Financing for development meet opens in Addis after New York talks

13 July 2015

UN talks geared towards reinvigorating and strengthening development finance kicked off today in Addis Ababa, Ethiopia, with opening statements from leaders of the process and international organisations urging countries to reach  consensus on an outcome document to support sustainable development over the next 15 years.

“Without resources, commitments will amount to little more than promises on paper,” said UN Secretary General Ban Ki-moon at the opening plenary, referring to plans to ink a post-2015 development agenda with a set of sustainable development goals (SDGs) later this year, in addition to a global climate pact.

The Third International Conference on Financing for Development (FfD3), as the meeting is known, will run from 13-16 July and bring together a wide range of stakeholders from heads of state, finance ministers, the private sector, and civil society. The meeting builds on past development financing commitments issued in 2002 and 2008 across several areas including, among others, trade.

Preparatory talks on the Addis outcome document, held since January at UN headquarters in New York, nevertheless proved challenging.

Countries diverged, in particular, on language around common but differentiated responsibilities, questions relating to tax, and the precise relationship between FfD3 and the means of implementation to support the post-2015 development agenda.

After several weeks of intensive informal and bilateral consultations, a revised Addis outcome document was released last Tuesday by the co-facilitators of the preparatory talks, for further consideration over the next four days.

A number of experts have said that the Addis outcome will set the tone for the other major multilateral meets later this year.

“If the Conference in Addis Ababa only focuses on mobilising more money and doesn’t do something about improving how that money is spent, then we will have missed the point, and will certainly miss the grand targets we have set for ourselves,” wrote Paul Ladd, UN Development Programme (UNDP) Director and Pedro Conceicao, Chief of Profession, Strategic Policy, UNDP, in a blog post last week.

Revised Addis outcomes

The draft Addis outcome is structured around three sections; an introduction outlining the development financing vision in a post-2015 world; eight action areas; and data, monitoring, and follow-up.

Officials during the opening plenary this morning said that the draft features a number of important policy commitments and deliverables. These include, among others, increased and revitalised aid commitments, steps to boost foreign direct investments, efforts to help ensure socially and environmentally responsible business, a new infrastructure forum, and the establishment of a technology bank for least developed countries (LDCs) by 2017.

Member states and other stakeholders are also expected to announce new finance development initiatives and commitments during the conference. With an eye on Addis, multilateral development banks and the International Monetary Fund (IMF) last Friday unveiled plans to set aside more than US$400 billion in financing for the SDGs.

However, the development aid landscape has changed dramatically since the current Millennium Development Goals (MDGs) were adopted, Ethiopia’s Prime Minister and president of the FfD3 talks Hailemariam Desalegn said this morning.

While total official development assistance hit a high of US$135.1 billion in 2013, foreign direct investment (FDI) flows are worth over four times as much as aid. Moreover some estimates suggest that approximately US$5 trillion to US$7 trillion worth of investments per year are required to deliver the post-2015 development agenda.

Part of Addis will focus on harnessing this level of investment for sustainable development, Desalegn explained on Monday.

Means of implementation

Some overlaps occur between proposed SDG targets and the slated FfD3 outcome on the tools envisioned to achieve the new framework or “means of implementation” (MoI).

A number of developing countries are opposed to using the financing talks as MoI for the post-2015 development agenda, preferring instead to keep the two outcomes distinct, a view countered by developed nations. (See BioRes, 29 April 2015)

The co-facilitators of the post-2015 talks last week also released a “final draft” of the outcome document for that process, due to be adopted by world leaders at a UN summit in September, after intergovernmental negotiations scheduled for the second half of July. The post-2015 draft’s section on MoI welcomes and endorses the FfD3 outcome and would see it included in an Annex to the new development agenda.

One example of the echo between the SDGs’ MoI and FfD3 appears in the role assigned to trade, with both supporting a rules-based trading system under the WTO, and concluding the current Doha Round of negotiations. In other ways, however, the Addis trade language goes beyond the role envisioned by the SDGs.

What role for trade?

“Trade has the power to be an important driver of development, especially when it is paired with right financing and capacity building assistance,” WTO Director General Roberto Azevedo told the FfD3 opening plenary.

The trade section in latest Addis draft retains much of the language seen in previous versions. (See BioRes, 20 May 2015)

Key differences include further specification that the multilateral trading system should be transparent, predictable, and inclusive. The draft also invites the WTO’s General Council to consider how the WTO can contribute to sustainable development.

The draft calls for an expeditious ratification of the Trade Facilitation Agreement and now includes a distinct paragraph on trade finance recognising the importance of such flows for harnessing trade as an engine for development.  Welcoming the work of a WTO Expert Group on Trade Financing, the draft commits to improve more WTO-compatible trade finance solutions, including trade credit, guarantees, insurance, and so on.

Language on correcting and preventing trade restrictions and distortions in world agricultural markets in the latest draft reflects the Doha Development Agenda (DDA). The draft also calls on WTO members to commit to strengthening disciplines on subsidies in the fisheries sector in accordance with the DDA mandate.

An affirmation is made of the right of WTO members to take advantage of the flexibilities in the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) in that the TRIPS Agreement should not prevent members from taking measures to protect public health. Earlier versions had also mentioned “sectors of vital importance for sustainable development” in this context.

A commitment to provide 50 percent of Aid for Trade flows to LDCs has been dropped in the latest version. The document acknowledges that such support can play a crucial role particularly for the world’s poorest economies, and looks to boost the proportion of Aid for Trade going to LDCs, but with no specific numbers. The new version also cuts mention of the effort to liberalise environmental goods and services.

The document now underlines the contribution trade facilitation measures and how they can help boost regional integration and trade agreements.  It recognises the role that regional integration can play in both reducing barriers and implementing policy reforms that would enable companies, including small businesses, to integrate into regional and global value chains.  

Review up in the air

In talks so far this year countries have disagreed on whether follow-up and review efforts should be integrated to cover both the post-2015 development agenda and FfD3 processes or whether these should be kept separate.

The latest Addis draft advocates for a “dedicated” FfD3 alongside efforts to track the post-2015 development agenda. The dedicated process should assess progress while identifying obstacles and challenges to implementing the financing for development outcomes.

The document commits to using existing institutional arrangements for this process and to set up an annual forum on financing for development under the UN Economic and Social Council (ECOSOC). The forum would run for five days, one of which would be for a special high-level meeting with Bretton Woods institutions, the WTO and the UN Conference on Trade and Development (UNCTAD).

Intergovernmental conclusions from the forum would feed into an overall follow-up and review of the post-2015 development agenda in the High-Level Political Forum (HLPF) on sustainable development.

The latest post-2015 draft, meanwhile, calls for a robust, effective, inclusive, and transparent follow-up and review framework, operating at national, regional and global levels. The document then lists sub-sections for each and the HLPF would be the “apex of a global network of review processes.” It welcomes the Addis outcome and dedicated review.

The document affirms that the HLPF should carry out regular reviews of progress, which should be voluntary, as well as encourages reporting from all countries.

Lack of clarity at high-level forum

The HLPF concluded its annual session last Wednesday in New York, following eight days of moderated dialogues and a high-level ministerial segment, under the theme of strengthening the forum’s functions of integration, implementation, and review after 2015. 

However, while a number of participants last week reportedly underscored the importance of the forum as a tool to help implement the post-2015 development agenda, little progress was made on agreeing to substantive modalities for future work.

Conversations were stymied by uncertainty around the ongoing negotiation of key parts of the post-2015 development agenda and the FfD3 talks, according to Earth Negotiations Bulletin (ENB). 

A number of questions were also raised on how exactly the forum should undertake review and follow-up on the post-2015 development agenda, how to handle oversight of the broad range of areas, and how it should interact with other bodies undertaking similar tasks in particular areas.

The HLPF itself was called for at the UN Conference on Sustainable Development held in Rio de Janeiro, Brazil in June 2012, to be convened under the auspices of the UN Economic and Social Council (ECOSOC). The intergovernmental body replaces the replaces the Commission on Sustainable Development (CSD), with a mandate to provide leadership and help implement sustainable development aims.

ICTSD reporting; “Summary of the 2015 Meeting of the High-Level Political Forum on Sustainable Development: 26 June-8 July 2015;” EARTH NEGOTIATIONS BULLETIN, IISD REPORTING, 11 July 2015.  

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