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Home » Financing for Development, Sustainable Development

New development goals lack the required resources

Submitted by on 28 Sep 2015 – 09:10

Public-private financing partnerships was the buzzword at the Financing for Development conference in Addis Ababa. Will public sector money be sufficient to transform development? Heidi Hautala, European Parliament’s Greens/EFA group shadow rapporteur on financing for development discusses the outcome rhetoric on private sector money

Heidi HautalaYear 2015 is crucial not only for tackling climate change, but also for sustainable development. Progress has been made in reducing poverty, getting children to school and providing access to clean water, but much more needs to be done in supporting developing countries. To achieve that, the new sustainable development goals (SDGs) will be officially approved at the UN General Assembly in September. The goals themselves are an improvement compared to the present Millenium Development Goals. However, there is a huge gap between goals and concrete actions.

In Addis Ababa conference on Financing for Development in mid-July, high hopes for redirecting the global economy and make robust commitments to finance the SDGs were lost.

One of the worst failures was the de facto postponement of 0.7 percent of GNI to development aid target with 15 years. This happens during the year when the target should be already met. The European Union failed to show leadership, as before the conference, the Council decided to support 0.7 only “within the timeframe of post 2015-agenda”. The European Parliament required more ambition and the commitment fulfilled by 2020. Now would be the time to be more ambitious, not less! Sadly, some countries made no concrete commitments at all.

The poorest and most vulnerable need the most support

The European Parliament wanted the EU to direct half of its official development aid to the least developed countries (LDCs). The Council was less ambitious endorsing 0.15-0.2 percent of GNI to LDCs as a target. This became also the call of the Addis Ababa conference, which is important as the trend shows decline in aid for the poorest. EU should also recommit to guide our aid especially to Africa.

The life of a poor rural young African boy or girl will not be changed only by public development aid. Contribution of the private sector is important, but not without conditions. If self-guiding private sector would be the sole answer, all millenium development goals would already be achieved.

The outcome of Addis Ababa seems over-optimistic about the role of private sector. We need more clear criteria for private investments, such as foreign direct investments, public-private partnerships and blending of aid and loans. A legally binding framework to guarantee that human rights and environment are respected in the UN framework is needed. Victims of human rights violations committed by companies need remedy. Investments need to support local business. Voluntary corporate social responsibility is not efficient. The Parliament showed again more ambitious than the Council.

One example of the consequences of the Addis Ababa outcome rhetoric on private sector is the decision of the new Finnish government on development aid budget. Finland is going to cut 38 percent of its development aid to balance the budget. This is shameful now when donor countries should show more commitment to implement the SDGs. At the same time when 42 percent of the funding of development CSOs is cut, the annual funding for concessional loans for businesses operating in developing countries will be 13 times higher than before. It is not clear whether the focus is in promotion of the Finnish firms or business in developing countries.

There is a need to increase support to private sector in developing countries, but this should not be done at the expense of other aid. Business sector needs public support services, access to finance, skilled work force, well-functioning regulatory framework and rule of law. This can be promoted by “traditional” aid.The Finnish government, in shifting its financial support from CSOs to companies ignores the important role of civil society in creating a better business environment.

Unfortunately, the Addis Ababa outcome did not deal with the bigger systemic issues concretely enough. All policies should aim to combat poverty. The resources are there, but they need to be used to tackle poverty and other global challenges. E.g. trade and financial policy should aim at reducing inequalities. There is a need for legal framework for restructuring debt. Unfortunately this was left vague in the outcome.

The importance of domestic resource mobilisation in developing countries was acknowledged in the conference

However, there is a need to show clearer commitments. Illicit financial flows are a major reason for leaking resources from development. At least a group of countries promised to direct more aid to support tax administrations. Apparently, the EU did not support the establishment of a robust UN tax committee. It is a big disappointment that the majority of countries convened in Ethiopia followed EU’s footsteps in this regard.

EU should also place human rights, especially women’s rights, sexual and reproductive health and rights, and quality and transparency of aid in the core of implementation of the SDGs.