Delhi Sustainable Development Summit 2002
DSDS 2002: Plenary session 2, 10 February 2002Financing development: focussed, transparent, and pro-poor systems
Chief Natural Resources Adviser, Department for International, Development London Making Better Use of Existing Resources
Dr Pachauri, honoured guests, ladies and gentlemen thank you for this opportunity to take part in the DSDS.
The issue of financing sustainable development was one of the major debates in the preparations for, and at the United Nations Conference on Environment and Development the Rio Summit. It remains a field of debate in many fora including the Commission on Sustainable Development and at meetings of the Conferences of the Parties of many of the multilateral environment agreements. It will inevitably be one of the main issues for discussion at the World Summit on Sustainable Development (WSSD) in Johannesburg later this year.
Agenda 21 placed considerable emphasis on the importance of increased domestic investment and international development assistance to achieve the goal of sustainable development. The call was for the richer countries of the world to provide new and additional financial resources to support the efforts of developing countries not only to tackle the domestic challenge of sustainable development but also to play their part in tackling the regional and global challenges of climate change, loss of biodiversity, ozone layer depletion and the pollution of international waters. The Global Environmental Facility (GEF) was established to assist developing countries to meet the incremental costs of their commitments under the multilateral environment agreements (MEAs).
The presumption was that sustainable development would require additional public domestic investment and increased flows of development assistance. For the most part this has not happened! Is sustainable development sustainable if it costs more particularly for poor countries? Was it realistic or even responsible to allow a perception that sustainability is an incremental activity that can only be addressed through additional finance? A bolt-on option for the rich or the generous!
Priority has been for all countries to develop and implement national strategies for sustainable development and to addressing some specific environmental challenges. But sustainable development has economic, social as well as environmental dimensions. The challenge is therefore to incorporate or mainstream sustainable development concerns into all development planning, activities and the ways in which we live. There is a job and responsibility for everyone.
Since Rio there has been a series of Summits and international meetings that have focussed on a wide range of development challenges - poverty, equity, population growth, health, education, gender, urban development, food security and water. The Conferences of the Parties to the several MEAs have made slow but deliberate progress.
The processes of globalisation are here to stay, they have many dimensions and can provide a powerful engine of growth: the challenge is making globalisation work for poor people and the environment. This requires partnerships and capacity.
The UN Millennium Summit agreed a series of Millennium Development Goals (MDGs) and route map that provides a series of valuable foci for international action, including the need to integrate the principles of sustainable development into country policies and programmes and reverse the loss of environmental resources.
There is now general agreement that poverty is the greatest threat to sustainable development. It is an underlying cause of instability that can only be addressed through concerted action, democratic government, good governance and enhanced institutional competence underpinned by a more coherent approach to development assistance.
The UK believes that WSSD should focus on development issues and throw its weight behind the MDGs and in particular:
Many developing countries have, through participatory processes and in cooperation with the development agencies, developed their own Poverty Reduction Strategy Processes (PRSP). It is important these strategies and their future revisions, address the short and the longer term issues, such as environmental concerns and the ability of the natural and physical environment to provide the goods and services required to support pro-poor economic growth and social development.
WSSD is too important to get bogged down in arguments and recriminations over levels of development assistance, there is much that can be done and done better using existing resources. This will require a better targeting and use of existing investments and resources and less emphasis on incremental finance.
So how should sustainable development be financed?
There is a fundamental question of whether the financing of sustainable development is in some way different or should involve incremental finance of some kind? There is much that could be done to improve the use of existing funds. For example to removal of wasteful subsidies in developed countries could do much to improve the trade opportunities for poor countries and remove the incentives for environmentally damaging production systems in the rich countries of the north. We need to identify and use these win-win or no regrets opportunities.
Poverty Reduction Strategy Processes (PRSPs)
Many developing countries have decided to put together their own poverty reduction strategies. These involve participatory processes at national and sub-national level. The value of these PRSPs is that they take a cross-sectoral view and also provide a valuable means for improving the coordination of donor support and investment behind a single agreed national process.
However very few of the current PRSPs take account of the longer-term issues of social and environmental sustainability. However the cyclical process of their production could provide a very useful basis for building in sustainability measures. It will be important to set out how this can be achieved. There is no blue print but there is value in exchanging views on good practice and lessons learnt in our endeavours to incorporate sustainability into development processes. The UK has been working with development partners on lessons learning.
Financing for Development.
Financing for Development (FfD) is a UN initiative, that has brought together developing countries, donors, civil society, the UN family, the World Bank, the IMF and the WTO to look at all sources of financing for development: domestic resources, international private flows, trade, aid and innovative sources of finances, debt relief and system issues. The process emerged from G77 pressure for a conference to agree how the UN Conference commitments of the 1990s should be funded. The conference will be take place in Monterrey, Mexico from 18-22 March 2002.
The UK has taken a leading role in FfD since its inception in 1999. It is an opportunity for the international community to make progress on mobilising the resources required for poverty reduction and sustainable development for all, by mobilising the resources required to meet the MDGs.
Key UK objectives for FfD are:
The main elements are:
Mobilising domestic resources
The domestic enabling environment for poverty reduction, including the rule of law, preventing and resolving conflict, fighting corruption, respect for human rights, good economic and fiscal governance, democratic government and evidence-based policies are essential for sustainable development. Domestic action and deployment of financial resources will always be the most important ingredient for stimulating pro-poor growth and improving the management of environmental assets. Without this national level commitment and action there is very little that external resources can achieve.
WSSD should recognise the vital importance of domestic commitment and action for achieving sustainable development
Mobilising international private resources
We need a consensus the measures needed to increase the volume of international private flows and how to spread them more widely, particularly in sub-Saharan Africa. This will involve:
It is very important that private sector representatives are engaged in FfD, through the UN-organise business hearings and through bilateral and regional contacts. Their engagement in WSSD is essential; it will provide an opportunity to build on the work of FfD.
Globalisation and International trade
Trade and the processes of globalisation offer powerful opportunities for development, if they can be tempered to bring benefits to developing countries and for poor people. This was the subject of a UK Government White Paper Making Globalisation Work for Poor People- published in 2001.
The appropriate forum for discussions and decisions on trade issues is the WTO Doha process. However the Monterrey meeting and WSSD can add value through a strong call for the new Trade Round to deliver benefits for developing countries. It is important that developing countries put in place adequate domestic regulatory frameworks so that countries can make use of the opportunities for trade and investment based growth in ways that are consistent with the goal of sustainable development. It will be important for the international community to provide trade-related capacity building: the European Union is developing a specific proposal on this. Greater access to developed country markets is an issue of great importance to many middle- income countries and those whose principle source of export earnings is based on primary commodities and natural resources. The current distortions in international trade as a product of subsidies in developed countries are unfair and unacceptable and must be reformed as soon as possible.
Development assistance has an important and catalytic role to play, and UK is pressing hard to secure greater aid flows and enhanced aid effectiveness. We have started to reverse the decline in our own aid volume (0.32%) and will continue to press for further increases. Our Chancellor of the Exchequer has called for significant increases in aid, in line with the Zedillo Panels calculations that an additional $50billion per year is needed to meet the MDGs. The EU is exploring the scope for a concrete initiative on aid volume.
It is clear for the success of FfD and WSSD that there should be some upward movement on oda volume. A failure to move on aid volume risks the collapse of the trust and partnership that are vital to achieving sustainable development and the difficult issues raised by events on September 11th 2001.
The UK hopes that FfD will promote measures to maximise aids impact on poverty reduction through calling for increased aid untying; increased targeting of aid on high poverty, good policy countries; increased harmonisation of donor procedures in support of country-owned poverty reduction strategies, and greater use of budgetary support, in preference to project-based assistance.
Global Public Goods
Global Public Goods have an important role to play in sustainable development. FfD will start to address the funding of goods that have global ownership and benefits eg the global environment and health issues, such as genetic resources and control of malaria and HIV/AIDS. Discussion on how to approach the funding of global public goods is still in its infancy. It is unlikely that FfD will come up with the answer but WSSD should build on the work of FfD and build a better understanding of what they are and how the international community should address their funding.
A continuing supply of new environmentally sound technology will be essential. Many of these will fall into the category of global public goods. The centres of the Consultative Group on International Agricultural Research (CGIAR) have a key role to play.
Innovative Sources of Finance
There have been several proposals on how to generate additional funds through innovative means. These include a Tobin Tax on financial flows, carbon and pollution taxes and an arms trade tax. The European Commission and the UN Secretary General have commissioned separate studies on the merits of these ideas, which should be available for WSSD. It will be important to debate the findings of these reviews.
The new funding mechanisms agreed within the Kyoto Protocol of the Climate Change agreement should when it enters into force - increase the follows of resources in support of sustainable development and actions aimed at reducing the emissions of green house gases.
The focus of debt reduction is on the needs of the heavily indebted poor countries - HIPC. The UK is committed fully to the implementation of HIPC 2. It is unlikely that there will be any further debt initiatives at this stage.
The UK is keen to enhance the voice of developing countries in the international architecture and where possible to identify practical measures to do so - such as building their capacity to negotiate and engage generally in international negotiations - such as the WTO Doha process, FfD and WSSD.
Global Environmental Facility meeting the incremental costs
The GEF has demonstrated its worth. It has shown the value and effectiveness of having a single funding mechanism to help developing countries meet their obligations under the MEAs.
The GEF has been given increased responsibilities for combating desertification, persistent organic pollutants, and to help countries build the capacity they need to meet their commitments under the Cartagen Protocol.
To meet these increased demands a number of executing agencies have been appointed to assist the three implementing agencies and management systems are being streamlined.
The third GEF replenishment is now under discussion. It is the view of the UK that the increased scope and the need for urgent action justifies a 50 percent increase in its next replenishment from $2000m to $3000m. In the year of WSSD it would send a strong signal of commitment if we can agree of this higher level of replenishment.
Consensus and coherence
The challenges of reducing poverty and improving environmental management are huge. They are unlikely to be achieved though countries, private sector, civil society and donors working on their own and bilaterally.
This points towards the need for donors to work in partnerships and more coherently. Development is about better outcomes for poor people, not a series of bilateral inputs. The PRSP process provides a valuable means of improving donor cohesion and impact.
Sustainable development is not solely responsibility of governments and donors: business, communities, civil society and individuals all have essential roles to play. It is about values, culture and the way we live, not solely about finance and technology. It is too easy to blame a lack of progress on the shortage of finance. We cannot afford to wait. There will never be enough funding to cover everything as an incremental cost. There is much that can and should be done to spend existing finance better. However there is little prospect of achieving sustainable development if we do not take urgent action to reduce and eradicate poverty.