Ministerial Round Table 7
The link between the progress in the implementation of the agreements and commitments reached at the International Conference on Financing for Development and the achievement of the Declaration, and the promotion of sustainable development, sustained economic growth and the eradication of poverty with a view to achieving an equitable global economic system
Summary by the Co-chairs
H.E. Mr. Donald Kaberuka, Minister of Finance and Planning, Rwanda
Mr. Rubens Ricupero, Secretary-General, UNCTAD
Participants noted that the successes of the Monterrey Consensus included an acknowledgement that each country bears primary responsibility for its economic and social development and that developing countries need assistance in creating an enabling environment for development. Discussions focused on the real achievements made by many developing countries in achieving domestic reforms and the need for countries to fulfill commitments made at Monterrey.
It was further noted that financing for development is essential for achieving the Millennium Development Goals (MDGs) including the alleviation of poverty and improving access to safe drinking water, the promotion of gender equality and combating the feminization of poverty, as well as in overcoming challenges posed by HIV/AIDS and other diseases.
Mobilization of Domestic Resources
It was widely recognized that domestic resources are an important source of financing for development, and that domestic reforms can enhance a countrys ability to mobilize domestic financial resources. Several participants highlighted effective reforms taken in their countries such as the implementation of sound macroeconomic policies like tax reforms, monetary policy and financial sector reform, better governance through improved transparency and anti-corruption regulations. One participant noted the effectiveness of tax reforms focused on transparency, accountability and simplicity in raising government revenues. Policies aimed at mobilizing domestic financial resources can also create an enabling environment for foreign direct investment. However, despite achievements, there remains a net outflow of capital from developing countries to developed countries. Moreover, additional claims on domestic financial resources, including those associated with HIV/AIDS, pose new challenges for many governments.
Foreign Direct Investment
Participants noted that recently foreign direct investment has been lower than in the past despite reforms undertaken in many countries. This is in part due to slower growth in the world economy and points to the need for greater coordination in macroeconomic policies especially among developed countries with large economies. It was pointed out that there remains a tendency for FDI to be concentrated in a few countries and in a limited number of projects.
Participants called the recent Cancun meeting a major setback and stressed the importance of trade as a key agenda item of the financing for development process.
A lack of significant initiatives and leadership could threaten the Monterrey pledge to create a multilateral trading system in support of development. Consequently, discussants called on each other to consider a message from the High Level Dialogue that the Doha negotiations should be re-started as quickly as possible and with a clear commitment to putting development back at the center of the trade agenda.
Discussants noted that agricultural subsidies by developed countries combined with low tariffs in the developing world are causing unsustainable imbalances in the world trading system. Ensuring market access for developing countries (especially for agricultural and textile products), and ending agricultural subsidies by developed countries were seen as the most pressing concerns on the trade agenda. Discussants also
underscored the urgency of addressing outstanding implementation issues and special and differential treatment. Some participants warned against expanding the trade system into non-trade areas. In this regard they called for the exclusion of the Singapore issues from future negotiations and a review of the TRIPs and TRIM agreements.
Official Development Assistance
Participants focused on the progress achieved in increasing the volume and the effectiveness of flows of Official Development Assistance (ODA) to recipient countries.
It was noted that while various initiatives announced at Monterrey (e.g. the Millennium Challenge Account of the US) have not yet been fully implemented, the declining trend of ODA is reversing. Discussants commended donor countries that meet or exceed the agreed ODA target of 0.7% and urged others to follow suit. In light of the fact that net resource transfers to developing countries are still negative participants underscored the need to rapidly increase the volume of aid and disburse it quickly in a predictable timeframe. The proposal for an International Finance Facility was seen as an important potential mechanism that should be seriously considered by the international community. It was also noted that the World Solidarity Fund established at the Johannesburg Summit could become another source of finance once it is adequately funded. Speakers emphasized that ensuring and increasing the quality of aid is critical. In this regard, the Rome Declaration on Harmonization was seen as a crucial effort to harmonize and reduce multiple requirements of donor countries on developing countries and assist the latter in taking charge of their own development process.
Many participants stressed that unsustainable debt levels prevent many developing countries to achieve the MDGs. The Heavily Indebted Poor Countries (HIPC) initiative was welcomed as an important instrument for debt relief. However, most speakers pointed to the fact that thus far the initiative had fallen far short even for countries that reached completion point. In this regard, it was suggested that eligibility criteria should be more flexible to include more countries in the process. It was also argued that many middle-income countries had unsustainable debt, but there was no mechanism to address this problem. Several participants stressed that the United Nations should play a more active role in developing new mechanisms to resolve problems between debtors and their creditors.
Many speakers stressed the need to enhance the participation of developing countries in international economic decision-making. There was support of ongoing considerations of these issues by the IMF and World Bank. It was, however, emphasized that thus far there had been no specific results.
Speakers emphasized that there should be more coherence and consistency between financial, monetary and trade policies in order to sustain development. They called for developed country policy makers to take into account global development prospects while making decisions on various economic, social and financial issues. In this regard, bringing trade issues in FfD was considered as an important move forward. More generally, many participants emphasized that there was a need of reform of multilateral system. One aspect of the reform is to further stimulate the participation of civil society and private sector.
Many speakers considered that financial outflows from developing countries were the most important indication that the objectives set in the Monterrey Consensus had not been fulfilled yet, despite progress on many individual issues. At the same time it was widely agreed that Monterrey was an ongoing process along with other global initiatives, and a point of departure for promoting development.
Participants highlighted the critical role that the annual Spring High Level Meeting of ECOSOC with the BWIs and WTO plays in maintaining the momentum of the Monterrey Process. The establishment of working groups on major agenda items of the Monterrey Consensus and the strengthening of the FfD Office were suggested to enhance the effectiveness of financing for development.