DESA News Vol. 11, No. 10 October 2007


Unlocking development through finance Unlocking development through finance

A high-level dialogue on financing for development this month will lay the groundwork for the Monterrey Consensus implementation review in Doha in 2008

The Monterrey Consensus is the flagship of international development cooperation. Through this agreement, countries committed in 2002 to join forces to unleash financial resources and achieve the economic conditions needed to reach internationally agreed development goals. Five years on, the Monterrey picture shows lights and shadows. Many developing countries have put their houses in order, improving macroeconomic management and governance, while a number of advanced countries have also made headway in debt forgiveness. But increased voting weights of developing countries in the global financial institutions, mobilization of significant resources for decent employment, and a development-based trade system are still far from reality. Much work lies ahead if finance is to unlock the potential of development.

The third High-level Dialogue on Financing for Development hosted by the General Assembly on 23 and 24 October will cast a spotlight on the status of implementation of the 2002 Monterrey Consensus and shed light on the road ahead. The meeting sets the stage for the Follow-up International Conference on Financing for development to Review the Implementation of the Monterrey Consensus taking place in Doha next year. Plenary meetings will take up the first day, bringing ministers and other high-level officials together with the President of the Economic and Social Council, the Secretary-General, and the executive heads of the World Bank, IMF, WTO, UNCTAD, UNDP. Six roundtables on the second day will build on the major themes of the Monterrey outcome: mobilizing domestic and international financial resources for development; international trade as an engine for development; international financial and technical cooperation; external debt; and systemic issues.

Unleashing domestic resources for development

The Monterrey Consensus of the International Conference on Financing for Development held in 2002 in Monterrey, Mexico forged a global development partnership in which developing countries acknowledged their primary responsibility for their own economic and social development while pledging to adopt policies to improve the use of domestic resources. Industrialized countries, for their part, committed to increased financing and greater market access so as to pave the way to growth, poverty reduction and macroeconomic stability.

Five years on, developing countries appear on the whole to be keeping their part of the bargain. Progress has been made in introducing macroeconomic policies that consistent with price stabilization and orderly government finances. Microeconomic reforms that increase economic efficiency have been introduced, as have measures to improve governance and the rule of law. This is according to the Report of the Secretary-General on follow-up to the International Conference on Financing for development, an analytical assessment of implementation of the 2002 agreement that delegates are invited to use as background information for the discussions.

Despite progress in policy and regulatory areas, growth has been extremely uneven. According to remarks made by DESA’s Assistant Secretary-General for Economic Development, Mr. Jomo K.S., in an informal presentation of the report to the General Assembly on 20 September, only a handful of countries have made significant strides, while many others have been unable to achieve sustained growth in per capita incomes.

Accent on decent employment

Developing countries need to speed up the growth and expand the diversity of their domestic financial sectors, according to the report. Countries should pay special attention to the creation of markets for long-term debt in domestic currencies, with an emphasis on the issue of domestic currency bonds and a strengthened role for national development banks. Countries should also ease conditions for financing of productive investments, by small- and medium-sized enterprises among others, and promote microcredit and microfinance to give all social groups access to financial services.

At the same time, the public sector and multilateral development banks should finance projects that private investors will not undertake, such as provision of infrastructure and basic services. “Tardy investments in these areas,” Assistant Secretary-General Jomo cautions, “undermines the medium-term growth prospects of developing countries, as it has in many countries which have unduly emphasized reducing fiscal deficits.”

When it comes to fighting poverty, national development strategies should give priority to macroeconomic policies that boost full, productive and decent employment, and mobilize resources accordingly. This commitment to employment, coupled with appropriate policy measures, should furthermore be incorporated in the 2008 Doha agreement, proposes Mr. Jomo, as it was recognized in the 2005 World Summit Outcome and the 2006 ECOSOC Ministerial declaration.

How can investment be sustainable

A good way to inject resources for development is through foreign direct investment. It is no coincidence that the 2002 Consensus included a recommendation for leading action in this area. In the last five years, strong economic growth and a better investment climate in a number of countries have resulted in significant private investment growth. FDI in particular amounted to almost $400 billion in 2006, according to the Secretary-General’s report. Yet most FDI materializes not in green field investment, notes Mr. Jomo, but through mergers and acquisitions. Moreover, much of the FDI for new economic activity entails a flow of funds from one industrialized country to another. Meanwhile, about 70 percent of the FDI reaching developing regions is absorbed by about a dozen countries.

Manuel Montes, Chief of the Policy Analysis and Development Branch in the Financing for Development Office in DESA, says that countries should create a domestic environment that can attract foreign direct investment. “But if that investment is to be sustainable, it has to be consistent with the national development strategies of developing countries and, therefore, be oriented towards employment and export growth, and expanded ownership.” Measures should be put in place, he adds, so that foreign affiliates and domestic firms can be brought together to strengthen linkages in pivotal areas such as information technology, training and finance.

For an equitable trading system

Trade continues to be a crucial component of the development partnership forged in Monterrey because benefits accrue to all partners, and are seen to be much greater and more permanent than either official development assistance or debt relief, the Secretary-General states in his 2006 report. In particular, the Monterrey Consensus stressed that a universal, rules-based, open, non-discriminatory and equitable multilateral trading system, along with trade liberalization, investment and technology, can spur development worldwide and fight poverty, “benefiting countries at all stages of development.”

When WTO members launched the Doha round of trade negotiations during the fourth Ministerial Conference in Doha, Qatar in November 2001, they in fact designated it a development round. The round would seek “to ensure that developing countries and especially the least developed among them, secure a share in the growth of world trade commensurate with the needs of their economic development.” Yet the fate of the Doha Round is uncertain. Trade negotiations resumed this year following a breakdown in 2006 chiefly over divergent positions on agriculture. Some industrialized countries were opposed to major concessions on farm subsidies, while some developing nations were reluctant to lower tariffs on industrial goods.

Clearly, the Doha Round can truly only be a development round if it results in real market access and entry for developing country exports of goods and services to major markets, including extension of duty-free and quota-free treatment to all least developed countries, stresses Assistant Secretary-General Jomo. This round of talks, he adds, should also ensure sufficient policy space for developing countries to manage and regulate economic policy in order to reach national development goals.

Development aid, a change in order

In contrast with the stagnation of trade talks, the world has seen development assistance virtually double since 2002 after years of decline. But aid growth has been driven largely by debt relief and emergency assistance, rather than fresh funding, the Secretary-General points out in his report. As proof, he cites a fall in development aid from 0.33 percent of GNI of OECD countries in 2005, when large debt relief packages were approved, to 0.30 percent in 2006. This is despite commitments made in 2005 by the Group of Eight in Gleneagles, Scotland, which pledged to double aid to Africa by 2010.

Projected development assistance of 0.36 percent by 2010, however, still falls far short of the pledged 0.7 percent target. The Secretary-General reminds in his report that $150 billion is needed to achieve the Millennium Development Goals by 2015. And only with significant, long-term, predictable resources can development goals be met. As the clock ticks, donor nations, with the exception of European Union countries, are behind schedule in their 0.7 commitment.

Development goals, however, are not the main driver of aid flows. Aid is selective, and driven “more by politics than by need, undermining its effectiveness,” Mr. Ban pointed out earlier this year. According to the World Economic and Social Survey 2005, the top twenty aid recipients were granted more than half of net bilateral development assistance, with ninety percent of aid going to fewer than half of eligible countries. Given this scenario of so-called darlings and orphans, the Secretary General recommends that countries discuss how aid delivery can be better aligned with national development goals, and how international cooperation can promote policy advice consistent with the national development strategies. Measures might include additional budget support, less aid conditionality, simpler monitoring, reduced transaction costs, more flexibility and improved effectiveness.

The quality of aid

The 2005 Paris Declaration on Aid Effectiveness called for more efficient forms of official assistance with an emphasis on more direct budget support. “The problems raised by aid conditionalities and the constraints they impose on development policy space also need to be boldly addressed and included in a revision of the Monterrey Consensus,” along with measures to ensure the fulfilment of promises to increase aid flows, suggests Assistant Secretary-General Jomo,

With the scaling up of aid also comes an urgent need for improved governance of the international system. Aid flows are complex, fragmented, and insufficiently coordinated. There are also a growing number of new donors, such as NGOs and the private sector. Recipient countries have little say in the process. Although the interests and views of donor countries are well represented in the multilateral financial institutions – especially in those associated with the allocation of concessional financing— and the on OECD Development Assistance Committee, no permanent financial forum exists to represent the interests of aid recipients.

The launch of the Development Cooperation Forum under the Economic and Social Council next year can play a crucial role in filling that gap, ensuring recipient countries participation and ownership, raising political oversight of aid effectiveness and discussing what kinds of flows should really be counted as aid. According to the Secretary-General, for aid to be effective, each country needs to set its own priorities, which include the pace and sequencing of implementation. The third High-level Forum on Aid Effectiveness at Accra next year should therefore not only review progress in implementation, Mr. Jomo points out, but also look at concrete actions to speed up and deepen it, focusing on ownership, accountability and capacity-building.

Overcoming external debt

In Monterrey, world leaders acknowledged that debt relief and debt cancellation play a pivotal role in liberating resources for development. Debt cancellations under the Heavily Indebted Poor Countries Debt Initiative have indeed rekindled growth, proving that “debt overhang is a shackle to economic growth,” in the words of Mr. Jomo.

Yet distressingly enough, even for a number of countries that have received debt forgiveness, debt is rising again. The Secretary-General report indicates that the debt relief and restructuring approach for low-income countries, and its associated conditionalities, have not paid sufficient attention to growth and the expansion of policy space required to make overcoming debt distress possible. Mr. Montes notes that “government finances have been so constricted under poverty reduction and growth programmes that countries have been unable to invest in critical infrastructure so that private investment can restart.”

At this juncture, an urgent paradigm shift is needed. Debt restructuring that allows debt-distressed countries to achieve self-regenerating growth is much needed, with an accent on the use of grants and the possibility of one hundred percent debt cancellation. In addition, the international community should begin discussions on alternatives to the Paris Club approach, with a view to broadening the creditor community in the interests of borrowers and lenders alike.

Greater voice in the global financial institutions

Among the main systemic issues that need to be addressed, the Monterrey Consensus called for modernizing the governance of global finance institutions which still reflect the period immediately after the Second World War. Developing countries are home to close to eighty percent of the world’s population, and they contribute forty-five percent of world output.  Yet, their size and significance is poorly reflected in forums where crucial decisions about their economic and social future are taken.

According to Mr. Jomo, “The global financial institutions’ sometimes controversial record and the sharp decline in their legitimacy – among middle-income countries as well as the least developed countries – have raise questions about their role and continued credibility in the developing world.” Reform of the voting weights of developing countries in the IMF and World Bank, called for at Monterrey, is long overdue and must be resolved before 2008. To fulfil the agreed-upon mandate, a redistribution of weights should result in a significant increase in the voting power of developing countries. “Global economic decision-making should be consolidated in international institutions of a universal nature – those that are part of the UN system – rather than in limited ad-hoc and unaccountable groups.”

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Bridging religions and cultures A bridge between religions and cultures

Recognition of shared values and a culture of understanding are elements of long-lasting peace in the 21st century

A path-breaking event devoted to the promotion of inter-religious and intercultural understanding and cooperation for peace will be held on 4 and 5 October, at the General Assembly. The event represents the culmination of numerous processes related to this theme at the United Nations, including the 2005 Conference on Interfaith Cooperation for Peace held at UN Headquarters, the Tripartite Forum on Interfaith Cooperation for Peace and the Alliance of Civilizations. The high-level gathering is expected to weave together the many thematic strands of these diverse bridge-building initiatives into a coherent fabric, which can provide guidance to the international community.

The high-level dialogue and its informal interactive hearing will seek to promote a culture of peace and dialogue among civilizations, advance a multi-stakeholder coalition, including with the private sector on related issues, further strengthen the Alliance of Civilizations initiative, and translate shared values into action in order to achieve long-lasting peace in the 21st century.

Rooted in the right to freedom of thought, conscience and religion contained in the Universal Declaration of Human Rights as well as in the many General Assembly resolutions on building a culture of peace, non-violence and tolerance, and on an alliance of civilizations, the dialogue is the first of its kind to bring together senior members of national governments around this theme. The theme of inter-religious and intercultural understanding now moves squarely into the mainstream of the General Assembly’s concerns and is here to stay.

The time for the dialogue has certainly come. In today’s world, there is a pressing need for religious and cultural bridge-building involving government and civil society in the neutral and universal space of the United Nations. Many of the world’s present conflicts are rooted in social, economic and territorial issues, which, more often than not, are transformed into violence by opportunistic extremists who manipulate religious and ethnic differences among communities to further their own ends.

At the same time, religion is a traditional and legitimate way in which societies transmit their values. Organized religion codifies a set of values for its adherents and packages them for transmittal to the next generation. Therefore, it is no surprise that economic and cultural globalization has met with a strong resurgence of religious belief and practice in many parts of the world, including in the industrial countries. This religious revival reflects a reaffirmation of traditional values and identities in the face of the powerful drive towards homogeneity in lifestyles and consumption that has been unleashed by globalization.

Time to mainstream religious and cultural debate

The United Nations and its sister agencies, which have been addressing economic, social, territorial and cultural issues for over six decades, are now seeking the policies, structures and programmes that can identify and respond to the causes and immediate needs of the many crises that have an intercultural and inter-religious dimension. Although it has not been common practice in United Nations programmes and publications to refer to the inter-religious and intercultural dimensions of economic and social issues, it is expected that the mainstreaming of inter-religious and intercultural discussions at the intergovernmental level would provide policy guidance and pave the way for bringing this bridge-building dimension more explicitly into the many economic, social and cultural programmes that the departments and agencies of the United Nations system undertake, including those for education, post-conflict institution building and long-term economic and social development.

The high-level dialogue will be opened by the President of the General Assembly, H.E. Dr. Srgjan Kerim, of the Former Yugoslav Republic of Macedonia, and will consist of statements to the plenary of the General Assembly by Member States and Observers to the United Nations. Mr. Kerim recently declared at a Ministerial Meeting of the Group of Friends of the Alliance of Civilizations that he comes from a country at a crossroads of cultures and religions. “I know from my personal experience how important it is that there be understanding between cultures, and that this understanding be enacted through dialogue on a daily basis.”

An innovative feature of the event will be the half-day informal hearing with civil society, including NGOs and the private sector, which will include remarks by Mr. Jorge Sampaio, High Representative of the Secretary-General for the Alliance of Civilizations. The hearing will be divided into two panels, where prominent civil society speakers will make presentations followed by interactions with member states on the subjects of “challenges of inter-religious and intercultural cooperation today,” and “best practices and strategies of inter-religious and intercultural cooperation going forward.” The first panel will be devoted to stocktaking on this theme from perspectives of different countries while the second will seek to suggest concrete courses of action. The subsequent formal plenary meetings of the dialogue will conclude with closing remarks by the President of the General Assembly, which will serve as the main outcome document of the dialogue.

From dialogue to action

The dialogue is expected to build on the outcome of the 2005 Conference on Interfaith Cooperation for Peace held at UN Headquarters, which called for strategies to enhance interfaith cooperation toward peace, and was transmitted to the President of the 59th General Assembly. The 2005 conference had called for an expansion and deepening of the relationship between the United Nations and civil society, including religious nongovernmental organizations. It advocated practical actions in the fields of education and the media so as to foster understanding, tolerance and cooperation between peoples of different religions and beliefs and urged the formation of an open-ended tripartite group comprising representatives of member states, civil society, and non-governmental organizations which would follow up on these issues through existing United Nations system mechanisms as well as by identifying new ways to address inter-religious, intercultural and inter-civilizational challenges. Finally, the conference invited the Secretary-General to explore ways to enhance implementation mechanisms and to follow up on the various initiatives and resolutions on enhancing the dialogue among cultures and civilizations.

The varied statements of member states, the proceedings of the informal interactive hearing, and the President’s concluding remarks are expected to constitute a significant and lasting body of outcomes that can guide action at the national, regional and international level in advancing inter-religious and intercultural understanding. Just as important as the details of any courses of action that may be proposed, is the very holding of this major event at ministerial level, which sends an important signal to governmental and civil society actors as well as to international organizations that economic, social, environmental and cultural policies and programmes need to take increasingly into account – explicitly or at least implicitly – the inter-religious and intercultural dimension of the challenges faced by the world, to ensure that the responses to these are sustainable and effective in preventing conflict in the 21st century.

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Voting for human rights: A step forward for indigenous peoples

Vote for indigenous peoples: Landmark declaration adopted

On 13 September, the General Assembly adopted the United Nations Declaration on the Rights of Indigenous Peoples. A non-binding text, the Declaration sets out individual and collective rights to culture, identity, language, employment, health, education, and other issues. The Declaration was approved after 143 Member States voted in favour, 11 abstained and four – Australia, Canada, New Zealand, and the United States – voted against the text.

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