TWN
Info Service on Finance and Development (Apr15/07)
30 April 2015
Third World Network
#5
29 April 2015
The Struggle to Shape the Agenda
By Barbara Adams, Gretchen Luchsinger
It is not surprising that the political battles have already become
fierce in the concurrent negotiations for the Third International
Conference on Financing for Development (FfD3) and the post-2015 development
agenda with its Sustainable Development Goals (SDGs). At stake is
who will shape the agenda—and how much real impact it will have.
What is the direction of the “transformation” that is now so frequently
discussed in both talks? Are we headed towards a world of multistakeholder
partnerships and the increasing outsourcing of public functions to
private control, where those in positions of privilege can maintain
their entitlements, at least until we fully breach planetary boundaries?
Or towards a world where we make decisions based foremost on the welfare
of the majority of people and the planet? Where we embrace the distinction
between primary duty bearers (governments) and rights holders (all
people without exception), and where we recognize that some actors
have more capacities and therefore responsibilities than others? And
where patterns of consumption and production are rebalanced so that
development reaches everyone and respects planetary boundaries, now
and over the longer term?
One interesting indication of the potential power of the post-2015
agenda is that actors like the multilateral development banks (MDBs)
are fighting hard to position themselves at the centre. Is that about
keeping on top of the trillions that they recently estimated would
be required to achieve the agenda? Or, digging a little deeper, about
fears of eventual irrelevance, since the agenda’s sustainable development
narrative—if taken seriously—diverges so thoroughly from the one pushed
by the MDBs for many years? If sustainable, inclusive development
is what we mean when we talk about a transformative agenda, who should
really be implementing it?
Who wants what?
The FfD3 session in mid-April talked about transformation, but that
was not very apparent in early political moves. Rich countries regularly
affirmed the importance of channeling more ODA to the least development
countries—despite a declining trend in some regions in recent years.
Were they motivated by the principle of tackling exclusion, or by
a hard political calculation that this would split off a major chunk
of the G77 bloc? And who could really blame the LDCs for responding
in kind with a steady stream of specific demands, since their challenges
are so stark on so many fronts and their options are so few.
Some of the BRICS countries have systematically pushed a progressive
take on both FfD3 and post-2015. But they have other fields of play—like
the G20. Less clear is what all of this might mean for the many smaller
and mid-size middle-income developing countries, who regularly call
attention to their set of issues, but who are looking at a future
that will probably be squeezed by a falling ODA share on one hand,
and on another, limited traction on many issues, from trade to illicit
financial flows to debt burdens, critical to continued development—much
less a version that is sustainable and inclusive. One civil society
advocate pointed out that unless you believe the “fairy tale” of the
0.7 ODA commitment—promised for so many years and never met—so far,
there is very little for developing countries in the FfD3 zero draft
outcome document.
Meanwhile, behind the scenes, some rich countries were hard at work
curbing challenges to political and economic configurations that mostly
benefit them. Their activities are taking place partly through the
FfD3 and post-2015 negotiations, but also through proxies such as
the international financial institutions (IFIs). In some developing
countries, finance ministries, having heard from IFI counterparts,
are reportedly questioning foreign ministries on issues like whether
or not the post-2015 agenda has too many goals, and why the whole
enterprise can’t be boiled down to a streamlined emphasis on poverty
eradication and shared prosperity.
This may miss the point made by a civil society advocate at the FfD3
civil society hearings that unless development models change significantly
to start with people and the planet instead of profits, prosperity
will continue to drive poverty. At a joint session on FfD3 and post-2015,
one of the post-2015 co-facilitators expressed astonishment that the
G20 recently committed to 1,000 structural reform actions in two years.
He suggested that in comparison, 17 goals and 169 targets over 15
years seemed quite doable, and if not, something is “clearly wrong.”
He hoped not to hear about the number of goals and targets again.
Who’s
in the agenda?
Following the April FfD3 talks, the zero draft of the outcome document
is now under review. It is revealing to look at who features most
prominently in it so far, and to wonder if this foretells what’s ahead.
Who is singled out in its second section, on mobilizing the means
to implement the post-2015 agenda? While governments are presumably
there in the background as the architects of the agreement, and the
“inviters” for others to “join us,” the first specifically mentioned
actors are global funds, philanthropists, foundations and the private
sector. These are followed by a reference to national and multilateral
development banks. And then the business sector appears again as a
critical driver of sustainable development. Governments (along with
households and businesses, again) only appear in the second to last
paragraph, in a reference to changing behaviours to achieve sustainable
consumption and production patterns.
In the following section on domestic public finance, actors highlighted
include the Extractive Industries Transparency Initiative (linking
back to the World Bank), the Global Forum on Transparency and Exchange
of Information for Tax Purposes (OECD), the OECD proper, the G20,
the IMF, the World Bank, the Financial Stability Board (G20), and
the Open Government Partnership (around 65 countries). Among references
to the United Nations system, the most universal and democratic of
all multilateral organizations, several are in conjunction with the
World Bank and IMF.
The international public finance section features the Leading Group
on Innovative Financing for Development (involving the OECD and MDBs,
among others), multiple references to the MDBs and IFIs, and the World
Bank’s Multilateral Investment Guarantee Agency. It devotes several
paragraphs to the so-called vertical or single-issue funds, several
of which link back to the World Bank or to private philanthropies
such as the Gates Foundation, as well as a few tied to the UN or regional
bodies.
And who weighs in on systemic issues? The IMF, the World Bank, the
Financial Stability Board and the Basel Committee on Banking Supervision,
with a nod to the ILO conventions for migrant workers, and to “UN
forums” for international sustainable development commitments.
MDB angling—for relevance?
The dominance of the multilateral development banks in the FfD3 zero
draft is not surprising—at least from the perspective of the current
power configuration, if not so much from the perspectives of global
democracy and sustainable, inclusive development.
To position themselves in the FfD3 and post-2015 processes, the World
Bank, all the big regional development banks and the IMF have come
together on a joint statement on post-2015 financing for development.
It sets forward the idea that financing the new agenda requires a
shift from billions to trillions of dollars. The exercise suggests
a couple of dimensions that may be a divergence from the past. Are
the banks and their backers realizing that the bill has come due and
needs to gradually be sold to electorates—as in, we really have come
to a crisis point that really is going to cost a lot to fix? And/or:
are the IFIs circling the wagons, as it were, because they feel their
dominant position is at risk?
In the past, for example, the World Bank viewed its regional counterparts
as somewhat distant cousins, easily overlooked outside Washington.
But now on the horizon are recent moves by China and other big developing
countries—and some rich countries as well—to create new multilateral
development banks. This follows ongoing discontent with the old banks’
undemocratic governance structures, plus policy advice that in many
cases would not be taken seriously without the money that comes with
it. After years of advising market competition, are the traditional
lenders finally worried about facing it themselves?
It seems the adjustment may take some time. The World Bank, at an
April session with delegates to both the FfD3 and post-2015 processes,
went on at length about how it is trying to be more responsive to
country concerns, while also emphasizing that the MDBs have doubled
investment to the private sector—which is not the primary concern
in many countries. It also clearly outlined how the banks would be
reporting on contributions to FfD3 and post-2015 through their individual
governance structures, and not through any combined forum at the UN,
even though those provide an equal voice for governments, and offer
a greater chance of ensuring all policies and resources are fully
consistent with the SDGs.
Further, much of the IMF and World Bank emphasis is on the money side
of financing. What about how the “trillions” will be spent? Priorities
of the IFIs, outlined in a recent press release, include strengthening
domestic financial markets and deepening financial inclusion—but with
no reference to sustainability.
Vertigo from vertical
If governments endorsed the FfD3 zero draft tomorrow, proponents of
the vertical funds would be pleased, given substantial space devoted
to these on issues such as environment, health, education and food
security. The funds were originally conceived as opportunities to
fill funding gaps and devote focused attention to major issues. Yet
they have led to a profusion of institutions and funding streams.
In some cases, they operate on top of existing bodies, as when UN
development agencies are used essentially to execute projects—and
that in itself is in addition to whatever may already exist in a given
country. If sustainable development is about integrating all dimensions
of development, recognizing how interdependent they are, single-issue
funds go in the opposite direction.
There are questions about how accountable they are to countries, since
many draw from private finance, do not operate under a multilateral
governance framework and are not bound by international norms. There
have been consistent country reports of misalignment with national
priorities. Poor countries, in particular, feel pressured to take
the funds, even for programmes that may not be most relevant to them.
Health has been an area where the single-issue funds have claimed
many achievements. And yet a telling moment came at the FfD3 civil
society hearings in mid-April when an advocate from West Africa described
Ebola as a failure of the global economic system. His point was that
poor West Africa countries cannot establish the comprehensive health
systems they need because they do not have the capacities or opportunities
to develop fully functioning economies that provide sufficient resources
for health care. Delivering a lot of vaccines or building
some hospitals or mobilizing people around a certain disease—as some
vertical funds do—only fills some gaps, for a while. It falls far
short of upholding the right to health, which depends on access, for
everyone, at any given point in time, to all treatments, all medicines,
all medical skills and facilities, and so on.
Calls in some quarters for assigning a vertical fund to each of the
Sustainable Development Goals suggest an odd direction—universality
via fragmentation?
Outsourcing to businesses
The private sector is so dominant in the FfD3 zero draft that some
government representatives have referred to FfD3 being “outsourced”
to businesses. What drives that emphasis? Is it about rich countries,
in the wake of the global economic crisis, wanting to reduce expectations
from their public purses? Is it about large businesses controlling
governments, through electoral finance and lobbying, and hoping to
tilt regulatory arrangements ever more in their favour? Is it the
old assumption, unproven by consistent evidence, that compared to
the public sector, business is more effective, efficient, innovative,
responsive (as long as there is money to be made), etc.?
The section on private business and finance “acknowledges the role
of private business activity, investment and innovation as major drivers
of increased productivity, job creation, and economic growth, which
provide people with the opportunity to overcome poverty and inequality.”
Today’s unprecedented levels of private business activity, however,
have run parallel to widening inequality around the world and the
destruction of environmental resources.
The current business model is not built on the principles of sustainability
and inclusion. It mostly does not operate within a social contract
grounded in human rights. The zero draft’s references to social and
environmental responsibility principles and to businesses assuming
costs for externalities such as pollution will only go so far—likely
not as far as the SDGs. For many businesses, the rewards of ignoring
principles outside those related to profit, even in the face of regulation,
are still very great.
Large business in particular are quite skillful in presenting a public
image of progress that often fails to translate very far into actual
practice, as has been obvious from the UN’s Global Compact, “welcomed”
by the zero draft. And then there is the draft’s reference to working
with international accounting standard-setting bodies to devise sustainable
development accounting principles. This almost certainly refers to
the International Accounting Standards Board, which is based in the
US state of Delaware, a well-known corporate “secrecy” jurisdiction.
Among other measures geared heavily to business interests, the board
has rejected country-by-country reporting by transnational corporations,
despite the obvious contributions this would make to fighting corruption
and tax evasion.
Every section of the zero draft has at least one mention (often many)
to engagement with the private sector: from unlocking the transformative
potential of business, to upping private investment in agriculture,
to encouraging new platforms for private infrastructure investment,
to catalysing private investment with ODA, to increasing private climate
finance, to involving businesses in FfD3 follow-up and monitoring.
This level of “partnership” verges in the direction of giving states
and businesses some level of equivalency in the quest for sustainable,
inclusive development. Yet states remain the primary duty bearers—they
are responsible for the rights of their citizens, and they will be
the ones signing off on both FfD3 and post-2015, not to mention the
numerous intergovernmental agreements that have come before them.
Instead of talking about the private sector as a partner at this stage,
maybe the real issue is determining what specific steps are required
to align every aspect of business and financial sector operations,
from the choice to locate a manufacturing plant to a stock trade,
with achieving the SDGs.
A Few Good Ideas
Transformative, ambitious, universal—these notions, which began in
post-2015, have started to filter into FfD3, setting a much higher
bar than might otherwise be there. Now the challenge is to take them
seriously enough to make them mean something.
Also raising the bar at the FfD3 April negotiations was a representative
from the Office of the High Commissioner for Human Rights, who at
session after session reminded delegates that the process must be
grounded in universal principles that transcend narrow interests,
national or otherwise. If we talk about an enabling environment for
business, what about an enabling environment for states to uphold
people rights? For people to claim those rights?
Another positive development was how delegates at the April joint
session on FfD3 and post-2015 hung on to the idea of a technology
facilitation mechanism by a thread, in the face of strong opposition
by at least one powerful country. Interest in the mechanism came from
all regions. After years of little progress in this area, it’s a baby
step—but still movement forward.
Finally, among the IFIs, IMF positions suggest a new level of rethinking
and nuance. Given past history, it is almost astonishing to hear the
IMF refer to post-2015 as a central institutional priority, as its
representative did at the joint session. And then to discuss how financial
markets are key to development, but so is regulation. Or that foreign
capital is not a panacea and needs to be well used. Or that we should
no longer take for granted that it is “natural” for markets to move
up and down at will. Or that international tax cooperation is key
so that developing countries get what they are entitled to. Now of
course the issue is to act consistently in line with these ideas—to
be a genuine partner committed foremost to sustainable, inclusive
development that reaches the entire world.
What’s Not on the Agenda?
Even before the political debate around FfD3 began gathering steam,
the MDBs had come together around a common agenda that goes something
like this: the needs for financing are huge (trillions), the public
sector will never have enough to meet these needs, therefore, we have
to tap all available resources (private). The mantra has become: public,
private, domestic and international.
Yet the notion that the public sector simply doesn’t have enough money
may deserve more scrutiny. Is this about reality, or anti-government
rhetoric? First, it may apply mostly to those countries struggling
with severe underdevelopment or structural constraints. For other
states, and particularly the richer ones, the public sector could
have a lot more funding through progressive taxation, tax cooperation
and curbs on illicit financial flows—plus, for many developing countries,
enhanced domestic capacities to manage economies in line with sustainable
and inclusive development. Tax dodging costs the European Union alone
around 1 trillion euros a year—a potentially big contribution to the
IFI estimate for post-2015 costs. And then there is how existing funds
are spent—in 2013, the defence budget of the 10 highest ranked spenders
globally reached $1.1 trillion.
Second, the public sector in some countries already has a history
of coming up with large sums when it has to. Within weeks of the 2008
financial crisis, the United States had committed $700 billion to
bail out troubled companies. China injected $600 billion in fiscal
stimulus and called on banks to boost their lending rates, to the
point where by 2009 it faced pressures from inflation.
Globally, state-owned financial institutions account for 25 percent
of total banking assets; they include development banks mandated to
provide services otherwise not commercially available. Nearly 40 percent
of these banks have been established in the last two decades—despite
pervasive advocacy for neoliberalism—and as of the end of 2009, they
had $2 trillion in assets. The China Development Bank and Brazil Development
Bank both have assets greater than the World Bank Group.
Asia and the Pacific as a region has over $7 trillion in foreign
exchange reserves, and around $3 trillion in sovereign wealth funds,
with some questions over why a greater portion of these have not been
channeled more systematically towards development. One answer: They
serve as a buffer against the vicissitudes of an under-regulated,
crisis-prone global economy.
Unpacking a Word…
Enabling environment used to mean the international environment enabling
poorer countries to develop their domestic economies through trade,
debt relief and so on. That is how the phrase is first applied in
the FfD3 zero draft. But then it moves on to new uses, most of which
apply to the domestic realm. Such as an enabling environment for infrastructure
investment. For private investment. For fiscal policy. For tax collection.
Given the interconnectedness of the global economy, on highly unfair
terms for many countries, how enabling can the domestic environment
be without an equally—or more than equally, through the lens of common
but differentiated responsibility—international environment?
What does it mean to have an enabling environment for fiscal policy
if countries are weighed down by debts, forced to offer tax breaks
to transnational corporations, and cornered into low-value commodity
exports? Does private investment really need to be enabled? Unless
that means enabled, by regulation, to contribute to sustainable, inclusive
development…
What’s Happening Next
Post–2015 negotiations
- 18–22
May: Follow–up and review; revised targets
- 22–25
June: Intergovernmental negotiations on the outcome document
- 6-8
July High-level Political Forum, "Strengthening integration,
implementation and review-the HLPF after 2015"
- 6-10
July ECOSOC High-level Segment, "Managing the transition from
the Millennium Development Goals to the sustainable development
goals: What will it take?"
- 20–24
July, 27–31 July: Intergovernmental negotiations on the outcome
document
- 25–27
September: UN Summit: Delivering on and Implementing a Transformative
Post–2015 Development Agenda
FfD3
negotiations
- 11-15
May: Intergovernmental negotiations on the outcome document
- 26-29
May: Intergovernmental negotiations on the outcome document
- 1-5
June: Intergovernmental negotiations on the outcome document
- 15–19
June: Intergovernmental negotiations on the outcome document
- 13–16
July: 3rd Conference on Financing for Development
To
Find Out More
UN
Sustainable Development Knowledge Platform
Proposals
for the SDGs
Financing
for Development III: official website
Statistics
Commission
Are
FfD3 and Post-2015 Striking the Right Public-Private Balance?
Universality
as Human Rights in the Financing for Development Agenda
From
Billions to Trillions-Transforming Development Financing (briefing)
From
Billions to Trillions-Transforming Development finance (paper)
OHCHR
Key messages on Human Rights and Financing for Development
www.globalpolicywatch.org
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