Published in The Daily Star on Monday, 10 August 2015.
MACRO MIRROR
Funding the battle against poverty
Dr Fahmida Khatun
The conference on Financing for Development of the United Nations held in Addis Ababa from July 13-16 received much less importance from global leaders than expected. As a result, it drew very little media attention. In spirit, however, the meeting carries a lot of significance as the world is set to adopt Sustainable Development Goals in September and reach an agreement on climate issues in December this year. The UN has termed the Addis meeting a milestone for global partnership in achieving SDGs in the next 15 years and a step forward towards the climate negotiation to reduce global carbon emissions. The Addis conference, which is the third of its kind after the first one in Monterrey in 2002 and the second one in Doha in 2008, puts forward various proposals to end poverty, ensure inclusive economic growth and reduce vulnerabilities to climate change.
The Addis Ababa action agenda includes more than 100 measures on issues including finance, technology, science, innovation, trade, infrastructure, taxation, illicit financial flows and institutional issues. If these measures are implemented, they would lead to financial investments by both public and private sectors to address challenges that the world is faced with today.
In short, the Addis agenda includes collaboration on technology. Towards that, countries agreed to establish a Technology Facilitation Mechanism at the Sustainable Development Summit next month in New York. Similarly, establishment of a Global Infrastructure Forum was agreed upon for addressing infrastructure gaps and exploring opportunities for investment and cooperation in projects which are environmentally, socially and economically sustainable. Countries also adopted a social compact for the poor and vulnerable groups and committed to set up social protection systems.
On foreign aid, countries promised to reverse the decline in aid to the poorest countries. They recommitted to provide 0.7 percent of their Gross National Income (GNI) as overseas development assistance, and 0.15 – 0.20 percent of their GNI to least developed countries. The EU pledged to strengthen LDCs’ investment promotion regimes through financial and technical support. The Addis agenda urged developed countries to fulfil their vows to mobilise $100 billion per year by 2020 for developing countries to address the adverse impacts of climate change. Countries also pledged to do away with fossil fuel subsidies gradually.
The Addis agenda, however, falls short of expectations on several counts. The financing framework for “leaving no one behind” and “ensuring lives of dignity for all” was not a holistic one. The UN has estimated that the cost of implementing 17 goals and 169 targets under the proposed SDGs will be $172.5 trillion over a period of 15 years. According to UNCTAD, developing countries currently have investment equal to $1.4 trillion per year while total investment requirement to achieve their development goals is in the range of $3.3-4.5 trillion annually. Thus, estimates of annual investment requirements are high with significant gaps at present. The Addis meeting has emphasised on mobilisation of this huge resource from several sources. However, there was no indication of new money from developed countries. The assurance on ODA sounds dry and dull as it is more than four decades old. There was no specific timeline on the fulfilment of this promise. The issue of reforming the global financing system to achieve SDGs by 2030 was overlooked as always.
Domestic resource mobilisation has been identified as one of the major sources of finance to implement SDGs. Therefore, improving tax collection and preventing illicit financial flow from countries caught the attention of global policymakers. Countries committed to collect more taxes, reduce tax evasions and work towards dealing with illicit financial flows which are performed in various ways, including tax dodging, forming fake companies, money laundering and transfer pricing. But there was no commitment to establish an international body for cooperation on tax issues. Due to the absence of such cooperation, a huge amount of resources is being misappropriated, which otherwise could be used for the poor. The Global Financial Integrity report estimates that the amount of illicit financial flow from developing countries is around $1 trillion per year. In order to stop the outflow of such huge resources from poor countries, transparency within the global financial system is an urgent need. While there is a need for strong and accountable tax system in each country for higher domestic resource mobilisation effort, this should not be viewed as an alternative to developed countries’ contributions to poor counties.
But everything is not about finance only. How this resource will be channelled to and utilised for the extreme poor to bring them above the $1.25 a day threshold level is a bigger challenge. SDGs are viewed as transformative agenda for taking human civilisation forward. This is a transformation from the MDGs in the sense that the MDGs aimed for certain levels of achievement for certain number of people in some areas. But the SDGs focus on development for “all” in several areas, including poverty reduction and access to health, education, food, energy etc by 2030. Achievement of SDGs will depend on adequate resources backed by robust policies and implementation mechanism. Governance and accountability at national and global levels are preconditions for the fulfilment of such ambitious global development agenda. As the world awaits the adoption of SDGs next month, these issues surface prominently in global discussions than ever before.