires that UNCTAD itself mobilises its financial,
technical and human resources in order to look into the ways and means
to have the necessary resources to implement these development instruments
especially in a concrete manner in various countries, said the Arab
This cannot be done without a consultative forum that brings together
the best development specialists so that they contribute with their
ideas and visions to have the optimal resources and means and most
effective methods to mobilise resources for development, it added.
It also welcomed the programme of this expert group. Indeed, it is
varied and covers the most important aspects on financing for development,
including illicit financial flows channelled abroad illegally from
developing countries, ways of reforming domestic tax systems, international
cooperation in fiscal policies, ways and means to develop ODA and
It is the Arab Group's belief that these issues need to be addressed
equally and holistically if we are to address the question of financing
for development in a way that is comprehensive and objective covering
all resources and in a manner that aims at mobilising all these resources
without exception to devote them for a single noble objective and
that is inclusive national development.
Sudan, on behalf of the African Group comprising 54 countries, associated
itself with the statement of Tanzania on behalf of the G77 and China.
It said that it is pleased that the IGE on financing for development
is commencing its first meeting according to the mandate given by
the Nairobi Maafikiano.
The African Group was of the view that this meeting should focus on
challenges facing developing countries and the international community
with regard to the mobilisation of international public finance for
sustainable development and international development cooperation.
The African Group believes that the expert meeting should examine
ways of ensuring the transparency of new frameworks and clear and
separate accounting of long-term costs and benefits of different types
of financial flows and financing instruments for sustainable development,
as well as their true development impacts.
Moreover, said the African Group, the meeting should address the AAAA
with a view to developing policy recommendations and how best to enhance
the mobilisation of domestic public resources in developing countries
and to maximise the contribution of international development cooperation
to sustainable development, transformation and to the achievement
of the SDGs.