Third UN Conference on LDCs

22^nd Meeting (AM)

DEV/BRU/23

20 May 2001

‘FINANCING GROWTH AND DEVELOPMENT’ FINAL THEMATIC SESSION AT BRUSSELS CONFERENCE ON LEAST DEVELOPED COUNTRIES

“Unless African leaders were clear and listened to their people, priorities could not be defined and articulated to outsiders”, a participant stressed this morning, during a lively interactive thematic session at the Third United Nations Conference on the Least Developed Countries in Brussels.

At the session on “Financing Growth and Development”, it was further emphasized that Africans were not precise about where they wanted to take their countries, or what was best for them. Before outsiders could be persuaded to come in, African countries needed to be certain about their own needs. That would only be possible through clear planning and policies and the participation of citizens.

Another key issue reiterated throughout the morning session was for ownership and leadership of poverty reduction-strategy papers (PRSPs), which are prepared by countries in collaboration with the World Bank and the International Monetary Fund (IMF) and describe a country’s policies to promote growth and reduce poverty. Speakers said that countries emerging from conflict usually found themselves with competing priorities when confronted by PRSPs, often being confronted by outsiders who dictated other priorities. The PRSPs were not just Bank documents; they ought to be planning tools that people believed in and used. Above all, they should reflect a country’s priorities.

The Co-Chairman, Donald Kaberuka, Minister of Economy and Finance of Rwanda, said that least developed countries (LDCs) were prepared to assume their own responsibility for good governance, peace and stability. They were also prepared to develop nationally owned development plans to exit from the conditions of poverty. As an example, he cited the compact for African recovery, in which those nations had agreed on a set of priorities, which included a concept of mutual accountability. The role of the partners would be to provide predictable, reliable, flexible and long-term assistance.

The session’s second co-Chair, Eveline Herfkens, Minister for Development Cooperation of the Netherlands, said that it was important for the donors to reduce paperwork and become more transparent and predictable. Countries should be able to rely on the donors, so assistance funding could be included in their budget resources. It was also important to harmonize the procedures and try not to put an additional administrative burden on the recipients.

Amidst repeated calls this morning for evaluation of donors by LDCs, a speaker said it might also be necessary to get civil society to evaluate the activities of non-governmental organizations and perhaps the donors themselves. In many countries aid was channelled through those organizations because the feeling was that governments were corrupt and the organizations more trustworthy. Attention was drawn to the fact that in conflict situations, the behaviour of those organizations, particularly the international ones, was questionable.

It was also highlighted that, despite political will by the LDCs, the requisite financial will by donors was not forthcoming. Least developed countries were expected to implement good governance and democracy. Yet, while such measures were being implemented, the poorer countries themselves were running short of money. Donors expected laws to be put in place. Yet, once the law was passed, there was no financial commitment to fund, for example, national elections. The LDCs had to find that capital themselves.

The Conference’s final session is scheduled for 3 p.m. today.

Interactive Session: Financing Growth and Development

The session’s co-Chair, EVELINE HERFKENS, Minister for Development Cooperation of the Netherlands, said that it was important to move towards concerted action on behalf of all participants. Prepared speeches were not encouraged in today’s debate. She wanted people to listen and react to each other. Many conferences were wasting time finger-pointing at each other, and that was not productive. The participants in today’s discussion should play on the same team, trying to jointly address the questions under discussion. It was important to understand what the least developed countries (LDCs) themselves could do to figure out how to improve donors’ participation and concentrate on the framework for future action. The LDCs should not fail because of the lack of financing. The donor community should use more transparent criteria for financing, and it was important to discuss the predictable and transparent benchmarks that could be achieved.

DONALD KABERUKA, Minister of Economy and Finance of Rwanda, agreed that it was extremely important not to waste time finger-pointing. Rather, it was necessary to concentrate on concrete results. What was it that the LDCs themselves should do? he asked. There was a consensus regarding best practices and policies, but there was still a big gap between good policies and practice on the ground. For instance, people in the LDCs did not want bad governance, but they found it difficult to apply good governance on the ground. One of the principles of good governance was the need for law enforcement institutions, but many LDCs did not have capable police forces and legal systems. Those countries were good candidates for assistance. In some cases, however, the capability existed, but it was not used. It was important to address that problem.

At all the conferences, it had been said that LDCs should have “ownership”, but it was important to translate that principle into practice. Least developed countries should take responsibility for their own destiny, and the era of conditionalities was at an end. The donors should not tell the LDCs what to do; they should define a broad participatory strategy, which should show the sources of resources. It was important for countries to stop deceiving themselves. It was not foreign assistance that could bring LDCs out of poverty. Instead, it would be a combination of domestic and foreign resources, access to markets and good governance.

Interactive Session

A speaker said Africans were not clear about where they wanted to take their countries or what was best for them. Before outsiders could be persuaded to come in, Africans needed to be clear themselves about their own needs. That would only be possible through clear planning and policies and the participation of citizens.

A country emerging from conflict, like Sierra Leone, for example, usually found itself with competing priorities in the face of poverty reduction-strategy papers (PRSPs). It was stressed that such projects should be country-owned and country-led. Post-conflict nations with competing priorities were often confronted by outsiders who dictated what the priorities were and how many there were. A country coming out of conflict had priories that were different to others and could not be limited. Poverty reduction-strategy papers were not just documents of the World Bank or the International Monetary Fund (IMF). They ought to be planning tools that the people believed in and used. Above all, PRSPs should match the priorities outlined by countries.

It was underscored that a country such as Sierra Leone had never had a properly drawn out long-term vision. Today, however, it had Vision 2020, which was articulated with the participation of the people who, while not educated, knew their needs. Unless African leaders were clear and listened to their people, priorities could not be defined and articulated to outsiders.

Another speaker said democratization aggravated the problem of social demands. Meeting social demands, in turn, complicated the task of budgetary discipline. The lack of such discipline led to inflation and macroeconomic imbalance. Consequently, the needs of democracy could not be met, nor could the structural adjustment set out by the World Bank or the IMF be implemented. The quest to reduce poverty, thus, became difficult.

It was stressed that what was needed was a dialogue on the dimensions of poverty. If there was a national consensus on poverty that was also based on demands by the grass roots, then governance would move in the right direction. Bad governance and the lack of transparency in determining policy promoted every possible sort of ambiguity, mistake and mishap. Social consensus on poverty must, therefore, be an absolute priority today.

A speaker said that good governance was, above all, a question of information. If people were not informed about what their public authorities were doing, then there would be no transparency and, by extension, no good governance. Interaction within countries was, therefore, critical. Another speaker said that governments were created to govern well, since the State had emerged as the result of a social contract to achieve that end. Subsequently, institutions of the State must function well, while citizens must have a wide scope of choice to pursue their lives.

It was underscored, however, that in pluralistic societies it was often difficult to arrive at social choices that would be subscribed to by all concerned parties. It was, therefore, up to the ingenuity and skill of the government of the day to try and manage dissent in the best manner. Institutions must also be set up to ensure that governments answered to those who put them in Office.

Introducing the second block of questions in today’s debate, Ms. HERFKENS said that it was important to also look at the role of donors. They had often been micro-managing the LDCs, and the time and volume of funding had been unpredictable for the recipients. It was important to talk to local and national governments, taking their needs and concerns into account. She wanted to address the questions of how individual donors could improve their behaviour. What could be done to allow for the LDCs’ ownership of the situation?

It was important for the donors to reduce paperwork, as well as to become more transparent and predictable, she continued. Countries should be able to rely on the donors and include the assistance funding in their budget resources. It was also important to harmonize the procedures, trying not to put an additional administrative burden on the recipients.

She added that a quarter of the official development assistance (ODA) to Africa was spent on technical assistance, which was “the worst kind of assistance”. Instead of “throwing cans of Western products” at the poorest countries, it was important to improve their own capacity. Cannot the World Bank rediscover its original mandate as a multilateral development bank? she asked.

Also important was the issue of countries coming out of conflict, she said. The peace dividend should be paid out immediately after the end of conflict, or else peace would not stick. Development, reconstruction, rehabilitation and reintegration should not be forgotten. Peer review among the donors should be more participatory and transparent, possibly with non-governmental organization (NGO) participation.

As participants moved on to the discussion of the second block of questions, a donor representative said that donors’ discussions should not be held behind closed doors, and the World Bank, for example, had made many of its documents public. Poverty-reduction support credit could be helpful in solving LDCs’ problems. However, development measures could only work if financial measures went together with participation and empowerment.

Another speaker said that the work on the Programme of Action and the Declaration of the Conference had been concluded at 3 a.m. today. The documents testified to the fact that the donors and the international community had become more serious about development and the eradication of poverty. There were good initiatives on the table to remove most of the barriers for products from LDCs, and now it was important to implement those intentions and improve access to markets for the poor countries. After 40 years of negotiations, the countries had pledged to “untie” aid for LDCS, but again that initiative would only be useful if it was actually implemented. As for technical assistance, donor-recipient process should be replaced with society-to-society cooperation. Not only bureaucrats but also professionals should be involved in the process.

The goal of devoting 0.7 per cent of their gross national product (GNP) to ODA had been met by only a handful of donors, a speaker pointed out. Only recently, the number of countries that achieved that goal had risen to five. The affluent countries were duty-bound to manage their resources properly, as were the poor nations. Setting development priorities, it was important to respect them. The developing countries had a justifiable complaint that, while insisting on the opening of markets on behalf of LDCs, the donors were reluctant to open their own markets. The Organization for Economic Cooperation and Development (OECD) had agreed on the major points with policy with respect to developing countries. Donor countries insisted on good governance and democracy, but they should also better manage their own side of the deal. Were the World Bank and the World Trade Organization managed democratically?

Also on the role of the donor countries and calls for modernization, a speaker said that it was important to calculate the cost of the supplies involved and take into account the long-term financial consequences of projects. Development assistance did not come cheap, and donor countries should be consistent in their approach. Financial instruments needed to be in place to channel assistance. Industrialized countries could provide assistance in setting up the relevant institutions in recipient countries.

A speaker said, despite political will by the LDCs, the requisite financial will by donors was not forthcoming. Least developed countries were expected to implement good governance and democracy. Yet, while such measures were being implemented, the poorer countries themselves were running short of money. Donors, for example, expected laws to be devised and put in place. Yet, once the law was passed, there was no financial commitment to fund, for example, national elections. The LDCs, in turn, had to find the capital themselves.

RUBENS RICUPERO, Secretary-General of the United Nations Conference on Trade and Development (UNCTAD), said the OECD should be asked to develop some donor performance indicators. That would ensure a genuine partnership

One speaker asked how each negative point in relation to LDCs could be resolved. Also, was aid sufficient to tackle the problems of development? Should not trust and confidence between the people of North and South be sought? There was a definite need to think about the people themselves. If northerners did not trust their leaders, then they would resent paying taxes, because they would not know where their money was going – hence, the decline in funding from the industrialized countries.

Another speaker stressed that structural adjustment programmes had to be evaluated in terms of what had worked, what had not worked, and why something had not worked. In addition, it was necessary to rethink the relationship among government, NGOs and donors. A speaker said that while it was necessary to comment on the behaviour of donors, it might also be necessary to get civil society to evaluate the activities of NGOs and perhaps the donors themselves. In many countries, aid was channelled through NGOs because the feeling was that governments were corrupt and NGOs more trustworthy.

Attention was drawn to the fact, however, that in conflict situations, the behaviour of NGOs, particularly the international ones, was questionable. The fear in Africa was that one evil was replacing another. Perhaps, there should be a performance indicator for NGOs, as well, to determine how well donor funds were being used. Another perception was that if NGOs came from the same country as the donors, a blind eye was often turned when money did not go to the final beneficiaries. It was necessary to establish that the target recipients were receiving money that originated with taxpayers.

Another issue raised involved the resources of developing countries. Corrupt politicians had transferred billions of dollars to the North. Perhaps, when the developed countries met, they could figure out how that money could be returned, since those funds would be a great boost to development.

A speaker drew attention to another donor, which had been omitted, from this morning’s discussions -- the multilateral system, and in particular the United Nations. The Organization was in a crisis finding itself with decreasing amounts of funds available to it. It was hoped that the LDCs would also evaluate the activities of the multilateral system vis-à-vis what was happening to the United Nations and its agencies.

Ms. HERFKENS said she agreed that the debate on United Nations system performance should continue. In addition, the internal divisions of countries should not be allowed to creep into global debates or the multilateral system would be incapacitated. Countries had to be coherent in their own positions and not say one thing in one forum, and something else at another.

At the opening of the third segment on partnership, Mr. KABERUKA said that the LDCs were fed up with aid conditionalities which did not work. For poverty reduction, the LDCs’ ownership of the problem was needed. The LDCs could not grow solely on the basis of their domestic resources. Development of good governance could attract direct foreign investment to those countries. The countries were prepared to assume their own responsibilities for good governance, peace and stability. They were also prepared to develop nationally owned development plans to exit from poverty.

Agreeing on the compact for African recovery, he continued, the countries of the continent had agreed on a set of priorities that were relevant for LDCs in all parts of the world. The ideas contained in that document could serve as a basis for further discussion. One of those ideas was a concept of mutual accountability. The role of the partners would be to provide predictable, reliable, flexible and long-term assistance. The money from donors should go through national budgets. Public accounts needed to be set, which were transparent for the people.

Regarding the peer reviews that had been mentioned in connection with donor countries, he added that the developing countries should also be open to each other. Assessments of needs should not be done by the donors, but by a third party. While market access was important, it was not the only condition for development. They needed to be accompanied by adequate financing and investments. It was also important to adopt country-specific measures.

Several speakers in the debate expressed interest in the document, which

Mr. Kaberuka had mentioned, agreeing that it could be useful for other regions.

Ms. HERFKENS said that as the ODA flow was disappointing, it was important to consider new means of improving the aid situation. Increased commitment to the established goals was needed. There was an established constituency of taxpayers in the North prepared to devote certain amounts to poverty reduction and reduction of hunger and child mortality. It was the political will that was lacking in many cases. She urged the participants to make a commitment not to let the agreed policies fail. Donors should be able to provide clear benchmarks, which would allow the world to judge their performance. Those benchmarks should include ownership, transparency and predictability. The ownership implied more than government participation; it should also involve the civil society and general population. The funds intended for education should not end up in a recipient country’s defence ministry, and that implied transparency of financing.

An NGO representative said that the IMF and the World Bank should be as open to peer evaluation as other donors. It was also important to see why some countries that had been painted as IMF success stories, including Ghana, were now reapplying to be included on the list of LDCs.

New performance indicators could be useful for determining the success of the new partnership emerging from the Conference, the session was told. It was also important to work together towards a set objective. The volume of aid from particular countries, however, depended on their budgetary considerations and could not be pre-determined.

A donor representative supported the transition from a conditional to contractual approach. At the country level, the new contractual relationship between the donors and the recipients should be based on the PRSPs. It was important to promote global coherence and transparency. A cross-agency collaboration was extremely important, which should involve the United Nations, the World Bank and the IMF. As a system, those organizations could do a much better job on the basis of realism, pragmatism and everyday hard work. The spirit of partnership that had been prevalent in Brussels was very important.

It was not always the donors that imposed conditionalities, a speaker said. He still encountered a “neo-colonialist” attitude on behalf of the developing countries, which kept asking what the donors wanted them to do.

A point was also made that the strategies for releasing development funds needed to be as concrete and tangible as possible. Least developed countries should be fully involved in that process.

In closing, Mr. KABERUKA said that everybody agreed that, if assistance was to be effective, it needed to be predictable, flexible and devoted to long-term goals. The transaction costs had also been discussed. Other things being equal, the aid should be equitable and country-specific. Poor countries should receive more. The countries should be able to produce competitively. The LDCs accepted the need for good governance, but sometimes they found it difficult to implement it. An exit strategy from ODA needed to be developed when PRSPs. Budgets needed to be transparent, and the question of peer reviews needed to be further discussed.

Ms. HERFKENS added that there was a commitment from the donor side, and agreement had been reached on many issues of importance to the LDCs. Lip service should be translated into real commitment on the ground. She saw the Conference was a process, and today’s debate, she hoped, would continue after the event. Such ideas as monitoring and peer reviews should be further continued at the United Nations and other forums.

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