This contribution is published as part of the Think Piece Series The Road To Addis and Beyond, launched to coincide with the third and final drafting session of the outcome document of this summer's Third International Conference on Financing for Development. In this Series, global experts discuss a range of topics complementary to the UNRISD research project on the Politics of Domestic Resource Mobilization on how to fund social development and raise provocative or alternative perspectives that can generate further ideas and debates. Please share your thoughts on this article in the comments space below.
Judging by the current draft outcome document, the Third Financing for Development (FfD) Conference is likely to achieve just one thing: a long list of declarations of intent, statements on what one might wish to consider or what should ideally be done—but few concrete commitments on who will deliver what means of implementation (MOI) and by when. The MOI declarations that have been put forth to date are no match for the sense of urgency and ambition that marks the Post-2015 Agenda or that which is likely to mark the COP21 outcome document (21st Session of the Conference of the Parties to the United Nations Framework Convention on Climate Change, being held in Paris in December 2015).
Thus, if the FfD Conference is to produce more than just a non-committal piece of paper, it must meet a twofold challenge and do so in the next few days. It must (1) close the ‘specificity gap’ by moving from declarations of intent to concrete, actionable MOI commitments; and (2) close the ‘ambition gap’ by identifying the MOI issues that are of strategic relevance to the successful implementation of the Post-2015 Agenda.
Impossible? No; because if there is a will, there is still a do-able way, consisting of four main steps.
is adjunct professor at the Hertie School of Governance, Berlin, and former Director of the Offices of the Human Development Report and Development Studies at the UNDP, New York.
is a PhD researcher at Leiden University, The Netherlands and former independent public policy consultant.
This Think Piece is a revised version of Briefing Paper 4/2015 from the German Development Institute (GDI-DIE) which is available both on the GDI-DIE website and is one of the substantive inputs to the current Financing for Development process (click on "Academia and research institutions" to see the link).
Step I – Identify strategically important means of implementation
The aim of an MOI strategy would be to lay the foundation to implement the sustainable development agenda. To this end it needs to foster an efficient, effective and equitable deployment of available resources, notably national and international public finance, which is of critical importance for multiple purposes, including, in many cases, the mobilization of private finance.
Accordingly, the criteria for identifying MOI issues of strategic relevance could be based on considerations such as whether a particular instrument could potentially contribute to:
(i) reducing the costs of future growth and development, thereby freeing up resources for initiatives designed to promote real progress—rather than efforts to prevent or correct growth and development reversals that stem from the pursuit of unsustainable policy paths and a lack of risk management;
(ii) frontloading investments, where required, for the speedy and decisive resolution of a policy challenge like mitigating climate change while meeting the goal of energy security for all or fighting against communicable diseases such as Ebola;
(iii) recognizing and tapping into new and innovative sources of finance, especially when they could generate funding of a quality that is now lacking, such as relatively predictable flows of longer-term financing; and
(iv) reducing institutional inefficiency that results from national and international governance arrangements lagging behind current and newly emerging policy realities and preventing the right money from being made available at the right time and in the right amount.
Of course, this set of criteria reflects today’s vantage point when it comes to priority concerns associated with fostering an efficient, effective and equitable deployment of public finance, nationally and internationally. As implementation processes advance and policy conditions change over time, this set of criteria may need to be modified.
Step II – Apply the strategically relevant criteria
Proceeding with and applying the criteria enumerated above, at least five MOI issues might qualify for further consideration due to their high strategic relevance:
1) Strengthening and expanding risk management—in order to smooth volatility and avert growth and development reversals
Disruptive events, including natural disasters, financial crises and disease outbreaks, are likely to occur in the post-2015 era. Moreover, as development proceeds, as further technological advances are realized and as consumption and production patterns evolve, the frequency of episodes of economic restructuring is likely to increase, leading to a rising trend in longer-term unemployment rates.
As the 2007-2008 global financial crisis and the natural disasters of recent years have shown, volatility and change tend to be costly in economic, social and human terms. And so are, of course, the human costs involved in what Schumpeter called “creative destruction”. Developing and introducing appropriate risk management mechanisms could allow countries, local communities and individuals to better cope with volatility and changes that might otherwise ruin their existence and cause serious development reversals.
Thus, in line with criterion (i) above, a cornerstone of the MOI package designed at the FfD Conference ought to be an enhanced risk management framework. This would ideally comprise items such as an expansion of natural disaster insurance, new and innovative social security schemes fit for our increasingly dynamic multi-polar world, and, in order to strengthen governments’ capacity to better withstand future economic and financial volatility, the issuance of sovereign bonds tied to the growth of a country’s gross domestic product—so-called GDP-linked bonds.
2) Balancing dynamic and static efficiency in the field of knowledge and technology management—in order to reduce the costs of growth and development and speed up progress
Many cases of premature death could be avoided and morbidity lowered if medical and pharmaceutical technology were less expensive. And green technology could already be more widely disseminated if more relevant research and development were undertaken and the associated knowledge made available at more affordable prices. In fact, many economies and the world economy as a whole could perform better even in terms of dynamic efficiency if the intellectual property rights regimes were more focused on encouraging the expansion of the world’s knowledge pool as a global commons.
Therefore, in line with criteria (ii) and (iii), better public/private balance in the field of knowledge management, facilitated by appropriately designed intellectual property rights regimes and mechanisms for the transfer of technology are key to progress toward sustainable and inclusive growth and development in the post-2015 era.
3) Exploring the introduction of a currency transaction levy (CTL)—in order to enhance the availability of funds suited for frontloading purposes and meeting longer-term international financial commitments
Globalization has opened up new avenues for resource mobilization, some of which have so far remained unutilized. One of these is the collection of a very small levy—say, just 0.005%—on currency transactions. A levy of this type could generate over US$25 billion annually, even if it was only applied to those transactions handled by the Continuous Linked Settlement system, a private-sector organization whose membership comprises the world’s major banks.
The advantage of such a levy lies in its ability to generate reliable, relatively large sums of public financing that, at present, are very difficult to obtain from governments. As a possible response to criterion (iii), it would help generate the type of public financing required , among other things, for mechanisms like advance purchase commitments and to meet continuous international financial obligations like payment of life-long treatment for disadvantaged HIV/AIDS victims, the maintenance costs of international seed banks, or pooled subsidies for pro-poor risk management schemes.
4) Aligning national budgetary rules with the financial requirements of today’s policy challenges—in order to reduce the costs of institutional inefficiency
In most countries the allocation of public finance follows a pattern that has not yet been fully adjusted to today’s realities. Budgetary allocations are still being approved on an annual basis, despite the existence of many multi-year international cooperation initiatives; and only a few designated government entities, usually foreign affairs ministries and, in industrial ‘donor’ countries, the entities in charge of development assistance, can effect public expenditure disbursements abroad, again, despite the fact that most policy areas today involve international cooperation requirements.
Considering the growing trend towards policy interdependence among states and public-private partnering, it appears timely to revisit, in response to criterion (iv) conventional budgetary practices from three aspects.
5) Devising simple guidelines for reporting global public good financing and official development assistance—in order to avoid accounting confusion and better distinguish between the two
- First, how to facilitate multi-year funding? While the CTL could finance recurrent longer-term expenditures, multi-year commitments by individual states could support investments in time-bound projects such as the International Finance Facility for Immunization.
- Second, which governmental entities should be authorized to disburse funds abroad?
- And third, what could be done to differentiate between budget allocations that are intended to be disbursed nationally and those destined to be disbursed abroad, either for global public good (GPG)-related purposes or for development assistance purposes?
Progress on the issues raised in point 4 could also greatly facilitate a further reform step in response to criterion (iv): more transparent international reporting and monitoring.
All that this might imply for industrial countries
is to answer four questions:
(i) How much money is being allocated to GPGs that are in our national self-interest?
(ii) What portion of these funds is disbursed at home and what portion abroad, either bilaterally or multilaterally (including, for efficiency reasons, in developing countries)?
(iii) What international ‘historical fairness’ commitments do we have, for example, obligations resulting from the principle of common but differentiated responsibility?
And (iv) to what extent are we meeting the long-standing ODA target of 0.7% of gross national income?
For developing countries
the question to answer in this context would be: What amount of national public finance, including ODA receipts and other types of development assistance or solidarity funding, is being allocated to GPG-type issues in order to contribute, within the country’s means and capacity, to meeting global challenges?
Developing countries with national solidarity or South-South programmes could additionally identify the amount of national public finance allocated to these areas.
If one were to follow simple accounting and reporting procedures along these lines, it would be eminently feasible to indicate which expenditures are new and additional relative to ODA, which are for GPG-related efficiency purposes and which pertain to GPG-related equity purposes. Further protracted international debates on these issues could be avoided, transaction costs saved and trust restored in all parties’ willingness to cooperate in meeting common challenges in an expeditious and mutually beneficial way.
Matters of accounting and reporting could be further facilitated by adopting the policy recommendation of the Sustainable Development Solutions Network, which calls for the creation of a new Multilateral Development Finance Committee to complement OECD/DAC.
Step III – Establish operationalization task forces (OTF)
The foregoing list of priority issues is intended as a first assessment for further discussion rather than a definitive and comprehensive selection. But, once agreement were reached on a final list of strategically important MOI issues which, if followed up on, would significantly facilitate and accelerate the implementation of the sustainable development agenda, Step III would simply require that an OTF be established for each of the issues identified. These task forces would be composed of high-level experts on the respective topics whose combined career experience would fully represent the relevant stakeholder groups.
The OTFs would also need to be provided with well-designed, goal-specifying terms of reference. Broadly, the objective of each task force would be to ready its particular MOI issue for implementation. As part of this process, the OTFs would quickly report back to the legislative body or bodies concerned to update them on interim progress.
Thus, while many MOI issues, including several of those mentioned above, have been discussed in a general way by previous expert groups, the proposed OTFs would bring added value to the process. They would be tasked with identifying precisely what could or should be done in order to push a particular MOI into the policy making mainstream. In this way, they would help to close the current ‘precision gap’ by enabling us to move beyond ‘just talking’ and actually achieve a better match between MOI and the goals of the sustainable development agenda. This, in turn, would close the ‘ambition gap’ that might otherwise stall full realization of the agenda.
Step IV – Decide to convene FfD Conferences on an annual basis
If, in addition, the 3rd FfD Conference were to decide henceforth to hold annual follow-up meetings on what could end up being called the Addis Ababa Accord, it would be desirable at those meetings to both review implementation of the previously agreed MOI issues and identify new issues of strategic importance to assign to the OTFs—so that an upward spiral of progress would be set in motion and another step taken on the road to dignity.
ABOUT THE AUTHORS
Inge Kaul is adjunct professor at the Hertie School of Governance, Berlin and former Director of the Offices of the Human Development Report and Development Studies at the United Nations Development Programme (UNDP), New York. She has published widely on issues of global governance and international cooperation and is the lead editor of Providing Global Public Goods; Managing Globalization and The New Public Finance; Responding to Global Challenges (OUP: New York, 2003 and 2006, respectively) and co-author of the Governance Report 2013 (OUP: Oxford, 2013). Her current research focuses on global public economics and finance, including climate finance and risk management.
Donald Blondin is a PhD researcher at Leiden University, The Netherlands, where he is investigating responses to transnational crises as part of the research project Crisis Management Cooperation in Europe. Previously, he coordinated pan-EU policy studies undertaken for the European Commission. He has also explored governance capacity in relation to global challenges like climate change, demographic transformation and financial instability as a research associate for the Hertie School’s Governance Report (OUP 2013). Donald is co-author of ‘Global Public Goods and the United Nations’ (in Global Governance and Development, Siglo XXI and OUP, 2015) and co-publisher of an oral history book on Native American economic issues.