OWG Joint Session with the Expert Group on Financing: Mobilizing New Resources

While achieving agreement on a set of coherent goals for the post-2015 development framework will not be simple in itself, their implementation will be an even more critical challenge.

As currently conceived, the sustainable development goals will be much more ambitious than the Millennium Development Goals. Take reducing global poverty. While the original goal of halving poverty posed a significant challenge, the goal proposed for the new framework – eradicating extreme poverty – will require a change of gear for the international community: member states and donors will need to reach those pockets of entrenched poverty.

As CIC Senior Fellow Alex Evans argues in his report Delivering the Post-2015 Development Agenda, the world’s remaining poor will be significantly “harder to reach than those lifted out of poverty during the MDG period – concentrated in fragile states (or parts of them), or in stubborn and often politically marginalized ‘tails’ of poverty in middle income countries.” Faced with this new challenge, the international community and member states will need to develop new global partnerships and new implementation plans to reach those who have – for now – been left behind. And this change of gear is also expected to come with a price tag.

Where will the money come from to implement such ambitious goals? To address this challenge, the ninth session of the Open Working Group (OWG) brought together OWG members and the expert group on financing (officially known as the Intergovernmental Committee of Experts on Sustainable Development Financing) to reflect on current progress in both forums and to discuss how to integrate these two critical discussions.

The debate was interesting. While some member states called on others to honor their ODA commitment to 0.7% of GNI, others were keen to expand the discussion to consider how to mobilize other sources of financing, including from the private sector. Some important questions were raised. How might accountability be ensured if the private sector is to be a vital source of financing for sustainable development? How might ODA serve as a catalyst to attract other sources of financing? It was clear from the discussion that a clear and firm recommitment to ODA might be necessary to ensure member state buy-in. However, there was also a recognition from some that ODA would not be sufficient to finance the broad range of ambitious goals envisaged and that member states needed to be open about how new financial flows might be mobilized.

The reality is that ODA represents only a fraction of the resources available that could be harnessed for development outcomes. For example, it is estimated that developing countries lose a trillion dollars annually in illicit financial flows - seven times the value of global ODA. Between 2002 and 2011, developing countries lost $5.9 trillion to such flows. It is estimated that Sub-Saharan Africa lost on average 5.7% of total GDP each year from 2002 to 2011 in this way. Greater international cooperation to curb illicit financial flows could lead to a significant increase of available resources for developing countries to reinvest in socioeconomic and poverty reduction outcomes, including in support of the new goal framework. CIC’s Delivering the Post-2015 Development Agenda proposes some other ideas for mobilizing innovative sources of finance, which could help ensure enough capital is raised to deliver on the post-2015 development goals. As member-states deepen their discussions on potential revenue streams beyond ODA they might consider an overarching global strategy for mobilizing new financial flows. As Alex Evans suggests, these areas of work are critical for member states to consider:

• Support for domestic resource mobilization particularly by improving capacity for tax collection (e.g support on tax design and administration and by helping to regulate transfer pricing and multilateral companies);

• Tackling illicit financial flows and tax avoidance by promoting transparency and accountability (e.g. getting more countries to sign up to the Extractive Industry Transparency Initiative, at present only 16 countries are EITI compliant); • Bringing down the cost of remittances;

• Mobilizing funds from international capital markets by engaging with financial sector leaders and discussing how financial regulations might need to evolve;

• Exploring innovative finance mechanisms, including an aviation fuel excise tax proposed by the International Civil Aviation Organization to invest in global public goods such as climate mitigation in developing countries.

Ultimately, the work of the expert group on financing will be crucial in convincing member states of the merits of exploring some of these options ahead of the intergovernmental negotiations. The joint session was a positive step. It will be important for member states and the finance group to continue to communicate and draw from each other’s experience as the world prepares to change gears after 2015.

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Mar 25, 2014