Helen Clark: Speech on “Small Islands Developing States: Meeting the Challenges of Financing Post-2015”

Jul 15, 2015

I am delighted to join colleagues from both within and outside the SIDS’ regions at this side event organized by UNDP and UN Department of Economic and Social Affairs.

In this session, we will explore how the post-2015 financing needs of SIDS can be met by identifying how to improve access to various sources of finance; tackling debt sustainability issues; and expanding access to new and innovative financing instruments.

Our discussion today follows on from last year’s successful Third UN Conference on SIDS in Samoa, where many of us met to debate precisely these issues. We pledged there to build partnerships to support SIDS to address some of their most important financing for development challenges.

Today’s event is an opportunity to report back on what has been achieved so far, and to reflect on what still needs to be done.

The Addis Ababa Action Agenda rightly acknowledges the particular development challenges faced by countries in special situations, such as LDCs and SIDS. It talks, for example, about the need to address infrastructure and capacity gaps, and to ensure that more resources for climate change adaptation are available for the most vulnerable countries.

There is also an acknowledgement that the debt sustainability challenges for a number of SIDS require an urgent solution, and that GDP per capita is a poor indicator of countries’ external financing needs. SIDS’ vulnerabilities to extreme weather events, and the heavy financial and human toll which they can inflict are also mentioned in the outcome document.

Together with the SAMOA Pathway, the Addis Ababa Action Agenda could help steer our collective effort to ensure that SIDS’ sustainable development needs are met.

UNDP proposes four ways that some of the agreements from Addis can be translated into practice:

First, on eligibility for concessional finance, the Action Agenda notes with concern that many SIDS are excluded from concessional finance because of their middle-income status.

Therefore development finance providers are encouraged to ensure that the level of concession of their finance takes into account not only a recipient’s income level, but also their institutional capacity, vulnerability, and the type of programme to be funded.

We now need to work with both finance providers and recipients to operationalize fresh approaches to eligibility for concessional finance. UNDP has undertaken some work in this area, and concrete proposals have also been developed by other international organisations, including the Commonwealth Secretariat and the World Bank.

Many proposals suggest that economic and environmental vulnerability should be included as a criteria for eligibility for concessional finance.

The research we have carried out at UNDP – and are sharing today – puts forward our proposals in this area.

For instance, we suggest that in addition to income per capita, we also use a basket of other indicators,
including: capacity to mobilise domestic resources; access to private finance; vulnerability; debt levels; level of human development; and the type of programme being funded.

We would like to extend an invitation to all present to work with us to see how some of the excellent proposals tabled so far can be made a reality.

Second, on debt sustainability, the Action Agenda points to the need to find urgent solutions to SIDS’ debt sustainability challenges, and encourages the exploration of new financial instruments for countries experiencing debt distress, such as debt swaps. As our report shows, achieving the SDGs will be impossible unless debt is sustainable.
We have an opportunity to scale-up successful innovations, such as debt-for-climate swaps, and to learn from recent successes in this area, such as in the Seychelles.

UNDP invites more creditors and borrowers to come together to explore how these innovations can be taken to scale.

The use of innovative financial instruments designed to reduce risk should also be expanded. UNDP has undertaken work which explores whether loans from
the official sector could be indexed to economic performance (i.e. when GDP growth is good, debt repayments are higher, but they are also lower when growthis slower).

The Commonwealth Secretariat, meanwhile, suggests that the French Development Agency’s countercyclical loan instrument could be expanded to SIDS. This financial instrument, piloted in several African countries, sees debt service costs fall or become zero for a specified time, if a major shock occurs.

Third, we see that the number of development finance providers is increasing and that the types of financial instrument available are now more sophisticated.

We need to ensure that SIDS are able to maximise these new financing opportunities, and that they have access to the types of finance most suited to their needs.

Capacity development will be key in this effort. UNDP has a long track record of helping SIDS to leverage environmental and climate finance. The demand and need for such capacity support is high and increasing.

In the Dominican Republic, for example, UNDP through the Green Commodity Programme is supporting policies and inclusive market systems which use sustainable production techniques to generate
employment and strengthen livelihoods, while facilitating public-private partnerships and fair trade.

In Seychelles, UNDP and the Global Environment Facility have supported the development of the Seychelles Sustainable Tourism Label which encourages sustainable business practices in the tourism sector. In the Maldives, UNDP has supported the tourism sector through private sector partnerships to promote sustainable resource utilization, resulting improved benefits and resource sharing, and reduced stresses on ecosystems.

Finally, development aid will remain central to many SIDS’ efforts to reduce poverty and develop sustainably. Our research shows that SIDS’ experiences with aid vary widely; some receive very little, or none at all, while others receive much more.

I am pleased to say that we have committed to work with our partners at the OECD on a survey of donor practice and policies towards financing for SIDS, with the aim of working with donors to identify where their approaches could be strengthened.

We look forward to progressing this important work together following the conference.

Many SIDS have made considerable human development progress, and are trailblazers when it comes to environmental protection and renewable energy. They can be proud of their achievements.

But financing needs also remain high and climate change continues to threaten development progress in SIDS.

As we move into the post-2015 development agenda, the time is right to take a fresh look at how innovative and unique development finance mechanisms can address the specific and unique circumstances of SIDS.

Getting this right will ensure we all fulfil the commitment to ‘leave no one behind’.

I hope this event serves as a platform for a reenergized debate on international policy thinking on development finance for SIDS, for the ultimate benefit of the millions of people who call a small island state their home.

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