Statement by Mr. José Antonio Ocampo, Under-Secretary-General for Economic and Social Affairs to the Ministerial Conference on Innovative Sources of Financing for Development
Paris, 28 February 2006

Let me start by expressing how delighted I am to participate in this conference. My Department, through its Financing for Development Office, has been fortunate to be the UN counterpart of the countries supporting the Action Against Hunger and Poverty, which have brought innovative sources of financing to the centre of world attention. Furthermore, as the Secretary-General has just said, we have taken a major step forward on this front, from theory into practice. We were set on this path by the Presidents of Brazil, Chile and France and the Secretary-General in Geneva in January 2004, followed by President Lula at the meeting of world leaders in New York in September 2004. Our gratitude goes today to President Chirac and the Government of France for providing us an opportunity to make this move decisive—and one that leads to concrete results.

Today I would like to raise four points for discussion, covering first some cross-cutting issues and then recommendations for the implementation phase.

Let me start with this panel’s sub-title: “building an inclusive globalization process”. We know that competitive markets alone will not produce outcomes that meet the needs of all people, particularly the poor. The tension between markets and social inclusion tends to increase with globalization, as evident in the experience of both industrialized and developing countries in recent decades. Hence the call for better global governance and for a stronger international social agenda that takes into account the “Social Dimensions of Globalization”. Last September in New York, this call received the full backing of world leaders.

Innovative financing processes can, and should, help the market support social inclusion. In the case of health, to be examined by the next panel, the needs and characteristics of developing countries’ economies tend to differ significantly from those of industrial countries. Indeed, most of the world’s impoverished peoples lack access to modern medical services and drugs. Projects, such as the “International Drug Purchase Facility” presented today, can be designed to reconcile the objective of competition in drug markets with the imperative to secure delivery of needed volumes of medicines according to strong quality standards and on an affordable basis.

This brings me to my second point, on the importance of the stability and predictability of flows. Exactly one year ago, the Paris Declaration on Aid Effectiveness stressed the need for stability and predictability of aid commitments, in order to allow recipients to engage in long-term measures. In June 2005, the UN High Level Dialogue on Financing for Development reaffirmed this point. The characteristics of the funding provided must match the long-term character of economic and social development goals.

Unfortunately, however, aid flows have been as volatile and procyclical for individual countries as private capital flows. The evidence presented in my Department’s World Economic and Social Survey 2005 is compelling in this regard. Innovative sources of financing present a potentially powerful exception, for they could provide stable and predictable long-term resource flows to developing country budgets.

Now to my third point, on implementation: aid funds should be channelled primarily through the budgets of recipient countries. This is also a major implication of the principles of aid effectiveness, for only funds so channelled meet the standards on ownership of policies by recipient countries, on alignment of donors with the planning and budgetary processes of recipient countries, and on contributions to state-building and fiscal planning in these countries. This recommendation stems from the Paris Declaration. But I could also mention the European Consensus of July 2005, which is very ambitious on this point, with 2010 as the deadline for channelling one half of all aid in this manner. Let us factor these commitments into our work on innovative financing mechanisms.

Finally, on the specific innovative mechanisms now at hand, I can only praise the extensive efforts made by all of you for moving to action—and encourage others to join in, with speed. We have two concrete initiatives currently being implemented: the IFF for immunization, and the contribution on airline tickets to facilitate access to drugs for fighting HIV/AIDS, tuberculosis and malaria. The long-term need for an adequate supply of these drugs could be assured through support for an International Drug Purchase Facility (IDPF).

Yet, while we drive ahead on action, I urge you to keep the pace in exploring other innovative mechanisms, complementary to those being implemented, which could also increase and supplement traditional sources of financing. And we need to remember the two overarching concerns here: to help governments reach their development goals, including the MDGs by 2015; and to help fill a potential financing gap after 2015, which could jeopardize advances made up to that point.

Several proposed projects could complement the IDPF, such as advance purchase commitments for vaccine development or public-private partnerships to facilitate investment in new technologies for fighting global pandemics. The private sector would be crucial for the success of these initiatives.

Among other proposals mentioned in previous reports—such as those by WIDER, the Group of Six and the Landau report—some seem to show promise for producing large, stable and long-term resource flows to developing country budgets. Our evaluation, in the World Economic and Social Survey 2005 and elsewhere, shows that a tax on carbon emissions and a tax on financial transactions would generate the most revenues. Their overall desirability would need to be weighed against that of other options, such as establishing an arms tax; using Special Drawing Rights (SDRs) for development; creating premium bonds; or establishing a lottery to finance UN funds and programs, on which the WFP has a proposal today. Tax cooperation is also an important matter that should be high on the agenda.

I welcome the proposal by President Chirac to create a “Leading Group on Development Solidarity Levies”, to encourage more widespread support for the initiative by the governments of Brazil, France, Chile, Spain, Germany and Algeria to provide workable proposals for implementing some of the other possible innovative sources of finance.

And let me, in closing, encourage all of you to maintain your close cooperation with international and non-governmental organizations active on this front, including the United Nations and its Department of Economic and Social Affairs. I assure you that, in line with our mandate from member states, we in DESA are dedicated to working with all stakeholders to support the global partnership for development entered into at Monterrey—and to help translate the Monterrey Consensus into positive, practical results for all peoples.