Helen Clark: Keynote address to Preparatory Session for The 3rd International Conference on Financing for Development United Nations, New York

Nov 10, 2014

Helen Clark, UNDP Administrator,
Keynote address to Preparatory Session for
The 3rd International Conference on Financing for Development
United Nations, New York

I thank Ambassadors George Talbot and Geir Pedersen for their kind invitation to me to speak at this first preparatory session for the Third International Conference on Financing for Development which will be held in Addis Ababa next year.

UNDP is committed to working with Member States and UN and other colleagues to make Addis Ababa the success it must be. Good results in Addis Ababa will bode well for reaching agreement on the new Sustainable Development Goals – and for achieving them.

The global context

We are just one year away from the MDG target date at the end of 2015. As we contemplate the scale of the challenges ahead – to which the Post-2015 development agenda must respond, we must also take a moment to reflect on the incredible development progress the world has made over the last fifteen years.

On average around the world, most children now enroll in a primary school and gender parity in primary schooling has been largely achieved. Greater progress has been made in areas targeted by the health MDGs than the pre-MDG trends would have suggested. The goal of halving extreme poverty was met five years ahead of the target date at the global level, with the huge movement in China helping to drive this global achievement.

One of the biggest contributions of the MDGs was to focus international attention on development and on our shared humanity. We see this again in the draft SDGs proposed by the Open Working Group.

Over the last two years, governments, civil society actors, the private sector, and other stakeholders have shown enthusiasm for a renewed global development agenda which is ambitious. This is an expression of goodwill for multilateral processes at a time when there is so much turmoil and uncertainty in the world.

The next agenda is expected to be broader and transformational. It is likely to

• aim to eradicate poverty, not just lift some out of it.
• demand transformations in countries at all income levels to ensure that our planet’s natural limits are respected.
• aspire to have peaceful and inclusive societies governed by the rule of law everywhere.

Taken together, the proposed SDGs are about the dynamics of development processes both within and beyond national boundaries, reflecting how intertwined nations’ and peoples’ prospects are.

This requires us to think in different ways about development finance. I believe that we now need to think in terms of a ‘Monterrey Plus’.

First, we need to review progress made under the Monterrey Consensus and strengthen our resolve to take action on those areas where implementation has been weak. These include lifting Official Development Assistance, strengthening efforts to combat corruption and the illicit financial flows which drain resources from development, mobilizing more domestic resources for development, and making trade fairer.

But, second, we also need to go beyond the Monterrey Consensus. The outcome document from Addis Ababa must chart a path on how to address the challenges which have emerged – or have become more pronounced – since Monterrey, such as climate change, accelerated environmental degradation, and inequality.

The financing needs for the new agenda are high, but there are also more resources and capabilities than ever before to tackle them.

As well, globalization and new technologies provide the international community with new opportunities to collaborate and to tap into the pool of global resources of capital and knowledge to pursue sustainable development objectives.

The recent report of the Intergovernmental Committee of Experts on Sustainable Development Financing proposed a basket of policy options for financing sustainable development. The report provides useful guidance as we seek to develop a financing framework for the post-2015 development agenda, and I thank the group for their important work.

Their report comprehensively covers the sources of finance – public and private, domestic and external – which can help meet the sustainable development challenge. Yet we now also have an opportunity to think beyond a static accounting approach of where resources will come from, and to move to a more sophisticated framework which incorporates risk management and resource allocation over time. Investments now in critical areas – whether they be public health or renewable energy – will minimize risk and future costs in the years to come.

To that end, let me offer some thoughts on possible action in three areas: Official Development Assistance and international public finance, private sector flows, and financing for resilience and risk management.

First: official development assistance (ODA) and international public finance.

While other sources of finance are much larger in volume, ODA is still often the largest source of finance for some Least Developed Countries and Small Island Developing States. It can play a catalytic role both there and in a wider range of countries.

ODA therefore remains critical, and developed countries should strengthen their resolve to deliver on their commitments and to deliver their aid transparently. We also need to think carefully about where to allocate aid, so that it has the biggest impact. The Addis Ababa conference, however, needs to go beyond this traditional dialogue on aid quantity and effectiveness.

We also need to be clearer about how climate finance fits alongside ODA. All agree that more climate finance is needed and that this should not be diverted from resources which are being used to eradicate poverty. There needs to be greater clarity on the differences between traditional ODA and climate finance. These areas should be counted and reported on separately, while also recognising that tackling climate change and eradicating poverty are linked objectives and processes.

There also needs to be a commitment to simplify access to climate finance. It can be very complex to access, especially for those countries with the least capacities.

The international community can also commit to developing more innovative sources of development finance. Those initiatives which have been developed have proven their worth. We should now reflect on how they can be scaled up and how new ones can be developed. As with climate finance, innovative financing should aim to provide additional resources for sustainable development.

The SDGs require major changes to be made in how public monies are used to address international challenges. It is increasingly clear that international co-operation, beyond what we understand as ‘development’, now needs to be funded. International public investment in the development of an Ebola vaccine, for instance, may have helped to avert the tragedy which has unfolded in Guinea, Liberia, and Sierra Leone, with the threat of spillover to other countries around the world if the outbreak is not arrested. Let us use the opportunity of the Addis Ababa conference to think about how we can improve international financial collaboration on areas like these.

Second: the mobilization of private finance


It is clear that the SDGs cannot be achieved through public finance alone, whether it be from domestic resources or ODA. Inevitably, much of the resourcing needed to finance the post-2015 agenda will come from the private sector.

The good news is that there is no shortage of capital in the world. The challenge is to ensure that much more of this capital is allocated to investments which yield sustainable development returns. We need to ensure that private investment decisions – in both the real economy and in the financial sector – move the world towards the aspirations set out in the post-2015 agenda.

Many factors, however, impede sufficient private sector investment in key ‘gap sectors’ such as sustainable infrastructure. These include high risk; uncertain, legal and regulatory environments; and weak governance. The shorter-term demands of some financial investors mean that many of the dominant investment strategies today are often not well-suited to sustainable development.

Government incentives and voluntary actions by businesses and financial institutions will play a key role, but may be insufficient given the scale of the challenges we face.

This points to an important role for governments in reviewing – and reforming where necessary – legal, policy and regulatory frameworks – at national and global levels – with the aim of getting greater alignment between private investment and the aspirations set out in the new development agenda.

International tax systems may also need further reform to enable developing countries to mobilize more domestic revenues. The G8, G20, and the OECD have made important progress in the work to tackle tax avoidance and evasion, and this must continue.

It will also be important to increase the voice of the least developed and low-income countries in international tax discussions. Truly global co-operation is the only way to solve the problems of tax avoidance and evasion, and of illicit financial flows. An intergovernmental committee on tax matters could be established to work alongside the OECD and G20, for example, on the measures needed to reform national and international tax systems.

We should also recognise that some developing countries are at a particular disadvantage when it comes to tax matters due to a lack of technical knowledge in their administrations on these highly complex and specialized areas. A commitment to strengthen developing countries’ capacities on tax should be part of our ‘Monterrey Plus’.

A framework for sovereign debt crisis resolution which is comprehensive, transparent, and impartial is also needed. Sovereign debt crises can result in serious development set-backs. Yet current ad-hoc approaches to debt restructuring are leading to unacceptably high costs for the populations of debtor countries.

Some countries, including some small island developing states, are still experiencing significant debt sustainability challenges; their predicament requires urgent and special attention.

Third: mobilizing financing for resilience through improved risk management

In our highly interconnected and challenged world, volatility is the new normal. This means that financing for development in the post-2015 era cannot be considered only in the context of ‘stable times’. There are fewer of them.

Shocks – whether they be economic, natural disasters, conflicts, or disease outbreaks – cost billions of dollars. Partly this is from lost income. But also there is a need to pay for enhanced social protection, for many more large humanitarian emergencies, for reconstruction, and for recovery. The current number of complex humanitarian emergencies, largely the products of conflict, are draining resources from every day development.

We therefore need to think about how the international community can better avoid shocks and manage risk. Doing so demands action on addressing the sources of risk. But, no matter how effective those efforts are, shocks, particularly natural disasters, will inevitably occur. Some we have no control over at all, like earthquakes. Others will prey on vulnerabilities which we have yet to recognize. So investment in risk mitigation and preparedness to cope with shocks and build greater resilience is needed, especially for those countries which currently have the least capacity to cope.

It is sometimes hard to make the case for investing in prevention and preparedness. The costs of the investments are immediate, but we only see the benefits when a shock occurs. The consequence of not investing up front however, is to transfer the risk to future generations.

In our increasingly interdependent world, the consequences of shocks spread across countries. As with the provision of many global public goods (or the prevention of global public bads), we face collective action problems. This implies the need for stepped up international co-operation in managing risk and making sure that investments are at the right level.

Two categories of risk deserve special emphasis in this context:

• First, risks related to climate change. The devastating effects of larger climate-related disasters are already being felt, and, according to the latest IPCC report, will only increase going forward. Financing for climate change adaptation is an important investment in reducing the impact of these events. Investments in mitigation are vital in tackling the longer term problem. If we keep investing in a greenhouse gas–intensive future, the outlook is grim.

• Second, risks related to conflict, violence, and insecurity. We do not often hear about these in the context of a “financing” conference. But the huge and long-lasting human and financial costs are well recognized – on disrupted economies and trade, lost infrastructure, and foregone education, and in caring for refugees and the internally displaced. Although there had been a long-term trend of decline in violent conflict, more recently there has been an upward spike. Countries trying to recover from conflict have a high probability of relapse within a few years. Financing the foundations of more peaceful societies will give a very high return on investment.

The contribution of the Financing for Development process in these areas will lie in considering how to integrate resilience-based approaches, recognizing that poverty, crisis, conflict, and environmental degradation are intertwined. Better synergies can be built between recovery, development assistance, and climate finance.

Through this framing around resilience and risk management, the international community has the opportunity to put in place a coherent strategy for more rational, targeted investments in risk reduction and resilience.

In conclusion, we need to think about what policy choices we all need to make to help us deliver on the transformative global development agenda which is being proposed, including on public finance, private finance, and managing risk. Some of these choices will be difficult to make, but there will be big dividends if we get financing for sustainable development right.

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