During the United Nations General Assembly’s High-level Dialogue on Financing for Development, held at UN Headquarters on 23-25 October, the Permanent Mission of France to the United Nations sponsored a side event panel discussion on “Innovative Financing Mechanisms”, the initiatives that help close the financial gap on the Millennium Development Goals (MDGs).
The High-level Dialogue was organized to assess worldwide implementation of the landmark consensus adopted by 50 Heads of State and Government attending the first International Conference on Financing for Development five years ago in Monterrey, Mexico. In the Monterrey Consensus, developing countries took primary responsibility for their own development and for mobilizing domestic resources, while developed countries agreed to provide assistance and promote an international environment conducive to development.
The panel discussion on “Innovative Financing Mechanisms” focused on the work of the Leading Group on Solidarity Levies to Fund Development, established at the Paris Conference on Innovative Development Financing Mechanisms in 2006. One of the Group’s goals is to provide substantial and sustainable additional long-term resources to foster economic and social development. Solidarity levies are considered a necessary supplement, not a substitute, for conventional official development assistance (ODA).
In his welcoming remarks, Jean-Maurice Ripert, France’s Permanent Representative, spoke of a pilot project, the International Drug Purchase Facility (UNITAID), which brings down the prices of pharmaceuticals through large purchases and is one of the major initiatives that came out of the work of the Leading Group. He noted that UNITAID and the Clinton Foundation HIV/AIDS Initiative, in their first year of partnership, ordered and delivered products to 38 countries and brokered average price reductions of 40 per cent on 25 formulations of HIV/AIDS drugs. UNITAID has already dedicated more than $250 million in additional sources to fighting pandemics. “The more predictable our funding, the more efficient our action”, Mr. Ripert said.
Cheikh Tidiane Gadio, Minister of Foreign Affairs of Senegal and current President of the Leading Group, spoke of the Global Digital Solidarity Fund (DSF), an international organization dedicated to fighting the digital divide and funded through the “1 per cent digital solidarity principle”. Suppliers of services related to information and communication technologies (ICTs) undertake to voluntarily donate one per cent of the contract value, deducted from their profit margin, to the Fund. DSF might be the best instrument for fighting poverty through education, Mr. Gadio pointed out.
The State Secretary of Norway, Anne Stenhammar, noted that the Leading Group was indeed new, but the issues were not, therefore its aim should be to move these issues higher on the political agenda to ensure progress. She also addressed the issues of solidarity levies on air travel and the proposed Currency Transaction Development Levy (CTDL). Similar to the rationale of the air ticket solidarity levy, the basic concept of CTDL would be to mobilize resources by imposing a levy of 0.005 per cent on currency transactions.
The remittances of migrants, which is greater than foreign direct investment or the total amount of ODA given to developing countries, was one of the issues stressed by Maria Luiza Viotti, Permanent Representative of Brazil to the United Nations. She also spoke of the use of Special Drawing Rights for development as well as the establishment of a lottery to finance UN funds and programmes.
Giorgo Novello of Italy focused on two specific issues relating to health. He spoke of the Advance Market Commitment (AMCs) for vaccines, originally established by Italy and several other countries in 2007 as a financial commitment to subsidize the future purchase of a vaccine not yet available at a pre-agreed price - if an appropriate vaccine is developed and if it is demanded by developing countries. Regarding the development of new vaccines, Mr. Novello identified two major problems related to the development of new vaccines: time and obstacles, such as legal issues or expenses. He also spoke of the International Finance Facility for Immunisation (IFFIm), a pilot project established in 2006 to provide vaccinations to developing countries. The potential for further reductions in child deaths was the driving force behind the IFFIm, he explained. IFFIm raised money from private investors through the sale of bonds on the capital market on the basis of long-term commitments of donors. The IFFIm was being implemented through the GAVI Alliance (formerly known as the Global Alliance for Vaccines and Immunisation) and the Vaccine Fund.
The panel demonstrated the growing consensus about the role innovative mechanisms play in increasing the amount of resources available for developing countries, as a supplement to the traditional sources of funds, to finance programmes that would allow them to achieve the MDGS by 2015. The follow-up to the International Conference on Financing for Development, to be held in Doha in the second half of 2008, could be an opportunity to confirm that innovative financing for development is a powerful weapon in the quest to achieve development.
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