The origins of the current Financing for Development process are in the first and second International Conferences on Financing for Development, which led to the outcome documents referred to as the Monterrey Consensus (2002) and the Doha Declaration (2008)The current discussions on Financing for Development culminated in the Third International Conference on Financing for Development in Addis Ababa, Ethiopia (13 -16 July 2015)which adopted the "Addis Ababa Action Agenda" (AAAA or A4), which was adopted by the U.N. General Assembly on July 27, 2015.

 

Following years of discussions on financing for development, the first FfD conference in Monterrey, Mexico in March 2002 led to the "Monterrey Consensus" which comprised a broad understanding between developed countries and developing countries about the importance of financing development, including the importance of economic growth and markets to development.  Monterrey addressed six general areas that related to development financing, including: 

  • mobilizing domestic financial resources;  
  • mobilizing international resources;
  • trade;  international financial cooperation for development consisting of an agreement on levels of Official Development Assistance to be contributed by donor countries (0.7% of gross national income) to developing countries;
  • managing debt of developing countries; and
  • systemic issues such as enhanced coherence in the international monetary system vis-à-vis development outcomes.  

The Doha Declaration (2008) reaffirmed the Monterrey Consensus in the shadow of the global economic crisis.  Since late 2014, the preparatory process for the current 3rd International Conference on Financing for Development led to the drafting of what has now been finalized as the Addis Ababa Action Agenda.  

Significantly, the SDG Outcome Document - Transforming Our World: the 2030 Agenda for Sustainable Development - reinforces and links the outcomes of the Addis Ababa Action Agenda as the key means of implementation (MOI) for financing and achieving the SDGs:

 

Means of Implementation

39. The scale and ambition of the new Agenda requires a revitalized Global Partnership to ensure its implementation. We fully commit to this. This Partnership will work in a spirit of global solidarity, in particular solidarity with the poorest and with people in vulnerable situations. It will facilitate an intensive global engagement in support of implementation of all the Goals and targets, bringing together Governments, the private sector, civil society, the United Nations system and other actors and mobilizing all available resources.

40. The means of implementation targets under Goal 17 and under each SDG are key to realising our Agenda and are of equal importance with the other Goals and targets. The Agenda, including the SDGs, can be met within the framework of a revitalized global partnership for sustainable development, supported by the concrete policies and actions as outlined in the outcome document of the Third International Conference on Financing for Development, held in Addis Ababa from 13-16 July 2015. We welcome the endorsement by the General Assembly of the Addis Ababa Action Agenda, which is an integral part of the 2030 Agenda for Sustainable Development. We recognize that the full implementation of the Addis Ababa Action Agenda is critical for the realization of the Sustainable Development Goals and targets.

The Addis Ababa Action Agenda identifies the following priorities:

 

  • Delivering a new social compact and essential public services for all, including health and education;
  • Scaling up efforts to end hunger and malnutrition;
  • Establishing a new forum to bridge the infrastructure gap;
  • Promoting inclusive and sustainable industrialization;
  • Generating full and productive employment and decent work for all and promoting micro-and-small/medium enterprises (MSMEs);
  • Protecting our ecosystems for all; and
  • Investing in young people by promoting national youth strategies to meet the needs and aspirations of young people, including a global strategy for youth employment by 2020.
  • Strengthen countries’ capacity for early warning, risk-reduction and management of national and global health risks, including health financing and training health workers.
  • Recognize the need for more timely, comprehensive and cost-effective ways to manage and mitigate natural disasters and complex emergencies

It will take all sources of financing to achieve these ambitious priorities, including unlocking new resources by:

  • Enhancing tax administration and improved transparency and effectiveness of tax systems for domestic resource mobilization;
  • Increasing catalytic aid to Least Developed Countries (LDCs);
  • Inviting the private sector to engage and invest as partners in the development process;
  • Investing in science, technology, innovation, capacity building and data.

Recognizing the unprecedented demand that will be placed on the private sector 's financial and other resources in the 2030 development era, there is a greater need for the private sector to have a seat at the negotiating table and a role in the strategizing and implementation of the new sustainable development agenda at both the UN and national levels.

International Business Forum - July 14, Addis Ababa, Ethiopia

International Business Forum - July 14, Addis Ababa, Ethiopia

Private sector input into the Financing for Development discussions was organized by the Finance for Development Business Sector Steering Committee (chaired by the International Chamber of Commerce), which has a diverse composition of members including global business organizations, multinational entities, smalland medium enterprises, multilateral development finance institutions, philanthropies and academia from around the world.  The Steering Committee also organized the the International Business Forum, which was part of the Financing for Development Conference and brought together hundreds of business representatives from all over the world to discuss the role of business in mobilizing resources for development.

What is clear is that ODA cannot do the job of development finance by itself:  in 2013, when ODA levels hit all-time highs, they only reached USD135 billion,but estimates are that the needs for financing the SDGs will be 4 trillion annually (UNCTAD World Investment Report 2014), leaving a gap of USD 2.5 trillion annually.

This is why the multilateral development banks have called for the need to move from "billions to trillions"in development finance resource flows and the need for 'blending' different resource streams to catalyze more investment, particularly for least developed countries.  These financing needs simultaneously creates a tremendous opportunity for the private sector, as it will mean that financing from private sources, including capital markets, institutional investors and business will become particularly important.

With the inclusion of other resource streams comes the need to more comprehensively measure development assistance.  The OECD's Development Assistance Committee, which tracks development flows, has proposed a new measurement - "total official support for development" (TOSSD). The Addis Ababa Action Agenda states that it Member States will "hold open, inclusive and transparent discussions on the modernization of the ODA measurement and on the proposed measure of 'total official support for sustainable development' and we affirm that any such measure will not dilute commitments already made." (para. 55).

It should be kept in mind that the bulk of investments in developing countries are financed with domestic resources (USD 7 to 8 trillion a year), to a lesser extent by Foreign Direct Investments (USD 500bn), and marginally by international public financing (USD 230bn) (although low-income countries rely on international aid for 25% of their investments).  The need to more effectively mobilize domestic resources, through expanded tax bases and incentivizing entrepreneurship  and the prospects of unlocking private flows through blended finance both point to a responsibility for governments to create the right enabling environments for investment.  This reaffirms why Goal 16 of the SDGs is so critically important to the larger SDG puzzle and why using ODA for capacity building for such governmental functions (or improving data capabilities) is particularly important.

Rio+20 contained a request to relevant United Nations agencies to identify options for a facilitation mechanism to promote the development, transfer and dissemination of of clean and environmentally sound technologies.  The President of the General Assembly convened four workshops on the topic in developing countries, which led to a series of dialogues in the General Assembly to consider possible arrangements for a facilitation mechanism. A further "Food for Thought" paper was released during the intergovernmental negotiations in May 2015.

The outcome documents of the Post-2015 Sustainable Development Agenda (para 70) and the Addis Ababa Action AGenda (para 123) established the Technology Facilitation Mechanism aimed at promoting science, technology and innovation, based substantially on that "Food for Thought."  The TFM was launched at the 2015 UN Sustainable Development Summit and will be a "multi-stakeholder collaboration between Member States, civil society, private sector, scientific community, United Nations entities and other stakeholders."  

The TFM will be coordinated by United Nations Interagency Task Team on Science, Technology and Innovation for the SDGs (IATT-STI), open to all UN Agencies, that will be guided by an Experts Advisory Group including 10 representatives from academia, civil society and business, appointed for 2-year terms by the Secretary General).  The IATT-STI will work to:

  • convene a Multistakeholder Forum on Science, Technology and Innovation for the SDGs once per year for two days to discuss STI cooperation around the thematic areas of SDG implementation to facilitate matchmaking and the creation multi-stakeholder partnerships to identify technology needs and gaps and facilitate development, transfer and dissemination of relevant technologies for the SDGs.
  • create an on-line platform to establish a comprehensive mapping of, and serve as a gateway for, information on existing STI initiatives, mechanisms and programmes, within and beyond the UN to spread information, best practices and lessons learned on STI facilitation initiatives and policies.
  • map existing STI initiatives, background research and reports in support of the TFM's activities.
  • develop UN capacity building programmes on technology facilitation for the SDGs.
  • create partnerships and seek funds for ongoing work.

As we noted in a recent blog post, there are some worrying signs that the TFM is not as open as it could be to input and engagement from the business community, something it will need to work hard on as it develops its various work streams.