United Nations

A/53/479


General Assembly

Distr. GENERAL  

9 October 1998

ORIGINAL:
ENGLISH



                                                  Original: English

Fifty-third session
Agenda item 91 (b)
Macroeconomic policy questions: financing of development, including
net transfer of resources between developing and developed countries



         High-level international intergovernmental consideration
         of financing for development: work of the United
         Nations system


         Report of the Secretary General

1.       The General Assembly, in its resolution 52/179 of 18
December 1997, requested the Secretary-General to prepare
a report to be submitted to the Assembly at its fifty-third
session on the work of the United Nations to address
financing for development. In response to an inquiry from
the Secretariat to assist in the preparation of that report,
replies were received from the following bodies:
Department of Economic and Social Affairs of the United
Nations Secretariat, Food and Agriculture Organization of
the United Nations (FAO), International Atomic Energy
Agency (IAEA), International Civil Aviation Organization
(ICAO), International Fund for Agricultural Development
(IFAD), International Finance Corporation (IFC),
International Labour Organization (ILO), International
Monetary Fund (IMF), International Maritime Organization
(IMO), International Telecommunication Union (ITU),
Economic Commission for Latin America and the Caribbean
(ECLAC), Economic and Social Commission for Asia and
the Pacific (ESCAP), United Nations Conference on Trade
and Development (UNCTAD), United Nations International
Drug Control Programme, United Nations Development
Programme (UNDP), United Nations Industrial
Development Organization (UNIDO), United Nations
Educational Scientific and Cultural Organization
(UNESCO), United Nations Population Fund (UNFPA),
Office of the United Nations High Commissioner for
Refugees (UNHCR), United Nations Children's Fund
(UNICEF), United Nations University (UNU)   Institute for
Advanced Studies, Universal Postal Union (UPU), World
Food Programme (WFP), World Bank and World Trade
Organization.

2.       The Secretariat inquiry set out eight broad headings
to guide organizations in making their replies: mobilizing
domestic resources for development, mobilizing
international private financial flows for development,
international financial cooperation for development,
external debt (bilateral, multilateral and commercial), trade
and financing for development, innovative sources of
financing, governance of the international monetary,
financial and trade systems, and interrelationship between
elements and other special topics.

3.       The present report draws from the replies many
examples of new approaches being taken by the different
organizations. Most of these organizations have a wide
range of activities relating to finance for development and,
within the space limitations of this report, it is not possible
to provide a comprehensive description of the activities of
each organization. In particular IMF, in its reply, explained
that it has a vested and active interest in all of the issues in
the questionnaire and that they occupy its staff on a daily
basis. Most of the topics mentioned are also reviewed
regularly by government representatives through discussions
of the Executive Board. Information on these activities is
contained in the Annual Report of IMF. Similarly, the
Annual Report of the World Bank contains a description of
its activities relevant to financing for development. In
addition, the Internet Web sites of IMF and the World Bank
(see www.imf.org and www.worldbank.org respectively)
carry an extensive list and, in many cases, the full text of
relevant documents and studies. The focus of this report will
therefore be on organizations of the United Nations system
other than international financial institutions.


          Overall perspective: the Agenda for
          Development

4.       The organizations of the United Nations system play
many roles in the matter of financing for development. In
the first place, they help finance development through
programmes in developing countries. These various
activities, undertaken to fulfil the mandates of the different
organizations, are subject to the oversight of their governing
bodies. Matters of coordination and of selecting the most
worthwhile projects are always present for consideration.
The Agenda for Development (see General Assembly
resolution 51/240 of 20 June 1997, annex) described the
efforts of the United Nations system to improve the
functioning of funds and programmes at the country and
headquarters levels. The Agenda stressed the need,
however, for a substantial increase in resources for United
Nations operational activities for development on a
predictable, continuous and assured basis, commensurate
with the increasing needs of developing countries, while
also stating that new approaches to financing the
international development cooperation activities undertaken
by the United Nations, including innovative funding
sources, should continue to be examined.

5.       The Agenda for Development also provided an
analysis in a broader sense of steps that should be taken to
finance development. It described how development is one
of the main priorities of the United Nations and a
multidimensional undertaking for the purpose of achieving
a higher quality of life for all people. The effective
implementation of the Agenda thus required the urgent
mobilization and more efficient use of resources for
development   public and private, financial and human,
national and international.

6.       The Agenda set out a series of measures that countries
and the international community should take to raise finance
for development. An appropriate level of domestic savings
should be achieved and countries should explore new ways
of generating new public and private financial resources,
inter alia, through the appropriate reduction of excessive
military expenditures, which bears on global military
expenditures and the arms trade and investment. The
savings efforts of developing countries, in particular African
countries and the least developed countries, needed to be
supplemented by external resources so as to raise
investment to the levels necessary for adequate and
sustained economic growth. New and innovative ideas for
generating resources for development should be explored.
The international community, including the international
financial institutions, was invited to continue to explore
ways of implementing additional and innovative measures
to alleviate substantially the debt burdens of developing
countries. The Heavily Indebted Poor Countries (HIPC)
Debt Initiative was welcomed, and the Agenda requested
that eligibility criteria should be interpreted flexibly so as
to ensure sufficient coverage.

7.       The Agenda highlighted the importance of reversing
the overall decline in flows of official development
assistance (ODA) and of achieving internationally agreed
ODA targets as soon as possible. Countries should also
honour their commitments in Agenda 21 1/ to provide
resources to promote sustainable development.

8.       The multilateral financial institutions should continue
to play a major role in development and in promoting the
stability of the international financial system. They were
urged to increase cooperation with other development
activities of the United Nations system. Regional
development banks should continue to play an important
role in the financing of development and the adequate and
timely replenishment of their concessional mechanisms was
essential in this context.

9.       The Agenda emphasized how special attention should
be given by all countries to measures aimed at promoting
international investment flows and enhancing their
contribution to development. In order to encourage
domestic investment and to attract foreign direct investment
(FDI), it was essential to have in place a stable, supportive,
effective and transparent legal framework. Governments in
the developed countries should facilitate long-term
investment flows to developing countries.

10.      The Agenda, which was adopted less than a month
before the eruption, in July 1997, of the present financial
crisis, emphasized how the globalization and growth of
financial markets had given rise to the need for improved
measures to address the negative effects of the volatility of
international capital flows. It set out an agenda for action,
some parts of which have been implemented in the past year.
It stated that the prevention of financial crises required
enhanced early warning mechanisms, including improved
and effective surveillance of national and international
financial market developments. Because prevention could
fail, enhancing the capacity of multilateral institutions to
respond in a quick and coordinated fashion was required.
Financial mechanisms needed to be developed for this
purpose, as well as to meet the challenges of the twenty-first
century. The international community was asked to explore
ways to broaden appropriate enhanced cooperation and,
where appropriate, coordination of macroeconomic policy
among interested countries, and monetary and financial
authorities and institutions, so as to enhance preventive
consultation arrangements between such institutions. An
example of action along the lines suggested by the Agenda
was the adoption of the Emergency Financing Mechanism
of IMF in September 1995 to strengthen its ability to
respond swiftly in support of a member country facing an
external financial crisis. This mechanism was first used in
July 1997 in approving a support package for the
Philippines.


          Research activities

11.      The Agenda did not foresee the full extent of the
shortcomings in the world's financial architecture and the
financial systems of individual countries which were
revealed in the course of 1997 and 1998. Many United
Nations bodies are undertaking research into aspects of the
global and national financial systems, often in partnership
with other international organizations, universities, research
centres, private companies, non-governmental organizations
and other actors in civil society. This research is frequently
followed by outreach programmes to bring it to the attention
of decision makers.

12.      For instance, UNU recently completed research on,
inter alia, "The impact of liberalization on key markets in
sub-Saharan Africa", "Growth, the external sector and the
role of non-traditional exports in sub-Saharan Africa",
"Short-term capital movements and balance of payments
crises", "New models of provision and financing of public
goods" and "Asia and Africa and the global economy". It
has also started research on information technology and
growth, and on environmental, export and human
development problems in natural resource-based growth
models.

13.      The regional commissions have carried out relevant
research that was published in their economic and social
surveys and in other publications. For instance, ESCAP
referred in its 1998 Economic and Social Survey of Asia, 2/
to Development paper, No. 19, on Foreign Direct
Investment in Selected Asian Countries: Policies, Related
Institution-Building and Regional Cooperation 3/ and to a
presentation by the Director of Development Research and
Policy Analysis entitled "The dynamics of Asian economic
crisis and selected policy implications". 4/ ECLAC referred
to "Pension funds, the financing of transition costs and
financial markets development" (LC/R.1822), "Flujos de
capital externo en Ame'rica Latina y el Caribe en los an~os
noventa: experiencias y poli'ticas" and "La relacio'n entre
el ahorro externo y el ahorro nacional en contextos de
liberalizacio'n financiera".

14.      On the subject of mobilizing international private
financial flows for development, UNCTAD's research
included the report and issues paper of the UNCTAD Expert
Meeting on the "Growth of domestic capital markets,
particularly in developing countries, and its relationship
with foreign portfolio investment" (TD/B/COM.2/EM.4/2
and TD/B/COM.2/EM.4/3), the secretariat report "Foreign
portfolio investment: implications for the growth of
emerging markets" (UNCTAD/GDS/GFSB/4) and its annual
World Investment Report.

15.      UNCTAD's research of relevance to international
cooperation for development, external debt and the
governance of the international monetary, financial and
trade systems is included in its annual Least Developed
Countries Report, in the Trade and Development Report and
in the series of publications under the general heading of
International Monetary and Financial Issues for the 1990s.
In connection with trade and financing for development,
UNCTAD is to publish a survey on export credit agencies.
Concerning innovative sources of financing, there is a series
of research publications and newsletters by the UNCTAD
secretariat on greenhouse gas emissions trading dating back
to 1992.

16.      UNIDO indicated that its Industrial Development
Global Report, 1997 5/ was devoted to the financing of
industrial development.

17.      Within UNDP, the Office of Development Studies
(ODS) of the Bureau of Development Policy reported that
it seeks to enhance private and public financing of
development as one of its major goals. It has sponsored
studies and publications that aim to influence the policy
dialogue, mobilize follow-up research at the global, regional
and country levels, and build capacity in the area of
development finance. Since 1996, it has published six
discussion papers and three working papers on financing
development. ODS is currently preparing two books relating
to the theme of financing development. The first, Global
Housekeeping: A New Approach for International
Development Cooperation, will, inter alia, examine the
financial implications of rethinking development
cooperation to secure the provision of global public goods.
The second, Private Finance for Human Development, aims
to close the gap between the abundance of investable private
finance and the unfulfilled financial needs of poor people.

18.      The Regional Bureau for Latin American and the
Caribbean of UNDP has supported research and analysis of
the potential and challenges of using pension funds to
finance development in Latin America. In May 1997, it
organized a seminar to discuss the pitfalls, promises and
power of pension funds in Mexico.

19.      The Department of Economic and Social Affairs of
the United Nations Secretariat undertakes search and
analysis on several dimensions of financing for
development, ranging from the handling of financial data
within the System of National Accounts (SNA) and
institutional innovations in financing sustainable
development to an examination of the linkages of various
financing questions to social development. Its recent reports
cover a range of considerations from micro- to macro-finance. In addition to
reports for intergovernmental bodies,
the Department of Economic and Social Affairs of the
United Nations Secretariat publishes major studies such as
the annual World Economic and Social Survey. It organizes
as well expert group meetings, such as the semi-annual
forecasting meeting of Project LINK, where financial
constraints on economic growth are a frequent subject of
consideration. It also organizes ad hoc expert groups, such
as the one arranged in July 1998 in cooperation with the
regional commissions to assess the current crisis of
international financial volatility (the results of that meeting
are to be published by UNU Press).


          Outreach and involvement of the private
          sector in research and analysis

20.      In terms of outreach, UNDP described how it had
supported the Chairman of the Second Committee of the
General Assembly at its fifty-second session in organizing
briefings for delegates to the United Nations on financing
for development in preparation for the high-level meeting
to be held in 2001. (This cooperative endeavour also
involved the Department of Economic and Social Affairs
of the United Nations Secretariat, UNCTAD, IMF and the
World Bank). In addition, ODS is a co-sponsor of the
Money Matters Initiative, a public-private policy approach
involving leading private investors. It has also organized
regional and country-level workshops and seminars on
private finance and issues of sustainable human
development with members of the Money Matters Institute.


          Training and capacity-building

21.      United Nations bodies undertake a range of training
and capacity-building activities relevant to finance for
development. For instance, through projects like the Inter-Regional Centre for
Entrepreneurship and Investment
Training and the help it gives to the development of focal
points for industrial and technology promotion, UNIDO
builds capacity for continued financial flows into the
industrial and service sectors. Of particular relevance are
activities relating to strategies, policies and institution-building to assist
small- and medium-sized enterprises in
integrating into the global economy. UNIDO pays particular
attention to financing, innovation, productivity and quality
for international competitiveness, human resources
development, including the integration of women in
industrial development, investment promotion networking
and regional programmes. 

22.      FAO reported that its Policy Assistance Division is
the central channel for providing member countries with
policy advice and assistance related to national development
policies, programmes and strategies in the agro-rural sector.
Its Regional Policy Assistance Branches assist member
countries in the formulation of policies and strategies aimed
at creating a favourable economic environment for rural
development, thus opening good opportunities for
investment of domestic and international capital. It also
provides assistance through training and the production and
dissemination of training manuals in strengthening national
capacity for policy analysis, formulation and
implementation, and for analysis of agricultural investment
projects.

23.      The programme of technical cooperation in public
administration of the Department of Economic and Social
Affairs of the United Nations Secretariat has a large
financial management dimension. It also supports technical
work on international cooperation in tax matters, and other
finance-related activities.


          Debt management

24.      The United Nations is providing technical assistance
to help countries manage their external debt. The Regional
Bureau for Africa of UNDP, in collaboration with
UNCTAD's Debt Management and Financial Analysis
Section, has focused on improving collection, compilation,
recording and reporting of debt data, installation and
operation of software packages, training of national staff,
and reinforcing of institutional capacity for debt
management. Recent activities include the Regional Bureau
for Africa's participation in the activities of Debt Relief
International, an initiative funded by Austria, Denmark,
Sweden and Switzerland to assist the HIPCs in preparing
debt policies and strategies. A working group led by the
resident representative of Uganda is reviewing the debt
situation in countries emerging from conflict; and
discussions were held in June 1998 on the Multilateral Debt
Fund for Rwanda.

25.      As a result of a programme that ended in 1994 and
involved UNDP, UNCTAD and the World Bank, the
Macroeconomic and Financial Management Institute of
Eastern and Southern Africa was set up as a permanent
regional institution to provide support to national capacity
development in the area of debt management. RBA and
UNDP are currently preparing a project on African debt,
which will provide an inventory of debt initiatives and
actors and will sample needs and existing capacities in the
area of debt. It will prepare an options paper and framework
that will draw on fieldwork to describe and analyse the debt
situation in Africa.


          Mobilizing international private financial
          flows for development

26.      Countries are also being assisted in obtaining access
to international financial markets. The Regional Bureau for
Africa of UNDP, for example, has undertaken a study on the
experience of Mauritius with regard to sovereign risk rating
and is organizing "trial runs" of credit ratings for five
countries. It is undertaking sensitization activities to
familiarize African officials with the requirements and
processes of credit ratings and is training African officials
on trade and investment promotion (with funding from
Singapore).


          Mobilizing domestic resources for
          development

27.      The importance of enabling the poor to obtain small
loans to undertake economic activities is widely recognized.
The Private Sector Development Programme of the Bureau
of Development Policy of UNDP developed "MicroStart"
in response to demand from country offices for a practical
and operational product to support them in this field.
Country offices commit to funding their participation (the
figure is set at $1.5 million) by using their own core
resources or by mobilizing resources from other partners
(possibly government, donors or the private sector). A
MicroStart project will consist of two integrated
components: (a) a micro-capital grant component in which
5 to 10 or more local organizations receive grants of up to
$150,000 in seed capital for loans and overhead costs and
(b) a technical services component in which an international
best practitioner provides a range of technical services to
the local recipient organizations. UNDP has prepared a list
of 30 qualified micro-finance institutions and six consulting
firms that can be contracted to provide these services at a
standard fee of $500,000 over a three-year period.

28.      In May 1997, UNDP also launched a Global
MicroStart Programme designed to undertake pilot
initiatives at the country level through cost-sharing. So far,
50 countries have expressed an interest. To date, 20 country
offices have earmarked full funding towards the programme
in the amount of $1.5 million or more. Twelve countries
have committed $16.8 million in funding for MicroStart.

29.      Another pertinent activity is that of the Consultative
Group on Assistance to the Poorest for which UNDP helps
mobilize support from banks and other financial institutions.


          Involvement of the private sector in
          financing United Nations operational
          activities

30.      United Nations bodies are increasingly involving the
private sector in the operations, projects and programmes
that they are supporting.

31.      FAO, for example, is giving increased emphasis to
public/private partnership as a way to increase the
effectiveness of its activities, as well as to leverage
additional resources for development. In 1995, it created
a Unit for Cooperation with the Private Sector and Non-Governmental
Organizations to provide a focal point and
coordination for FAO's relations with the private sector and
to promote partnership initiatives. A new strategy for
partnership has been approved and a new publication
outlining experience and areas for collaboration will be
published shortly.

32.      One major element in this cooperation will be an
expansion of the activities of the FAO Investment Centre.
The Centre helps countries prepare investment projects for
international financing by the World Bank and other
development banks. In 1996, it helped prepare projects
worth $2.5 billion. Increasingly, these projects include
private sector components. The Centre is also now starting
to work with national commercial banks. 

33.      FAO's collaboration with the private sector involves
direct private sector support for its activities and
collaboration in fieldwork. For example, the private sector
has provided all the costs of maintaining FAO's "Telefood"
campaign. FAO launched the Special Programme for Food
Security to help low-income, food-deficit countries increase
food production and productivity as rapidly as possible,
primarily through the widespread adoption by farmers of
improved production techniques. The private sector can be
involved in each phase of the Special Programme, from the
exploratory phase to the undertaking of the investment. A
global private sector network (International Agri-Food
Network) and an Italian Private Sector Committee are
examples of new mechanisms to provide for more
comprehensive private sector involvement in the Special
Programme.

34.      FAO's cooperation with international industry
associations has facilitated trade, technology transfer and
investment in developing countries. The International
Fertilizer Industry Association, for example, has supported
a wide range of FAO initiatives and is now a partner with
FAO, the World Bank and others in the Soil Fertility
Initiative, which is focused on sub-Saharan Africa.

35.      UNIDO's activities are focused on building capacities
for investment and technology promotion, with the private
sector becoming the dominant partner together with the
public sector in the mobilization and utilization of
investment resources from both international and domestic
sources. Its Investment and Technology Programme is
conceived and carried out in an integrated manner,
encompassing the entire project cycle. It covers the
establishment of national policies for creating the enabling
environment for promoting investment flows; building
national capacities for project identification, preparation,
evaluation and promotion; developing and effectively
utilizing technological capabilities and other technical
skills; developing and promoting entrepreneurial
capabilities, especially for small- and medium-sized
enterprises; investment project negotiations, start-up and
implementation; continuous quality management,
standardization and meteorology; industrial technological
and business information networking; and environmentally
sustainable industrial development. The above activities are
carried out at the national, regional/subregional and
international levels. UNIDO has also developed a network
of partners   Investment Promotion Agencies or Offices in
developing countries and major developed countries  - they
are in contact with the donor Governments and the private
sector international centres of excellence in leading
emerging technologies as well as other international funding
agencies involved in promoting the flow of investment and
technology to developing countries.

36.      In addition, UNIDO provides a wide range of services
for private sector support. Its tools include methodologies
to identify and formulate investment/technology transfer
proposals, application of software to appraise their
potential, and the organization of investors and of
investment technology markets (INTECHMARTs) to bring
together international partners for investment and
technology transfer.

37.      The Regional Bureau for Latin America and the
Caribbean of UNDP has been helping bring venture capital
to development. For instance, in collaboration with the
Association of Enterprises in Buenos Aires and Mendoza,
it has been helping identify opportunities for venture
capital. The South-North Institute, a non-governmental
organization, joined hands with UNDP in designing a pilot
programme to involve the local private sector in creating
employment opportunities for the low-income population.

38.      Similarly, in its Public-Private Partnership for Urban
Environment, UNDP is helping direct private capital
investment flow to areas of critical importance to
sustainable development, namely water and sanitation,
waste management and energy. It uses its knowledge and
analysis capabilities to create an enabling environment for
private sector investment in areas that would otherwise not
be seen as attractive opportunities for generating revenues.
An example of its work was a project in Manizales,
Colombia, which aimed at providing domestic waste
collection services to 21 municipalities, in addition to
examining the business potential of an efficient coffee-washing process. The
project attracted $600,000 from a
private company that was involved in the solid waste
recycling programme and in producing fertilizer from
biodegradable refuse, as well as in recycling of plastic, glass
and paper for sale.


          Indirect assistance to mobilizing finance
          for development

39.      In some cases, the connection between an agency's
work and finance for development is indirect. For instance,
ICAO drew attention to the fact that air transport has an
integral role in the world economy as a tool for conducting
much of the world's business, as a foundation for the
tourism industry and as a cost-effective means of
distributing goods and services. Similar considerations
apply to the work of UPU. It reported that it had undertaken
an important project in a large developing country to reform
that country's postal system as a "self-financing fund".
UNDCP reported how financial flows based on illicit
earnings from drug trafficking or other crime do not
contribute to development, but rather have the opposite
effect of undermining legitimate enterprise, concentrating
wealth in the hands of a small number of individuals and
diverting resources from government budgets. It operates,
jointly with the Centre for International Crime Prevention
of the United Nations Secretariat, a global programme on
money laundering, targeting the strengthening of institutions
to prevent or combat money laundering and related
economic crime.


          Innovative sources of financing

40.      Specific examples of innovative sources of financing
were included in the replies. The United Nations
International Drug Control Programme (UNDCP) described
how, in keeping with the terms of the United Nations
Convention against Illicit Traffic in Narcotic Drugs and
Psychotropic Substances of 1988, 6/ the Government of
Luxembourg donates to UNDCP a portion of the revenues
it receives from assets forfeited in drug
trafficking/laundering cases. These funds are used for
development-based initiatives in rural areas where illicit
crops are grown, as a means of removing the economic
dependence on drug crops. A Japanese non-governmental
organization undertakes regular fund-raising campaigns
with the public in Japan and provides between $400,000 and
$500,000 per year to UNDCP for use exclusively in small
grants to non-governmental organizations working on drug
abuse prevention in developing countries.


               Notes


          1/   Report of the United Nations Conference on Environment and
               Development, Rio de Janeiro, 3 14 June 1992, vol. I,
               Resolutions Adopted by the Conference (United Nations
               publication, Sales No. E.93.I.8 and corrigendum), resolution
               1, annex II.

          2/   United Nations publication, Sales No. E.98.II.F.59.

          3/   United Nations publication, Sales No. E.98.II.F.62.

          4/   Mimeographed document presented to the Expert Group
               Meeting on "What have we learned one year into the emerging
               market countries financial crisis?", New York, 21 23 July
               1998.

          5/   Vienna, UNIDO, 1997.

          6/   See Official Records of the United Nations Conference for the
               Adoption of a Convention against Illicit Traffic in Narcotic
               Drugs and Psychotropic Substances, Vienna, 25
               November 20 December 1988, vol. I (United Nations
               publication, Sales No. E.94.XI.5).
 

This document has been posted online by the United Nations Department of Economic and Social Affairs (DESA). Reproduction and dissemination of the document - in electronic and/or printed format - is encouraged, provided acknowledgement is made of the role of the United Nations in making it available.

Date last posted: 10 January 2000 10:05:30
Comments and suggestions: esa@un.org