State of play as the global Financing for Development Conference opens on Monday

Added 13 Jul 2015
When the third conference on Financing for Development opens on Monday 13 July in Addis Ababa, Ethiopia, there will not be a pre-agreed outcome document on the table. Instead, there is an Addis Ababa Action Agenda – until last week the Addis Ababa Accord – that leaves some major issues unresolved, including whether to establish a new intergovernmental body on tax matters under the auspices of the United Nations. 

The intergovernmental tax body, which both developing countries and civil society organisations have been calling for for years, seems to be the last remaining candidate for a major concrete decision to come out of the Addis Ababa conference. And as Eurodad and others have highlighted, there are many reasons why such a tax body could benefit not only developing countries, but all governments, citizens and businesses alike.

Other known areas of disagreement include the question of the relation between the financing for development process and the post-2015 negotiations, and how to integrate the principle of common but differentiated responsibilities. 
But governments have indicated that other disagreements might also be brought back on the table during the conference. The draft outcome document, which was the product of more than six months of pre-negotiations, has not been endorsed by governments. Therefore, nothing is yet agreed and all options are still open.

One of the issues that remains controversial is the role of private finance. In the current draft outcome document, the wording on private finance does not address the need to carefully consider the use of public resources to subsidise or ‘leverage’ private finance (known as blended finance) and the promotion of public-private partnerships (PPPs). As Eurodad’s report What lies beneath? shows PPPs are, in most cases, the most expensive method of financing and are all too often a risky way to deliver development projects. Some of these projects entail providing services which are basic human rights such as clean water, basic education and healthcare. Governments should take the opportunity of the Addis Ababa Summit to commit to accounting practices that expose the true costs of PPPs and insert transparency and accountability into these deals. They should also ensure that development outcomes are at the forefront. Although developing countries have pushed to keep references to some of these issues, rich country governments managed to delete some of these references in mid-June. When the conference opens, CSOs will still be calling for governments to include safeguards and more cautious wording in relation to private finance.

As a tragic backdrop to this finance conference, Greece is still fighting for a sustainable and responsible solution to the country’s debt crisis. This serves as a hard reminder of what is at stake in Addis Ababa. The situation of Greece illustrates the consequences of not having a global debt workout mechanism for states. Greece is far from being the only country that would need it. The debt situation in many developing countries is deteriorating quickly. When looking at the draft debt chapter, it is difficult to say if the glass is half full or half empty. It addresses many relevant issues, such as country debt relief on a case-by-case basis, responsible sovereign lending and borrowing, and fair and orderly debt restructurings. But this Addis Ababa Action Agenda does not commit to any concrete actions on any of them. The vague consensus language included certainly does not reflect the urgent need to act on the areas of debt crisis management and prevention. Perhaps the current escalation of the Euro crisis might help to convince decision-makers last minute that the chance that the Addis Ababa Summit offers must not go wasted.

The conference will also be watched carefully by the many stakeholders and actors working hard to reach a new agreement on global sustainable development goals in September, as well as a new global climate treaty in Paris at the end of 2015. Addis Ababa will be the first indication of whether our governments are able to cooperate and reach ambitious decisions. If the Financing for Development conference fails, it will not only be a missed opportunity to fix the global financial system. It will also be a very bad omen for the other upcoming global summits.