Blog: Financing Post-2015: Lowdown on the UN Expert Committee’s Report

This article was originally published by Righting Finance

The UN’s Inter-governmental Committee of Experts on Sustainable Development Financing (it is a bit of a mouthful, I know) met for the last time this month to put the final touches to their much anticipated report on how the world should finance the post-2015 Sustainable Development Goals – or SDGs.

So what have they come up with? Does it offer a sensible strategy for financing the new international development vision? Will the report be the game-changer many civil society organizations want to see? And how far will it support human rights realization for all?

The Committee had a mammoth task for sure. The range of issues they have had to cover is massive: from assessing how much cash is needed to finance sustainable development (a minefield in itself); to thinking about where the cash could come from (domestic and international, public and private sources); where these funds should be directed (what do you think the priority countries and issues should be?); to the role of the ‘enabling’ environment (i.e. governments’ domestic policies on trade and tax etc. which impact other countries). Where to start?!

The approach the report takes is to draw up a ‘menu of options’ for the financing of sustainable development. The argument is that this allows policymakers in different countries to make choices as to what policies and financial instruments are most suited to their specific circumstances. That makes perfect sense, of course: the strategy that will be best for a climate vulnerable small island such as the Maldives for instance will not necessarily be the same for a larger resource-rich country such as Kazakhstan. On the other hand, it could also lead governments to ‘cherry-pick’ among the ideas presented, and to leave the more difficult issues (and potentially those with the biggest impact) to one side.

Some of the ideas put forward in the report could undoubtedly help to support fuller human rights realization in the post-2015 era.

For example, the report suggests that more attention should be paid to progressive and equitable tax policies and governments may wish to prioritize those at the bottom of the income distribution. Governments should also aim for universal provision of social services with a particular eye on the most marginalized in society. Governments could consider policies to strengthen “social protection floors” which can – in most cases – be funded exclusively through domestic resources. In some cases, however international assistance may be warranted to help the poorest countries. Insurance services and products offer further opportunities to create a social safety net for households, but the report stresses that these are usually not effective in covering those most in need so government policies remain crucial.

Emphasis is also placed on the importance of financial inclusion, and in particular expanding the scope and scale of financial services offered to the poor and other underserved populations. Governments could consider support for the development of credit bureaus and promote strengthened financial literacy and better consumer protection. Lending to SMEs (small and medium-sized enterprises) is also mentioned as important.

On Official Development Assistance (ODA), the need for more of it is emphasized and the report suggests it should focus on the countries where the needs are greatest and the capacity to raise resources is weakest, such as the LDCs and SIDS. Larger shares of ODA should also be oriented towards capacity-building of revenue and customs administrations. Fine in theory, but it is also likely that larger shares of ODA in the future will be allocated to the financing of Global Public Goods (GPGs). If this is the case, it will be larger middle-income countries which will benefit, not the poorest or smallest countries. This tension is not touched on in the report.

There are sensible suggestions around the need to strengthen international tax cooperation – an issue which has recently been high on the political agenda – in order to stem tax avoidance and tax evasion. It highlights, in particular, the problems posed by harmful tax competition and suggests these challenges can be resolved, at least in part, through better cooperation between competing countries in regional and international fora. The concern remains however as to how to ensure that the poorest countries are able to benefit from progress in areas such as the automatic exchange of tax information between countries.

Governments could also make voluntary principles mandatory. Policymakers could create regulatory frameworks to enforce mandatory reporting on environmental and social impacts. Corporations that already embrace labor, environmental, anti-corruption and human rights values may serve as a model for others says the report. There are also suggestions that policymakers could levy taxes on ‘global bads’ (e.g. taxes on air or water pollution as well as other activities that degrade the environment).

The pros and cons of so-called ‘blended finance’ is also discussed (i.e. finance that pools public and private resources). Policymakers have shown considerable interest in this class of financial instruments as they can allow governments to leverage official funds with private capital, as well as share risks and returns. But the report also cautions against poorly-designed PPPs (Public-Private Partnerships) and points to a high failure rate. There was little consensus within the committee as to how far these represented real options for many countries and the importance of ensuring a ‘fair return’ to citizens was emphasized.

The need to ‘rationalize’ a fragmented international architecture for development finance – which has seen an explosion in sometimes uncoordinated, but undercapitalized, international funds and bodies – is also mentioned. Measures to strengthen the stability of the international financial system are also mentioned as important and the report recognizes that excessive financial sector growth can cause inequality and instability. But it does not delve into issues such as speculation on commodities – and in particular food and fuel – which have had such a devastating impact on some of the world’s poorest people recently, and on their ability to access their human right to food.

On debt, the need to improve mechanisms to restructure unsustainable sovereign debt is also in there and it encourages the international community to continue ongoing discussions over how to prevent and resolve debt crises quickly and fairly.

There is much more ‘meat’ in there for sure. I have just scratched the surface with this rough summary. Positively, the report recognizes that all forms of finance are important, have distinct characteristics and play distinct roles. They are therefore complementary and should not be seen as substitutes.

But as is also probably clear, there are few specifics and no commitments. The report simply describes policies and actions which could make a difference to sustainable development and human rights realization – if implemented. And of course, that is the crucial point. Will these important suggestions be implemented? And looking forward, what will happen next with all this valuable work?

Next year, in July, the UN will host another international conference on financing for development in Addis Ababa, Ethiopia. This report will be an important contribution to discussions there. The expectation is that this event will offer the international community an opportunity to discuss how concretely they plan to implement – and finance – the SDGs. Many countries are also likely to want to see some financial commitments put on the table.

It will be important for all stakeholders to have their voice heard at this event to ensure a post-2015 financing strategy that is underpinned by core human rights principles and values.

Read the full report here

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