The Economic and Social Council conducted a series of interactive discussions on a range of issues spanning from development cooperation to debt to foreign investment as it wrapped up its four-day forum on financing for development.
Countries' debt levels were steadily increasing and reaching red flag levels, warned Mark Flanagan, Assistant Director of the International Monetary Fund (IMF), during a round-table discussion aimed at reviewing emerging debt trends and challenges, particularly in the post 2008 global financial crisis environment.
Although the world was not yet facing a full-blown debt crisis, vulnerabilities had risen in several countries, he said, adding that the number of countries facing debt distress was increasing. The Fund expected to see a peak in debt levels and then a steady decline over the next five years, he noted, although it was imperative that the right steps were taken by those countries that were at high or moderate risk to carefully look at their debt vulnerabilities, including the places where debt was mounting in the public sector.
Expressing concern about the growing debt distress that countries were facing in what had otherwise been a rather benign international context, Richard Kozul Wright, Director, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD), said a large portion of the debt that was accumulating in emerging economies was private.
The balance sheets of the major central banks around the world had risen by some $8 trillion since the global financial crisis in 2008, he said, underscoring that it was not really known what the consequences would be if those banks attempted to more aggressively adjust their balance sheets. Nevertheless, it stood to reason that countries in the developing world would suffer as a result.
New risks were developing every day, warned Kavaljit Singh, Director of Madhyam, who stressed that his biggest concern was that systemic risk issues were not getting enough attention. Many regulatory reforms were being rolled back, which could result in a race to the bottom and another financial crisis, he said, expressing concern that financial institutions were now far more integrated, both domestically and internationally, due to large scale mergers and acquisitions following the 2008 crisis.
The most pressing question was how to bring development financing to scale, said Abdoulaye Mar Dieye, Assistant Administrator and Director Bureau for Policy and Programme Support, United Nations Development Programme (UNDP), during a round-table discussion on shifts in development cooperation policies.
Leverage existing or potential funding flows; whether they be internal or external, public or private, would be the only way to increase development financing, he said, pointing out that the resource gap was huge and ODA alone could not fulfil those needs. In that context, domestic resource mobilization and the engagement of the private sector was imperative.
Around the world, a trend was emerging, whereby a large portion of aid � up to 25 per cent � was being driven by humanitarian crises, said Jorge Moreira da Silva, Director of the Development Co-operation Directorate of the Organisation for Economic Cooperation and Development (OECD).
There was a need to address aid in a more programmatic, long-term way, as well as increase the volume of official development assistance (ODA), he said, highlighting that ODA had steadily increased since 2000, despite the economic crisis in 2008 and the recent backlash against globalism.
Noting that Burkina Faso was dependent on aid for development, Alimatou Zongo-Kabore, Director of Coordination and Aid Development Effectiveness, Ministry of Economics, Finances and Development for Burkina Faso, said most sectors in the country received assistance, particularly social sectors. With the adoption of the 2030 Agenda for Sustainable Development, she said the country had begun to pursue a new vision of development and adopted a national strategy in 2016 aimed at ensuring that assistance was funnelled toward the neediest sectors.
In the afternoon, the Council held two expert discussions; the first focused on encouraging foreign investment to countries in special situations, while the second looked at trends in financing for gender equality and the empowerment of women.
In other business, the Council adopted its report on the session (document E/FFDF/2018/L.1).
The Economic and Social Council will reconvene at a date and time to be announced.
Round Table D: International Development Cooperation
The first round table of the day was chaired by Marc Pecsteen de Buytswerve (Belgium), Vice-President of the Economic and Social Council, and moderated by Elliot Harris, Assistant Secretary-General for Economic Development and Chief Economist, Department of Economic and Social Affairs. The panellists included Alimatou Zongo-Kabore, Director of Coordination and Aid Development Effectiveness, Ministry of Economics, Finances and Development, Burkina Faso; Jorge Moreira da Silva, Director, Development Co-operation Directorate, Organisation for Economic Cooperation and Development (OECD); Kilaparti Ramakrishna, Head of Strategic Planning, Green Climate Fund; Abdoulaye Mar Dieye, Assistant Administrator and Director Bureau for Policy and Programme Support, United Nations Development Programme (UNDP); Regis Marodon, Special Adviser, International Development Finance Club, Agence Francaise de Developpement; and Lotte Schou-Zibell, Chief of Finance Sector Group, Asian Development Bank.
Ms. ZONGO-KABORE said that Burkina Faso was a country that was dependent on aid for development and that most sectors were recipients of that type of assistance, particularly social sectors. With the adoption of the 2030 Agenda for Sustainable Development, the country had begun to pursue a new vision of development and had adopted a national strategy in 2016, which took those issues on board to ensure that the assistance that was received was focused on the neediest sectors. The goal was to boost the mobilization of domestic resources which would allow for better management of social needs, thus allowing the population to benefit from those services.
Mr. MOREIRA DA SILVA said that there had been a trend emerging in recent years whereby a large portion of aid � up to 25 per cent � was being driven by humanitarian crises. There was a need to address aid in a more programmatic, long-term way, as well as a need to increase the volume of official development assistance (ODA). He highlighted that ODA had steadily increased since 2000, despite the economic crisis in 2008 and the recent backlash against globalism. The international community could not keep repeating the billions to trillions narrative without proper measurement capabilities.
Mr. RAMAKRISHNA said there were several different approaches when it came to financing for climate action. Every effort must be made to ensure that the money that was available was moving in the right direction. At the One Planet Summit in France, financial institutions agreed to five principles when it came to addressing climate change. He pointed out that there were a number of such institutions that were specifically oriented towards climate action, yet the international community needed to make sure that the financing pipeline was moving in the right direction.
Mr. MAR DIEYE said that the pressing question was how to bring development financing to scale. The only way to achieve that objective was to leverage existing or potential funding flows; whether they be internal or external, public or private. The resource gap was huge and ODA alone could not fulfil those needs, he said, stressing that domestic resource mobilization and the engagement of the private sector was imperative. The goal of UNDP was to support countries in their efforts to expand their fiscal space. Public resources would not do the trick, he said, emphasizing that the bulk would come from private resources.
Ms. ZONGO-KABORE noted that the country used the 2030 Agenda and the Addis Ababa Action Agenda as frameworks for drawing up its national development strategy. Despite that comprehensive process, national resources would not be sufficient for the country's development process, so efforts were being made to look at other resources.
Mr. MAR DIEYE said that UNDP was working with 30 countries on expanding their fiscal space and addressing tax evasion. Those countries were now witnessing behavioural changes that would have far-reaching benefits.
Mr. MARODON said that one of the challenges of financing for development was the fact that there was no exclusive nature to the transfer of assistance between the countries that provided and received aid. If the objective was to achieve the Sustainable Development Goals, then all financers must ask what the impact would be in terms of sustainability.
Ms. SCHOU-ZIBELL said that the Asian Development Bank hoped to expand its lending. She pointed out that the Asia-Pacific region had made tremendous strides in terms of economic growth and poverty reduction, yet there remained lingering challenges due to global economic volatility, climate change and urbanization, among other issues. The Bank was seeking to strengthen its capacity in social support and was pursing more public-private partnerships.
Mr. MARODON noted that France President Emmanuel Macron had announced an increase in the amount of ODA the country would provide, which demonstrated that there was a will to do more. In the eyes of many, there was no competition between climate and development.
Mr. MAR DIEYE said that, when countries were moving towards middle-income status, quality was more important than quantity. He warned that, in some cases, those countries continued to operate with the same economic model, which was a troubling pitfall that should be avoided.
Mr. MOREIRA DA SILVA said that OECD was producing a set of methodologies to refer to when structural � rather than contextual � issues emerged. It was also developing strategies to help countries address the challenges created by dramatic events.
Ms. SCHOU-ZIBELL said that the Bank focused on where it could add the most value, while also bearing in mind the need for inclusiveness.
Mr. MOREIRA DA SILVA said that, while blended finance was trending, it was not the silver bullet.
Mr. MARODON said there were mainly two types of blended finance.
Mr. RAMAKRISHNA said that the Fund was not only looking at larger projects and it had simplified the approval process which brought in many new financing requests.
In the ensuing discussion, the representative of Georgia stressed the need for greater investment in guiding middle- and low-income countries in the development of their own evidenced-based national policies. The representative of Cuba said it was not a question of shift from social to economic cooperation, particularly given that there were many middle-income countries where up to 50 per cent of the population was grappling with poverty. A representative of civil society said there should not be a shift, but rather a balance between social and productive-sector investment.
Round Table E: Debt and Systemic Issues
Moderated by Marilou Uy, Director of the Intergovernmental Group of 24 on International Monetary Affairs and Development, the round table included the following panellists: Mami Mizutori, Special Representative of the Secretary General for Disaster Risk Reduction; Gillian Golah, Chief Operations Officer, Caribbean Catastrophe Risk Insurance Facility Segregated Portfolio Company; Mark Flanagan, Assistant Director, Division Chief, Debt Policy Division, Strategy Policy and Review Department, International Monetary Fund (IMF); Azeema Adam, Government of Maldives Envoy for Financing for Development and former Governor of Maldives Monetary Authority; Richard Kozul-Wright, Director, Division on Globalization and Development Strategies, United Nations Conference on Trade and Development (UNCTAD). Kavaljit Singh, Director, Madhyam, was the discussant.
Ms. MIZUTORI noted that this was the first time that the disaster risk reduction agenda was being considered at the forum. There had been much done in dealing with disasters after they had occurred, but greater efforts needed to be devoted to risk reduction to prevent and be prepared before the disaster takes place. That would require a better understanding of risk and the potential loss and damage that could occur. Her office's objective was to assist Governments in promoting and establishing national strategies that had a scientific base and understanding of risk. Capacity-building was a major part of that effort.
Ms. GOLAH said that her organization was one of the first to offer insurance policies against disaster risks, including earthquakes and hurricanes. Much had been accomplished in the last 10 years, including a better understanding of parametric insurance. Such insurance was now becoming more commonplace and was being integrated into countries' disaster risk reduction strategies. Although their work was primarily focused on the Caribbean, the portfolio could be replicated in other parts of the world.
Mr. FLANAGAN said that countries' debt levels were steadily increasing and reaching red flag levels. IMF looked at a wide range of information to calculate debt vulnerabilities. The number of countries facing debt distress was increasing, which was a worrisome trend. Vulnerabilities had risen in many countries, although the world was not yet facing a full-blow debt crisis. The Fund expected to see a peak in debt levels and then a steady decline over the next five years. It was imperative that the right steps were taken by those countries that were at high or moderate risk to carefully look at their debt vulnerabilities, including the places where it was mounting in the public sector.
Mr. KOZUL-WRIGHT expressed concern about the growing debt distress that countries were facing in what had otherwise been a rather benign international context. A large portion of the debt that was accumulating in emerging economies was private. The balance sheets of the major central banks around the world had risen by $8 trillion since the global financial crisis. It was not really known what the consequences would be if those banks attempted to more aggressively adjust their balance sheets, but it stood to reason that countries in the developing world would suffer as a result.
Ms. ADAM highlighted that there had been a rise in Maldives' debt, in part due to its numerous development needs. The country had been unable to get financing from multilateral, bilateral or traditional donors. Finding innovative instruments in the region was difficult for Maldives, because the country was not part of an island chain, such as the countries in the Caribbean.
Mr. FLANAGAN said there had been a move away from the hedging instruments that did not provide a long-term view. The area that was the ripest for development related to natural disaster triggers and those tied to commodity prices.
Mr. KOZUL-WRIGHT said the question was whether there were market-friendly solutions to the existing problems. Given the complexity of the problem, there were too many gaps to provide an adequate enabling environment.
Mr. FLANAGAN said that the financial system currently in place was encountering severe challenges, particularly in developing and low-income countries due to changes in the creditor structures.
Ms. ADAM noted that her country was seeking new ways of acquiring financing, including by looking to non-traditional creditors which had created difficulties due to the geopolitical issues of the region. The expansion of the international airport to accommodate the influx of tourists to Maldives provided a good example of the difficulties the country experienced when seeking financing from traditional creditors. After being unable to get traditional financing, the country turned to non-traditional lenders which resulted in political tension within the region and the country itself.
Ms. MIZUTORI expressed concern that countries were not moving away from the current debt cycles, which would only be exacerbated if a natural disaster was to hit. While insurance was a step in the right direction, every effort should be taken to put in place sound mitigation strategies.
Ms. GOLAH said that there had not yet been a link made between premium reductions and mitigation strategies.
Mr. SINGH noted that, during the discussion, a wide range of risks had been explored. His biggest concern was that systemic risk issues were not getting enough attention. Many regulatory reforms were being rolled back which could result in a race to the bottom and another financial crisis. New risks were developing every day. He expressed concern that financial institutions were far more integrated, both domestically and internationally, due to large scale mergers and acquisitions following the crisis. There was a lack of policy coordination on the international level.
In the ensuing discussion, the representative of the Dominican Republic said that middle-income countries were facing complex situations because of the change in their debt profiles. A member of civil societyhighlighted the importance of conducting human rights impact assessments with regard to debt, while another civil society representative said the current global debt situation looked similar to what took place in the late 1990s.
Expert Discussion: Foreign Investment to Countries in Special Situations
Chaired and moderated by Mr. Pecsteen de Buytswerve, the expert discussion included the following panellists: Kayula Siame, Permanent Secretary, Ministry of Commerce, Trade and Industry, Zambia; Kazi Aminul Islam, Executive Chairman, Bangladesh Investment Development Authority; and Muna B. Ndulo, Professor of Law, Cornell Law School. Irene Khan, Director-General, International Development Law Organization was a discussant.
Ms. SIAME said that to foster foreign investment in countries in special situations, smart investments had to be favoured. Poor infrastructure or limited capacity prevented investment in many vulnerable countries. Tools were available to promote and enable foreign direct investment (FDI). Zambia created an investment development guide to help boost investments. Industrial fairs were also helping in specific areas of the economy. Private-public dialogue platforms were essential to promote investments and showcase profits. Chambers of commerce were also key instruments, as were trade fairs and business forums.
Mr. ISLAM stated that the global community had established many initiatives to help least developed countries, such as the Almaty Programme of Action and Istanbul Programme of Action. The future contained the challenge of the Sustainable Development Goals. Bangladesh was focusing on the promotion and facilitation of investor services to help attract FDI and improve the general business climate. Reforms were under way to improve the country's economic ranking. The digitalization of investment services was one of the ongoing initiatives. Providing decent jobs to the large young population was a priority for the country's future. The Government had taken a country-wide approach to engage all the stakeholders to generate income.
Mr. NDULO said that investment, when accompanied by sound Government policies, was an essential instrument through which raised the capital necessary for economic development. But, more than 80 per cent of the recipients of investment flows and more than 90 per cent of the initiators of the outflows were located in developed States. FDI offered many advantages, including bringing capital, technology, jobs and business to local firms. The challenges of such investments were also real, including a lack of positive linkage with the local economy and potentially harmful environmental impacts. Political stability and security were the leading characteristics that concerned investors. Pursuing sounds macroeconomic policies, upgrading infrastructure, investing in education and strengthening domestic financial systems could help attract foreign investment. Governments and investors should promote, protect and respect human rights, and tax avoidance should be fought.
Ms. KHAN highlighted gaps that were preventing least developed countries from achieving the Sustainable Development Goals, including a lack of legal capacity. It was a critical ingredient to successful trade and investment. An investment support programme had been created to provide expertise on investments, negotiations, arbitrations and settlements to least developed countries. The programme was based on a private-public partnership and would pay particular attention to vulnerable populations and women.
In the ensuing discussion, Mr. ISLAM, responding to a question from the delegate from Bangladesh about the cost of reforms for least developed countries, including for political risks, said that improving the business climate was not sufficient and therefore attracting foreign investment was a collective effort. Some legal gaps existed for least developed countries and they needed to be filled in at the international level with a collaborative and concerted action.
Mr. NDULO said that the risks were recognized, but the narrative had to be changed to talk about vulnerable countries.
Expert Discussion: Gender Equality and Empowerment of Women
Chaired and moderated by Mr. Pecsteen de Buytswerve, the discussion including the following panellists: Yolanda Martinez Lopez, Secretary of Social and Human Development for the State of Oaxaca, Mexico; Shahra Razavi, Chief of Research and Data, United Nations Entity for Gender Equality and the Empowerment of Women (UN-Women); and Kathleen Lahey, Professor, Faculty of Law, Queen's University, Canada, and Director, Tax Justice Network, United Kingdom.
Ms. LAHEY said that gender equality was a crucial component to moving forward on the 2030 Agenda. Every tax system was built around the concept associated with the traditional economy of gender. Women's rights in the workplace were weak and they remained disadvantaged despite progress. Globally, women accounted for more than 70 per cent of all the unpaid work. Tax systems were built around the notion that women were meant to do unpaid work. The playing field was uneven and women were excluded from equal opportunities on the economic and political areas. The tax system resulting from that had damaged the status of women even further, especially in developing and low-income countries. Most domestic laws had not been reformed and women could not challenge the unfairness of tax structures. The pervasive use of tax unit rules, treating women as part of their husband's fiscal space, was an example of unfair practices towards women.
Ms. MARTA�NEZ LA�PEZ highlighted the poverty and inequality existing in Oaxaca, impacting women and girls very negatively. The Government had implemented many policies to promote gender equality. The gender equality secretariat was established with that goal. Financial inclusion and training were priorities for gender equality. The microcredit system was focusing on helping low-income women to create start-ups and incentivize local businesses. Further training was needed, including on renewable energy, to develop microcredit even further.
Ms. RAZAVI highlighted some of the conclusions of the UN-Women report Turning Promises into Action on gender equality across all the Sustainable Development Goals. Unequal pay and unpaid work were an issue, but there were also gender gaps on poverty, especially for women in their reproductive years. Despite a world with unprecedented wealth, that wealth was not evenly distributed and didn't create equitable or inclusive growth to achieve the Goals. In fact, the world was moving in the opposite direction in both developed and developing countries, she said. Countries should be adding revenue from domestic and external sources to reinforce essential public services for women and girls. The way countries mobilized resources was highly important with regard to gender equality. Unregulated global financial systems were creating off shore tax heavens and wealth inequality. The cost of policy inaction was too high and fell on developing countries. Illicit financial flows were robbing countries of resources could be used to implement policies for the better good.
In the ensuing discussion, a representative from civil society raised the question of the effectiveness of public policy and cash transfer in regard to gender equality. The moderator also asked about the role of cooperatives to help empower women by providing them access to work and finance.
In her response, Ms. LAHEY said that policies could promote gender equality and transform women's lives. Providing education to children was a good example.
Ms. MARTA�NEZ LA�PEZ pointed out that Oaxaca had a legal framework to work towards gender equality.
Ms. RAZAVI noted that cash transfer programmes included a lot of conditions added to unpaid work and could be penalizing for women. But, the cash transfers themselves could provide a life line for women, given they didn't come with conditionality. Under Sustainable Development Goal 5, resources should be tracked to ensure they would be spent in a gender sensitive manner.
With regard to cooperatives, groups could be useful, she said, to borrow money and share resources, equipment or land. But, it should not stop the other forms of production and wedge work, where glass ceilings needed to be broken.
The Council then adopted its report on the session (document E/FFDF/2018/L.1).
In her closing statement, MARIE CHATARDOVA� (Czechia), President of the Economic and Social Council, said that the broad-based recovery of the world economy was encouraging, although some countries continued to experience high levels of debt, which was concerning. We must capitalize on the economic upturn to address the systemic and structural changes, she said. National implementation of the Addis Ababa Action Agenda was taking place in an increasingly complex context. Countries must take full ownership of their development and all appropriate sources of finance, including public, private and blended financing must be tapped into. New technologies held tremendous opportunities, while also posing serious challenges. A renewed commitment to development cooperation remained critical, she said, adding that countries could not thrive without trade. International rules and institutions needed to place greater focus on prevention, risk reduction and crisis response.
Source: United Nations