During the General Assembly’s High-level Dialogue on Financing for Development, the third sponsored by the United Nations in the last five years, the international community assessed the implementation of the landmark 2002 Monterrey Consensus. One of the issues discussed was mobilizing domestic resources, which was also the focus of one of the six round tables held as part of the high-level meeting at UN Headquarters in New York from 23 to 25 October 2007.

The Monterrey Consensus emphasizes that many different aspects of a national economy are involved in mobilizing domestic financial resources, among them providing “the necessary internal conditions for mobilizing domestic savings, both public and private”, so that they may sustain “adequate levels of productive investment and increasing human capacity”. But under the conditions of a global economic system in which all economies are interwoven, “national development efforts need to be supported by an enabling international economic environment”.
The lead discussant, Carlos Braga, Senior Advisor for Poverty Reduction and Economic Management at the World Bank, highlighted several questions noted in the 2007 Report of the Secretary-General on “Follow-up to an implementation of the outcome of the International Conference on Financing for Development”. Mr. Braga spoke of the importance of the development of local financial markets, the establishment of effective legal institutions, systems of taxation, finance infrastructure, the importance of growing domestic savings and investment climate, and public administration, in order for public and private funds to be mobilized and deployed efficiently.

During the discussion that followed, Senator Edgardo J. Angara of the Philippines said that his country would continue to implement fiscal reforms that mobilized taxes and shrank fiscal deficits, consistent with the Secretary-General’s report. Noting that flows of official development assistance (ODA) to the Philippines had decreased by 29 per cent over the past seven years and that his country suffered losses in trade-related tariffs, the Senator pointed out that the Philippines managed to overcome losses by increasing value added tax (VAT) and other sales taxes. Examining the role of national development banks and sub-prime lending, Mr. Angara said that in the Philippines almost 95 per cent of enterprise financing was through bank borrowings, which was the reason why many entrepreneurs and inventors who are not credit worthy or do not have collateral were excluded from the financial market.

Ambassador Angus Friday of Grenada noted the over-reliance of island States on foreign direct investment (FDI) to drive development. Island States needed to put more effort in developing their own domestic entrepreneurs and businesses, so that the domestic private sector could become a true engine of growth of domestic economies, he said. On the vital importance of ODA, Mr. Friday stressed the need for increasing the amount of equity available to developing countries and for ensuring that these countries had stock markets that could provide exits for such investments.

Marek Belka, Executive Secretary of the Economic Commission for Europe (ECE), examined the severe decline in the national saving rates of Central and Eastern European countries. Their national savings rate was about 20 per cent or less, while for other emerging markets it was 35 per cent, he said. There was no answer, Mr. Belka noted, to whether it was the demographics or aging of societies of ECE countries that made them save less, or whether there was a cultural or an institutional reason. At the same time, there was evidence of rapid, deepening credit growth, which was dangerous when public saving was low, he added.

Sergey A. Storchak, Deputy Finance Minister of the Russian Federation, spoke in favour of the development of local bond markets, in both emerging markets and developing nations, in order to prevent over-reliance on foreign currency debt and the accompanying currency risks. He also reiterated his country’s commitment to financing for development and expressed the hope that the Doha Conference would be a turning point for poverty eradication and the achievement of the Millennium Development Goals.

Financial literacy policy should be set up in all the countries, business sector representatives agreed, as wide access to the formal finance sector was a key element in mobilizing domestic resources for development. Financial services should be made more accessible, not only by increasing the proximity of banking institutions but also by renewing commitment to serving less sophisticated clients. Inclusive financial sectors and broad-based approaches to the provision of financial services was needed all around the world.

When talking about financing for development, from the point of view of civil society, human, material and cultural resources were important, for they allowed financial resources to be implemented, said Rosario Romero, Senior Representative of the International Presentation Association of the Sisters of the Presentation. Civil society had to be a social and political actor in order to monitor and have an impact on policies that would benefit all people, she added. Fighting corruption at all levels was a priority, Ms. Rosario pointed out, noting that corruption was a serious barrier to effective resource mobilization and allocation, diverting resources away from activities that were vital for sustainable development.

Hilde Johnson, Deputy Executive Director for Partnership of the United Nations Children’s Fund (UNICEF), questioned the larger purpose of mobilizing domestic financial resources. Many considered education an expenditure, she said, but education was an investment, which when compared with classical investment like infrastructure proved to be by far the investment with highest profit, providing a long-term basis for mobilizing domestic resources. Without a holistic approach, there would be problems in realizing the goals, Ms. Johnson concluded.

Given the diversity of economic growth among and within developing countries, the participants agreed that there could be no one-size-fits-all development strategy and that the international community needed to find a tailored approach to financing for development.

For more information on Financing for Development, please visit: http://www.un.org/esa/ffd/index.htm
For the full version of the 2002 Monterrey Consensus, go to: