Global Financial Crisis Should Not Affect Fulfilment of Official Assistance Commitments, Say Speakers in Second Committee
Global Financial Crisis Should Not Affect Fulfilment of Official Assistance Commitments, Say Speakers in Second Committee
|Department of Public Information • News and Media Division • New York|
Sixty-sixth General Assembly
11th & 12th Meetings (AM & PM)
Global Financial Crisis Should Not Affect Fulfilment of Official Assistance
Commitments, Say Speakers in Second Committee
Delegates Also Consider Innovative Mechanisms for Financing Development
The current global financial crisis should in no way impact upon the delivery of official development assistance (ODA) pledges, and more must be done to meet those commitments, delegates in the Second Committee (Economic and Financial) stressed today.
As the Committee took up the question of financing for development, Brazil’s representative said the challenges stemming from the global economic crisis were felt most in developing countries, meaning that the mobilization of resources for development remained extremely pertinent. He called upon the international community to mobilize significant additional financial resources for that purpose, to ensure implementation of their pledges to devote 0.7 per cent of gross domestic product (GDP) to official assistance. He went on to highlight the fundamental role of aid in supplementing developing countries’ domestic resources and catalysing private investment, including foreign direct investment (FDI).
Argentina’s representative, speaking for the “Group of 77” developing countries and China, was one of several speakers to echo the calls for a redoubling of efforts to fulfil international commitments, including the 0.7 per cent target. He called for predictable and timely distribution of ODA and multilateral resources, and for “an end to the ongoing pro-cyclical conditionalities that curtail the available financial options for developing countries and needlessly exacerbate the financial, economic and developmental challenges”.
The global economy’s systemic problems still required resolution and there was a need to address major unfulfilled objectives, such as providing predictable financing for development, he said. The Economic and Social Council should strengthen the promotion of coherence, coordination and cooperation in the implementation of the Monterrey Consensus and the Doha Declaration, he added, in reference to the outcome documents from the 2002 International Conference on Financing for Development and the 2008 Review Conference. He called for the convening of a follow-up financing for development conference in 2013.
Nepal’s representative, speaking for the Group of Least Developed Countries, said that if the financial situation were allowed to affect delivery on commitments or to hinder efforts to augment the level of assistance pledged, least developed countries were unlikely to meet internationally agreed development targets, including many of the Millennium Goals, by 2015. While commending the recent increase in the level of Aid for Trade, he expressed concern over the skewed distribution, noting that two thirds of assistance went to only 10 least developed countries.
Canada’s representative, speaking also for Australia and New Zealand, agreed that there was a need to strengthen Aid for Trade efforts to help boost trade performance and address the significant “supply-side” constraints faced by developing countries. Though the Group of Twenty (G-20) countries had committed to refraining from protectionism, more was needed to meet the challenges facing developing countries. Trade remained central to their development and they would gain greatly from a new framework better tailored to their benefit. That would require a balanced conclusion to the Doha Round of World Trade Organization negotiations, which was critical to faster poverty reduction and fulfilment of the Millennium Development Goals.
Botswana’s representative stressed the impact of the crisis on middle-income countries, saying that his nation’s poverty-eradication and job-creation efforts had been disrupted despite the Government’s sound policies. While accepting the importance of harnessing domestic resources, he said foreign direct investment and ODA were critical to spurring economic development in the short and long term. However, like many middle-income countries, Botswana continued to suffer exclusion, and aid commitments remained depressingly low.
Guyana’s representative, speaking for the Caribbean Community (CARICOM), also noted the impact of the crisis on middle-income countries, which found it increasingly difficult to source adequate and assured levels of development financing on concessionary terms. That had had a negative impact on development planning, with global economic uncertainty and aid-flow volatility making the situation even more untenable.
CARICOM would explore the possibilities of innovative development-financing schemes, but there was a need to address their potential positive as well as negative implications, he said, emphasizing the importance of not placing an undue burden on developing countries. He called for further deliberation and analysis to bring a more definitive understanding of such aspects of innovative financing as “additionality”, its relationship to ODA and its effectiveness. Intergovernmental agreement was needed on the parameters of the term “innovative financing” so as to maximize its potential contributions to development.
The Committee also considered the question of innovative mechanisms for development funding, with several speakers echoing the calls for agreement on a definition of innovative financing methods and terms such as “additionality”. Several stressed that innovative financing methods should complement rather than replace ODA.
Spain’s representative, speaking for the Leading Group on Innovative Financing for Development, urged the addition of new resources to the traditional ones. Doing so would make financing for development more stable and sustainable, helping to protect it at the same time from budgetary fluctuations and political changes, especially in times of economic and financial crisis.
He pointed out that more than $5 billion had been collected through innovative mechanisms since 2006, with innovative financing mechanisms implemented in more than 20 countries. He pointed delegates towards several examples of best practices that had created a base for broader action on a greater scale.
France’s representative sketched the parameters of the term “innovative financing”, going some way towards a definition, and clarified several categories of innovative mechanisms of financing. He stated that the Leading Group, of which France was a member, had identified a tax on financial transactions as the most effective innovative mechanism for financing development. Various studies and surveys had identified the feasibility of such a tax, with 40 countries already using it. That meant the issue was not so much about feasibility as coordination.
He went on to say that with the financial sector having benefited greatly from globalization, multiplying in size by seven times between 2000 and 2007, and having done so against a backdrop of minimal taxation, it was time for the sector to contribute to international solidarity. The aim of the tax was to benefit from growth, not to constrain it.
Also making statements today were representatives of Norway (on behalf of the Nordic countries), Russian Federation, Nicaragua, Mexico, United Arab Emirates, Bangladesh, China, India, Belarus, Kazakhstan, Republic of Korea, Ukraine, Pakistan, Cuba, Japan, Nigeria, Morocco, Liechtenstein, Norway, United Kingdom, Iran and Germany.
Introducing the Secretary-General’s reports for the Committee’s consideration was the Director of the Financing for Development Office in the Department of Economic and Social Affairs.
The Second Committee will meet again at 10 a.m. onMonday 17 October, to take up its agenda item on “Eradication of Poverty”.
Meeting this morning to take up its agenda item on Financing for Development, members of the Second Committee (Economic and Financial) had before them three reports relating to the subject.
The report of the Secretary General on the follow-up to and implementation of the Monterrey Consensus and Doha Declaration on Financing for Development (document A/66/329) assesses the state of implementation of those two documents and reviews developments in the strengthening of development financing.
Committee members also had before them a summary, by the President of the Economic and Social Council, of that body’s special high-level meeting with the Bretton Woods institutions, the World Trade Organization and the United Nations Conference on Trade and Development (UNCTAD), held in New York on 10 and 11 March 2011.
Also before the Committee was the report of the Secretary-General on innovative mechanisms of financing for development (document A/66/334), which reviews the scope and scale of innovative financing mechanisms and examines their contribution and potential in respect of achieving the Millennium Development Goals, particularly in the areas of health and the environment. It highlights the implications of innovative financing mechanisms for the architecture and effectiveness of aid, while drawing policy conclusions.
According to the report, there is a need for measures to make innovative financing methods more durable, predictable and effective, and to explore opportunities for new schemes. An international agreement on the scope of the term itself would provide an appropriate reporting and accounting reference point for recording reliable data over time, the report says, adding that several other issues need discussion, particularly questions of “additionality”, the relationship between innovative finance and official development assistance (ODA), and the effectiveness of that link.
Besides recommending a review of delivery and monitoring methods in the health sector, the report urges examination of the systems and structures of innovative financing to ensure they are kept as simple and efficient as possible. It cites the United Nations as the right type of institution to take responsibility for allocating funds, suggesting that transaction costs would be kept low if independent, international monitoring and evaluation mechanisms were established and their activities harmonized. Vertical funds should be encouraged to incorporate more flexibility into their strategies and financing modalities, so as to ensure country ownership. Innovative funding models for climate change finance should also be flexible and responsive to national development goals.
Introduction to Report
ALEXANDER TREPELKOV, Director, Financing for Development Office, Department of Economic and Social Affairs, introduced the Secretary-General’s report “follow-up to and implementation of the Monterrey Consensus and Doha Declaration on Financing for Development”, saying it provided an overview of developments in mobilizing domestic and international financial resources for development, including foreign direct investment (FDI) and other private flows; international trade as an engine for development; external debt; increasing international financial and technical cooperation. The report also addressed systemic issues, he said, adding that the concluding chapter, “staying engaged”, highlighted the latest events in the financing for development follow-up process.
He said policies promoting more effective and transparent tax systems, supported financial inclusion, and helped combat tax evasion and corruption remained crucial for the mobilization of domestic resource. As for international resources for development, the development impact of foreign investments tended to be most pronounced when it forged linkages with local economies in host countries, with due regard to their national priorities and absorption capacity. He said the chapter on financial and technical cooperation provided the latest data on net ODA by member countries of the Development Assistance Committee of the Organisation for Economic Cooperation and Development (OECD /DAC). Noting that the G-8 pledge to increase its aid to Africa by $25 billion (in 2004 prices) had not been fulfilled, he said the delivery gap was projected to be $18 billion (in current prices).
The Director also discussed the liability structure of public and private debt — both domestic and external — including that accrued due to disasters, warning that high public debt-to-gross domestic product (GDP) ratios in many developing countries could be cause for concern. Furthermore, the spillover effects from the European debt crisis and other risk factors, such as volatile energy and food prices and exchange-rate instability, could significantly affect the debt-sustainability outlook of countries with external vulnerabilities.
He said the Fourth High-level Forum on Aid Effectiveness, to be held in Busan, Republic of Korea, next month, and the 2012 Development Cooperation Forum of the Economic and Social Council would provide timely opportunities to follow up on those matters. Since the present report was finalized, he recalled, the General Assembly had adopted, in resolution 65/314 of 12 September 2011, modalities for the Fifth High-level Dialogue on Financing for Development, to be held in New York on 7 and 8 December 2011, under the overall theme, “The Monterrey Consensus and Doha Declaration on Financing for Development: status of implementation and tasks ahead”.
MARCELO SUÁREZ SALVIA (Argentina), speaking on behalf of the Group of 77 and China, said the prevailing global crisis raised the importance of fulfilling international commitments, including the pledge by developing countries to allocate 0.7 per cent of gross domestic product (GDP) to official development assistance (ODA) to poor countries. He called for predictable and timely distribution of ODA and multilateral resources, and for “an end to the ongoing pro-cyclical conditionalities that curtail the available financial options for developing countries and needlessly exacerbate the financial, economic and developmental challenges”. He also called for a greater emphasis on innovative financing sources, stressing at the same time that they should neither substitute nor negatively affect traditional sources.
The crisis had demonstrated the urgent need to mobilize financial resources for liquidity, and returned International Monetary Fund (IMF) special drawing rights to the forefront as a potential source of development financing, he said. The expansion of special drawing rights as an effective, low-cost measure that could quickly boost liquidity and give developing countries the means to meet external financing gaps and implement counter-cyclical policies to mitigate the impact of the crisis. Many developing countries were vulnerable to spillover effects from the European debt crisis, market volatility and instability, he noted, warning that without an efficient and fair debt-restructuring mechanism, resolving debt problems would be arduous and costly.
Noting that trade growth had “lost steam” and that protectionist measures were rising in response, he said trade was a vital tool in providing long—term sustainable growth, and underlined the need for “a universal, rules-based, open, non-discriminatory and equitable multilateral trading system”. Meanwhile, he called on countries, especially developed ones, to desist from enacting protectionist measures, including agricultural subsidies and non-tariff barriers, and to fulfil their commitments in favour of least developed countries, as contained in the World Trade Organization’s 2005 Hong Kong Ministerial Declaration. The global economy’s systemic problems still required resolution and there was a need to address major unfulfilled objectives, such as providing predictable financing for development, he said. The Economic and Social Council should strengthen the promotion of coherence, coordination and cooperation in the implementation of the Monterrey Consensus and the Doha Declaration, he added, calling for the convening of a follow-up financing for development conference in 2013.
SHANKER BAIRAGI (Nepal), speaking on behalf of the Group of Least Developed Countries and associating himself with the Group of 77 and China, renewed the call that the financial situation should in no way affect delivery on commitments made or hinder efforts to augment the level of assistance pledged. As things stood, least developed countries were unlikely to meet the internationally agreed development targets, including many of the Millennium Goals, by 2015. While commending the recent increase in level of Aid for Trade, he expressed concern over the skewed distribution, noting that two-thirds of assistance went to only 10 least developed countries.
He recommended that the international community undertake effective measures to ensure the long-term debt sustainability of least developed countries, particularly through full cancellation of multilateral and bilateral debt. Given the financing needs in the areas of climate change and the environment, the potential of innovative financing mechanisms should be further explored and expanded, with due priority given to least developed countries, he said, cautioning, however, that innovative funding should in no way substitute traditional sources, ODA in particular. He concluded by calling for the timely and effective implementation of the Istanbul Programme of Action in order to materialize the vision of the Monterrey Consensus.
BRIANNA PETERSON (Canada), speaking also on behalf of Australia and New Zealand, called for strong political will and leadership in ensuring decisive action on the sovereign debt crisis. The economic environment had placed constraints on ODA, she said, stressing the urgent need to mobilize financial resources from a range of sources, as well as the importance of the private sector and the need to find innovative ways to leverage public-sector financing. Trade remained central and developing countries would benefit greatly from a new framework better tailored to benefit them. That would require a balanced conclusion to the Doha Round of World Trade Organization negotiations, which was critical to faster poverty reduction and fulfilment of the Millennium Development Goals, she said.
Improved market access called for a complementary strengthening of Aid-for-Trade efforts to help boost trade performance and address the significant “supply-side” constraints faced by developing countries, she continued. The G-20 countries had committed to refraining from protectionism, but more was needed because of the challenges confronting developing countries. A key priority relating to commodities was to send the right price signals to producers and consumers, she said, adding that there was little empirical evidence that speculative activity had caused excessive volatility in commodity prices. G-20 Finance Ministers and Central Bank Governors were taking steps to improve the functioning of the commodity and energy markets, she added.
TINE MORCH SMITH (Norway), speaking also on behalf of the other Nordic States (Denmark, Finland, Iceland and Sweden), noted that illegal outflows of capital from developing countries were estimated to be many times greater than total development assistance. National and international measures to prevent them could make a major contribution to financing for development, she said, adding that United Nations bodies played an active role in fighting corruption, through general awareness-raising and through such instruments as the Convention against Corruption and the Convention against Transnational Organized Crime.
With food and energy insecurity, biodiversity loss and climate changes affecting all countries and requiring effective redress, she said, there was a shared responsibility to secure the financing needed to realize internationally agreed development goals. The Nordic States shared the view that ODA was a critical source of financing for development, in particular to least developed countries and those in conflict or transition. However, a key principle of the Monterrey Consensus was that every country had primary responsibility for its own development, she noted, emphasizing that domestic resource mobilization was crucial to national economic and social development. ODA and foreign direct investment (FDI) must not be a substitute, she stressed.
GEORGE TALBOT (Guyana), speaking on behalf of the Caribbean Community (CARICOM), said that since most CARICOM members were middle-income countries, they found it increasingly difficult to source adequate and assured levels of development financing on concessionary terms. That had had a negative impact on development planning, with global economic uncertainty and aid-flow volatility making the situation even more untenable.
CARICOM would explore the possibilities of innovative development-financing schemes but there was a need to address their potential positive as well as negative implications, he said, emphasizing the importance of not placing an undue burden on developing countries. He called for further deliberation and analysis to bring a more definitive understanding of such aspects of innovative financing as “additionality”, its relationship to ODA and its effectiveness. Intergovernmental agreement was needed on the parameters of the term “innovative financing” so as to maximize its potential contributions to development.
He went on to point out that CARICIOM had been particularly active with respect to international cooperation in tax matters. There was an urgent need for an inclusive and participatory intergovernmental body in which a development-oriented dialogue on tax matters could be discussed and agreed. CARICOM would continue its collaboration on a draft resolution aimed at upgrading the Committee of Experts on International Cooperation in Tax Matters to an intergovernmental body of the Economic and Social Council, he said, adding that the draft also aimed to strengthen international cooperation in tax matters, as called for in the Doha Declaration. CARICOM looked forward to the Fifth High-level Dialogue on Financing for Development in December, which offered a timely opportunity to refine collaboration and move to accelerated and more effective implementation, he said.
DMITRY BIRICHEVSKIY ( Russian Federation) stressed that national efforts to harness domestic growth and effective infrastructure in eradicating poverty and creating jobs should be undertaken in line with international norms and laws. As the Second Committee focused on innovative financing, that issue should be taken on with a consensus among Member States, he said, expressing hope that the Committee would adopt a balanced resolution based on global partnership. However, innovative financing approaches should not replace traditional forms of development financing but rather complement them, he said.
Expressing trust that the General Assembly would take that into account, he went on to call upon the international community to find a timely solution to the challenge of financing for development by ensuring coherence and cooperation as a priority. He said the Russian Federation had increased its ODA in 2011, and it amounted to about $500 million, without considering debt relief. The assistance went mostly to member States of the Commonwealth of Independent States (CIS) and to help poor countries in Africa carry-out long-term projects in education, health care and agriculture, he said.
DANILO ROSALES DIAZ ( Nicaragua), associating himself with the Group of 77 and China, described the trend of declining ODA as deplorable. Donors were failing to live up to their international commitments, and lacked the political will to remedy the injustices of the past. That unwillingness was all the more inexplicable when thinking of the enormous military expenditures many of them had made. Effective ODA needed to be depoliticized and foreseeable, he said, stressing that countries could not plan their own development if assistance could be reduced on the basis of the North’s perceptions, which were often completely groundless.
Asking whether assistance was meant to alleviate poverty or achieve political alignment while silencing independent voices and ideas in the poorer countries, he pointed out that billions of dollars had been spent on saving banks while the poor paid the price in hunger, sickness and death. The idea of the Tobin Tax had been resurrected not to finance development, but to pay off bank debt, which was an extreme idea, he said. With the world on the brink of an abyss, global institutions needed to adapt to change, he stressed, adding that the current and recent multiple global crises should have led to calls for a new, democratic, environmentally and socially sustainable economic model, based on the imperative needs of the human race. He also called for a new international monetary system, to be established through the United Nations.
JOAO LUCAS QUENTAL NOVAES DE ALMEIDA ( Brazil) said that the integrated platforms adopted in Monterrey and Doha remained the models for international cooperation in economic and financial issues. As the ongoing economic and financial crisis imposed increasing challenges for developing countries, the focus on the mobilization of resources for development remained extremely timely and called for the international community to mobilize significant additional financial resources for that purpose. The renewed global partnership for development required full engagement by Member States, civil society, the private sector, and non-governmental organizations, he said.
He went on to highlight the fundamental role of ODA in supplementing the domestic resources mobilized by developing countries and catalysing private investment, including foreign direct investment. Brazil called on developed countries to implement their international commitment on development assistance, in particular regard to delivery on the pledge to devote 0.7 per cent of GDP to development assistance. By bringing together the IMF, World Bank and World Trade Organization, as well as the United Nations Conference on Trade and Development (UNCTAD) and the United Nations, Member States recognized the need to ensure policy coherence, collaboration and cooperation between the principal international organizations charged with implementing the development agenda, including with regard to realization of the Millennium Development Goals, he said, adding that his delegation looked forward to the 2013 follow-up dialogue on financing for development, to be held in Brazil.
SARA LUNA( Mexico) said that Monterrey and Doha reflected the collective wisdom on development financing and enabled a comprehensive and holistic approach to obtaining funding. The fifth high-level dialogue would give the issue new impetus. Noting that the economic and financial crisis continued to affect internal and external funding sources, she said that, to offset its short-term effects and deal with medium- and longer-term vulnerability, Mexico would continue to advocate reform of the international financial architecture. Development financing needed innovative, voluntary mechanisms to provide stable, predictable resource flows.
She said that her country, as a member of a pilot group on innovative financing, would seek new approaches to complementing ODA, but innovative funding sources would never be seen as a substitute. Furthermore, Mexico would not support any proposal that would negatively affect the flow of remittances from abroad. She also recognized the importance of South-South and triangular cooperation in trade, saying it complemented North-South cooperation. Amid the present economic uncertainty, she continued, middle-income countries needed to work towards better use of human and financial resources to promote technical and scientific cooperation while offsetting the negative impacts of the crisis.
SALEH AHMED ALDHEEB ( United Arab Emirates) stressed that the Doha Declaration and the Monterrey Consensus represented financing mechanisms for realizing the Millennium Development Goals and providing financing to the poorest countries. Following the global economic downturn, efforts must be redoubled and there must be renewed political will to face the effects of the crisis and meet the needs of the poorest people, he stressed. The United Arab Emirates had been able to safeguard itself against the global crisis, which had not affected its ODA commitments, he said, adding that meeting the Millennium Goals on a national level had enabled the country to continue providing aid to developing countries.
Pointing out that investment in his country remained high compared to international levels, he said the communications, finance, education and health-care sectors had all experienced growth and development. The United Arab Emirates paid special attention to building relationships with countries and corporations, which allowed it to continue providing aid to developing countries. The country had aid to more than 120 countries, he said, adding that much of the funds had gone into building infrastructure and raising the productive capacity of developing countries. The United Arab Emirates also played an important role in providing emergency assistance, including to Yemen, Palestine, Afghanistan and Africa, specifically the Horn of Africa, he said.
TAUHEDUL ISLAM ( Bangladesh), associating himself with the Group of 77 and the Group of Least Developed Countries, said it was regrettable that developed countries had generally not met their ODA commitments. While thanking those that had done so, he urged others to fulfil the pledges they had made in Monterrey and reiterated in Doha. He pointed to some key misinterpretations, including the concept of allocating “collective gross domestic product”. The figure should be based on national GDP and was not a collective procedure, he stressed.
Concurring with the Nordic countries on innovative sources of financing, he said they were unrelated to traditional funding sources, complementary to them and not part of the original Monterrey commitments. Monterrey was the only United Nations summit with no institutional framework, which meant that follow-up “could not be maintained duly, aptly and practically”, he said, urging the immediate establishment of a follow-up framework. He went on to note that while their had been 25 least developed countries in 1971, when the term had entered into existence, that number had now doubled, yet financing for development had reached its lowest level in history. That must be addressed without further delay, he said, calling also for the separation and dissociation of financing for development from the Monterrey framework.
ZHANG YI ( China) said that although the total levels of ODA had shown some increase, it was still short of commitment targets. Compounding that was the sovereign-debt crisis in developed countries, which had made financing for development even more uncertain. Underscoring that the United Nations should continue to play a leading role in that area, he urged developed countries to demonstrate greater political will and “truly honour” their commitments. In addition, stronger coordination of macroeconomic policies, stabilizing the international market, and promoting the sustained and inclusive growth of the international economy were essential steps, he said.
He went on to call for improved global economic governance and deeper reforms of the international financial system, which would allow greater representation and ensure a “bigger voice” for developing countries. It was also necessary to explore new channels of financing to increase ODA levels, he said, emphasizing: “Innovative financing should be a supplement to ODA, not a substitute for it.” If conducted on a voluntary basis, developing countries would then not be unduly burdened. He noted in conclusion that his country, while addressing its own financial challenges, continued to assist other developing countries with a “host of initiatives”, including the reduction or cancellation of debt, human-resource training and the expansion of China’s foreign aid packet under the South-South cooperation framework, to name a few.
HASSAN AHMED, Member of Parliament from India, associated himself with the Group of 77 and China and noted that the dependence of developing countries on external aid was not out of choice but compulsion. Saying he deeply appreciated the policy initiative taken to pursue “financial inclusion” as a way to mobilize domestic resources, he added that his country had set itself the target of making all its citizens “bankable” by 2012. While FDI and trade were important for development financing, they were not sufficient on their own for tackling poverty, hunger and disease.
He said the lack of market access, the shortage of Aid-for-Trade measures and the absence of rules-based trading system severely restricted growth opportunities for poor countries, a situation compounded by untenable debt levels. Additionally, only five donor nations had fulfilled its pledge to allocate 0.7 per cent GDP to aid in 2010, and stressed that while South-South financial and technical assistance could be expanded, it was no substitute for North-South commitments. Also, a common understanding was needed of what constituted innovative financing sources, as it was often passed off as ODA and had yet to establish itself as an institutional support in various areas of development.
VADIM PISAREVICH (Belarus) said that soaring energy and food prices, the sovereign debt crisis, growing trade protectionism and rising global unemployment threatened to send the world into a new global economic recession and quite naturally stood in the way of both the financing of development through internal and external resources and the realization of internationally agreed development targets, including the Millennium Development Goals.
In that complicated international context, he continued, there was an urgent need for the international community to streamline its efforts with a view to establishing an equitable international financial architecture, capable of both effectively addressing global crises and contributing to global development. There would be no place in such a system for economic sanctions and other unilateral coercive measures, he stressed, calling for the repeal of United States sanctions against four of his country’s enterprises.
TLEUZHAN SEKSENBAY ( Kazakhstan) highlighted the special needs of landlocked developing countries, urging parties to the Almaty Programme of Action to follow its recommendations. That would require improved cooperation on ODA, technical assistance and efforts to better tailor multilateral trade negotiations to specific conditions. He also stressed the need to strengthen United Nations support for ensuring the eradication of poverty in middle-income countries.
Underlining the importance of identifying innovative sources of development finance, with a greater focus on the private sector, he said his country had already launched a public-private partnership mechanism to pursue that and had made social responsibility mandatory. Kazakhstan had already surpassed expectations with regard to the Millennium Development Goals, thanks in large part to the financing for development process, he said, adding that the country needed to consolidate those achievements at the institutional level.
SUL KYUNG-HOON ( Republic of Korea) said that in order to address growing challenges, the international community must increase ODA, use available resources effectively and efficiently, and broaden its partnership for development. With only four years left until the Millennium Development Goals target year, ODA was the central resource — though not the largest — for helping developing countries achieve the goals, he said. However, global financial and economic instability should not be an excuse for paying less attention to the international commitment to the goals, he stressed.
To obtain the most desirable result from limited ODA, the international community must be mindful of its development impact and the necessity of coordination, he continued. Partnerships should not be limited to traditional players such as donor and recipient countries, and international organizations. Instead, further efforts should be made to engage more diverse development partners, including civil society, private foundations and the business sector. He concluded by saying his country would seek a new global partnership for development, encompassing diversified modes and various providers of development cooperation, at the Fourth High-level Forum on Aid Effectiveness to be held in Busan next month.
OLEKSANDR NAKONECHNYI (Ukraine), recognizing that every country had primary responsibility for its own development, emphasized the importance of fulfilling international commitments on assisting developing countries, including middle-income ones. The mobilization of financial resources for development still depended on external flows, FDI in particular. Foreign investment also played an important role in furthering economic progress and development, he said, adding that his country stood for an open and non-discriminatory system of multilateral trade as an engine for ensuring progress in the economic and social spheres.
He went on to emphasize that the early conclusion of the Doha Round negotiations was the most efficient way to improve the multilateral trading system. Ukraine supported the introduction of innovative tools and methods to decrease the burden of external debt, as well as the UNCTAD Principles on Responsible Lending and Borrowing. Taking into account the long-term consequences of the economic recession, Ukraine had taken the necessary steps to launch national economic reform programmes aimed at stabilizing economic growth, improving income distribution, increasing work efficiency and protecting the rights of workers, he said.
AHMED NASEEM WARRAICH ( Pakistan) remarked that while there was no dearth of goals, the delivery of agreed solutions left much to be desired. The global crisis offered the international community an opportunity once again to address inadequacies in supporting sustained economic growth as well as inclusive and sustainable development. Pro-growth and people-centred national policies and governance structures were of critical importance in that regard.
He went on to stress the need for enhanced and predictable ODA, aligned with the development priorities of developing countries. International capital flows, FDI in particular, should be encouraged in order to ensure that a wider circle of developing countries was reached. Despite the importance of innovative mechanisms for development financing, some old ideas, such as linking special drawing rights to development financing, still merited consideration, he said.
NADIESKA NAVARRO BARRO (Cuba), associating herself with the Group of 77 and China, said it was “irrefutable and self-evident” that a lack of resources was the main obstacle to development, particularly given the current global crisis, whose negative impact must be dealt with through the use of domestic resources. It was unacceptable that most rich countries had failed to live up to their modest ODA and other commitments, and it was impossible to move ahead with an agenda to advance development because ODA was a mirage, almost 10 years after Monterrey.
The question of how to follow up on the modest commitments made remained a problem despite efforts by the Group of 77 to establish an effective mechanism to review agreements on development financing, she said. Expressing support for another follow-up conference, she also urged a thorough review of issues crucial to the countries of the South, where immediate progress was required. Pledges made to the South, particularly the allocation of 0.7 per cent of GDP to official development assistance, were not being met, she said, pointing out that the OECD/DAC countries had achieved only 0.32 per cent, well below the target. Other financial promises had not been fulfilled, she said, pointing out that the poorest countries were still not receiving any debt relief.
CHARLOTTE MONTEL ( France) said her country remained committed to the Doha Declaration and the Monterrey Consensus, supporting an integrated vision of financing for development. As Chair of the G-8 and the G-20, France would ensure that commitments already made were taken under review with the aim of achieving mutual accountability for and monitoring of the use of development funds.
In terms of the G-20, she said that, as Chair, her country sought to encourage better fiscal cooperation and the increase of financial flows. France had collaborated with the African Development Bank to find more efficient modes of operation. It was also determined to complement its ODA with innovative financing, and welcomed any relevant ideas, from both developing and developed countries. France had proposed a tax on financial transactions that would give money to developing countries, she recalled.
Phologo Jim GAUMAKWE (Botswana), associating himself with the Group of 77 and China, pointed out that middle income countries had not been spared the impact of the crisis, and had been prevented from fulfilling their development goals. Botswana had been disrupted despite its good policies, he said, pointing out that its poverty-eradication and job-creation efforts were in trouble.
Like many other middle income countries, he said, Botswana continued to suffer exclusion from assistance. Despite following sound and prudent macroeconomic policies and maintaining its credit rating, the country remained on the margins of most-favoured-nation status in terms of foreign direct investment. The “escape route” of international trade was imperilled by a lack of progress in the Doha negotiations, he said, adding that there had been a resurgence of trade barriers and other protectionist policies.
HAJIME UEDA ( Japan), stressing that financing was not the end but the means to development, said the international community must be more active in contributing funding as well as implementing commitments. Japan was focusing on financing development in its health sector, specifically focusing on prenatal care, he added.
As the Government delivered steadily, and in some cases even doubled ODA to African countries, it had an opportunity to focus on how to translate aid into results and help the poorest people, he said. Collaboration with all stakeholders, particularly African countries, was vital, he said. Innovative sources of development financing had been and should remain complementary and not substitute traditional forms of finance, he added.
ALEXANDER TREPELKOV, Director, Financing for Development Office, Department of Economic and Social Affairs, introduced the Secretary-General’s report “innovative mechanisms of financing for development”, saying it reviewed the scope and scale of innovative finance mechanisms and pointed out that different interpretations of the term, for example between the World Bank and the OECD, had led to various estimates of their scope and scale. The concept of “additionality” in relation to traditional sources of development financing had also gained interest. In a narrow sense, “additionality” would only apply to resources not classified as ODA, but in a broader sense, all resources raised through innovative mechanisms, regardless of classification as ODA, might be regarded as “additional”, provided they did not substitute traditional ODA. However, quantifying the concept was not straightforward within the current reporting system, he said.
The report revealed how innovative financing could contribute to the Millennium Development Goals, particularly in health and environment. In health, most mechanisms pooled resources into three public-private partnerships — the GAVI Alliance, the Global Fund to Fight AIDS, Tuberculosis and Malaria and the international drug-purchasing facility, UNITAID. The tangible global results of those partnerships, seen in the saving of millions of lives, constituted a significant incentive to further scale up innovative financing for health, he said. The impact of innovative financing on the international aid architecture and on aid effectiveness was hard to assess because revenues were distributed together with traditional sources, he said. Fragmentation in the environmental sector was just as acute as in the health sector owing to the emergence of a large number of special-purpose climate funds, he added.
Mr. SUÁREZ SALVIA (Argentina), speaking on behalf of the Group of 77 and China, called for more emphasis on innovative sources of financing, but stressed that financing should be disbursed in accordance with the national priorities of developing countries. It should neither substitute nor negatively affect traditional funding sources, he added, calling for “a precise and agreed definition and scope of the concept”. He underlined that priorities should remain focused on providing additional, stable and supplementary resources to traditional development financing.
MANI PRASAD BHATTARAI (Nepal), speaking on behalf of the Group of Least Developed Countries and associating himself with the Group of 77 and China, said the international community must come to an agreement on the definition of “innovative finance”. Nevertheless, innovative financing mechanisms had helped channel resources to many developing countries, mostly in the areas of health, climate change and environment. In the health sector, considerable progress had been made in terms of saving millions of lives through reduced prices for the treatment of some diseases, he noted.
Considering the huge potential for generating resources, appropriate measures should be taken to make innovative financing mechanisms more durable, predictable and effective, he said. An international consensus on a definition would provide the appropriate framework for standardized reporting and accounting of funds, he said. In addition, he called for the removal of parallel systems and complicated structures, stressing the need to ensure that resources under innovative mechanisms were fully aligned with national systems.
ABDELLAH BENMELLOUK ( Morocco), associating himself with the Group of 77 and China, said there should be a greater focus on innovative financing, particularly in post-conflict areas. Implementing a tax on international financial transactions would be likely to generate financial resources, he said, adding that innovative financing mechanisms were commonly used in the health and climate-change sectors. However, they should be extended to other areas, including food security, education, and the provision of drinking water, particularly in Africa, he said, while also calling for a reduction in the cost of sending migrant funds and remittances.
YOO HYERAN ( Republic of Korea) described her country as a pioneer in introducing innovative mechanisms, especially in Africa, and urged other countries to seek additional ways to engage more actors. She noted the significant role played by non-traditional donors in the use of innovative mechanisms.
BUKUN-OLU ONEMOLA (Nigeria), associating himself with the Group of 77 and China, said that with all the promises of Monterrey yet to be fulfilled, and with hope having been placed in innovative financing, it was critically important to strengthen and institutionalize macroeconomic policy coordination on the multilateral agenda. For that purpose, the G-20 needed to forge stronger linkages with non-member States and international bodies such as the United Nations, he said, adding that the Organization’s policies must be complementary to those of the IMF, the G-20 and other multilateral stakeholders. Describing attainment of the 0.7 per cent GDP target for official assistance as “currently unattainable”, he said there must be agreement on a realistic target for the next few years, corresponding to the collective sense of urgency, responsibility and atonement for past failures.
MANUEL FRICK ( Liechtenstein) recalled that the report on financing for development emphasized the need for effective national and international measures to combat money-laundering and tax evasion. The Government of Liechtenstein had committed itself to implementing internationally recognized standards of transparency and information exchange, he said. Regarding the report on innovative financing, he said that besides additional or complementary resources, the goal of allocating 0.7 per cent of GDP to official assistance by 2015 must remain at the centre of ODA efforts.
FERNANDO FERNANDEZ-ARIAS (Spain), speaking on behalf of the Leading Group of Innovative Financing for Development, noted that more countries were adopting innovative mechanisms to complement their traditional development assistance. It was vital to improve aid effectiveness so as to have a greater impact on poverty reduction through contributions from those who had benefitted most from globalization. However, both developing and developed countries shared a responsibility to eradicate hunger and poverty worldwide while promoting sustainable development, he said. New resources must be added to traditional ones, he said, adding that they would make financing for development more stable and sustainable while offering protection against budgetary fluctuations and political changes, especially in times of economic and financial crisis. More than $5 billion had been collected through innovative mechanisms since 2006, he said, noting that the mechanisms had been implemented in more than 20 countries.
MARTIN BRIENS (France), associating himself with the Leading Group on Innovative Financing for Development, noted that international commitments to greater international solidarity demanded more stable capital flows in greater quantities, so there was a place for mechanisms that “beat the traditional deficiencies of the market economy and of traditional aid mechanisms”. Outlining key parameters of how he saw the term, he explained that Leading Group had identified a tax on financial transactions as the most effective innovative mechanism of financing development. Various studies and surveys had identified the feasibility of such a tax and 40 countries already used it. That meant that it was not so much about feasibility but about coordination, and that there was also an ethical dimension involved.
Noting that the financial sector had benefited greatly from globalization, multiplying in size by seven times between 2000 and 2007, he pointed out that it was the least taxed and must contribute to international solidarity. The aim of the tax was to benefit from growth, not to constrain it. France advocated the tax and the European Commission had produced a draft directive on the matter, identifying potential revenues of between $30 billion and $50 billion per year, he said. European movement on the matter would be a staging post on the route to a global consensus that would not impair European competitiveness, he stressed, adding that headway was possible on the matter and that many countries had signed a declaration of the Leading Group.
MORTEN WETLAND (Norway), associating himself with the Leading Group on Innovative Financing, said that innovative mechanisms helped developing countries generate resources for development and climate change, but they should not be used as an excuse for failing to deliver on ODA pledges. Norway had raised its aid to above 1 per cent of GDP, he said, adding that the Government contributed to various initiatives in the area of health, including through UNITAID and the GAVI Alliance.
He said that in other areas, an expert group appointed by 12 Leading Group countries, including Norway, had assessed how taxation of the financial sector could be used to fund global public goods, development and climate measures, concluding that a levy on current transactions was the most feasible alternative. An estimated $30 billion could be generated annually by levying a 0.005 per cent tax on global currency transactions, an idea that Norway advocated. For a levy to be effective, it should include as many countries as possible, he emphasized.
CHLOE ADAMS ( United Kingdom), describing her country as a strong supporter of innovative financing, she said that, together with its partners, it had helped to drive progress and creativity in that area. Examples of successful mechanisms included the International Finance Facility for Immunization, which had helped the GAVI Alliance raise donor support and use it in an efficient way. Similarly, the Advance Market Commitment used donor money to leverage “real progress and binding supply commitments” from vaccine manufacturers, accelerating the rollout of vaccines against pneumonia to developing countries at a long-term low price. The United Kingdom would continue to engage with partners on the matter of taxing financial transactions, on which matter the delegation had no objections in principle, she said. However, any such tax would need to apply globally, she stressed, adding that a number of related practical issues must be worked through. However, meeting existing ODA commitments should be the priority, she emphasized.
BRENO HERMANN, General Coordinator for Innovative Mechanisms of Financing for Development, Ministry of External Relations of Brazil, associated himself with the Group of 77 and the Leading Group on Innovative Financing. He recalled that in 2004, the Governments of Brazil, Chile, France and Spain had launched an initiative to fight global poverty and hunger. They had called on the international community to create new sources of financing in order to achieve the Millennium Development Goals. Innovative mechanisms had since shown that significant resources could be effectively mobilized without subtracting or detracting from traditional sources of development assistance, he said. For example, in May 2011, Brazil had approved national laws renewing its predictable and sustainable commitment to initiatives such as UNITAID and GAVI.
While innovative mechanisms had proven effective and significant, several “defining features” must be preserved in order to keep them true to their original purpose, he said. First, they must be voluntary in nature, and not unduly burden developing countries. Secondly, they must be additional to traditional sources of funding, such as ODA, and finally they must be channelled in ways that respected national ownership in the allocation process, and aligned with the recipients’ long-term national development goals and priorities. Brazil was therefore concerned about information in the Secretary-General’s report indicating that a significant proportion of revenues raised through innovative financing mechanisms were recorded as ODA. That practice distorted the commitments undertaken by Member States, allowing the same revenues to be counted twice, he warned, calling for the proper classification of those funds
HASSANI NEJAD PIRKOUHI ( Iran), associating himself with the Group of 77 and China, said his country recognized that innovative financing could be used as a way to alleviate poverty and hunger. However, despite the world economic crisis, arms sales had increased in recent years and the “business of war” was earning a lot of profit, contributing to poverty and hunger. The “business of war” must take responsibility and contribute funds to development, he said, proposing a “peace and development tax” on the arms trade that would raise millions of dollars.
MARION GEISSLER (Germany) said that her country was an active member of the Leading Group on Innovative Financing, using carbon revenues for development as well as mobilizing resources from the capital markets and private investment finance. Germany would continue in that vein, she said. External assistance was important but the need to mobilize domestic resources was just as important, she underlined. She said her country helped developing countries build capacity, and through the international tax compact, they shared good practices from developed countries. She emphasized the importance of how funds were used, calling for greater efforts to increase effectiveness. “More financing for development employed more effectively” was more important than whether it was innovative or “additional”, she stressed.
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