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Info Service on UN Sustainable Development (Nov13/02) New York, 12 November (Lamia Bazir) – The UN General Assembly held its Sixth High-Level Dialogue on Financing for Development on 7-8 October 2013. Following the General Assembly resolution 67/300, the Sixth High Level dialogue was organized on the theme “The Monterrey Consensus, Doha Declaration on Financing for Development and related outcomes of major UN conferences and summits: status of implementation and tasks ahead.” This High-Level Dialogue on Financing for Development was a two-day event that included a series of plenary meetings chaired by Mr. John Ashe, current President of the General Assembly, three interactive multi-stakeholder round tables, and an informal interactive dialogue with the participation of relevant stakeholders. Opening Statement During his initial statement, Mr. Ashe emphasized the link between financing for development and the achievement of the Millennium Development Goals (MDGs) and the advancement of the UN development agenda post-2015. He affirmed that the foremost challenge in the coming months is to advance in the achievement of these internationally agreed development goals. Therefore, he declared the importance of focusing on the goals that are most off-track and on the countries facing particular development challenges, mainly the least developed countries, landlocked developing countries, small islands developing states and countries affected by or recovering from conflicts or disasters. He also stressed that financing is the driver of the MDGs. Therefore, he considered that this high level dialogue's focus on financing is essential as the 2015 target date is getting closer and the post-2015 Development Agenda is being prepared for. Mr. Ashe called for countries to mobilize domestic resources to face development challenges but he also emphasized the necessary role of donor countries. It is crucial that these countries stick to their Official Development Assistance (ODA) commitments. Furthermore, a successful implementation of these financial commitments requires a comprehensive and coherent financing strategy and should be grounded in international agreements, namely the Monterrey Consensus and the Doha Declaration on Financing for Development. Finally, this year the General Assembly will hopefully advance and conclude its review of the follow up and implementation of the 2012 International Conference on Financing for development. On the same token, the Group of 77 developing countries (G77) called for a follow up UN international conference on financing for Development. Statement of G77 and China Ambassador Peter Thompson, Permanent Representative of Fiji to the United Nations and Chair of the G77 delivered a statement on behalf of G77 and China. The Group recalled the Doha Declaration on Financing for Development and the General Assembly resolution 67/199 decision to hold an informal consultation with a view to taking a final decision on the need for a follow-up financing for development conference by 2013. With less than three months to go before the end of 2013, the Group urged the General Assembly President to appoint co-facilitators before the end of the year and to hold open, inclusive and direct intergovernmental consultations, with the participation of all State Members, on all issues related to the conference.
On the modalities of financing for development and arrangements to strengthen the follow-up process, the Group reiterated its call for the establishment of an appropriate follow-up mechanism within the United Nations system, a Financing for Development Commission subsidiary body of the Economic and Social Council, to bridge the gap between policy making and implementation of commitments, as well as to ensure the necessary support for the implementation of the internationally agreed development goals. The Group welcomed the decision of the General Assembly to convene at the current session a separate meeting of the Second Committee under the item entitled "macroeconomic policy questions" to discuss actions in response to the world financial and economic crisis and its impact on development, as a further contribution to the follow-up to the Conference on the World Financial and Economic Crisis and its Impact on Development. Given the importance of this agenda item for developing countries, the Group will submit four resolutions relating to international trade and development, international financial system and development, external debt sustainability and development, and commodities, in the upcoming Second Committee session. The Group also reiterated that the global financial and economic crisis cannot be a convenient justification for developed partners to avoid fulfilling existing international financial and technical cooperation for development. It is ironic that Official Development Assistance (ODA) continues to decline as our leaders reaffirmed their commitment recently at the Special Event on MDGs to accelerate progress towards achieving the MDGs by the 2015 deadline and look towards elaborating a bold post-2015 development agenda, with poverty eradication and sustainability as its core. While ODA alone is insufficient to meet the full sustainable development needs of developing countries, it remains crucial for countries without sufficient resources to fulfill development goals. An enhanced predictable and sustainable flow of ODA is essential to meet the regular development challenges as well as new and emerging challenges in developing countries, in particular in Least Developed Countries (LDCs). In this respect, the Group expressed its deep concern that for the second time, ODA fell for two consecutive years, and that developed countries, with a few exceptions, are still far from achieving the longstanding goal of mobilizing 0.7% of GNP as ODA to developing countries, including the target of 0.15-0.20 per cent of GNP to the LDCs. Moreover, given the urgency and seriousness of climate change, the operationalisation and capitalization of the Green Climate Fund by early 2014 has to be prioritised and scaled up to reach US$ 100 billion per year by 2020, said Thompson. In the context of sustainable development, the Fund will play a key role in channelling new, additional, adequate and predictable financial resources to developing countries and will catalyse climate finance, both public and private, and at the international and national levels. While recognising that the innovative mechanism of financing can make a positive contribution in assisting developing countries to mobilize additional resources for development on a stable, predictable and voluntary basis, the G77 also reiterated that such financing should neither substitute nor negatively affect the level of traditional sources of development financing, including ODA. It believed that there has been a considerable progress in innovative sources of financing for development, though it is important to scale up present initiatives and develop new mechanisms, as appropriate. Priorities should remain focused, namely, on providing additional, stable and supplementary resources to traditional development financing, particularly in favor of developing countries. Referring to the Monterrey Consensus and the Doha Declaration that also stress the importance of remittance for development, the Group supports the Secretary-General Report's call for source and destination countries to collaborate with a view to reducing the transaction costs of remittances, and where possible, relax legal and funding barriers to remittances and other financial flows by migrants. The G77 further stressed that the debt crisis is costly and disruptive and is often followed by cuts in public spending, adversely affecting developing countries. There is no path to growth and no achievement in poverty eradication with unsustainable debt overhang. Debt relief and sovereign debt management are therefore crucial issues for developing countries. In this regard, the Group reiterated its call for the international community to urgently examine options for an effective, equitable, durable, independent and development-friendly debt restructuring and international debt resolution mechanism. The Group views international trade as an engine for development, emphasizing that a fair multilateral trading system is essential to ensure sustained growth in global trade and create new market access and opportunities for developing countries. It said that the Ninth Ministerial Conference of the World Trade Organisation, scheduled to take place in Bali in December 2013 should fully respect the WTO's development mandate and take into account the needs and priorities of developing countries. Lastly, the G77 underscored the importance of having a favourable and enabling international environment to complement developing countries' national efforts in eradicating poverty and advancing their level of development. Systemic shortcomings of international monetary, financial and economic institutions must be addressed through serious reforms. A more inclusive framework of global economic governance is required to improve the functioning, stability and resilience of these institutions. This requires a strengthened role and increased effectiveness of the United Nations, including high-level engagements with all relevant international and regional financial institutions and other relevant stakeholders. Roundtables Representatives of Member States, civil society organisations (CSOs) and the private sector participated in round tables and delivered statements on effective financing for the promotion of development. Round Table 1 was on 'The impact of the world financial and economic crisis on the reform of the international monetary and financial system and its implications for development”. This round table addressed the vulnerabilities of the international financial system, five years after the global financial and economic crisis. Indeed, the sovereign debt crisis in Europe has led to heightened risk aversion and affected developing economies. Even if the prospects for 2014 seem to have slightly improved, there remain a number of risks for the global economy. The unconventional monetary measures adopted in developed countries have generated spillover effects on emerging economies; thereby, further weakening their growth. In addition, there is a risk that an early “unwind” of these measures affect the recovery in some developed countries and provokes more volatility in major exchange rates, commodity prices, and capital inflows in developing countries. The panelists addressed two major themes: • International
capital flows and global imbalances The panelists also mentioned the improvement of global imbalances in current accounts between major countries in 2013. This is mainly due to subdued aggregate demand. There is still a need for major policy efforts to address global imbalances. Hence, the G20 pledged to undertake tailored policy actions despite the existence of structural issues. • Financial
market regulation Furthermore, there are concerns that tighter bank regulations (related to the complexity of Basel III) might generate a new wave of regulatory arbitrage with a potential spillover effect from the regulated banking sector and consequent dilution of regulation. Consequently, higher capital will shift from the regulated banking system to shadow banking practices. The value of shadow banking has increased from $26 trillion in 2002 to $67 trillion (24% of total assets). Therefore, the FSB recommendations focus on regulated banks' interactions with shadow banking entities as well as entities with shadow components. In addition, the participants referred to the access to finance and financial services as an other critical issue. Measures need to be adopted to encourage and ensure access – particularly to SMEs, long term finance, and other areas necessary for sustainable development. Other regulatory initiatives under discussion include uniform global accounting standards, establishment of macro-prudential regulatory frameworks and countercyclical buffers. However, participants consider these steps as insufficient. They raised the problems related to the translation of international agreements at the national levels. They also called for greater participation and representation of developing countries in the regulation process and in international financial regulatory bodies such as the Bank for International Settlements, the Basel Committee and the FSB; limited to advanced economies and some emerging countries. Round Table 2 was on “Mobilization of public and private financing, including foreign direct investment and other private flows, and fostering international trade and sustainable debt financing, in the context of financing for development.” This round table was chaired by Jeremiah Nyamane Kingsley Mamabolo, the Permanent Representative of South Africa. The panelists were Mansur Muhtar (Co-Chair, Intergovernmental Committee of Experts on Sustainable Development Financing and Executive Director, World Bank Group), Shamshad Akhtar (Assistant Secretary-General for Economic Development), Erik Berglöf (Chief Economist and Special Adviser to the President of the European Bank for Reconstruction and Development), Renate Hahlen (Head of Unit, Aid and Development Effectiveness and Financing, Directorate General for Development and Cooperation, EuropeAid, European Commission, Brussels), as well as Bruce Greenwald and Robert Heilbrunn (Professors of Finance and Asset Management, Columbia Business School, New York). The panelists mentioned that one of the challenges consists in facilitating a financial system that dedicates a portion of investment towards sustainable development. The financial needs for sustainable development exceed public sector capacity; therefore, both private and public resources at the domestic and international levels should be considered. The public sector has a key role to play in incentivizing private investment in developmental areas. The foreign direct investment flows have also decreased. Furthermore, institutional investors (holding between $75 and $85 billion in assets) are increasingly looked to as an investor group. However, their investment in sustainable development financing especially in areas with “investment gaps” such as environmental finance, long term investment in infrastructure, innovation and SMEs has been limited. This, according to the panelists, is mainly due to poor governance, weak regulatory structures, market failures. In addition, misaligned short term incentives of investors impede long term investment and increase systemic risks. Therefore, it is important to restructure investor incentives. The panelists emphasized that domestic resources need to be mobilized and driven by sustained and inclusive economic growth. Every country has the primary responsibility for its development. Therefore, developing countries need to enhance their tax systems, reinforce their tax administration, fight tax avoidance, combat corruption, and enforce accountability. Knowing the critical role of private finance – larger than all public finance combined, States should also adopt the needed policies to create an enabling environment and channel investment towards sustainable development. As far as ODA is concerned, even if developed countries were affected by the economic crisis, they can still meet their commitments and need to improve their resources allocation. Some panelists have also called for international assistance to target the least developed countries rather than middle income countries, while other panelists disagreed, and declared that middle income countries need assistance too. The panelists also referred to the role of the private sector and philanthropists as a new source for financing development. But they cautioned that these should not be considered as substitutes to official government assistance. Last but not least, some panelists referred to technology diffusion as the key to development. Indeed, peripheral economies that were specialized in agriculture a century ago have now gained more productivity and manufacturing has become a dominant sector. However, as for agriculture, it is dying. So, the next generation of developing economies will have to face growth challenges; and technology transfer can play an important role in ensuring growth. At the end of the panel, representatives of Member States, CSOs, and the private sector made comments. The representative of Australia considers that trade is the driver of growth and sustainable development. Therefore, he emphasized the need to boost trade exports in developing countries and liberalize trade. Since 2003, his country offers full duty free access to LDC exports. Other developed states should also improve market access as it is also a way to encourage entrepreneurship, competition, and innovation within their own countries. The representative of Germany rather insisted on domestic capacity and the need to assist developing countries in achieving accountability and appropriate tax reforms. Representatives of developed country Member States have also stated public resources have to be used in a catalytic manner, that helping recipient countries in funding is not enough, it is also crucial to improve coverage and efficiency. The representative of Saudi Arabia mentioned the importance of assessing ODA and FDI not only in terms of quantity but also quality. He declared that his country's ODA exceeds the 0.7% commitment, but the failure of other countries to commit requires a critical assessment of ODA, is it too high? Is it too low? Representatives of the CSOs have insisted on the need to increase effectiveness, harmonize policies with other donors, and align with government objectives. They also called for a regulatory framework. They have pointed out the importance of independent institutions for regulation mentioning that institutions such as the IMF, for instance, are not independent. In the same way, public private partnerships need to be regulated. Last but not least, the issue of debt was raised. If some low income countries benefited from comprehensive debt relief programs, recent increase in borrowing by HIPCs including bond finance, lending from non traditional creditors and concessional finance increase debt burdens in some countries. So, a balance is needed between new financing and debt restructuring and adjustment policies. The CSOs insisted on the need for debt relief and representatives of developing countries called for debt cancellations in some cases. Round Table 3 was on “The role of financial and technical development cooperation, including innovative sources of development finance, in leveraging the mobilization of domestic and international financial resources for sustainable development”. This round table was chaired by František Ružička, Member of the Intergovernmental Committee of Experts on Sustainable Development Financing and the Permanent Representative of Slovakia to the United Nations. The panelists were Pertti Majanen (Co-Chair, Intergovernmental Committee of Experts on Sustainable Development Financing, Finland), Jon Lomřy, Director (Development Cooperation Directorate, Organization for Economic Cooperation and Development), Gargee Ghosh (Director of Policy and Finance, Bill and Melinda Gates Foundation), Mauricio Escanero (Alternate Permanent Representative of Mexico to the United Nations Educational, Scientific and Cultural Organization), and Gilles Alfandari (Senior Economist, International Policy and Partnerships Group). They stressed that developing countries need global support and external sources of finance. In the framework of the Monterrey Consensus, countries have committed to dedicate 0.7 % of their gross national income as ODA to LDCs. These commitments were reasserted at the UN Conference on Sustainable Development, known as Rio+20. However, aid has declined in the last years even if additional efforts were put to achieve the MDGs. ODA decreased in real terms two years in a row while aid to the LDCs decreased by 12.8%. In 2012, globally donors' ODA represented only 0.29% of GNI (4% decline in real terms from 2011) with the largest cuts post-crisis in the Euro-Zone. So, there is a need for more predictable international public financing and alternative source of finance to complement rather than replace ODA. In addition, measures need to be undertaken in order to increase the effectiveness of aid. It is crucial to guarantee transparency and avoid duplicity. Globally even FDI – one of the most stable sources of foreign capital decreased by 18% from 2011 to 2012. In addition, the panelists pointed out the role of South-South cooperation in boosting financing sources, but they explained that it should not be regarded as a substitute to international aid but rather as complementary to North-South cooperation. The financing landscape is formed of three major elements: domestic mobilization of resource, private investments, and public financing. The first element is instrumental and implies that developing countries take their part of responsibility through the improvement of their tax systems including increased tax bases, the elimination of tax exceptions on large scales, and the streamlined taxation of natural resources. Achieving MDGs would require low income countries to raise their tax-GDP ratios by 4% points and to strengthen anti-money laundering measures. Actually, the practical Manual on Transfer Pricing from developing countries prepared by the UN committee of expert on international cooperation in tax matters can assist in this process. As far as private financing is concerned, panelists mentioned the need for a more strategic and creative use of public-private resources. It is also significant to recognize some successes of ODA. It is crucial to reverse the decline of the flows of ODA. However, it is important to refer to the positive achievements of ODA as well, instead of over-emphasizing its problems and declines otherwise its failures will turn into a self-fulfilling prediction. For instance, the international community should acknowledge the cases where recipient countries have become ODA providers. Last but not least, it is also important not to forget about the needs and challenges of middle-income countries. At the current juncture, when the intentional community is working towards the completion of its millennium targets and towards a new development agenda, global cooperation needs to be strengthened. At the end of the panel, representatives of Member States, CSOs and the Private sector also delivered comments. The Indian delegation emphasized that economic growth is a sine qua non condition to poverty eradication. So, it called for an enhanced financial and technological assistance and a supportive fair international economic system. The representative of India said that the failure to achieve MDGs is linked to shortfall in development financing. The developing countries’ capacities are eroded by widening gap in aid delivery and reversal of capital flows. He mentioned that the gap in commitments and disbursement of ODA reached $167 billion in 2011, and widened in 2012. To craft a transformative development agenda post 2015, requires crafting a strengthened global partnership and the reform of institutions of global economic governance in order to give real voice and participation to developing countries. Other developing countries as well as India emphasized that unlike North-South aid, South-South cooperation is a voluntary partnership guided by its own principles; it must remain free from externally imposed norms drawn from North-South assistance; it can neither be a substitute for North-South, nor a pretext to dilute existing, aid commitments. They also called for a supportive multilateral trade regime and a strengthened framework to transfer of technology to foster growth and job creation. The private sector pointed out the need to create domestic conditions for internal growth. They called for government action to provide business regulation, limit barriers to enterprises, address informal sector, and focus on SMEs. Representatives of the business sector also called for the adoption of risk mitigation instruments and the enhancement of ineffective legal systems in order to remedy uncertain returns for investors. Closing remarks Mr. Octavio Errázuriz, Permanent Representative of Chile to the United Nations, delivered a statement on behalf of Mr. Ashe, President of the General Assembly. He thanked the participants for their constructive interventions and outlined the key points pointed in the dialogue. He referred to the need for an adapted conceptual framework to respond to new challenges ad circumstances, in particular related to the need to integrate social economic, and environmental dimensions of sustainable development. He also mentioned the call for a conclusion of the World Trade Organization Doha Round of trade negotiations. He insisted on the importance for countries to fulfill their ODA commitments for development. Last but not least, he recalled delegations' request for the follow up international conference on financing for development to be organized before the end of 2015 in order to best contribute to the post 2015 agenda.
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