by Kevin Watkins
16 June 2015
When you are operating at the negotiating coal-face it can be easy to forget what’s at stake in summit diplomacy. In the case of July’s Addis Ababa conference on Financing for Development, the stakes could hardly be higher.
Skim the first paragraph of the draft outcome document and you get a reminder of the ambition. This is about governments coming together behind an agenda aimed at eradicating poverty in a generation, avoiding climate catastrophe, building a more equitable global economic order, and ‘ensuring no country or person is left behind.’
These are the defining challenges of our generation. Success in Addis Ababa could open the door to a bold new era of international cooperation. Failure will have the equal and opposite effect. So closely intertwined is the Addis conference with the September UN General Assembly meeting that’s due to agree the Sustainable Development Goals (SDGs) and the December climate summit, that a weak deal would create a harmful domino effect.
So what would success look like? The co-chairs have done an extraordinary job in cutting through the negotiating fault lines – and the recent draft text has promise. The challenge now is to go the extra mile by backing the ambition with some practical – and measurable – commitments. It strikes me that there are five winning tickets.
First, let’s get specific about the social floor – and about ensuring no country or person is left behind. Even with an enhanced revenue effort, the world’s poorest countries will be unable to finance the universal health coverage, basic education and social protection needed to turn the SDGs from aspiration to outcome. My colleagues in ODI have estimated the financing gap at US$84bn. Surely all countries could unite in their support for a social compact that would extend opportunities for millions of the world’s most marginalised people.
Second, financing for development is about much more than aid – but that’s not a reason for underplaying the importance of aid. Bluntly stated, too little aid is going to the countries that need it most. Aid per person living below the international poverty line in the average low-income country is about one-third the level in lower middle-income countries. Fragile states are particularly neglected. Beyond reaffirming the 0.7 per cent aid target, the summit should deliver a clear commitment to provide half of all aid to the Least Developed Countries (LDCs). The EU could set a standard. Instead, its current offer is to provide 0.2 per cent of GNI to LDCs (possibly) by 2020. Meanwhile other donors and large emerging economies are yet to commit at all.
Third, build a bridge to the Paris climate summit. The UN Secretary General has launched a sustainable energy for all initiative aimed at achieving universal access to electricity by 2030. Recent proposals from the Africa Progress Panel report have set out how governments, private investors and aid agencies could mobilise the US$20bn needed to achieve this goal in Africa through renewable energy. Rich countries could also set clear and transparent benchmarks for delivering the US$100bn in climate finance pledged for 2020.
Fourth, remove the infrastructure financing bottleneck. Aid is a drop in the infrastructure financing deficit. Other official flows with lower budgetary costs for donors, like risk guarantees to private sector investors and lending from World Bank and regional development banks, could help fill the gap.
Fifth, redirect wasted resources to sustainable development. The current draft has some encouraging language on action to build revenue mobilisation capacity, cut tax evasion, and curtail energy subsidies. What are missing are dates and practical commitments. How about a pledge by countries to eliminate the US$88bn now allocated to discovering and exploiting new reserves of ‘unburnable carbon’? Africa could lead by example, transferring the US$21bn in subsidies used to support energy use by the rich to finance low carbon energy access for the poor.
None of the above detracts from the infinitely complex challenge of translating a global commitment into real world action. Moving up the scale of country incomes, revenue capacity and creditworthiness, my colleagues have also highlighted the problem of the “missing middle” – countries in which the combination of aid and non-concessional public finance declines faster than additional public revenue increases. Clearly, graduation to true “market” access needs to be smoothed. And we need a far higher volume of non-concessional loans for countries that can use it well – not just from “new” development banks like the AIIB, but from a reinvigorated approach by the traditional ones.
Negotiators have a tough few weeks ahead in New York. Anticipate late nights, shortened tempers and a dose of eleventh hour brinkmanship.
My appeal is for all governments to keep an eye on the big prize. An ambitious global partnership agreement on financing for development would be a triumph for international cooperation. It would set the stage for SDGs commitments that are worth the paper they are written on – and it would help raise the debilitating lack of ambition surrounding the Paris climate talks.
Above all, though, it would chart a course towards a fairer and more sustainable pattern of globalisation, offering the hope of a better future to the world’s poorest people.