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February 2015

ON THE ROAD TO ADDIS ABABA

The third Financing for Development summit starts with disagreement about the agenda.

By Roberto Bissio

            In the last week of January, diplomats in New York started the discussions about the third UN Conference on Financing for Development (FfD) to be held at summit level in July 2015 in Addis Ababa, Ethiopia.

            The FfD summit is to review and follow-up on previous conferences with the same title held in Monterrey (2002) and Doha (2009) and it has been additionally mandated with the task of outlining the means of implementation for the ambitious Sustainable Development Goals that are at the basis of the new agenda of the United Nations.

            To guide the discussions, the co-chairs of the conference, Ambassadors George Wilfred Talbot (Guyana) and Geir O. Pedersen (Norway) distributed a paper outlining “elements” to be included in the debates. The “elements” cover a variety of issues and many far-reaching proposals, ranging for increased tax coordination to a revision of bilateral investment agreements. But the “elements” were structured under different categories from those of the preceding FfD conferences (see box).

            This “repackaging” was rejected by the Group of 77 and China (G77) and by many speakers from civil society organizations. The reviewing of the previous conferences, they argued, would be very difficult if the chapters follow a different logic.

                        “We cannot credibly look into the future without acknowledging the unfinished agenda” of the previous FfD conferences and the many unmet commitments by developed countries, argued a civil society representative.

            The “elements” paper has a chapter on “sovereign debt” and many Southern voices emphasized that the Addis Ababa conference should strongly support the creation of a legitimate and fair mechanism to renegotiate sovereign debts. But we should not forget that the sovereign debt of today, particularly in developed countries that are highly indebted, is the results of bail-outs that covered the irresponsible indebtedness of the private sector. Thus, the Monterrey and Doha notion (and chapter title) of “External debt” (including both public and private debts) is much more appropriate to the analysis of vulnerabilities and policies to addess them.

            Similarly, while the “elements” on tax collaboration and the need to fight illegal and illicit financial flows were welcomed by many, the analysis of domestic resources should not be limited to “public resources” as the Elements document wants. The contribution of women to the care economy, as well as the contributions of small and medium enterprises and the informal sectors are domestic non-public resources that should not be ignored. And they are not properly dealt with in the chapter of “domestic and international private finance” that implies the corporate sector.

            Domestic and foreign private resources are different. Foreign direct investment can contribute to development but it also creates liabilities that may affect balance of payments and should not be packed together with domestic capital.

            In the “elements”, the Global Partnership for Development does not find an adequate space and key issues introduced by the Sustainable Development Goals, such as inequalities and sustainable consumption and production patterns should also be incorporated.

            After the 2008 global financial and economic crisis, the stimulus packages were stopped too early in most developed countries, as a consequence to wrong growth predictions. Austerity is creating unnecessary sufferings around the world, including the erosion of social policies and high unemployment.

            One of the consequences of excessive austerity policies is stagnation and deflation. As a result, interest rates have dropped to zero in many developed countries and thus we have huge funds looking for higher interest rates. Addis Ababa should not be about reducing the risk of these corporate financial investors with public monies. These risk-sharing mechanisms have been called PPPs (Public-Private Partnerships), “blended finances” or “leveraging ODA” but all those modalities basically entail a moral hazard where the costs end up socialized and the benefits privatized. Instead, Addis Ababa should be about strengthening a “development state” that is able to regulate finances in order to fulfill its human rights obligations, including the right to development. – Third World Network Features.

Changing the package, altering the content

The Monterrey and Doha FfD structure:

The new suggested structure:

1. mobilization of domestic resources
2. mobilization of international private flows
3. international trade
4. international financial and technical cooperation
5. external debt
6. systemic issues (including reform of the global financial and monetary system and global economic governance)
7. Other new challenges and emerging issues
8. Staying engaged

A. Domestic public finance
B. Domestic and international private finance
C. International public finance
D. Trade
E. Technology, innovation and capacity building
F. Sovereign debt
G. Systemic issues

H. Monitoring, Data and Follow-up

-ends-

About the author: Roberto Bissio is Coordinator of Social Watch and Executive Director of the Instituto del Tercer. Mundo (Third World Institute).

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