Select Committee on International Development Fifth Report



II. THE UN CONFERENCE ON FINANCING FOR DEVELOPMENT

The Preparatory Process

  1. In response to demands from the G77 group of developing countries, the UN General Assembly agreed in June 1997 to consider holding an intergovernmental dialogue on the financing of development. The first substantive session of the Preparatory Committee—a "Prepcom" in the language of international conferences—took place in May/June 2000, and the fourth and final Prepcom was held in New York from 14 to 27 January 2002. There were in addition numerous regional meetings, and discussions between the various international organisations and other key stakeholders such as civil society and business interests. The final Prepcom completed the Monterrey Consensus Document for heads of state to endorse two months later at the Monterrey Summit.
  2. One feature of the preparatory process, highlighted particularly in the memoranda received from UNDP,[16] and jointly from the Department for International Development (DFID) and HM Treasury,[17] was the participation of business interests and civil society organisations throughout the process. In contrast, other witnesses including British Overseas NGOs for Development (BOND) reported that civil society organisations had not been able to participate effectively either in the preparatory process or in the "roundtables" at Monterrey when they were given very little time and were unable to influence a pre-decided outcome.[18] As we discovered, NGOs had, in part, ruled themselves out of the Financing for Development (FfD) process having decided that they would not be able to exert much influence. As BOND wrote, "NGO involvement in [the] FfD preparatory process was modest. The broad nature of the agenda was often beyond the remit of individual NGOs and coordination of efforts took place both at the UK and the EU level to maximise impact. Many heavyweight NGOs and NGO networks decided early not to invest in the FfD process assuming their views would have little chance of influencing the official proceedings; furthermore, the usual lack of resources hampered southern NGOs involvement".[19]
  3. The Secretary of State for International Development, Clare Short, told us that "the preparatory process was very good and went well",[20] and in their joint memorandum DFID and HM Treasury claimed that "the significant participation of the IMF [International Monetary Fund] and the World Bank meant that this was a good example of the UN and the Bretton Woods institutions collaborating effectively towards shared objectives".[21] Improved coordination between the UN, the International Financial Institutions and the World Trade Organisation (WTO) was similarly applauded by UNDP[22] and the Overseas Development Institute (ODI),[23] although the World Development Movement (WDM) was more critical, arguing that "the FfD process clearly asserts the primacy of the international economic institutions over the UN system".[24] We understand these concerns about the relative weight and influence of the International Financial Institutions as opposed to the more democratic UN, but we welcome the improved coordination between the various international organisations and feel that such efforts are crucial if there is to be policy coherence as regards international development. The appropriate response to greater coordination between the International Financial Institutions and the UN is to strengthen the voice of developing countries in all fora, rather than to decry such coordination. Policy coherence and the grounding of international cooperation in national-level politics would be improved too by the participation of parliamentarians in international conferences, something which—as seems to be the norm at international meetings—was lacking at Monterrey.
  4. From the Zedillo Report to the Monterrey Consensus

  5. In December 2000, as part of the conference preparations, the UN Secretary General appointed a panel to recommend strategies for the mobilisation of resources to finance development. This panel was headed by Ernesto Zedillo, the former President of Mexico, and published its report—the Zedillo Report[25]—on 26 June 2001. The Zedillo Report provided a basis for subsequent negotiations, and ultimately led to the Monterrey Consensus. The Zedillo report was wide-ranging, discussing issues including domestic resources, private capital flows, trade, aid, and the architecture of global governance. It was widely welcomed by NGOs and the wider international development community for imparting a sense of urgency to proceedings and for making it clear that the MDG targets would not be achieved if a "business as usual" approach were adopted. In addition to calling for a doubling of aid to US$100 billion, the report made a series of recommendations about: establishing attractive economic and business environments in developing countries; the need for the WTO to pursue a "development round" and to implement fully previous agreements; the need for donors to honour their commitments to provide aid amounting to 0.7 percent of their national income and to harmonise their development assistance; the importance of reforming the architecture of global governance; the desirability of international taxes and a new allocation of Special Drawing Rights to finance the provision of global public goods; and a proposal to establish an international tax organisation. For many NGOs including BOND[26] and WDM,[27] the Zedillo report was an exciting document full of innovative proposals, a document which provided a benchmark against which the Monterrey Consensus could be judged.
  6. Given the political realities of relationships between developed and developing countries, and the need to ensure the continued participation of the USA in the process, it is not surprising that the Monterrey Consensus emphasises the responsibility of developing countries for their own development, and has a somewhat narrower agenda than the Zedillo report, expressed in less forthright language. Developed and developing countries insisted that some issues were best dealt with in other fora—trade in the WTO, and debt relief in the Heavily Indebted Poor Countries (HIPC) initiative—with the result that more attention was focussed on aid volumes, and most especially aid effectiveness. BOND criticised the role of the USA in diluting the Zedillo report's recommendations, highlighting in particular its intransigent negotiating stance and obstructive negotiating tactics, and its efforts to exclude mention of either the 0.7 percent of GNI target, or the MDGs in the Monterrey Consensus.[28] We were also told that the EU reduced its ambitions for the process when at the third Prepcom its primary objective became that of keeping the USA on-board.[29]
  7. The UK played an active role in the Financing for Development process. UK objectives were: to focus FfD on poverty elimination; to promote developing countries' efforts to create the right policy environment for poverty reduction; to press for significant increases in aid; to press for measures to increase aid effectiveness; and, to strengthen the voice of developing countries in the international financial architecture.[30] Speeches by the Chancellor of the Exchequer in November and December 2001 pushed international development issues further up the international political agenda and highlighted the need for more and better use of finance for development. The UK was a key player in developing the common EU position and making the case for aid; as BOND put it, 'the UK appeared to be one of the more progressive voices' in the process.[31] Indeed, the UK has increased its ODA/GNI percentage contribution from 0.26 in 1997, to 0.32 in 2000, and is firmly committed to reaching 0.4 percent by 2006. Such progress is very welcome, and puts the UK in a stronger position to persuade other states to increase their contributions. If the UK were to set a timetable for reaching its 0.7 percent commitment, its position would be strengthened further. Despite the arguments made by the UK and other states at the conference, it is disappointing that the Monterrey Consensus lacks the sense of urgency of the Zedillo report, a sense of urgency which must be revived if there is to be any hope of meeting the MDG targets. We commend the Government on its active role during the FfD process, and trust that it will endeavour to inject international discussions and actions to meet the MDGs with a sense of urgency.
  8. Aid Increases, Assessment, and Implementation

  9. Whilst not part of the Monterrey Consensus, the most dramatic outcomes of the conference were the announcements by the EU and the USA of substantial increases in ODA. (ODA volumes are discussed in more detail in chapter five of this report). The EU announced on 15 March that—as an intermediate target en-route to meeting the 0.7 percent of GNI target—all member states would seek by 2006 to meet or exceed the current EU average of 0.33 percent of GNI. Assuming that the currently more generous donors maintain their current generosity, this would have the effect of pushing the EU average to 0.39 percent of GNI, providing an extra US$7 billion of aid per year from 2006 and raising an additional US$20 billion between now and 2006. On 14 March the USA announced that it would provide—through its Millennium Challenge Accounts (see also paragraphs 61 and 94-99)—an extra US$5 billion of aid per year from 2006, and an extra US$10 billion between now and 2006. Assuming that the announced increases in aid from the EU and the USA materialise, they would amount to an extra US$12 billion per year from 2006, a long way short of Zedillo's costing of an extra US$50 billion per year from 2001 for the MDG targets, but a step in the right direction. Made in the week before the conference commenced, the ODA announcements were clearly precipitated by the Monterrey process and the debate it generated about aid and international development. In our view this was one of the most important outcomes of Monterrey, pushing international development right to the top of the international political agenda, perhaps for the first time ever.
  10. But, being briefly on top of the international political agenda is not the same as being adequately resourced. As the Chancellor of the Exchequer acknowledged in the Budget Report or "Red Book", the commitments to increase ODA fall short of raising the resources needed to meet the MDG targets.[32] Critics of the FfD process point out too: that Monterrey merely produced a reaffirmation of existing commitments;[33] that no binding commitments were made, or timetables set for reaching 0.7 percent;[34] that little progress was made on untying aid; that the Consensus entrenched a one-size fits all development model and failed to challenge the inequitable system of global governance;[35] and, perhaps most strongly, that in sacrificing the message of the Zedillo report in order to keep the USA on board Monterrey was a "failure of multilateralism".[36] We share some of this disappointment, but are keen to maintain the momentum gained at Monterrey rather than dwell on what might have been.
  11. Whilst developing countries and many NGOs were understandably disappointed with the Monterrey outcomes,[37] and regarded the process as excessively donor-driven,[38] the achievement of a consensus was no mean feat. As ODI put it:
  12. "A now obvious but important point about the long process of preparing for Monterrey is that a consensus was achieved. At the outset this was far from a foregone conclusion. There could, until the end, have been an unresolved confrontation between exaggerated expectations of developing countries for higher resource flows, more debt relief, a preponderant role for themselves in the international financial architecture and the construction of new institutions of world economic governance with authority over macroeconomic policy and international investment on the one hand, and defensive and negative attitudes on the part of developed countries on all these issues on the other".[39]

    Clare Short too told us that "Monterrey was very important, in that the developing world and the OECD countries agreed on what the reform agenda is to deliver to the poor of the world; that is unprecedented in human history, and very post cold war".[40] In addition—whilst conforming to the USA's demands and referring to "internationally agreed development goals" rather than to the MDGs—the Monterrey Consensus strengthened international commitment to the MDGs, and "became the first UN conference to achieve concrete and specific increases in ODA".[41] In summary, the UK Government's assessment was that, "The UN Conference on Financing for Development was a major success and potentially represents a turning point in the global fight against world poverty".[42]

  13. We warmly welcome the aid increases announced by the EU and the USA. But, the success of the summit must ultimately be assessed in terms of its contribution to meeting the MDG targets. As such, it is too early to judge the summit's success. Thus far, little has been achieved and nothing has been implemented. If the Monterrey Summit is to be seen as a turning point rather than a talking shop, the international community must implement quickly the agreements reached, and use them as a starting point for a concerted international effort to eliminate poverty.
  14. The next step is to make the forthcoming World Summit on Sustainable Development (WSSD) a success. Unfortunately, as WWF-UK made clear in its memorandum, the FfD process and the Monterrey Consensus lacked substantive links to the environmental and resource dimensions of sustainable development.[43] There is much work to do to bring the anti-poverty and pro-environment agendas together beneath the banner of sustainable development. Indeed, the failure of the Bali preparatory conference to agree on a clear agenda for Johannesburg, suggests to us that WSSD will be hard-pressed to make much progress in terms of promoting sustainable development and poverty elimination. DFID and HM Treasury wrote that: "It is now a matter of taking forward the agenda from Monterrey, at the UN and the Bretton Woods institutions, through the G7 Meetings in Halifax and G8 in Kananaskis, at the World Summit on Sustainable Development in Johannesburg and the Commonwealth Finance Ministers' Meeting in London".[44] We agree, and share with Clare Short the view that, "now, we have got to get WSSD right and then drive the world into implementation and stop having so many conferences, and, if we have conferences, let us just check on delivery, rather than have any more grand declarations".[45]
  15. We welcome the Monterrey commitment to agree on a follow up conference by 2005, and trust that this will be about checking on delivery rather than merely re-affirming old commitments. In the remainder of this report our attention shifts to mechanisms—existing and proposed—for financing development, something which is crucial if the MDG targets are to be met.

 


16   Ev 109 Back

17   Ev 78, para 1 Back

18   Ev 7 and Ev 8 Back

19   Ev 7; see also Q5 and Q13. Back

20   Q99 Back

21   Ev 78, para 1 Back

22   Ev 109 Back

23   Ev 42 Back

24   Ev 111, para 4 Back

25   Zedillo Report-see footnote 6 for web-site. Back

26   Ev 5 Back

27   Ev 110, para 1 Back

28   Ev 7 Back

29   Q12 Back

30   Ev 78, para 2 Back

31   Ev 6 Back

32   Budget Report "Red Book", 2002, p.107. Back

33   Ev 1 Back

34   Ev 8 Back

35   Ev 113, para 20, Ev 110, para 3 and Ev 111, para 4 Back

36   Ev 68 Back

37   Ev 48 Back

38   In its memorandum too, ODI described the Monterrey Consensus as reflecting "the mainstream of donor thinking on how to make development policy and development assistance effective in reducing poverty and achieving the Millennium Development Goals". However, for ODI this was a statement of fact rather than a criticism. See Ev 40. Back

39   Ev 41 Back

40   Q99 Back

41   Ev 78, para 1 Back

42   Ibid. Back

43   Ev 114. WWF is now the brand-name for organisations previously called either the World Wildlife Fund or the Worldwide Fund for Nature. Back

44   Ev 79, para 11 Back

45   Q99 Back

 
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