Did the UN financing for development conference deliver?

by Katy Migiro | @katymigiro | Thomson Reuters Foundation
Friday, 17 July 2015 12:31 GMT

Liberia's President Ellen Johnson Sirleaf addresses the opening of the Third International Conference on Financing for Development in Ethiopia's capital Addis Ababa, July 13, 2015. REUTERS/Tiksa Negeri

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Failure to upgrade a U.N. tax committee to hand it more powers to pressure multinationals to pay more tax in poor countries was a big disappointment to campaigners

ADDIS ABABA, July 17 (Thomson Reuters Foundation) - A major United Nations summit to finance ambitious global development goals, from giving free education to all to dealing with climate change, fell short of developing countries' expectations with few aid pledges.

But a strong focus on tax reforms, the universal right to free basic services and welfare, and support for the poorest were among the significant breakthroughs, aid agencies said.

After three days of negotiations in the Ethiopian capital Addis Ababa, world leaders this week agreed a broad framework for funding the Sustainable Development Goals (SDGs), due to be adopted in September at a cost of more than $3 trillion a year.

The 15-year Addis Ababa Action Agenda emphasises the need to look beyond aid to increased tax revenues and private financing to foot the bill.

"What Addis was about is: 'Are we going to get more taxes and are we going to use them better?" said Oxfam's Paul O'Brien.

BIG STEP

Better tax systems will bolster budgets and give governments more funds to invest in the SDGs. In many low-income countries, tax is under 15 percent of GDP, against at least 24 percent in advanced economies, IMF data show.

"This is the new priority of the development world and that's a massively big step," said Jonathan Glennie, Save the Children's policy and research director.

Many aid officials welcomed the launch of the Addis Tax Initiative, in which several donors promised to double aid to strengthen tax systems in developing countries.

But some criticised the initiative, and a similar one by the Organisation for Economic Cooperation and Development (OECD), for merely tinkering at the edges of a broken global tax system.

"This is just glossing over the fact that there are fundamental issues to be fixed," said Pooja Rangaprasad, policy coordinator for the Financial Transparency Coalition.

"What capacity and knowledge is there to transfer?" she asked, pointing to rich countries' inability to stop tax dodging at home.

The failure to upgrade a U.N. tax committee to hand it more powers to pressure multinationals to pay more tax in poor countries was a major disappointment to campaigners.

A more robust body would have been better placed to tackle the $1 trillion a year lost to illicit financial flows, according to the research group Global Financial Integrity.

Stemming these leaks is critical for poor countries to achieve the SDGs as they dwarf development aid of around $135 billion a year from OECD countries.

RIGHTS

One of the biggest wins was the adoption of the 'social compact', which means everyone has the right to basic social services such as free healthcare, education and an income.

These rights underpin several SDGs, such as ending poverty and hunger, reducing inequality and achieving universal access to health services and free education by 2030.

"This may well be what the Addis agreement is remembered for," Save the Children said in a statement.

The deal encourages countries to set national spending targets in essential public services for all, including health, education, energy, water and sanitation.

"The language in there is strong," said Romilly Greenhill, a researcher with the Overseas Development Institute think tank in London. "I think it's the first time it's really been expressed in this way."

RHETORIC TO REALITY

But, crucially, the agreement doesn't say where the money will come from to pay for this bold new agenda.

"It's a good first step but what we need to see now is the rhetoric translated into reality," said Greenhill.

Poor countries cannot pay for the social compact themselves, ODI says, even if they collected more taxes. Factoring in current aid levels, they would only have about half of the $148 billion needed each year, leaving a gap of $73 billion.

There were hardly any new pledges made, except for an additional $214 million in support for the World Bank-managed Global Financial Facility, which aims to strengthen healthcare systems to cut mother and child deaths.

Many donors, struggling with austerity and sluggish growth, were reluctant to sign up for fresh targets.

The document merely welcomes the European Union's existing commitment to spend 0.7 percent of GNP on aid, with 0.2 percent of GNP going to the least developed countries, by 2030.

For seasoned aid watchers, this doesn't mean all is lost.

The first Financing for Development conference in 2002 in Monterrey also set a broad direction for financing the Millennium Development Goals. Concrete aid pledges and debt cancellation were only made at the G8 summit three years later.

Governments are tasked with providing detailed national action plans to implement the SDGs at a September summit, which are then likely to attract public and private funding. (Reporting by Katy Migiro; Editing by Ros Russell; Please credit the Thomson Reuters Foundation, the charitable arm of Thomson Reuters, that covers humanitarian news, women's rights, corruption and climate change. Visit www.trust.org)