The UN General Assembly’s High-level Dialogue on Financing for Development, held at UN Headquarters from 23 to 25 October 2007, reviewed the progress made in implementing the Monterrey Consensus since it was adopted in 2002. During the event, chaired by Assembly President Srgjan Kerim, six round tables discussed the major thematic areas agreed upon in the Consensus, including mobilizing international resources, such as foreign direct investment (FDI) and other private flows, while side-event panel discussions focused on related themes, such as illicit financial flows and its development impacts.

The round- table discussion on “m obilizing i nternational resources for development—foreign direct investment and other private flows” was co-chaired by Hina Rabbani Khar, State Minister for Economic Affairs of Pakistan, and László Várkonyi, State Secretary at the Ministry of Foreign Affairs of Hungary.

It was of great importance to promote sustainable development, boost jobs, entrepreneurship and economic growth in developing countries, Ms. Khar said in her opening remarks, adding that if Governments lacked the resources, the private sector, as well as multilateral and private organizations, should assist in the effort. G overnments in developing countries should bear in mind that foreign investors would only settle in countries that attracted them economically, she said, for “they would not act on goodwill alone ” . Governments should therefore ensure transparency and economic consistency, and provide a business environment that was conducive and predictable to foreign investment, she said. B y implementing these measures, she noted, Pakistan’s foreign investment had steadily grown in the past years and poverty had dropped by 10 per cent. The responsibility was everybody’s, Ms. Khar remarked, concluding that “we have to do our part in our countries, and then multilateral organizations and other developed countries will follow ”.
           
Khalil Hamdani, Director of the Division on Investment, Technology and Enterprise Development at the United Nations Conference on Trade and Development (UNCTAD), said that since the Monterrey Consensus, FDI had doubled, with peak levels in developing countries of Africa and Asia. He noted that outward investment flows from regions, which had originally been recipients, had risen to 15 per cent, and that South-South investment, especially in Africa, had grown significantly. However, although there was an abundance of capital worldwide, there was still not enough to meet development needs, Mr. Hamdani said, adding that in order to attract FDI, smaller countries with no natural resources needed to engage in public-private partnerships and invest in basic education and health plans. He also emphasized the need for complementarity between official and private financial flows of FDI and the integration of local production into international production and global value chains.
           
Botswana’s r epresentative outlined that foreign direct investments were made for profit and therefore the question of risk was very important to investors. They needed to find an enabling environment, such as an uncomplicated legal system, regulations for entrepreneurship and the right infrastructure, e.g. adequate electricity and skilled employers, he said. Additionally, the information flow about progress made by developing countries in the promotion of good governance and macro-economic management needed be enhanced in order to attract more foreign investors, he added.
           
Welcoming the emerging phenomenon of South-South cooperation for investment , Egypt’s r epresentative noted that it was important to improve international cooperation supportive of increasing capital flows between countries of the South within this framework, including triangular cooperation. In h ighlighting the growing financial flows from South to North countries, he said that to sustain this positive progress, the most fundamental tool was to reach a general commitment from developed countries to implement policies that led to regulations for free and fair trade and to address external debt, sustainability and relief .
           
Spain’s representative, speaking on behalf of donor countries, highlighted the risk of illicit financial flows, which did significant harm to both donor and developing nations.

Illicit Financial Flows

One of the High-level Dialogue’s side events, organized by the Permanent Mission of Norway, focused on “Illicit financial flows and its developmental impacts”.  During the panel discussion, Raymond Baker of the Center for International Policy noted that 70 to 90 per cent of global income still went only to 20 per cent of the world’s population. There was a troubling shift of money from poor to rich people, he said, which was made possible through the 72 tax havens that existed worldwide. T he most significant reasons for this shift, Mr. Baker said, were bribery or corruption of government officials, drug trading and terrorism financing, as well as tax evasion. The most common practices contributing to these illicit mechanisms were false documentation and falsified pric ing of imports and exports, he said, adding that, i nterestingly, the actual ways of shifting money had not changed from past decades, while the outcome, unfortunately, remained the same: illicit financial flows undermined trade and reduced tax collection in developing countries , which le d to losses of approximately $ 1 trillion to $1.6 trillion per year.  That annual figure, Mr. Baker said, dwarfed the $150 billion needed to achieve the Millennium Development Goals.

David Spencer from the Tax Justice Network said that there were close ties between tax evasion and corruption because persons who received money through corruption usually did not declare it. He criticized the proposals made by the Organisation for Economic Co-operation and Development (OECD) did not apply to the illicit financial flows from developing countries to OECD Member States and offshore financial centres. I nformation about bank accounts in tax havens could only be obtained upon specific request if the account owner and the number were known, which was seldom the case, he said .  
Focusing on multinational companies that use tax havens to cover up their transactions.