UN talks deliver development financing framework for post-2015 era

20 July 2015

UN members have agreed to updated development finance rules that reflect changes in international cooperation over the last decade.

Countries meeting in Addis Ababa, Ethiopia have agreed to a revised global framework for development finance, aligning flows with a range of economic, social, and environmental priorities. The “Addis Ababa Action Agenda” was secured last Wednesday evening after months of tough preparatory negotiations.

The 39-page framework outlines a series of principles that countries agree should underpin development financing efforts in the context of an emerging sustainable development architecture. These include building resilience to economic shocks in an interconnected world, recognising the risks posed by climate change and environmental degradation, and reaffirming the importance of freedom, the rule of law, and good governance. 

A set of seven action areas are identified in the document and policy efforts defined under each to scale up the means to deliver sustainable development. The areas cover domestic public resources; domestic and international private and business finance; international development cooperation; international trade; debt and debt sustainability; as well as systemic issues; science, technology, innovation and capacity building.

 “The Addis Ababa Action Agenda points the way for all stakeholders for smart investments in people and the planet where they are needed, when they are needed, and at the scale they are needed,” UN Secretary General Ban Ki-moon said in a statement at the close of the meet.

UN officials also said the document features several new policy deliverables. These include, the decision to establish a technology facilitation mechanism to boost collaboration among stakeholders in support of sustainable development.

The mechanism will be composed of an inter-agency UN team; a multi-stakeholder forum on science, technology and innovation for a new set of sustainable development goals; and an online platform to facilitate access to information. A number of stakeholders welcomed the move, noting that technology has not been as extensively included in past financing for development outcomes.

The document encourages countries that have not yet done so to achieve a target of spending 0.7 percent of gross national income (GNI) on official development assistance (ODA). The 28-members of the EU collectively pledged to dedicate 0.20 percent of GNI as ODA to least developed countries (LDCs).

A changing landscape

The Third International Conference on Financing for Development (FfD3), as these talks were dubbed, built on outcomes from two previous conferences held in 2002 and 2008. However, as noted by a number of participants during the opening plenary and reflected in the outcome document, the development landscape has changed dramatically over the past decade.

For example, developing countries’ share in global trade has jumped from 28 to 42 percent in the last 20 years, new players have emerged on the global stage, private sector investment is increasingly important to development, and the urgency of financing climate action in order not to lose development gains has become clearer.

Despite the progress made, some 836 million people around the world continue to live on less than US$1.25 a day, and many more face inequality, discrimination, conflict, poor health, adverse living and working conditions, as well as the impacts of climate change.

In this context, countries are preparing to adopt a new post-2015 development agenda at UN headquarters in September, with an accompanying set of 17 sustainable development goals (SDGs). These will succeed the eight Millennium Development Goals (MDGs) when they expire at the end of this year.

A key question ahead of Addis was whether countries could agree on a new financing for development framework to match the ambition of the priorities identified in the SDGs and what the precise relationship between the two processes would be.

The Addis outcome acknowledges FfD3’s role in strengthening the means of implementation (MoI) for the post-2015 development agenda and identifies a series of cross-cutting actions to address some critical gaps.

These include a commitment to a new social compact to deliver fiscally sustainable and nationally appropriate social protection systems for all, scaling up efforts to end hunger and malnutrition, promoting sustainable industrialisation, ensuring affordable access to credit for small-and-medium sized enterprises, and building peaceful, inclusive societies.

In this context countries also called for the establishment of a new forum to bridge infrastructure gaps, which would meet periodically to improve coordination around infrastructure initiatives led by multilateral and national development banks, the UN, and the private sector. Some estimates suggest developing countries face a US$1.5 trillion annual gap in funds needed to boost energy access, build roads, and develop telecommunications infrastructure. 

In addition, the document recognises the importance of ecosystem conservation, and commits to coherent policy, finance, trade, and technology frameworks to protect planetary resources and ensure their sustainable use.

Tough issues

Negotiations on the outcome document proved difficult in some areas and the result received a mixed reception among stakeholders. Some delegates reportedly bemoaned the absence of more concrete funding.

The outcome document nevertheless envisages a dedicated review process and an annual forum under the UN Economic and Social Council (ECOSOC) to help track progress on development financing. This review process will be integrated with an overall review process for the post-2015 development agenda. The language in this section remains the same as the 7 July draft sent to the conference.

A number of developing countries and civil society representatives expressed disappointment over the decision not to create a global tax body. The issue at one point threatened to scupper the talks, with proponents arguing that a multilateral body was required to increase transparency in tax standards, particularly for developing countries who felt shut out of work undertaken in the Organisation for Economic Co-operation and Development (OECD). 

References to the principle of common but differentiated responsibilities and respective capabilities (CBDR) also proved challenging in the lead up and start of the conference. The principle is mentioned in the outcome document in the context of reaching a new, universal climate deal in December during a meeting in Paris, France. (See BioRes, 1 July 2015)

On the climate front, the document reaffirms developed countries’ commitment to provide US$100 billion a year by 2020 to help developing countries move to sustainable growth models, as well as to rationalise inefficient fossil-fuel subsidies, and explore carbon pricing as innovative mechanisms to combine public and private resources. 

What role for trade?

The Addis Ababa Action Agenda recognises the role of trade as an engine for inclusive economic growth and the promotion of sustainable development. The language remains effectively the same as the 7 July draft and includes a range of pledges geared towards boosting developing country participation in world trade, reaffirming commitments made in the context of WTO ministerial decisions, and securing trade finance. Notably, the trade section invites the WTO General Council to consider how the WTO can contribute to sustainable development.

The section also recognises the role of regional economic integration and trade for economic growth and integrating micro, small, and medium sized enterprises into global value chains. According to the document, UN members will endeavour to negotiate trade and investment agreements with appropriate safeguards, so as not to restrict efforts to regulate in the public interest. They also commit to integrating sustainable development into trade policy at all levels.

Reference is made to the current Doha Round mandate to correct and prevent trade distortions in world agricultural markets, eliminate export subsidies, and discipline measures with equivalent effect.  WTO members are called to commit to strengthening disciplines on fisheries subsidies, including those that contribute to overcapacity and overfishing, in accordance with the Doha mandate. Countries also recognise the need to tackle illegal wildlife trade, illegal mining and logging, as well as illegal, unreported, and unregulated (IUU) fishing. (See BioRes, 13 July 2015)

The Addis outcome targets the lack of access to trade finance, noting that it can constrain countries’ trade potential, welcoming work on the issue by the WTO and calling on development banks to increase market-oriented trade finance. 

During the opening plenary WTO Director General Roberto Azevêdo told delegates that trade could bring new investment, employment, and technology diffusion opportunities, but securing the necessary trade finance and capacity-building were critical to make sure the poor also benefited.

“The benefits of trade still do not reach some of the poorest and most vulnerable. So simply providing more trade opportunities is not enough. A broader and more systemic approach is needed,” the WTO chief said, adding that up to 80 percent of global trade is supported by some form of financing credit or credit insurance.

Azevêdo outlined existing efforts, such as the WTO’s Aid for Trade initiative, to boost developing countries’ trade capacity. The global trade body also recently launched a second phase of the Enhanced Integrated Framework, a multi-donor programme to help 47 LDCs play a more active role in the global trading system, with a funding target of US$250 million.

Other relevant contributions from the trade system include a package of outcomes for developing countries from the WTO’s 2013 ministerial conference held in Bali, Indonesia. A Trade Facilitation Agreement secured on that occasion could also help streamline the costs of trade that often fall disproportionately on the poorest.

However, the remainder of the multilateral trade talks have moved at a slow pace in Geneva, Switzerland, with the prospects for reaching a Doha Round “work programme” receding quickly. (See Bridges Weekly, 16 July 2015) [Editor’s note, Bridges Weekly is ICTSD’s flagship publication on international trade news]

Global governance litmus test

In the lead up to Addis, number of stakeholders had said it could prove the litmus test for multilateral cooperation, and set the tone for the two other major international gatherings later this year. UN leaders said on last Thursday that the conference’s successful outcome augured well for upcoming summits. 

"If Addis and New York help illustrate the scale of the opportunity and forge consensus around what’s necessary to grasp it – that is a good first step.  But the follow on steps – actual policy change – had better start coming pretty quickly thereafter."

“The outcome in Addis is a building block for our new development agenda for the next fifteen years,” Wu Hongbo, Under Secretary General for Economic and Social Affairs, told reporters at a press conference. “The successful conclusion of the negotiations lay a solid foundation for the post-2015 summit in New York and will be a very positive influence on the conclusion of the December climate talks.” 

Some commentators, meanwhile, suggested the measure of Addis’ success would be in its implementation.

“The breadth of the Addis Agenda will help move the discussion of global development from one dominated by aid to one that also addresses trade, investment, technology flows and (even) migration,” Charles Kenny, a senior fellow at the Washington-based Center for Global Development, told BioRes.   

“If Addis and New York help illustrate the scale of the opportunity and forge consensus around what’s necessary to grasp it – that is a good first step.  But the follow on steps – actual policy change – had better start coming pretty quickly thereafter,” he continued.

ICTSD reporting; “Glee, relief and regret: Addis Ababa outcome receives mixed reception,” THE GUARDIAN, 16 July 2015. 

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