ACCESSIBILITY AT UNOG A A A A The United Nations in the Heart of Europe

ECONOMIC AND SOCIAL COUNCIL HOLDS PANEL DISCUSSION ON FINANCING FOR SUSTAINABLE DEVELOPMENT

9 July 2013

The Economic and Social Council (ECOSOC) this afternoon held a panel discussion on financing for sustainable development.  During the discussion, panellists explored ways of devising a coherent strategy for sustainable development financing and considered the role which development financing could play in implementing the development agenda. 

Daffa-Alla Elhag Ali Osman, Vice-President of the Economic and Social Council, said that the international community was paying more and more attention to financing the investment needs for sustainable development.  In April this year, the Council had held a thematic debate on financing for sustainable development, where there was broad agreement that an integrated approach to financing for sustainable development should build on the Monterrey and Doha outcomes.  A key challenge was the creation of mechanisms to leverage private finance and to align private incentives with public goals.

Shamshad Akhtar, Assistant Secretary-General for Economic Development of the Department of Economic and Social Affairs and discussion moderator, said that an expert committee established last month would prepare a report proposing options for a financing strategy for sustainable development.  Different sources of financing were not substitutes for one another but were positioned to reinforce each other, even if they each had a distinct set of objectives.  The main areas of development financing around which the discussion would revolve included long-term investment, the financing of smaller and medium enterprises, and climate financing.  

Petko Draganov, Deputy Secretary-General, United Nations Conference on Trade and Development, said that official development assistance was on the decline and this was a direct consequence of the financial crisis.  The international community needed to take into consideration the necessity to take measures and mitigate climate change.  Global capital flows had revived since the collapse in 2008 and the share of international flows to developing countries had increased significantly.  They could try and redefine the role of central banks to play a more direct role in allocating credit.  

Manfred Scheper, Vice-President and Chief Financial Officer, European Bank for Reconstruction and Development, said that the Bank was focused on supporting the private sector and there was a venue where the current dormant funds around the world were currently not accessing opportunities.  Over the past year it had been asked to become a supporter of the countries of the Southern Eastern Mediterranean and act as a provider of equity.  Another one of its initiatives was the Institutional Investment Partnership, looking to mobilize long-term investment to 35 countries.

Axel Bertuch-Samuels, Special Representative to the United Nations and Deputy Director of the Strategy, Policy and Review Department, International Monetary Fund, said that owing to the financial crisis and subsequent recession many advanced economies had difficulty honouring their financing for development commitments.  Domestic resource mobilization was a critical issue in developing countries and it was possible to achieve.  More efficient, fairer and less prone to corruption tax systems had to be established in developing and low-income countries.    

Marilou Uy, Senior Adviser to the President’s Special Envoy on the Millennium Development Goals and Financial Development, World Bank Group, said that both the public and private sector had a role to play in leveraging additional resources, and if they did, financing could have a great impact on development.  At country level, domestic resource mobilization and efficient public sector spending were important.  There were various types of subsidies which targeted the poor, including a number of well-designed transfer programmes.  In addition to official development assistance, countries also obtained financial support from new development partners.            

Manuel Montes, Senior Advisor on Finance and Development, the South Centre, said that it was important to discuss how to attain greater coherence and coordination and to provide access to steady, predictable and adequate financing.  There was a critical need to repair the international financial and payments system.  A global enabling environment should increase the capacity of developing countries in terms of domestic resource mobilization.  International disciplines on reserve issuing countries had to be restored and a comprehensive sovereign debt resolution mechanism had to be established. 

Participating in the interactive discussion were Benin, Egypt, Sudan and Gabon.

Daffa-Alla Elhag Ali Osman, Vice-President of the Economic and Social Council, said that since draft resolutions under items 4 and 6(a) were still being negotiated, the Coordination Segment would now be suspended and it would be concluded at a later time.

The Economic and Social Council will resume its work at 10 a.m. on Wednesday, 10 July when it will open its Operational Activities Segment and will hold a panel discussion on progress made in the implementation of General Assembly resolution 67/226.

Panel Discussion on Financing for Sustainable Development

DAFFA-ALLA ELHAG ALI OSMAN, Vice-President of the Economic and Social Council, said that as the world economy continued to struggle for recovery in the aftermath of the global economic and financial crisis, and against the backdrop of falling official development assistance levels, the attention of the international community was increasingly shifting towards financing the ever growing investment needs for sustainable development.  Today’s debate presented a timely opportunity to continue the dialogue within the Financing for Development process and discuss further options for a coherent strategy for financing sustainable development.  Deliberations would serve as a critical input to the preparations of the sixth High-level Dialogue on Financing for Development later this year in New York, and would further inform the elaboration of the post-2015 development agenda as well as the implementation of the Rio+20 outcome document. 

In April this year, the Economic and Social Council held a thematic debate on financing for sustainable development within the context of its annual special high-level meeting with the Bretton Woods Institutions, the World Trade Organization and the United Nations Conference on Trade and Development.  There was broad agreement that an integrated approach to financing for sustainable development in follow-up to Rio should build on the Monterrey Consensus, the Doha Declaration on Financing for Development and the Johannesburg Plan of Implementation, which remained critical policy frameworks for development cooperation.  It remained critical that international commitments, particularly those on official development assistance, be met.  There was a convergence of views that all sources of financing would be necessary.  A key challenge included the creation of mechanisms to leverage private finance and to align private incentives with public goals.  There was also a need to enhance the role of both foreign and direct investment and technology transfer in promoting inclusive and green growth.  Addressing these points remained critical in the formulation of a coherent sustainable development strategy. 

SHAMSHAD AKHTAR, Assistant Secretary-General for Economic Development of the Department of Economic and Social Affairs and discussion moderator, said that, regarding the ongoing work within the United Nations system in terms of financing for sustainable development, a committee of experts was officially established last month.  It would hold its first meeting in New York in August and would prepare a report proposing options for a financing strategy for sustainable development.  Member States had emphasized the need to integrate the committee’s work into the General Assembly, which was critical in order to avoid reduplication of efforts.  Ms. Akhtar said that it was important to recognize that sustainable finance was an integral part of development finance.  Different sources of financing were not substitutes for each other but were positioned to reinforce each other, even if each one of them had a distinct set of objectives, so it was important that complementarities be exploited.  The main areas of development financing around which the discussion would revolve included long-term, riskier investment, the financing of smaller and medium enterprises, and climate financing.  Some of the main questions to be addressed during the discussion were how principles could be translated into a more cohesive strategy, what were the most effective policies and regulations for middle to high-income countries, and what was the most effective way of devising a coherent strategy for development financing?

PETKO DRAGANOV, Deputy Secretary-General, United Nations Conference on Trade and Development, said that the United Nations Conference on Trade and Development had been doing a lot of work on analyzing the current situation, the financial crisis and the ways to best come out of it and recover.  Indeed there were a lot of worrying signs.  Official development assistance was on the decline and this was a direct consequence of the financial crisis.  The international community needed to take into consideration the necessity to take measures and mitigate climate change.  It was crucial to discuss, to debate openly and to look for ways forward.  There was a wealth of finance in one sense and they should think about why this finance was not working for development.  Looking at global liquidity in the aftermath of the crisis, liquidity creation had not led to credit creation despite efforts.  Global capital flows had revived since the collapse in 2008 and the share of international flows to developing countries had increased significantly.  They could try and redefine the role of central banks to play a more direct role in allocating credit.  An engaged banking system was historically evident in some cases and there were many examples.  A second issue that could be discussed was the phenomenon of development banks, with specific goals where long-term risk capital was needed for specific areas and sectors.  The overall conclusion was that development banks played an important countercyclical role.  A third avenue to explore was non-bank specialized source of finance.  A fourth issue was taxation, an avenue to mobilize resources for sustainable development and it was encouraging to see reviving of interest by many countries in this regard. 

SHAMSHAD AKHTAR, Assistant Secretary-General for Economic Development of the Department of Economic and Social Affairs and Moderator, said that there were a lot of concrete ideas on how central banks could play yet a more effective role in channelling funding for development purposes.  What were the efforts that the European Bank for Reconstruction and Development was making to unleash the potential of the capital that was floating around?

MANFRED SCHEPER, Vice-President and Chief Financial Officer, European Bank for Reconstruction and Development, said that the European Bank for Reconstruction and Development was relevant because it focused on supporting the private sector and there was a venue where the current dormant funds around the world were currently not accessing opportunities.  It was set up as an institution to support the development of the market based economy in the region, and as a very well capitalized institution.  Over the past year it had been asked to become a supporter of the countries of the Southern Eastern Mediterranean.  It was also a provider of equity.  Other instruments at its disposal were technical assistance funding from shareholders and supporting grants, particularly in relation to sustainable energy.  The Bank was there to essentially provide support to a private sector company with a price consistent with what the private sector would have provided had it been willing to do so.  In terms of the breadth of investments, these went across sectors.  Its shareholders had not had to provide any additional capital since the Bank’s creation.  International finance was increasingly absent as a response to the events over the past years and so the role of the Bank and its domestic finances was very important.  One of its initiatives was the Institutional Investment Partnership, looking to mobilize long-term investment to 35 countries, increase risk capacity, and to demonstrate alignment of interest. 

AXEL BERTUCH-SAMUELS, Special Representative to the United Nations and Deputy Director of the Strategy, Policy and Review Department, International Monetary Fund, said that owing to the financial crisis and subsequent recession many advanced economies had difficulty honouring their financing for development commitments.  Yet, countries like the United Kingdom were very close to achieving their 0.7 per cent target, despite having been hit hard by the crisis.  There was not really a shortage of money, but it was rather a question of trade-offs, priorities and political choices.  Stronger lobbying was needed, and the Council and the United Nations in general could play an important role in that.  It was easier to redistribute money from taxation when the economy was growing rather than when there was economic stagnation.  Mr. Bertuch-Samuels said that domestic resource mobilization was a critical issue in developing countries and it was possible to achieve.  More efficient, fairer and less prone to corruption tax systems had to be established in developing and low-income countries.  The International Monetary Fund provided technical assistance to countries to help them enhance domestic resource mobilization.  Core challenges included fighting against non-compliance, especially in terms of value added tax collection, corruption, maintaining revenue from corporate taxing, and the effective tackling of personal income tax evasion.

MARILOU UY, Senior Adviser to the President’s Special Envoy on the Millennium Development Goals and Financial Development, World Bank Group, said that today’s discussion was all about implementation.  In leveraging additional resources, both the public sector and the private sector had a role to play, and if they did, financing could have a great impact.  Achieving the Millennium Development Goals had been associated with policy and institutional reforms, which led to growth and service delivery.  At the country level, domestic resource mobilization and efficient public sector spending were especially important.  More specifically, the importance of natural resources should not be underestimated, for example in the case of African countries which were mineral-dependent in terms of exports.  Some of those countries had sought technical assistance for the management of their mineral resources, while other countries were also receiving assistance on resource infrastructure.  There were various types of subsidies which targeted the poor, including a number of well-designed transfer programmes.  In addition to official development assistance, countries also obtained financial support from new development partners, who offered integrated packages of support and were different from the traditional donors.          

MANUEL MONTES, Senior Advisor on Finance and Development, the South Centre, said that the global economy had been engulfed in the deepest, ongoing and unresolved global crisis, centred in the financial sectors of developed countries.  It was therefore important to discuss what would be required to attain greater coherence and coordination and to provide access to steady, predictable and adequate financing.  Since the breakdown of the Bretton Woods system in 1971, reserve issuing countries such at the United States, the Eurozone and Japan had not been subject to international disciplines.  This deficiency fuelled global imbalances and exposed developing countries to unsteady, volatile mood swings of international private portfolio players, making bets toward high returns in developing countries during the booms and stampeding back to safe havens during busts.  Research from the South Centre indicated the critical need to repair and overhaul the international financial and payments system if it was to provide steady, predictable and adequate access to finance.  The unfulfilled need to recreate an enabling global environment for sustainable development through systemic reforms must be a key lesson from the ongoing financial crisis.  Domestic austerity should not be the main framework for access to international markets and finance.  Restoring policy space to developing countries over their capital account had to be a key element of global systemic reform in order to mobilize domestic investment for sustainable development and to privilege long-term investment from external sources.  A global enabling environment should increase the capability of developing countries in domestic resource mobilization.  International disciplines on reserve issuing countries had to be restored and a non-arbitrary, non-case-by-case, predictable, equitable, comprehensive sovereign debt resolution mechanism had to be established. 

Benin said that in 2011 the world had seen the adoption of the Istanbul Plan of Action.  Official development assistance was falling and countries were becoming more fragile.  It was clear to the world that Governments in many cases had to subsidize in the current crisis.  How could the countries confronted with many difficulties emerge from the crisis?  What was to be done?  Could it still be hoped that the Istanbul Plan of Action would be implemented?

Egypt said that States had the responsibility to provide the needed resources to achieve development, but many developing countries were unable to do that.  That was why there was a process of international cooperation, for example in the context of the sustainable development goals which, however, had not been achieved.  Therefore, mobilizing domestic resources was not a feasible process.  

Sudan said that the specificities of each State and culture should be taken into account when discussing the issue of domestic resource mobilization, for example in terms of the taxation system, including tax collection and spending.   

AXEL BERTUCH-SAMUELS, Special Representative to the United Nations and Deputy Director of Strategy, Policy and Review Department, International Monetary Fund, said that the lack of expertise was as serious a challenge as the lack of funds in certain cases.  Concerning resource generation for climate change, it was common to say that the private sector should invest more money in development, but there were alternative ways to finance that, including creatively raising revenue in the public sector.    

MARILOU UY, Senior Adviser to the President’s Special Envoy on the Millennium Development Goals and Financial Development, World Bank Group, said that a lot of discussion on leveraging private sector finance was largely on how to mobilize funding from savings elsewhere to finance projects in developing countries.  What it may not have conveyed as well was that there was still a lot of potential to increase domestic funding but at the same time it was important to leverage funding from outside. 

MANUEL MONTES, Senior Advisor on Finance and Development, the South Centre, said that one of the arguments with respect to making progress in the Sovereign Debt Restructuring Mechanism in a predictable, non-ad hoc way was that it provided a structure internationally.  A predictable process would allow a developing country to have access to the kinds of expertise and to international financing on a predictable basis.  In response to the question from Sudan, you cannot import a culture.  It really depended on how a government grew and what accountability it was able to show and what ownership was possible.  There should be better cooperation on the part of the international community about preventing the ability of individuals to hide their assets overseas. 

PETKO DRAGANOV, Deputy Secretary-General, United Nations Conference on Trade and Development, said that international cooperation was important, but Governments also had an important role to play with regard to financing for development, especially in the case of the least developed countries.  The international community should change the way it structured cooperation in the least developed countries because at the moment it was not sufficiently attractive for those countries to graduate.  Remittances, which in certain cases were even higher than official development assistance, had an enormous potential and should be explored further, but for that the necessary policies needed to be put in place.

MANFRED SCHEPER, Vice-President and Chief Financial Officer, European Bank for Reconstruction and Development, said that the international community could do more to play a fuller role in providing technical know-how.  In the African Development Bank there was acute awareness that more work had to be done to involve the private sector.  Regarding the focus on domestic-based finances, it was of course well known that there were no vast pools of savings available in middle- and low-income countries, but the main problem was that all international finance was based around a series of hard currencies, which did not help matters.  Therefore, local currency-based finance systems should be involved more.

Gabon said the Millennium Development Goals process had allowed countries to make progress but this progress was uneven and much remained to be done.  It had been confirmed that great liquidity existed and official development assistance needed real support.  Taking the case of middle income countries such as itself, some countries were encountering the same difficulties as least developed countries.  What support could be expected from the international community in addition to the significant support from innovative financing? 

MARILOU UY, Senior Adviser to the President’s Special Envoy on the Millennium Development Goals and Financial Development, World Bank Group, said that
when looking at official development assistance it was clear that fragile and low income economies were truly dependent on official development assistance as a form of external finance and so the comment by Gabon about the vulnerability of certain countries to major changes in official development assistance was correct.  Official development assistance was responding to macro-economic situations in major donor countries.  As the recovery eased, it was quite likely that this trend could be revisited but that of course was for the global community to discuss.  Ensuring that this became a focus was a good point. 

AXEL BERTUCH-SAMUELS, Special Representative to the United Nations and Deputy Director of Strategy, Policy and Review Department, International Monetary Fund, said that private and other sources of financing would be complementary and grow in importance but these were means that came out of national budgets and decisions would have to be taken by national governments and parliaments, which would have to undertake advocacy.  The United Nations had a role to play in defining the post-2015 strategy.  It was in the interest of developed countries to raise official development assistance and that was a job to be done. 

SHAMSHAD AKHTAR, Assistant Secretary-General for Economic Development of the Department of Economic and Social Affairs and Moderator, speaking in concluding remarks, stressed that sustainable financing was a prerequisite for development financing.  Under the Millennium Development Goals framework, the official development assistance had a role to play in mobilizing funding for those goals, but it was important to bear in mind that there were alternative sources of financing available.  All of those could help to ensure national and global financial stability.

DAFFA-ALLA ELHAG ALI OSMAN, Vice-President of the Economic and Social Council, said that they had heard about the critical role that a coherent strategy for sustainable development financing was expected to place in the implementation and realization of the vision of their future development agenda.  Such a strategy had to build on Monterrey and Doha and other outcomes of the major United Nations conference and summits in the economic and social fields, and move towards a broad global financing framework that integrated tradition development cooperation, climate financing and private sector investments for sustainable development.  Deliberations would provide important inputs for the Financing for Development follow-up process, particularly for the preparations for the sixth High-level Dialogue to be held in New York later this year, as well as inform the implementation of the Rio+20 outcome document and the work of the Intergovernmental Committee of Experts on Sustainable Development Financing. 

A number of draft resolutions under item 4 and 6(a) within this Coordination Segment were still being negotiated and the Council would therefore not be able to adopt these draft resolutions today.  The Segment would therefore be suspended and adoption would take place at a later stage.  Tomorrow morning, the Council would begin the Operational Activities Segment. 


For use of the information media; not an official record

ECOSOC13/016E


Related Information