The General Assembly has just concluded its review of the implementation of the Millennium Declaration at the World Summit in New York. The Outcome document contained a strong and unambiguous commitment by both donor and developing nations to achieve the goals agreed in the major Summits and Conferences of the United Nations, including the Millennium Development Goals. The Summit incorporated a special session on Financing for Development, in which world leaders also reaffirmed their commitment to the global development partnership between industrial and developing countries agreed in the Monterrey Consensus.
A number of authoritative reports presented to this and previous Development Committee meetings, including the United Nations’ Millennium Development Goals Report, UNDP’s Human Development Report, and the Global Monitoring Reports, have indicated that the world is not on track to meet the MDGs by 2015. A particularly large shortfall looms for Sub-Saharan Africa, as well as for the world in the case of some specific targets. The United Nations has also provided an assessment of the Financing for Development process in its recent World Economic and Social Survey, which served as the background document for the General Assembly’s High Level Dialogue on Financing for Development held in late June and for the first day of the World Summit.
Preparations for the Summit galvanized an important series of initiatives, which have led the World Bank’s Chief Economist to characterize this year as the “Year of Development”. Implementation of these decisions and of the Summit outcome will determine whether we can succeed in helping the millions of the world’s poor break out of their recurrent poverty by taking decisive action to meet the Millennium Development Goals over the next “Decade of Development” to 2015.
The World Summit answered the call in paragraph 65 of the Monterrey Consensus when the United Nations Convention Against Corruption received its thirtieth ratification by a member state, allowing it to become operational. As noted by the Secretary General, corruption hurts the poor disproportionately by diverting funds intended for development, undermining the government’s ability to provide basic services, feeding inequality and injustice, and discouraging foreign investment and aid. The Convention provides for international cooperation to return assets illicitly acquired by corrupt officials, as well as for preventive measures to detect the diversion of national resources. Through provisions on banking transparency and against money laundering, the Convention will help in the fight against organized crime, as well as in preventing private and public sector corruption.
The acceptance by developing countries in the Monterrey Consensus of the principle that the primary responsibility for development lies with the policies and actions taken by developing countries themselves shows in their commitment agreed at the Summit to adopt, by 2006, national development strategies to achieve the internationally agreed development goals, including the MDGs. And all countries agreed to a stronger mechanism to follow up commitments to achieve the internationally agreed development goals, to be driven by ECOSOC and its functional and regional commissions.
The sense of responsibility felt by developing countries also shows in the increased attention given to measures of financial and technical cooperation amongst them. The South Summit held in Doha in June created “The South Fund for Development and Humanitarian Assistance” for economic, social, health and educational development, as well as for addressing problems of hunger, poverty and human catastrophes. A number of measures to increase South-South cooperation were announced during the World Summit. In particular, the Government of the Peoples Republic of China announced a package of measures to support financial flows to Least Developed Countries. Venezuela announced the extension of its Petrocaribe programme to ease the impact of rising oil prices on developing countries in the region. And Brazil and Chile announced that they will impose a solidarity contribution on air tickets that will be used in the fight against HIV/AIDS.
The Monterrey Consensus reaffirmed the central role of official assistance in financing the internationally agreed development goals. It generated a series of new aid commitments that reversed the trend decline in ODA that had started in the 1980s. In preparation for the World Summit, the Secretary General called on donors to scale up contributions by setting firm dates to reach the long-standing United Nations ODA target of 0.7 per cent of GNI.
The EU-15 members that had not yet done so responded to this call by announcing that they will meet that target between 2012 and 2015. European countries that already exceed the target reconfirmed their strong commitments to development and announced in some cases further increases in their aid. New entrants to the European Union also announced commitments that will make them active participants in development cooperation. EU member countries also set intermediate ODA targets for 2010.
The G-8 Summit held in Gleneagles, Scotland in July provided additional commitments to increase assistance. In particular, a doubling of aid to Africa was announced, equivalent to an additional $25 billion per year by 2010. Specific additional commitments were made by Canada, Japan and the United States. The specific focus on Africa in the G-8 Summit echoed the emphasis given to the particular challenges that Sub-Saharan Africa faces in meeting the MDGs by all international institutions and by the Blair Report on Africa, “Our Common Interest”, released in March.
On the basis of commitments made at Monterrey and more recent commitments announced in preparation for the World Summit, ODA from the main OECD donors should increase by about $50 billion from the 2004 levels to around $130 billion by 2010. The sharpest increases will be in Africa, rising by some $25 billion, which would achieve the G-8 objective of doubling the level of aid to around $50 billion by 2010.
It is important to recognize, however, that a significant share of recent and projected increases in aid is associated with humanitarian assistance, debt forgiveness (including that announced for Iraq) and technical assistance. So the amount of aid going into current budgets of recipient countries remains low and has actually fallen as a proportion of ODA. In addition, the increase in real terms is substantially lower due to the fact that the contributions are calculated in terms of a depreciating currency. As the World Bank will be collaborating with the OECD in monitoring the implementation of aid commitments, the Development Committee might consider the creation of a new approach to measuring aid, in terms of its direct contribution to recipient countries’ budgets.
In addition to the reversal of the declining trend in the magnitude of ODA since Monterrey, there have also been significant steps taken to improve the quality of aid, through measures to improve its effectiveness. The commitments were materialized in the Paris Declaration on Aid Effectiveness and later work by the OECD/DAC Working Party on Aid Effectiveness. The commitment to agree on the targets to monitor the 12 indicators of aid effectiveness by the 2005 World Summit was met.
The Working Party produced a set of formal proposals for targets for all 11 of the indicators that have been accepted, subject to reservations by one donor on the methodology for assessing local procurement systems and the quality of financial management reform. For the 12th indicator, on untying aid, the target of “continued progress” agreed in Paris has been maintained.
There has also been recent progress in the call in paragraphs 23 and 44 of the Monterrey Consensus to seek new and innovative sources of development financing. A pilot project for the International Finance Facility proposed by the United Kingdom has been announced by the Global Alliance for Vaccines and Immunization with the cooperation and support of Britain, France, Italy, Spain and Sweden. The French and Brazilian governments, members of the Group for Action Against Hunger and Poverty, have recently announced their intention to introduce a pilot project for a global solidarity contribution on air tickets, while Chile has announced that it will implement such a measure from the beginning of next year. Chile has also called for a reconsideration of the use of Special Drawing Rights to provide development finance, as well as to help eliminate instability and financial imbalances in the international financial system.
The recent large increases in workers’ remittances have brought efforts to enhance their contribution to financing development. Measures to reduce the transactions costs are being implemented. In this regard, the Group for Action Against Hunger and Poverty will introduce a General Assembly resolution in the 60th session on coordinating actions to reduce costs. It is important to remember that, although these are private transfers, their development impact can be increased if they are used to “bank” the poor or if they are channeled into local development projects. To support “banking” of the poor, the United Nations will unite diverse members of the microfinance community from 7 to 9 November to celebrate the successes of the International Year of Microcredit in an “International Forum to Build Inclusive Financial Sectors.”
It is important to recognize that remittances are the result of international labor migration often driven by the large international inequalities of employment opportunities. They are also often associated with irregular conditions of employment and residence that deprive migrant workers of the human and civil rights guaranteed under the UN Charter. The Secretary General of the United Nations has thus sponsored an independent Global Commission on International Migration to study how to improve international cooperation in this field. The report of the Commission will be presented to the Secretary General on 6 October. In 2006, the General Assembly’s High-Level Dialogue will be devoted to international migration and development. We hope that this dialogue will break new ground in identifying appropriate ways and means to increase international cooperation in order to maximize the development benefits from international migration and minimize its negative impacts.
The Gleneagles G-8 Summit also made a major contribution to achieving the Development Goals, by making a formal proposal for full relief for countries that reach their Completion Point on debt to the IMF, IDA and the African Development Fund. There was widespread support for this initiative at the World Summit. World leaders stressed the importance of devising a financing package that fully compensates the three institutions for the loss of resources, which would satisfy the Monterrey condition that debt reductions be genuinely additional to increased ODA commitments.
All of these actions represent major improvements in both the political and financial support for implementation of the Monterrey Consensus to provide the foundation for achieving the internationally agreed development goals, including the MDGs. Nonetheless they are still not sufficient and can readily be amplified and extended to make a truly major impact.
The World Summit reinforced the political commitment already expressed in other high-level international meetings dealing with development for a rapid conclusion of the Doha trade round. This also made evident, however, the widening gap between political commitment and the willingness to make concessions in negotiations that will give a major boost to developing countries. Many heads of state and government from developing countries attending the World Summit expressed concern over the difficulties observed in making progress in realizing the full development dimension of the Doha round.
The expert estimates of the benefits to be reaped by developing countries through trade—and in particular through increased market access in agriculture—dwarf the sums available through other measures. But it is important to remember that this potential can be realized only if the ability exists to exploit the trade measures. Even if agreement is reached in time to honor the Secretary General’s urgent request to complete the Round by the end of 2006, the benefits will not be immediate. The increasing recognition of the crucial importance of complementary aid for trade measures is encouraging, but it also underscores the need for continued increases in official assistance to support production sector development sufficiently strong to allow developing countries to benefit from the opportunities provided by the international trading system. It will also be important to ensure adequate compensation for developing countries that may lose in the negotiations, either because of lost preferences in industrial country markets or because they have benefited from subsidized exports from developed country exporters.
We must bear in mind that positive treatment under the Doha Round of Mode 4 of service delivery (labor services) can do much to enhance the links between migration and development.
The debt relief initiative adopted at the G-8 Summit will benefit HIPC countries, particularly from Sub-Saharan Africa. This is particularly appropriate, as that continent contains the largest number of countries in need of extra assistance to achieve the MDGs. In absolute terms, however, the majority of the world’s poor reside in developing countries that are considered to be middle income countries, some of which face extremely high debt burdens. Some participants in the World Summit were thus concerned to stress the importance of regional diversity within countries and the necessity to extend debt relief to a larger number of non-HIPC Least Developed Countries and to middle income countries. Many also stressed that the measures had little impact on Latin American HIPC countries, which receive support from the Inter-American Development Bank and subregional development banks not included in the relief proposals.
Thus, while the shareholders of the institutions involved are encouraged to approve the G-8 proposal, much more can be done through debt relief to provide support for achieving the MDGs. In this context, it is important to note the widely held concern that there is still no formal mechanism to resolve debt problems facing middle income countries.
It is increasingly recognized that conditionality attached to aid often conflicts with the commitment to increase developing countries’ responsibility for their domestic development strategies through increased national ownership, which, in turn, may impede aid effectiveness. Only when aid is fully aligned with national development strategies, as agreed in the Paris Declaration on Aid Effectiveness, can it be nationally owned and fully effective.
The United Kingdom has recently proposed measures to align aid contributions with national decisions by substituting agreed benchmarks for measuring progress on the reduction of poverty for the policy conditions traditionally set by donors. The new approach will increase direct budget support and reduce reliance on an ongoing IMF support programme as the indication of policy performance. The United Kingdom has indicated that it will encourage the major official institutional donors to join them in reducing imposed conditionality and increasing national ownership.
The European Commission has also recently announced the “European Consensus” intended to coordinate the official assistance of the European Union members. The aim is to strengthen ownership, ensure the financing of essential operating budgets, promote sound and transparent management of public finances and align aid with the partners’ national procedures. In this respect, the new approach recognizes the need to ensure stable and predictable longer-term aid commitments, in order to allow recipients to engage in medium-term expenditures, such as those that would be required for meeting the MDGs.
Finally, notwithstanding these encouraging proposals, we must also remember the call in the Monterrey Consensus for this responsibility to guarantee adequate voice and participation of developing countries in international economic decision-making. While this problem has been studied extensively, no concrete proposals have emerged on the Agenda. The Managing Director has recently noted that “The Fund’s legitimacy as a global organization rests on fair representation for all members. The current allocation of quotas…puts this legitimacy at risk in many regions, including in Africa, where the Fund is heavily engaged, and in Asia, whose place in the world economy has grown far more than its role in the Fund. The issue…must be addressed.” I could not agree more. Regrettably, however, while the issue is part of the Medium Term Review of IMF strategy, it no longer even appears on the Agenda of this Development Committee. I hope you will give it the attention it deserves.