As prepared for delivery.
I would like to thank Her Excellency Ms. Marie Chatardová, President of ECOSOC, for the invitation to address Member States at the 2018 Financing for Development Forum. I also thank the two co-facilitators of the conclusions and recommendations of this Forum: His Excellency Mr. Courtenay Rattray, Permanent Representative of Jamaica, and His Excellency Mr. Francisco Duarte Lopes, Permanent Representative of Portugal.
UNDP is pleased to have contributed to this year’s Inter-Agency Task Force (IATF) on Financing for Development (IATF) report. As we continue to support implementation of the 2030 Agenda for Sustainable Development, we are coming together as a system in an unprecedented way – not only in the IATF – to deliver support on the ground.
From our engagement with countries around the world, finance is clearly becoming ever more important. Countries are increasingly committed to the implementation of the 2030 Agenda and the SDGs. They are now requesting support to put in place the appropriate financing frameworks to deliver. This implies mobilizing more domestic resources, expanding international concessional public finance, and creating incentives and policies that align private investment decisions with the SDGs, which is what will make the difference.
They are also interested in exploring innovative new financing modalities, such as opportunities increasingly offered by blended finance, green finance or Islamic finance.
Our aim with the work of the IATF is to provide a report that is helpful to policy-makers, that helps trigger action and supports decision-making towards advancing the Addis Ababa Action Agenda and the implementation of the SDGs.
It is important to have a report that speaks to people’s concerns and connects with the public at large. Going forward, we can do this by speaking to three key issues:
The first is technological change and institutional and policy shifts that are increasing inequality and economic insecurity. This year’s report rightly recognizes that new technologies create exciting opportunities, including for advancing the SDGs. But it also warns that the transformative power of technology raises complex ethical, socio-economic and human rights challenges and risks.
We are seeing an unprecedented shift in income from workers to owners of capital and from low to high-skilled workers. The direction and pace of technological change are ever more labour-saving and could lead to even further job losses and increased polarization in labour markets. Many tax systems rely on taxing labour income for revenues while at the same time, on average, corporate income tax rates are declining in most countries, both developed and developing. Excessive tax incentives, tax breaks and aggressive tax avoidance further erode countries’ revenue bases and shift the burden of taxation even further on to labour. As developing countries are running out of industrialization opportunities sooner and at lower levels of income than ever and as inequalities are either high or increasing, our tax and transfer systems must adjust to ensure more progressive outcomes. Greater transparency in tax systems is also needed. We also need to be prepared to raise revenues that are linked to the way in which our economies will look in the future. This implies drawing on tax and transfer systems to incentivize skills development, learning and sustainability.
As the IATF report advises, policymakers need to take a long-term perspective, strengthen social protection and urgently develop regulatory frameworks so that benefits of technological change are shared broadly. Developing countries need the capacity to deploy and use new technologies.
The second key issue is managing risk and volatility. This has rightly been taken up by the last two IATF reports, at a time when we are confronting multifaceted challenges due to conflicts, economic volatility and environmental shocks. There has been an upsurge in conflict in the last decade. Environmental shocks such as those witnessed in the Caribbean last year can wipe out years of development progress, and are expected to become more frequent and severe with climate change. Dominica’s losses are estimated at 226% of 2016 GDP.
Higher income levels alone cannot protect countries from conflict and extremism, natural hazards, epidemics and financial crises. Vulnerability to shocks is decoupled from levels of income. Some middle-income countries have been unable to access concessional finance in times of need and crisis. This includes Lebanon and Jordan and some small island states hit by major environmental disasters. Ad hoc solutions to provide these countries with concessional resources have commendably been found, but sometimes with considerable delay. It would be more efficient to put in place more flexible concessional financing facilities to address crises and shocks.
The IATF report points to growing concern over debt sustainability, more so in disaster-vulnerable SIDS that are already debt-stressed and need to borrow further for recovery and rebuilding. We need to continue to argue for more systematic approaches to risk-informed finance, including the use of state-contingent debt instruments such as GDP-linked bonds and countercyclical loans.
The third issue is growing sustainable finance, which can represent a ‘win-win’ for both people and planet. Last year, Member States asked the IATF to consider sustainable financing, and this is a critical area of work that needs to continue to be explored. Sustainable finance initiatives have the potential to align substantial amounts of global capital, especially private capital, with the SDGs.
It is encouraging to see a rise in impact investing and other sustainable and ‘ethical’ finance initiatives. Global green bonds saw a record US$163 billion issued in 2017, with more growth expected. People in the private sector and the investor world are beginning to look at the SDGs as a real opportunity. There is an opportunity to both grow the value of assets under ESG standards, while moving these assets from a do-no harm approach to a positive engagement approach. As this year’s report shows, however, investing with environmental and social factors in mind is still too marginal.
UNDP is engaging with companies and the financial industry to support the proactive engagement of private capital for the SDGs and to invest in high impact areas. To facilitate this, UNDP is testing ideas and has established impact investment platforms and promoted Islamic finance for measurable environmental and social results. Finally, it is also our collective responsibility to make sure all countries can benefit from the opportunities of a new development financing landscape, not just MICs.
The IATF report and the FfD Forum provide a unique space to advance the financing for development agenda at a global level. We also must do more to have the report speak to people on the ground, not only to those that come to New York for the FfD Forum. We can mobilize our organizations to, for instance, organize debates in countries on the report and implications of the analysis for national authorities. A possible focus in next year’s report on national financing strategies, highlighting innovations at the national level in financing development, would be welcome and valuable.