A background of crisis
Last week I indicated that the first international conference on financing for development held in Monterrey, Mexico at the end of 2002 was a precursor to the launching by the United Nations of its global development agenda. The ambition of that development agenda soon morphed into the Millennium Development Goals, 2005 to 2015. At the time of the first conference the world was gripped in multidimensional global crises spearheaded by the peace and security crisis arising from the 9/11 terrorist attack on the United States. This crisis-ridden global environment favoured bold international actions aimed at promoting peace and development.
In that column I had identified three innovative international best practices in financing for development, coming out of the first conference. These were 1) endorsing targets for transferring official development assistance from rich to poor countries; 2) full commitment to pursuing “innovative financing”; and 3) acknowledging, in a global forum, the fundamental challenges corruption poses to financing for development.
The first conference had also formally acknowledged four types of financing flows for development, which are now standard in the development literature. These are firstly, domestic public flows, with by far the most important component being taxation. Secondly, there are domestic private flows, with loans from private banks the largest component.
Thirdly, there are international private flows, with private foreign direct investment, portfolio investment, remittances, private debt and equity the leading components. Fourthly, there are international public flows provided by government agencies directly and indirectly through funding of international financial institutions like the IMF and World Bank, and through the activities of their countries’ civil society organizations.
Crisis again
As indicated above, the First International Conference on Financing for Development held in March, 2002, followed in the aftermath of the global meltdown precipitated by the 9/11 terrorist attacks on the United States. Similar to that first conference, the Second International Conference held in Doha, Qatar November 29 to December 2, 2008 came on the heels of a global financial and economic meltdown, which has been termed the Great Recession. While not spearheaded this time by violent engagements, the Great Recession, which started in late 2007, threatened global financial and economic collapse of the order of magnitude of the Great Depression of the 1930s. Global transnational banks, insurance companies, hedge funds and other financial firms and investment vehicles, considered till then as “too big to fail”, were indeed failing, and governments everywhere pursued emergency measures to protect and insulate their economies against global contagion.
Seven years later the major crisis that confronted the international community was different in its origin from that which obtained at the time of the first conference. Furthermore, the global economic situation had become very different in key aspects.
In particular 1) the Millennium Development Goals, MDGs, were signed on to by the United Nations community in 2005, and 2) the Doha Development Round of WTO trade negotiations that started in 2001 was well underway. Despite such differences, however, the galvanizing effects of the crisis on the international community were, to say the least, equally profound.
Best practice advances
Like the first Monterrey conference, the second Doha international conference has also produced three significant advances to emerging international best practices in financing for development, the last of which is explicitly related to the hypothesis that is guiding the current series of columns. These are:
1) Re-commitment
Typically, conference cycles on a particular theme give token acknowledgment to earlier conferences, as each succeeding conference stresses the added value or innovations it brings to its engagement with the topic. The Doha Declaration was refreshingly different in this regard. It fulsomely re-committed to the Monterrey Consensus’ goals and commitments stating that it re-affirmed the consensus: “In its entirety, in its integrity and holistic approach.” Such a fulsome re-affirmation brought confidence to the poor countries, which therefore expected that, despite the grave adverse economic consequences occasioned by the Great Recession, the rich countries still intended to honour their pledges to transfer agreed amounts of official development assistance to their poor counterparts.
2) Centrality of FFD
The Doha Conference recognized the profound changes in the global economy since the first conference. It correctly noted that up to the recession, there was progress in several areas, for example, increased financing flows for development, both public and private; higher growth rates in most developing economies; and, a reduction in global poverty rates. Accompanying these items of progress inequality was widening and major challenges emerging, particularly food security, volatile commodity and energy prices, and problems associated with climate change. This reality led to the conclusion that, despite the global financial and economic meltdown, financing for development should remain central, integral and indissolubly linked to the achievement of the United Nations Development agenda, including the internationally agreed Millennium Development Goals, MDGs, and the Doha Development Round of Trade Negotiations underway.
3) Corruption, stolen public assets
The Doha Conference was much further along in its treatment of corruption than the first conference. Indeed it produced for the first time in history at such a forum, as we can note from the references and quotations that follow, specific references to recovery of stolen public assets as a contributor to the international financing for development. Thus, the Declaration acknowledges: “Capital flight … is a major hindrance to the mobilization of domestic resources for development” and goes on to affirm “it will strengthen national and multilateral efforts to address the various factors that contribute to it.” It then specifically refers to measures to prevent illicit financial flows, money-laundering and transfers abroad of stolen public assets.
It further asserted: “The on-going fight against corruption at all levels is a priority”. The Declaration urged members’ participation in both the United Nations Convention against Corruption and its joint Office on Drugs and Crime and World Bank Stolen Assets Recovery Initiative.
Next week I shall look at the upcoming third international conference.
