Ministers and other high-level officials concluded the 2019 Forum on Financing for Development Follow-up today, pledging to scale up efforts towards the full and timely implementation of the Addis Ababa Action Agenda — a comprehensive set of policy actions adopted in 2015 to finance sustainable development through 2030.
“We note with concern that mobilizing sufficient financing remains a major challenge in implementing the 2030 Agenda for Sustainable Development,” they stated in a 10-page outcome of agreed conclusions and recommendations (document E/FFDF/2019/L.1), adopted to a burst of applause. “Progress has not been shared evenly within and among countries.”
The Forum’s outcome document will feed into the Economic and Social Council High-Level Political Forum on Sustainable Development in July. The document is structured around the Addis Ababa Action Agenda’s seven chapters — domestic public resources; domestic and international private business and finance; international development cooperation; international trade as an engine for development; debt sustainability; addressing systemic issues; and science, technology, innovation and capacity-building; as well as an additional section on data, monitoring and follow-up.
By its terms, ministers acknowledged that world economic growth has likely peaked at 3 per cent, with growth in per capita gross domestic product “significantly” below what is needed to end poverty. They pledged to work to develop integrated national financing frameworks in support of nationally owned sustainable development strategies, recognizing that the diverse needs of countries in special situations must be addressed.
In terms of domestic public resources — recognized in the Addis Ababa Action Agenda as central to the common pursuit of sustainable development — the Forum’s ministers recommitted to strengthening revenue administration through modernized, progressive tax systems, noting that the ongoing challenges of base erosion and profit shifting are facilitated, in part, by the digitalization of the economy.
On cooperation, ministers agreed that international public finance plays an important role in complementing country initiatives to mobilize domestic public resources, calling on donors to intensify efforts to fulfil official development commitments and on providers of blended finance to engage strategically with host nations to ensure that projects align with national priorities.
Turning to trade as an engine for development — a topic that provoked lively debate over the Forum’s four days — they acknowledged that the multilateral trading system is falling short of its objectives. They reiterated the importance for all developing countries to benefit from its opportunities. Expressing support for World Trade Organization reform, they encouraged progress, including through the Aid for Trade initiative, in improving revenue collection as a powerful tool to reduce trade costs and increase public revenue.
In the area of follow-up, ministers decided that the fifth Economic and Social Council Forum on Financing for Development Follow-up will convene from 20 to 23 April 2020.
In closing remarks, United Nations Deputy Secretary-General Amina Mohammed said the multilateral system is under strain and trust is eroding “in part because we are not delivering inclusive sustainable growth for all”. Maintaining the status quo will not close the $2.5 trillion funding gap for reaching the Sustainable Development Goals. The concept of national financing frameworks was introduced in Addis Ababa, and it is time to start using them to mobilize finance. Success will also require aligning private sector priorities with sustainable development objectives.
“We leave with a mixed picture of how the current global context is shaping financing for development,” said Economic and Social Council President Inga Rhonda King (Saint Vincent and the Grenadines). Rapid shifts in climate, technology and geopolitics are challenging economic policies and financial systems to end poverty, while a range of innovations is fostering a more sustainable future.
Reflecting on the Forum’s discussions, she said some Governments and financial leaders are showing the way with measurements recognizing the interplay between economic growth and climate goals. Calls were made for a more cooperative global order, with actions linked to national and local levels alongside efforts to mobilize all sources of financing, including incentives for investments that are better aligned with sustainable development. There is evidence of what works in harnessing the needed resources, she stressed.
These calls dovetailed with messages delivered earlier in the day during three panel discussions on: “Trade, science, technology, innovation and capacity building”; “Debt sustainability and systemic issues”; and “The road to the General Assembly High-level Dialogue on Financing for Development”.
Speaking to concerns over waning global growth, panellist Miho Shirotori, Chief of the Global and Regional Trade Analysis Section at the United Nations Conference on Trade and Development (UNCTAD), said data reveal that regional trade can be decoupled from the current “slowbalization”, or ebbing of trade, investment and capital flows.
On that point, Jane Nalunga, Country Director at the Southern and Eastern Africa Trade Information and Negotiations Institute, said Africa’s Continental Free Trade Area has fostered structural transformation while addressing high unemployment, inequality and poverty. The integration of African economies will require a package of complementary policies that develop national and regional infrastructure, create national and regional markets, and promote the rights of workers, farmers, traders, and small and medium-sized enterprises.
Also today, the Forum adopted the report of its 2019 session (document E/FFDF/2019/L.2).
The representatives of Italy and Zambia, as co-facilitators of the draft outcome document, also delivered statements.
The Economic and Social Council will reconvene at a time and date to be announced.
The Forum began the day with a panel discussion on “Trade, science, technology, innovation and capacity-building”, covering Action Areas D and G of the Addis Ababa Action Agenda. Moderated by Olajumoke Adekeye, Founder of the Young Business Agency, it featured presentations by Nojibur Rahman, Principal Secretary to the Prime Minister of Bangladesh; Miho Shirotori, Chief, Global and Regional Trade Analysis Section, Trade Analysis Branch, Division on International Trade, United Nations Conference on Trade and Development (UNCTAD); and Sofie Maddens, Head, Regulatory and Market Environment Division, International Telecommunication Union. Serving as lead discussant was Jane Nalunga, Country Director, Southern and Eastern Africa Trade Information and Negotiations Institute.
Ms. ADEKEYE said the shifts and disruptions of the fourth industrial revolution, in which technology breakthroughs are fusing the digital, physical and biological worlds, offer an opportunity to achieve the 2030 Agenda for Sustainable Development. It would be irresponsible of global leaders to shy away from dialogue and action on policy on emerging technologies that have a potential for inclusive economic growth. “Our world as we know it is changing and so must our approach,” she said, emphasizing that global trade is a crucial vehicle through which emerging technologies can help to fulfil the Sustainable Development Goals.
Mr. RAHMAN highlighted steps needed to ensure the multilateral trading system makes greater contributions to sustainable development and how trade can be more equally distributed. Trade can offer considerable support to countries as a means of implementation for attaining the Sustainable Development Goals. At the same time, official development assistance (ODA) is declining in real terms for development purposes, while foreign direct investment is not growing significantly, especially in least developed countries. With global growth likely to fall to 2.6 per cent in 2019 from 3 per cent in 2018, he said increased protectionism and failing to deliver on related commitments are limiting trade as a successful means of implementation. Underscoring the need for a universal, rules-based and equitable trading system and for World Trade Organization (WTO) ministerial decisions to be implemented, he pressed WTO to keep development front and centre in its discourse and to address both trade barriers and trade-distorting subsidies.
Ms. SHIROTORI, highlighting that South-South regional trade offers growth potential, said inter-African trade has been steadily increasing since 1995 and is more diversified than the continent’s trade with the rest of the world. Africa’s top 10 exports to the world account for 50 per cent of total export earnings, whereas those for inter-African trade account for 15 to 20 per cent. Further, 30 per cent of inter-African trade is in high to medium-high technology products. Comparing the current state of “slowbalization” — characterized by slowing trade, investment and capital flows — to past periods of expansive globalization, she said data shows that regional trade can be decoupled from this slowdown. While ending tariffs and opening the services sector can increase inter-African trade by 33 per cent and total employment by 22 per cent, the problem is that non-tariff barriers — and compliance costs — have a disproportionately high impact on low-income countries. Such measures are legitimate and cannot be eliminated. However, their trade-distorting impacts can be eliminated through regulatory cooperation in the form of mutual recognition agreements, such as food safety standards. With a view to reaching the Sustainable Development Goals, Governments can discuss how to reduce compliance costs and engage in policy coordination.
Ms. MADDENS said information and communications technologies (ICTs) are impacting global trade and can help to achieve the Goals. While technology is evolving, it also creates challenges. “We have to know how to connect,” she said, as well as foster trust, especially in the context of trade. Noting that half of the world is connected, she said not everyone uses ICTs to their benefit. These technologies can help to end poverty and enable business opportunities for small- and medium-sized enterprises if used to maximum efficiency. It is important to both ensure that people have the skills and knowledge needed to effectively use ICTs and connect the other unconnected half of the world. Digital financial inclusion requires more than just a “digital wallet” to pay for goods; it requires skills so that a person understands how to sell crafts on a local market, for example, or receive information about relevant products. “We need to think about this holistically,” she asserted, challenging participants to find a balance between flexibility and stability and to think holistically, adding: “ICTs are at the service of achieving many Goals.”
Ms. NALUNGA said the global trade system is in crisis, especially for poor African countries, and it must remain relevant and provide policy space for countries to carry out industrialization policies. Emphasizing that the Doha development round of WTO trade talks must be concluded, she said regional trade — and the Continental Free Trade Area in particular — is important for promoting structural transformation and addressing Africa’s high unemployment, inequality and poverty, principles enshrined in the Agenda 2063 of the African Union. Integration of African economies will require a package of complementary policies that develop national and regional infrastructure, create national and regional markets and promote the rights of workers, farmers, traders and small and medium-sized enterprises to foster truly inclusive sustainable development.
Ms. SHIROTORI said trade policy is not the solution for making trade more inclusive. It is important to identify the mutually reinforcing aspects of competition, investment and education policies. She underlined the importance of raising the productive capacity of the most marginalized segments of society, especially women.
Ms. MADDENS said it is important to build accessibility into trade policies from the start and to give people an opportunity to become involved in trade. Bringing these opportunities to under-serviced areas requires the elaboration of universal services policies, notably through public-private partnerships, municipal networks and working with partners, such as Grameen Bank, which offers microcredit.
Mr. RAHMAN added that leaders should do their utmost to establish an enabling policy environment and demonstrate the political will to build a digital economy.
When the floor opened, delegates raised a range of issues. The representative of Mexico said it is crucial to have greater integration within the United Nations.
A representative of Third World Network said the crisis within the multilateral trading system reflects the failed policies of globalization, leaving weaker countries at the mercy of those with greater economic strength. Noting that the discourse is not focused on the regulatory challenges to gaining control over digital data, she said the push for investment facilitation at WTO is important, especially regarding investor-State dispute settlements. She welcomed that the reform agenda challenges the concept of special and differentiated treatment, as it does not recognize the extent of poverty in developing countries and has the ability to push several countries into debt. Any WTO reform must include a strong development mandate and must not undermine the position of the world’s weakest nations, she insisted.
A representative of Public Service International said he is sceptical that current trade regimes can protect people and the planet, noting that fewer than 30 people own more wealth than half of all human beings on Earth. “Why are we failing so miserably in our duties to care?” he asked. It is due in large part to the shrinking role of Government, paving way for the managers of global capital to “do what they like”: privatize and denigrate Governments’ ability to do anything right. He advocated a rights-based approach which restores dignity to labour, family and community, rather than a financed-based approach, which reduces all decisions to short-term financial considerations.
Mr. RAHMAN replied that developing countries, in name of promoting the digital economy, have given privileges to e-commerce. Now there is a renewed push to bring e-commerce under taxation systems. Noting that in Bangladesh, tax policies are debated in Parliament and tend to be both pragmatic and rules-based, he favoured bringing e-commerce under a taxation regime.
Ms. MADDENS explained that a regulatory framework must consider the public good and those who are excluded from the digital economy, but not impose so restrictive a regime that innovation is stifled.
Ms. SHIROTORI added that UNCTAD seeks to discuss important inclusiveness from various perspectives, recalling that it organized an “e-commerce week” earlier this month. “We need to nurture these kind of opportunities” to ensure all these elements are part of policy decisions, she asserted.
The discussion also featured speakers from ETC Group and those participating through a virtual platform.
The forum then convened a panel discussion on “Debt sustainability and systemic issues”, covering Action Areas E and F of the Addis Ababa Action Agenda. Moderated by Martin Guzman, Associate Professor at the University of Buenos Aires Department of Economics and Co-chair of the Columbia Initiative for Policy Dialogues Taskforce on Debt Restructuring and Sovereign Bankruptcy, it featured presentations by: Maria Edita Z. Tan, Assistant Secretary, International Finance Group of the Department of Finance, Philippines; Denise Knight, Senior Economist, Ministry of Finance, Antigua and Barbuda; and Martin Mühleisen, Director of the Strategy, Policy and Review Department of the International Monetary Fund (IMF). Heron Belfon, Director of Jubilee Caribbean, served as a discussant.
Mr. GUZMAN, opened the discussion, noting that debt sustainability is a challenging issue dealing with the capacity of debtors to meet their payments. In reality, such capacity is often elastic, with shifting expectations that often affect markets, raising debt servicing costs, sparking austerity measures or sending countries into spirals of recession. Meanwhile, debt restructuring processes – if they happen at all – are usually “too little, too late”. In the 187 sovereign debt restructuring processes undertaken since 1970, more than 50 per cent were followed by yet another situation of distress, he said, asking the panellists to consider what can be done to improve this process. In addition, he asked whether demands of the 2030 Agenda can be met while also ensuring debt sustainability.
Ms. TAN underlined the importance of effectively monitoring a country’s fiscal policies and the composition of its debt, as well as related global trends. States should also consider their counterparts’ risks and domestic and global interest rates. Turning to the 2030 Agenda, she said strong macroeconomic and fiscal policies can help to inform debt managers and assist Governments to facilitate smart expenditures, sound cash management and well-balanced liabilities while better managing shocks at the national level.
Ms. KNIGHT said many of the members of the “Group of 77” developing countries and China – including small island developing States such as Antigua and Barbuda – face significant climate vulnerability, dropping ODA levels and, more recently, a loss of crucial banking relationships. Describing the severe impact of hurricanes, she said they often translate into higher debt burdens as States are forced to borrow at high rates to finance reconstruction. Citing work to reverse these trends, she described the Caribbean Risk Insurance Facility, a parametric insurance instrument, as well as several new renewable energy projects. The limited fiscal space of small island developing States has forced them to become more creative, she said, adding that their serious debt challenges are also cause to re-evaluate cuts in the provision of ODA.
Mr. MÜHLEISEN said a serious discussion continues in various international forums on how to strengthen the resilience of Caribbean nations and others affected by natural disasters. One challenge in that area is that most investors in the sovereign debt market still lack the capacity to take on the high risks associated with climate vulnerability and still expect normal returns on their investments. He said: “It’s not just a question of sovereign debt alone,” as the landscape of creditors has also become much more complicated in recent years.
Ms. BELFON said the Caribbean region has learned from previous debt crises that the “timid steps” currently being taken are insufficient. More transparency is important, but hidden debt is not the only problem – even known debt levels remain far too high. Calling on all parties to build upon work done within the United Nations system, she recalled that the General Assembly has committed to working towards a fairer debt workout system. “We must act now” to resolve the worsening debt sustainability crisis, she said.
In the ensuing dialogue, many participants echoed the need for swift action. However, some stressed that the funds acquired by taking on debt – if well managed – can be used in productive ways to combat poverty, improve service delivery and meet other development goals.
In this vein, the representative of Nepal asked how debt can be used more productively while also ensuring more monetary and fiscal balance around the globe.
The representative of El Salvador, noting that his country is not an island but still faces significant climate-related vulnerabilities, asked the panellists to address the potential of an initiative proposed by the Economic Commission for Latin America and the Caribbean (ECLAC) related to debt swaps for climate adaptation measures.
The representative of Guyana wondered if, and how, the developing country graduation process considered the risks and realities of repeated natural disasters.
A representative of Jubilee USA, recalling that many countries have begun to enact measures to curb predatory lending practices and the practices of so-called “vulture funds”, asked how to encourage more States to put these measures in place and to develop legal frameworks for responsible lending and borrowing.
Mr. GUZMAN pointed out that what is considered a best practice in macroeconomic policy changes over time. While most creditors prefer to be paid out at normal rates and on a timely schedule, that is not always possible in high-risk countries. In this vein, he asked the panellists to consider ways to develop different expectations in the creditor-recipient relationship.
Responding, Ms. TAN said good investors can be attracted if countries maintain strong macroeconomic and fiscal policies. Turning to the potential of debt swaps - in which the Philippines has taken part on several occasions - she said the success of this tool is largely dependent on the interests and expectations of the various bilateral partners.
Also to this point, Ms. KNIGHT said few lenders are currently interested in debt swaps. However, given the world’s increasing climate vulnerability, more creditors might come to embrace this instrument in the coming years.
Mr. MÜHLEISEN agreed that sound fiscal policies and control over liability are crucial elements of debt sustainability. However, international organizations should also commit to assisting States to generate revenue in a more efficient way. “We take this really seriously,” he said, spotlighting IMF efforts and underlining the importance of both domestic revenue mobilization and support at the international level.
Mr. GUZMAN, describing a highly deficient international financial architecture, agreed with the overall point that the world is not prepared to face the next major debt crisis.
Also participating in the discussion were representatives of the civil society organizations Germany Year of Relief and Bretton Woods Project.
The forum then held a panel discussion on “The road to the General Assembly High-level Dialogue on Financing for Development”. Chaired by Economic and Social Council President Inga Rhonda King (Saint Vincent and the Grenadines), it featured Martha Ama Akyaa Pobee, Permanent Representative of Ghana to the United Nations; Marc-André Blanchard, Permanent Representative of Canada to the United Nations; and Mauricio Escanero, Head of the Mission of Mexico to the European Union, Ambassador to Belgium and Luxembourg and facilitator of the Monterrey Consensus.
Mr. BLANCHARD said this week’s discussions reflect a growing recognition of – and a broad alignment around – the need to think and work differently to achieve the Sustainable Development Goals. Indeed, given the gap between that ambitious agenda and the current pace, “we need speed and scale like we have never done before”. The General Assembly’s high-level meeting in September will provide a new chance to galvanize action and a real opportunity to engage leaders on financing for development. Underlining Canada’s strong support for multilateralism, he warned against continuing along the same path that has not yet yielded sufficient results. Today, a wide array of stakeholders must all be engaged on such issues as debt sustainability, harnessing the digital economy, mobilizing tax revenues and increasing investment flows where they are needed. Pledging to take up work streams on those and other important topics in the coming weeks, he urged representatives to roll up their sleeves and make things happen.
Ms. POBEE agreed that discussions at the Forum, along with those at the Second High-level United Nations Conference on South-South Cooperation, also called BAPA+40, and other recent multilateral meetings, demonstrate a desire to scale up efforts to accelerate the implementation of the 2030 Agenda. Calling for tangible action to emerge from those discussions, she said the funds needed to achieve the Sustainable Development Goal targets already exist but need to be harnessed. Underlining the importance of building strong partnerships to overcome structural challenges facing middle-income countries and other States in special situations, she pledged to use the opportunity presented by the array of high-level meetings slated for the coming months to develop a common narrative around these crucial issues. The year 2019 has so far been a positive one, she said, urging States to embrace that momentum in pushing forward their important tasks.
Mr. ESCANERO expressed hope that States will work together to ensure that the Assembly’s high-level dialogue is meaningful and elevates efforts to achieve sustainable development “to the next level”. The establishment of the financing for development framework represented a new way of thinking and a crucial first step, but now parties – from States to civil society to a range of other actors – must maintain the will and commitment needed to bring about results. “The process is still alive, which is great and more needed than ever,” he said. However, global challenges are becoming increasingly complex, with fragmented societies, emerging climate change consequences, rising inequality, rapid technological changes and threats against multilateralism. In this context, he cited several priorities going forward, including building synergies between the various upcoming high-level meetings; relaunching the financing for development process at a higher level; and tackling such issues as debt, taxes, trade, technology, green job creation and the protection and sustainable management of the global commons.
In the ensuing discussion, the President of the UNCTAD Trade and Development Board said his organization can help to funnel both existing and innovative financial flows into the Goals. Curbing illicit financial flows, while attracting foreign direct investment, can go a long way in those efforts. Recalling that UNCTAD helps countries to improve their management of debt traps, he called for redefining debt sustainability in a manner that is fit for the Sustainable Development Goal era.
The representative of Mexico asked the panellists about measures countries can take to advance a holistic vision of development financing.
Mr. BLANCHARD replied that the question is more specifically around how to finance the implementation of the Goals. Highlighting the importance of small steps and the sharing of examples, he also advocated the creation of partnerships “that are unusual”. As the discussion often describes the lack of scale in countries or markets, the international community must figure out how to correct that problem through the aggregation of projects, he said, citing the Seychelles’ “blue bonds” as an example in that regard. As to whether the United Nations is the best place to bring parties together, he said “probably not”, but it can certainly advance the discussion. The goal is to better align capital with sustainable development.
Ms. POBEE said that along with aggregation of initiatives, there is a need for harmonization, especially in assessing the impact that projects might have. In developing such work streams, she said, “we need to start from somewhere.”
Mr. ESCANERO encouraged an understanding of the process as building the means of implementation — different coalitions — for implementing the Goals. There is also a historical focus on building an enabling environment, he said, so all stakeholders can benefit. “There are no simple solutions,” he said, describing the objective as building meaningful actions that will change the world, using imagination, hard work and diplomacy to get there.
The Forum then adopted the draft intergovernmentally agreed conclusions and recommendations (document E/FFDF/2019/L.1).
An observer for the European Union delegation said the bloc attached great importance to the financing for development agenda, expressing regret that recognition of the Addis Ababa Action Agenda does not appear in the outcome. The same holds true for mentioning the exceptional nature of 2019, during which the international community will assess progress on both the 2030 Agenda and the Addis Ababa Action Agenda. The outcome also lacks a balanced treatment of all three pillars of sustainable development. Having proposed language on climate change and sustainable finance, the European Union found the outcome’s reference to such issues as the Green Climate Fund “rather superficial”.
Moreover, he said, wording in the trade section, while an improvement over 2018, should have included stronger language regarding a rules-based, predictable and inclusive trading system. He also raised a reservation on paragraph 20, explaining that the European Union’s understanding of the recommitment “to exploring how official creditor cooperation mechanisms can address the potentially more complicated future insolvencies more effectively” is not a mandate for the United Nations to create a new mechanism. It is likewise unfortunate that the debt-related segment does not acknowledge a changing landscape. The bloc would have preferred better placement of the reference to triangular cooperation, and while it accepted the reference to “leaving no country behind” in the outcome, it cannot accept the use of this phrase in different contexts, he said, while nonetheless welcoming the strong language around gender equality.
The representative of the United States explained that the outcome document does not create obligations under international law, emphasizing that much of its trade-related language has been overtaken by events since July 2015. While affirming support for promoting economic growth, she clarified that language on the Paris Agreement on climate change, and on climate change itself, is without prejudice to the United States position. On gender, the United States prefers the term “women’s equality” to gender equality as a way of clarifying its commitment to empowering women and girls.
She said the United States shares the aspiration to increase universal access to health care and applauds these efforts; however, in line with previous United Nations resolutions, each country should develop plans to do so in line with its own priorities. The United States recognizes the role of partnerships with the private sector and others in achieving universal access to health care. However, she voiced regret that the outcome document no longer includes references to development assistance, which is provided as international public cooperation.
She said the United States will act on its sovereign interests on trade, meaning it does not take direction from the United Nations, and the Organization must not involve itself in decisions under way at WTO. It is not the appropriate venue for such discussions, and the United States will not heed decisions by the Economic and Social Council or the General Assembly in such matters. She recognized that increased private investment is key to unlocking prosperity in the developing world. But, her delegation does not agree that “affordable infrastructure” is an appropriate standard, as it does not acknowledge the needs of citizens. Also, the term “illicit financial flows” lacks an agreed international definition, and as such, the outcome should specify the need for all States to combat such crimes at home. She also objected to the term “countries of origin” in the return of confiscated or stolen assets. With those clarifications, the United States joined consensus.
AMINA MOHAMMED, Deputy Secretary-General of the United Nations, said the scale of financing required for attaining the Goals is more now than has ever been needed, citing the $2.5 trillion gap for funding such key infrastructure as roads, power, water and sanitation. The status quo will not achieve the objectives. The multilateral system is under strain and trust is eroding, “in part because we are not delivering inclusive sustainable growth for all”, she said.
Indeed, she said, there are many areas where multilateral cooperation provides the only path to solutions. Only through deeper cooperation on tax, for example, can Governments combat illicit financial flows. Only through a rules-based, non-discriminatory trade system can the global community help all countries realize their aspirations for growth.
Throughout the Forum, participants underscored the importance of adopting national financing frameworks which are needed to meet the Goals at the national level, she said. The concept of national financing frameworks was introduced in Addis Ababa and it is time to start using them to mobilize finance. Success will require aligning private sector priorities with those of sustainable development, she said, noting that the Secretary-General will launch in September the Global Investors for Sustainable Development Alliance.