The global movement under way to stamp out international tax fraud was central to ending the booming illegal cross-border flow of money and capital obstructing realization of the Sustainable Development Goals, the Economic and Social Council heard today, as it wrapped up its Forum on Financing for Development follow-up with a series of expert panel discussions and related events.
Since the financial crisis, there had been a growing awareness of international tax crimes, said Eric C. Hylton, Executive Director of International Operations for the Internal Revenue Service’s Criminal Investigations in the United States, during an expert discussion on “Promoting international cooperation to combat illicit financial flows in order to foster sustainable development”.
“This has never been the case in my 20 something years,” Mr. Hylton said, stressing that since 2009, the Internal Revenue Service had aggressively pursued international finance institutions helping people from the United States evade taxes. The Service’s forensics accountants were experts at following the money, he emphasized, specializing in illicit financial flows, international criminal tax evasion and money-laundering.
Illicit finance and tax evasion was an area in which the Service could help Governments increase revenue, he stressed, adding: “It doesn’t make a lot of sense to have development aid if it’s coming in one door and going out the other,” he said, describing it as a national security issue and noting that two thirds of criminal activity related to tax evasion.
Tax avoidance was central to illicit financial flows and hindered gross domestic product (GDP) particularly in lower-income countries, said Alex Cobham, Director of the Tax Justice Network. Financial secrecy underpinned every major corruption and tax abuse case around the world, from the British Virgin Islands to Delaware, characterized by opaque corporate accounting that covered profit shifting and tax avoidance.
“We see increasingly, not least within the ongoing process to develop targets in the Sustainable Development Goals, efforts to remove multinational tax avoidance from the definition of illicit financial flows,” he said.
In 2007, the Network created a Financial Secrecy Index that identified jurisdictions, like Switzerland, as central to producing corrupt flows elsewhere, he said. While the United States had worked to break the Swiss commitment to banking secrecy, international cooperation was essential to require a fully multilateral approach.
In the last 50 years, illicit financial flows had cost sub-Saharan African countries $528 billion, lamented S.O. Olaniyan, Deputy Director, Ministry for Foreign Affairs of Nigeria, who added that his country was losing an estimated $15.7 billion annually, more than what the continent received in official development assistance (ODA).
Domestic resource mobilization was the most crucial element to national sustainable development efforts, which could be achieved by blocking illicit financial flows that were aided by bad governance, corruption and weak institutions, he stressed. In that context, it was imperative for African countries to overhaul their financial services and investment engineering.
The question of why Africa was among the richest continents in terms of natural resources but poorest in terms of income had led to a 2010 event in Malawi, said Adam Elhiraika, Director, Macroeconomic Policy Division, Economic Commission for Africa (ECA), adding that a High-level Panel on Illicit Financial Flows, chaired by Thabo Mbeki, former President of South Africa, was formed afterward.
The Panel’s main finding was that Africa lost $80 billion annually and resources must be better managed, while State capacity must be improved, he said. Furthermore, the Panel had found that 65 per cent of illicit financial flows out of Africa were due to abusive trade mispricing, while 30 per cent were due to criminal activities and 5 per cent due to outright corruption.
During the day, the Council also held an expert round table on “Trade, science, technology, innovation and capacity-building” and an expert discussion on “The specific challenges to finance sustainable development for countries in special situations”.
In addition, the Council held an interactive dialogue with civil society, the business sector and other stakeholders and received updates on the outcomes of the forums mandated by the Addis Ababa Action Agenda, as well as key voluntary initiatives launched at the Third International Conference on Financing for Development.
At the end of the meeting, the Forum approved its draft report and the Council President, Frederick Musiiwa Makamure Shava (Zimbabwe), made closing remarks.
The Economic and Social Council will reconvene at a date and time to be announced.
Expert Round Table I
The first expert round table under the theme “Trade, science, technology, innovation and capacity-building” was moderated by Chantal Line Carpentier, Chief, United Nations Conference on Trade and Development (UNCTAD) New York Office. The panellists included: Ratnakar Adhikari, Executive Director, Enhanced Integrated Framework, Nepal; Mark Henderson, Directorate General for Trade, European Commission; Sirimali Fernando, Chairperson, National Science Foundation, Sri Lanka; and Joon Kim, Head of Global Trade, BNY Mellon.
Ms. CARPENTIER noted there had been a persistent slowdown in global trade growth, as the world was experiencing its slowest decade of trade growth in 70 years. At the same time, slowing international trade had raised concerns about “de-globalization” and had been compounded by political scrutiny of trade, especially in Europe and North America, where trade had taken on a central role in a number of electoral contests, creating divisions between those who were pro- and anti-globalization. From the perspective of UNCTAD, too much of the trade focused on rules and negotiations, giving the impression that trade could not promote development unless there were rules changes. The role of technology in financing for development was also at risk with a deepening digital divide, which had manifested itself in a sharpening digital economy divide. Whether the dislocation of jobs and the painful economic adjustment many countries were experiencing in recent decades was due to expanding international trade or to technological changes was central to the debate about globalization.
Mr. ADHIKARI noted that the Enhanced Integrated Framework was a small global development programme dedicated to the least developed countries and others that had recently graduated from that status. The Framework represented a partnership of major international actors, working in collaboration with the World Bank, the United Nations, the International Trade Centre (ITC) and others. To date, it had funded more than 150 projects with a total of $200 million. The global community had recognized trade as key to the implementation of the 2030 Agenda for Sustainable Development, as it was directly related to at least 11 targets under nine of the Sustainable Development Goals, and was indirectly related to nearly all of the Goals. Much more must be done to boost the trade capacities of the least developed countries, which suffered from poor infrastructure, outdated technology, limited access to finance and low production capacities. It was important to continue to ensure that investment in aid for trade worked towards development that was sustainable in the long term. The Framework had also worked to help build more resilience, diversified production capacities and structural transformation for States that had recently graduated from least developed status.
Mr. HENDERSON said there were many examples of how the European Union’s trade policy contributed to development through bilateral and regional trade agreements. The bloc continued to be the largest donor of aid for trade, with more than €12 billion in 2014. The stronger the trade investment relations the Union had with partners, the more it could tailor its aid offers. Such partnerships worked and helped countries boost exports towards higher-yield arrangements. He recalled that zero tariff arrangements had allowed for greater recognition of the key role of trade as one of the means of implementation for the Goals, as established by the Addis Ababa Action Agenda and Sustainable Development Goal 17. But the Unions’ efforts did not stop there. Its “Trade for All” was the first policy adopted after agreement had been reached on the 2030 Agenda, and laid out the specific means through which the Union’s trade policy would directly support and reinforce sustainable development.
Ms. FERNANDO emphasized that Sri Lanka’s current trade environment was of some concern. The majority of the country’s exports were made up of commodity items and low-technology products, which highlighted the need to move towards higher-end technologies. The country hoped to increase high-tech exports from the current level of 1 per cent to 10 per cent by 2020. Sri Lanka recognized the imperative of trade and had put in place a science, technology and innovation strategy that was geared towards rapid socioeconomic development. The strategy took into account the need for economic development, social justice and environmental quality through capacity-building and technological entrepreneurship. Investment was needed in research and development and a scaling up of technology, which would then result in industrial and commercial production, and finally, market penetration. Skills, infrastructure, systems and processes would all need to be financed and developed.
Mr. JOON noted that the relationship between trade and finance had been traversing a challenging landscape over the last few years, although bankers were doing everything possible to promote trade finance going forward. Since the financial crisis, bankers were trying to “derisk”, which was an effort to move away from particular countries or regions once doing business there became less cost-efficient. Part of that dynamic was due to increased costs associated with changes made to the regulatory landscape. There were significant impediments to trade finance, including low country credit ratings and regulatory requirements. Bankers were trying to innovate and provide technology solutions so that trade transactions could be done in the most efficient manner. There was no question that trade finance was operating in a challenging environment, but with the right collaborative effort whereby the bankers were working in harmony with other stakeholders, there could be a bright future in the trade finance arena.
In the ensuing discussion, a member of civil society expressed concern that the financing for development conversation had focused primarily on the private sector and failed to take into account the situation of workers. In response to a question from the representative of Mexico on how the move towards higher-end technologies impacted human capital, Ms. FERNANDO noted that at the outset, her country had to develop programmes to scale up the capacities of workers, adding that one positive development was that the country had been able to bring back some of their highly skilled expatriates thanks to new high-tech jobs that had been created. A representative of the business sector stressed that trade was a powerful vehicle for sustainable development and supported broad deployment of innovative technologies. In response to a question from the representative of Algeria on the growing trend towards protectionism, Mr. JOON said that the creation of more restrictive trade measures had resulted in many businesses focusing more inward on domestic opportunities.
Also speaking were the representatives of Chile, Nepal and the International Trade Centre.
Expert Discussion I
The Forum then began an expert discussion on “Promoting international cooperation to combat illicit financial flows in order to foster sustainable development”. Moderated by Simone Monasebian, Director, United Nations Office on Drugs and Crime (UNODC), New York Office, it featured presentations by: Eric C. Hylton, Executive Director, International Operations, Internal Revenue Service — Criminal Investigations, United States; S.O. Olaniyan, Deputy Director, Ministry for Foreign Affairs, Nigeria; Adam Elhiraika, Director, Macroeconomic Policy Division, Economic Commission for Africa (ECA); and Alex Cobham, Director, Tax Justice Network.
Ms. MONASEBIAN said General Assembly resolution 71/213 on illicit financial flows urged States to join the United Nations Convention against Corruption, while the Forum’s outcome document, adopted on 24 May, likewise called for more cooperation on that issue. UNODC worked with States to prevent illicit financial flows. Existing normative frameworks to prevent corruption or money-laundering must be more effectively used to combat illicit financial flows. The return of stolen assets was provided for under the Convention, for which UNODC was custodian, and work was under way to prevent such flows through assistance to countries to strengthen anti-money-laundering regimes, enhance enforcement systems and return proceeds from stolen assets. “We still have to overcome the challenges posed by our different systems,” she said.
Mr. HYLTON said he was the only United States authority that could bring criminal charges. Since the financial crisis, there had been a global movement to address international criminal tax. Many leaders were talking about the issue. “This has never been the case in my 20 something years,” he said. Internal Revenue Service forensics accountants were experts at following the money, and looking at illicit financial flows, international criminal tax evasion and money-laundering. Since 2009, the Service had aggressively pursued international finance institutions helping people from the United States evade tax. Illicit finance and tax evasion was an area in which the Service could help Governments increase revenue. “It doesn’t make a lot of sense to have development aid if it’s coming in one door and going out the other,” he said. It was a national security issue. About 40 countries participated in the Organization for Economic Cooperation and Development (OECD) Task Force on Tax Crimes and Other Financial Crimes, and the fifth OECD forum on tax and crime would be held in November. Advocating a whole-of-Government approach, he said two thirds of criminal activity related to tax evasion. The United States was working in joint investigation teams, comprised of competent judicial and law-enforcement authorities, which were established for a limited duration to carry out criminal investigations.
Mr. OLANIYAN said illicit financial flows originated from such behaviour as tax evasion, abusive transfer pricing, drug trade, illegal arms deals, money-laundering and theft by corrupt Government officials. In the last 50 years, sub-Saharan African countries had lost $528 billion. Nigeria was losing an estimated $15.7 billion annually, more than what the continent received in official development assistance (ODA). Illicit financial flows were aided by bad governance, corruption and weak institutions. It was imperative for African countries to overhaul their financial services and investment engineering. Domestic resource mobilization was the most crucial element to national sustainable development efforts, which could be achieved by blocking illicit financial flows. One area of inequality was tax-related: Many developing countries failed to raise domestic revenue to meet their needs, he said, citing abject poverty, poor infrastructure, and underdeveloped health and education sectors in that context. Global efforts to reduce illicit financial flows included transparent information-sharing, assets recovery, and observance of the “arm-length principle”, whereby a company could show it was not involved in abusive transfer pricing. Nigeria’s efforts to combat illicit financial flows had enhanced the Ministry of Finance, the Central Bank of Nigeria, the Economic and Financial Crime Commission, the Independent Corrupt Practices and Other Offenses Commission, and the Code of Conduct Bureau and Tribunal. It also had consolidated all inflows from all national agencies into a single account in the Central Bank. Nigeria was committed to sustained international cooperation and would host a conference from 5 to 7 June on that topic.
Mr. ELHIRAIKA said the question of why Africa was among the richest continents in terms of natural resources but poorest in terms of income had led to a 2010 event in Malawi to tackle that question. A High-Level Panel on Illicit Financial Flows, chaired by Thabo Mbeki, former President of South Africa, was formed afterward. Its main finding was that Africa lost $80 billion annually and resources must be better managed. State capacity remained a major issue. For years, African countries had lost the capacity to manage their economies. Global coalitions must also be built to support them. The Panel had found that 65 per cent of illicit financial flows out of Africa were due to abusive trade mispricing; 30 per cent were due to criminal activities and 5 per cent to outright corruption. It recommended that a working group and consortium be formed to follow-up on its recommendations, and African Heads of State were requested to present annual reports. The Consortium to Stem Illicit Financial Flows out of Africa was set up, with a focus on advisory services and capacity-building for African Governments; public and diplomatic advocacy campaigns, and building customs and tax data bases. The issue of tax incentives, which did not really work, must also be addressed.
Mr. COBHAM said that the Tax Justice Network was created in 2003 because international policy discussions on the issues of tax and financial transparency had not reflected the scale of the problem. While now increasingly discussed, policies had not been delivered in a manner that ensured full inclusion. He raised the alarm about a political threat — attempts to subvert global international agreement underpinning the Goals. The illicit flows agenda had emerged as an opposition to a view of corruption which, at the time, had been seen as a problem mainly in lower-income countries. In 2007, the Network had created a Financial Secrecy Index that identified jurisdictions, like Switzerland, as central to producing corrupt flows elsewhere. They were the central driver of the problem. Financial secrecy underpinned every major corruption and tax abuse case around the world, from the British Virgin Islands to Delaware, characterized by opaque corporate accounting that covered profit shifting and tax avoidance. While the United States had worked to break the Swiss commitment to banking secrecy, international cooperation was essential to require a fully multilateral approach.
“We see increasingly, not least within the ongoing process to develop targets in the Sustainable Development Goals, efforts to remove multinational tax avoidance from the definition of illicit financial flows”, he said, despite that it was the biggest element in those flows. It was a bigger problem in lower-income countries in terms of impact on gross domestic product (GDP). It was under pressure to be removed from the target. The other problem was that, despite the formation of a high-level United Nations panel, avoidance was central to the use of illicit financial flows. When sustainable development target 16.4 was agreed, avoidance had been included. [Target 16.4 calls for significantly reducing illicit financial and arms flows, strengthening recovery and return of stolen assets, and combating all forms of organized crime.] Now, there were efforts to remove it. It was possible that the target could subvert the entire global agreement contained in the Sustainable Development Goals and questions now centred on whether the United Nations could establish a tax commission to oversee such issues.
In the ensuing interactive discussion, Nigeria’s delegate underscored the need for an intergovernmental body to handle the matter raised by Mr. COBHAM, which was an attempt to water down illicit financial flows. He requested that in terms of forensic activity, the Internal Revenue Service could help countries tackle financial secrecy so that the issue of impunity could be addressed. Ghana’s delegate said tax incentives had not worked as planned, but politicians had engaged in such incentives because it was a race to the bottom: if one country did not do it, it would not keep up with its neighbours. Multinationals threatened to move to a neighbouring country and she asked about the role of regional bodies to ensure countries did not engage in such behaviour. She also asked about double taxation agreements. Ethiopia’s delegate advocated greater global cooperation and a better understanding of what illicit financial flows constituted. Ecuador’s delegate underscored the need for an intergovernmental body on illicit financial flows, and asked about the next steps for strengthening cooperation on tax matters, as called for in Addis Ababa. South Africa’s delegate asked why trillions of dollars flowed to safe havens, and whether the United States and other developed countries had a code of conduct for their own multinationals to do business in other countries.
Mr. OLANIYAN replied that if African resources were flowing to other places, then all countries had a responsibility to address that issue.
Mr. HYLTON said that capacity-building training was being conducted throughout the world. On double taxation, he said United States citizens were taxed on their global income.
Mr. ELHIRAIKA replied that there was a need for more coordination and an international body to address that issue.
Mr. COBHAM said major financial secrecy jurisdictions were good at “paying lip service” and not delivering change. “We need indicators that measure the degree of cooperation,” he said. It was also important to think about how countries could cooperate to eliminate the race to the bottom. One idea was to consider, regionally, the development of a minimum corporate tax, and setting aside OECD rules, which could have “dramatic” revenue effects.
Expert Discussion II
The Forum then held an expert discussion on “The specific challenges to finance sustainable development for countries in special situations”. Moderated by Magdy Martínez-Solimán, Assistant Administrator and Director, Bureau for Policy and Programme Support, United Nations Development Programme (UNDP), it featured presentations by: Tevita Lavemaau, Minister of Finance and National Planning, Tonga; Nim Dorji, Finance Secretary, Ministry of Finance, Bhutan; Margarida Rose da Silva Izata, Director of Multilateral Affairs, Ministry of External Relations, Angola; and William Jose Calvo Calvo, Deputy Chief Negotiator for Climate Change and Sustainable Development Official, Costa Rica.
Mr. MARTÍNEZ-SOLIMÁN said this year’s outcome document underscored the need to focus efforts on where the challenges were the greatest. The session would focus on strengthening private investment, ensuring graduation was smooth and countries retained financing in terms appropriate to their needs, and supporting countries with structural constraints. More than 50 per cent of UNDP resources were allocated to least developed countries, and it helped countries prepare for graduation by identifying requirements and promoting South-South cooperation.
Mr. LAVEMAAU said small island developing States faced considerable structural constraints in efforts to mobilize domestic resources for sustainable development, due largely to their small and dispersed populations, which made revenue collection difficult, high costs of service provision and infrastructure investment, large agriculture and informal sectors, trade liberalization that had eroded tax bases, and vulnerability to climate change impacts. International support was essential for boosting domestic tax systems, as was political commitment for reform in those States. Tonga’s tax revenues comprised 22 per cent of its GDP, higher than the small island developing State 19 per cent average. To help combat non-communicable diseases it had increased taxes on tobacco, fatty food and sugary beverages. However, tax revenues could contribute much more if they were mobilized effectively. There was wide variation in the capacity of small island developing States to mobilize domestic resources. While some had managed to broaden their personal income tax base, many relied on such indirect taxation as value-added and sales taxes, which could be regressive. For Tonga, he advocated increased international support to review the tax system with a focus on consumption tax, build capacity to improve tax revenue administration and compliance, promote South-South cooperation, strengthen public financial management and upgrade technology systems.
Mr. DORJI said least developed countries were “literally at the bottom of the development ladder”, with the Inter-Agency Task Force on Financing for Development report citing the need for more progress in the seven action areas of the Addis Agenda. In Bhutan, a least developed and landlocked country, low productivity, inadequate infrastructure, a weak private sector, reliance on commodities and capacity constraints were just some of the challenges, along with vulnerability to climate change impacts. Yet, its comparative advantages of political stability, rule of law, good governance and a focus on environmental and cultural conservation had helped Bhutan achieve good economic progress. To reach the next development phase, all financial instruments must be tapped. While foreign direct investment and investment promotion regimes had the potential to bring about transformative change, “on this, I’m afraid the news is not very encouraging”, he lamented. Generally, the total share of foreign direct investment in least developed countries was low and had been concentrated in very few countries. To reverse that trend, it was important to start with the right policy framework to ensure that the growth sectors were aligned with the development vision. To address capacity constraints, it would be useful to have a “nodal” investment promotion agency to help least developed countries with advisory and technical support. It was also important to inject confidence and predictability into the graduation process, with partners adopting smooth graduation as a development priority and accommodating the reality that abrupt withdrawal of international support could endanger hard-won gains.
Ms. DA SILVA IZATA said Angola was transitioning smoothly from a least developed to a middle-income country, and it was important that the graduation process did not jeopardize its development. While each country had primary responsibility for its economic and social development, international finance played an important role in complementing countries’ efforts to mobilize domestic public resources. Advocating that investment promotion regimes in least developed countries be strengthened, she said support in tax collection enhanced domestic enabling environments and built public services. While the international community recognized the unique needs of countries in special situations, such as small island developing States and landlocked least developed countries, it was paramount to enhance international cooperation to benefit developing country growth. The Global Environment Facility was a vital platform to address such concerns, and she advocated grant and concessional resources be provided to support such projects in countries such as Angola.
Also, efforts to create a Technology Facilitation Mechanism, called for in Addis Ababa, must be stepped up, she said. The same was true for a technology bank for least developed countries. She welcomed market access efforts, and suggested revision of the European Union’s “everything but arms” preferential trade scheme to enable all least developed countries to profit from it. “How many LDCs [least developed countries] are really exporting to the EU [European Union],” she asked? Angola was preparing a zero draft on lessons learned, outlining gains and losses related to the graduation process at the sector level, with coordination by the Ministry of Planning and Territorial Development. By July, Angola would start consultations with the private sector, non-profits and academics, addressing those perspectives and highlighting possible implications of the process.
Mr. CALVO said middle-income countries faced specific challenges to achieve the 2030 Agenda. Efforts should be made to foster an exchange of experiences, as well as provide better support from the United Nations development system and international financial institutions. Those bodies must consider the diverse needs of middle-income countries in a tailored manner in relevant policies and strategies. The middle-income country category created by the World Bank was inaccurate and harmful. The United Nations must take a more comprehensive approach that recognized their diverse realities, especially as similar criteria were used by OECD. Middle-income countries promoted implementation of Addis Agenda paragraph 129 to develop transparent measurements of progress based on recognizing sustainable development in a manner that went beyond simply measuring per capita income. Some United Nations agencies, including UNDP, had developed multidimensional criteria that captured the realities in those countries. Noting that by 2030, 28 Latin American countries would graduate to middle-income country status, he said the Forum should create a road map for a new United Nations strategy that considered such needs. There had been concerns over whether it should be a strategy or action plan, but “the name is not important here”, he said. Rather, system-wide guidelines must be developed to help middle-income countries achieve the 2030 and Addis Agendas. Graduation policies, which were unfair and lacked consistency with the Goals, must be adjusted to middle-income countries’ experiences. Within the Community of Latin American and Caribbean States, countries had proposed designing a platform for a sustainable development transition.
In the ensuing discussion, Zambia’s delegate said landlocked developing countries faced unique challenges stemming from their geography, resulting in trade costs that were three times higher than for coastal countries. Measures to address such structural constraints included assistance in building tax bases and enhancing productive capacities, especially in the transport sector, along with trade facilitation and efforts to strengthen accountability. She underscored the importance of capacity-building to create “bankable” projects and design policies that supported sustainable infrastructure investment. Mexico’s delegate said the financing for development agenda was one of cooperation, which developing countries could use to leverage their resources to achieve the Goals. He asked the panellists about building a system that was not a zero-sum game of ODA, but rather included concessional flows, green funds, and South-South cooperation. A balance was needed to ensure all countries received the support that best suited them.
Honduras’ delegate stressed the importance of moving beyond an income understanding of development, while Bangladesh’s delegate expressed disappointment that the Forum had failed to address implementation of the Paris Agreement on climate change or refer to climate finance or access to it. She outlined various trade challenges, including market access. The European Union delegate said the bloc, the largest market for least developed country products, could boost their exports by up to 10 per cent. He recognized that market access alone was not enough; aligning development assistance was the number one priority in the review of the European Union Aid-for Trade strategy.
Moderated by Alexander Trepelkov, Director of the Financing for Development Office, Department of Economic and Social Affairs, the speakers for the stakeholder dialogue included Stefano Prato, Society for International Development; Emilia Reyes, Equidad de Genero; Hui Chan, Citi Bank; Wild Ndipo, Mayor of Blantyre, Malawi; and Daviz Simango, Mayor of Beira, Mozambique.
Mr. TREPELKOV recalled that civil society, the private sector, parliamentarians and local authorities had been involved in the financing for development process since its inception. With their diverse voices and priorities, those stakeholders had provided substantive inputs to both the ministerial and expert segments, as panellists, moderators, keynote speakers and with many thoughtful contributions from the floor. The stakeholder dialogue would draw on the important work of civil society, the private sector and local authorities in collaboration with the United Nations.
Mr. PRATO noted that civil society was concerned with ensuring that necessary, critical actions were taken to unlock the capacity for sustainable development. In that regard, there was a need to change the existing business model. There was a gap between what was legal and what would be adequate to reach the Goals. Civil society was duly concerned with all cases in which the private sector was called to deliver on public goods and services. Public interest should be the primary factor when framing such initiatives. While including the public sector in the pursuit of the 2030 Agenda was welcome, efforts must be made to ensure that public policy spaces were protected from conflict of interest and that the integrity of policy processes were maintained. He recalled that when analysing the area in which public and private sectors interfaced, there was a specific call in the Addis Agenda to establish a set of guidelines with respect to public-private partnerships.
Ms. REYES said that rather than addressing individual problems, her organization was seeking to identify the points of entry that would change the interconnections between those problems. In that regard, gender equality had a crucial role. If there was a large-scale value placed on women’s unpaid, domestic care work, there would not be enough money in the world to pay for all such work that women performed. Women’s human rights should not be commodified and there needed to be a change in the narrative that sustainable development could be achieved if women were “included”. Her organization had called for comprehensive fiscal measures with a clear gender perspective. Women’s empowerment alone was not enough to address the issues surrounding human rights. As had been said by others, the negative repercussions of illicit financial flows had an impact on gender equality.
Ms. HUI said that Citi promoted innovative financing for development through various mechanisms. The funding needed to achieve the Sustainable Development Goals was estimated at $4.5 to $6 trillion annually. Given those huge requirements, there would need to be an increase in ODA, although the only way to fill the expected funding gap was by working with the private sector. The “good news” was that there was no shortage of private-sector capital. While there had been momentum in the current scale and pace of private-sector investment, those efforts would still not produce the money needed. Without appropriate risk mitigation, private-sector investment would continue to fall short. There must be a move beyond traditional financing systems and philanthropy to create new investment opportunities that would attract private-sector capital. Moreover, without profits and returns, the level of private sector investment would remain far below what was needed. Blended finance — the strategic use of private finance to deliver social, environmental and economic benefit — was one viable and important option. The United Nations should involve the private sector early on and make it a partner for designing solutions.
Mr. NDIPO said that the common challenge was to reach the Goals, which would require more strategic investment and partnerships. There was an urgent need to empower local governments by bringing them into policy design. Efforts must be made to give local and regional governments the means to mobilize resources. From the perspective of local governments, new innovative partnerships must be designed to link finance to local needs. The dialogue between the various levels of governments must be enhanced. He was pleased to report that the public-private partnership environment was taking shape in Malawi, as was evident in several on-going projects. Cities had become anchors for international trade and national economies. To promote a more balanced development framework there must be a fairer distribution of public revenues across the various levels of government. In Malawi local governments did not have the ability to maximize local potential due to a lack of power to manage land use and taxes.
Mr. SIMANGO recalled that through the 2030 Agenda, the international community had committed itself to improve ways to invest in people in the areas where they lived and worked, to support liveable cities, towns and rural areas and include local governments in that partnership. Local governments often saw decisions made on the national level without taking into account local realities. The majority of cities in less-developed countries had a lack of resources and capacities. Local governments would be a “game changer” when it came to achieving the Sustainable Development Goals. His city in Mozambique, Beira, had managed to leverage some international funds when creating its long-term development plan. The international community would not be able to meet the tremendous challenges ahead if cities were unable to access long-term, external resources. Reaching local governments could be a powerful way to generate development cooperation. The world would not be able to reach its development objectives if investment in local and regional governments were not empowered to move beyond the short-term.
In the ensuing discussion, the representative of Mozambique questioned how the resources of the public sector should be harnessed to address the needs of the most vulnerable members of society. A member of civil society expressed concern that the Addis Agenda follow-up lacked specific references to emerging issues such as austerity, ecological risks, tax reform, stranded assets and military expenditures, as well as others. Furthermore, there were limited references to youth in the follow-up. Another member of civil society emphasized that he did not share the same enthusiasm for public-private partnership as had been expressed by the panellists, stressing that there was a severe lack of understanding about those complex schemes, which largely fed the shadow banking system.
Mr. PRATO said there was a blurring of what was public, what was private, and who was responsible for which tasks. He went on to emphasize that the public interest must remain paramount.
Ms. REYES said there was great emphasis placed on getting more money, but she questioned what was happening with the money that was already circulating, citing illicit financial flows, tax avoidance and corruption as major issues of concern.
Ms. HUI stressed that reaching the most vulnerable would require particular focus on partnerships and risk mitigation, as well as bringing all actors together to structure solutions that worked.
Mr. NDIPO said one challenge was that most lending institutions did not trust local councils.
Mr. SIMANGO said his city had already managed to enjoy some success in garnering private-sector investment for various projects.
Presentation of Outcomes from Addis Agenda Forums
The Forum then heard presentations on the progress made in forums mandated by the Addis Agenda and key voluntary initiatives launched at the Third International Conference on Financing for Development. Moderated by Alexander Trepelkov, Director, Financing for Development Office, Department of Economic and Social Affairs, it featured presentations by: Carlota Cenalmore, Acting Representative of the European Investment Bank; Luis Miguel Castilla, Manager, Office of Strategic Planning and Development Effectiveness, Inter-American Development Bank; Shantanu Mukherjee, Chief, Policy and Analysis Branch, Division for Sustainable Development, Department of Economic and Social Affairs; and F.M.M. Shava, President, Economic and Social Council.
Mr. TREPELKOV said the session would look at the contribution of mandated fora to the Addis Agenda.
Mr. CASTILLA reported on the outcome of the Second Global Infrastructure Forum, which took place in Washington, D.C., on 22 April. With 650 participants from nearly 70 countries, the spectrum of stakeholders included Governments, the private sector, academia, civil society and multilateral development banks, as well as the OECD and the United Nations. Discussions focused on how multilateral development banks worked with regional financial institutions to catalyse public and private resources for infrastructure. There was broad agreement that plenty of resources existed to finance sustainable infrastructure, such as pension funds. Multilateral development banks had been created to mobilize private capital and could bridge gaps. Planning, good project preparation and the engagement of all parties from the start was critical to success. For their part, multilateral development banks and Governments had a key role to play, he said, noting that adaptability was an increasingly important aspect to sustainability. Government willingness to show long-term commitment was also essential, as infrastructure assets required significant up-front costs. New sectors and lesser developed countries presented some of the best opportunities. For the first time, the Forum held a plenary session on the topic of diversity, which could lead to better policy outcomes.
Ms. CENALMORE, also reporting on the Infrastructure Forum outcome, outlined progress made by multilateral development banks since last year, highlighting a spirit of partnership. Compared to last year, the number of joint initiatives had substantially increased. “This trend will continue,” she said, noting that the key role of the private sector had been recognized and included in the agenda of multilateral development banks. The outcome document had set priorities for the immediate and long-term future up to 2030. Noting that national development banks, including from Brazil, Turkey and South Africa, had participated in technical sessions, she said such banks represented a crucial role in infrastructure finance. The Forum had underscored the commitment of multilateral development banks to sustainable and inclusive infrastructure, and demonstrated a willingness to tackle the challenges with other key players. With that, she announced that the Asian Development Bank would host the 2018 Forum in Bali, Indonesia, on the margins of the annual meetings of the International Monetary Fund and World Bank Group in October.
Mr. SHAVA presented the work of the 2016 Development Cooperation Forum, stressing that its key message was about putting into daily practice a transformative focus on results. Developing and developed countries, along with civil society, parliamentarians, international organizations, development banks, the private sector and philanthropic foundations had gathered for the Development Cooperation Forum’s fifth biennial high-level meeting. They embraced a concept of development cooperation that included financial resources, as well as capacity development, technology transfer, cooperation and partnerships.
In its recommendations, he said, the Forum stressed that development cooperation should continue its distinct role in supporting the poorest, which required making large-scale investments, using new evidence-based tools, strengthening domestic institutions and providing long-term budget support. More ODA should be allocated to those with the weakest policymaking capacities. Second, the Forum should advance understanding of how to strengthen incentives for the private sector, with blended finance one such vehicle. ODA should be closely monitored against its effectiveness in eradicating poverty, not simply increasing the volume of finance. Further, the full potential of South–South cooperation must be tapped to reduce asymmetries in order to access sustainable development opportunities and directly respond to local demands. Finally, there was an unprecedented need to improve multi-layered monitoring and review of development cooperation. The Forum had identified tremendous capacity gaps and new opportunities in that regard.
Mr. MUKHERJEE reported on the second Multi-stakeholder Forum on Science, Technology and Innovation, held on 15 and 16 May, noting that its outcome was being prepared and would be presented at the High-level Political Forum on Sustainable Development. Led by Kenya and the United States, that Forum was supported by the Inter-Agency Task Force and included 800 scientists, innovators and technology specialists, as well as representatives of civil society and Government. An innovation hub exhibited examples of how to harness science, technology and innovation in implementing the Goals. Science, technology and innovation touched on several Goals and targets simultaneously, making the Forum a perfect place to discuss an integrated agenda. Many advances bore fruit among several Goals, notably in making energy services available to all people. Multi-stakeholder approaches were essential in order to use science, technology and innovation — all of which were rapidly advancing — for the Goals, especially through matchmaking opportunities. While not explicitly mentioned in the 2030 Agenda, biotechnology, automation, artificial intelligence, or rapid data proliferation and use could determine — individually or collectively — how well that framework was realized. Twelve innovations were presented on how technology was rapidly influencing peoples’ lives. One demonstrated how remote censors were predicting weather with 89 per cent accuracy, with text messages sent to farmers to help them plan their planting.
In the ensuing interactive dialogue, speakers reported on the progress of various voluntary initiatives and partnerships, with the representative of the Netherlands commenting that one launched by Germany, the United Kingdom, the United States and his own country at the Addis Ababa conference had doubled cooperation on taxation. Australia’s delegate said innovation exchange had been created to work with the private sector, as had entrepreneurship and impact investing initiatives.
The Forum then approved its draft report (document E/FFDF/2017/L.2), which Mr. SHAVA explained would be updated by the Secretariat, in consultation with the Council President, and issued as a full procedural report of the Forum’s meetings, for consideration by the Council.
Mr. SHAVA, in closing remarks, said 20 ministers and vice-ministers, as well as a large number of high-level officials had participated in this year’s Forum. “I deliberately set a high bar for our discussions,” he said. “I believe that we have delivered.” The outcome document committed the Forum to a range of new policies and actions to accelerate national and international efforts in all areas of the Addis Agenda. He called for implementing those commitments in due time and in full.