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  • on 11.05.2015
  • at 06:05 PM
  • by Kevin Hind

The New EU Paradigm Shift for The Sustainable Development Goals 0

Two months before the Third International Conference on Financing for Development to be held in Addis Ababa, a report financed by the European commission has called for a paradigm shift in development co-operation through combining new financing and policies.

The theme of finance for development will be at the heart of the conference and will be followed by the UN general assembly in September – where the new Sustainable Development Goals will be agreed – and the UN climate change conference in Paris in December.

“These meetings will set the level of ambition of the international community for the years and decades to come,” said the EU Commissioner for International Cooperation and Development Neven Mimica, last week in Brussels during the launching of the European Report on Development 2015. The report advocates a switch from merely providing funding to shaping and implementing policies with a long-term, transformative impact.

From ODA to a completely new approach for finance for development

“A completely new approach towards finance for development” is needed says the report, that also suggests that “it is not an overall shortage of funds that will be the constraining factor in achieving a transformative post-2015 development agenda, but the way finance is mobilised and used that will determine success in achieving the goals”. According to the report, a new paradigm regarding the relationship between finance and policies should be built which takes into account all types of finance (public, private, domestic and international), recognises of the role of complementary national and international policies and focuses on long-term enablers and a transformative post-2015 development vision.

“Achieving the SDGs will require the mobilisation of resources from private sources including foreign direct investment, bank loans, bond issuance, equity and other risk capital and private transfers as well as the use of risk-mitigation instruments”, adds the report.

In other words, we should move from a narrative based on Official Development Aid (ODA) – on which, the Millennium Development Goals (MDGs) were founded -, to a global development strategy combining international public finance and new financial sources as well as “appropriate policies ensuring that finance is used effectively to achieve results”.

As for the financing, the ODA era has already ended. According to Debapriya Bhattacharya, founder of the Centre for Policy Dialogue, Bangladesh-based think tank and co-author of the report, “the role of traditional international public finance such as ODA and other finance flows (OOF) is declining, while all other forms of financial flows are on the rise”. Or, to put it in another way, “the data shows that domestic public resources have grown rapidly and are the largest source of finance for all country income groupings”, says the report. “International public finance has also increased but is declining in relative importance. Domestic private finance has shown the fastest growth, but it still much lower in low-income countries than in lower middle-income countries”.

The data shows that international public finance rose by 114% between 2002 and 2011 whereas , domestic public revenues rose by 272% in the same period, private domestic finance 415% and private international finance 297%. In absolute terms, international public finance accounted for about 161 billion $ in 2011, as opposed to 1,484 bn for the domestic public revenues, 3,734 bn for private domestic finance and 1,269 bn for private international finance.

This trend is clear in Bangladesh: from 2000 to 2012, ODA increased by 75%, whereas domestic tax revenues rose by 280%.

Finance alone is not sufficient, Policy matters

However, the volume of financial flows does not ensure a reduction in poverty. As highlighted by the EU Commissioner for Development Neven Mimica during the presentation of the Report in Brussels, “finance alone is not sufficient to achieve the post-2015 development agenda. Policies are fundamental. And, policies matter because good policies will attract both public and private financing”.

The report draws attention on the effective use of domestic and financial frameworks of resources for sustainable development. The recommended policy environment also includes “supportive agreements on climate change, an improved global trade regime, better global tax rules and the management of the global financial system.”

By focusing on accountability and participation, the report underlines the importance of creating a framework for dialogue between the various stakeholders involved in each type of finance during the implementation of the post-2015 agenda. “Participation in such a dialogue will allow stakeholders to monitor progress, hold each other accountable, jointly manage the evolving pattern of finance and make adjustments as required global.”

So closed, so far from a common global agenda on SGDs

However, agreement on a common global agenda is far from clear. Sources from the European Commission claim that “the Italian Presidency of the Council of the EU allowed an agreed position on the Post-2015 Agenda.” This is a good starting point. The US are also an ally for Brussels, although they ask for a reduction in the targets identified in the actual proposal for SGDs (169 targets have been so far identified). The approach of developing countries is one of a much more hostile nature. They show no interest whatsoever in the theme of accountability and have no intention to allocate 0,7% of GDP to ODA (a committed required by the European Commission when it comes to the SDGs). “These countries are not ready to accept some commitments and they are more focused on South-South co-operation”, said EU Commissioner Mimica. As for Africa, Abraham Tekeste, the Ethiopian finance minister, made clear what he wanted to prioritise in Addis Ababa.

“If there’s no commitment from developed countries to spending more on ODA, the agreement is at risk,” he told during the meeting. “The support of our partners is highly valuable in supporting and channelling growth in Africa. However, the development of our countries is first of all our responsibility. It is up to us to define the policies which correspond with our own needs of social change. The idea is to reach an agreement sufficiently ambitious enough to finance the post-2015 Sustainable Development Objectives.”

Time is running out. “The Addis conference is more important than the UN Summit”, said Mimica.

by Joshua Massarenti, in collaboration with Evelina Urgolo –

The ERD 2015 report is the result of a partnership between the Overseas Development Institute (ODI), the European Centre for Development Policy Management (ECDPM), the German Development Institute (Deutsches Institut für Entwicklungspolitik) (GDI/DIE), the University of Athens (Department of Economics, Division of International Economics and Development) and the Southern Voice Network, Brussels, 2015.

Click Here to read the ERD 2015 report

Photo Credit: Flickr/Brecht Houben

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