News

27 July 2015

Strengths and weaknesses of the agreement reached at the Addis Ababa Conference on Financing for Development

At the Third International Conference on Financing for Development held in Addis Ababa, Ethiopia, from 13 to 16 July, the 193 participating countries agreed on several measures to improve the way in which development is being financed. Among the points of agreement are measures aiming at improving local tax collection as well as combating tax evasion and illicit financial flows. An accord was also found on the need to provide official development assistance, particularly to the least developed countries. The Conference participants also advocate for aligning private investment with sustainable development through a proper policy environment and incentives. Several new initiatives were launched in Addis on technology, infrastructure, health, small enterprises and taxation.

An important decision for the combat against hunger is the adoption by countries of a new social compact in favour of the poor and vulnerable groups that states the need for establishing social protection systems and measures for all. This is probably the first time that a high-level international gathering recognises that economic development alone is not enough to combat hunger and poverty, and that social protection measures are indispensable for all to benefit from development, in so far as social protection measures are a way to redistribute the wealth created by economic growth while at the same time enhancing the capacity and opportunities of the poor and vulnerable to take part in economic activities.

This change of philosophy is welcome in hungerexplained.org where we have advocated for this type of approach [read].

It is also good to see that for the first time, the Rome-based food agencies, FAO, IFAD and WFP, in their jointly tabled document “Achieving Zero Hunger - The critical role of investments in social protection and agriculture”, added to their usual estimates of investment for developing agriculture, investments required in social protection with the view to end hunger, malnutrition and poverty. In doing so these agencies adopt “a new approach that combines public investment in social protection with public and private efforts to raise investment levels in productive sectors - especially in rural areas and particularly agriculture - to much higher levels than in a ‘business as usual’ scenario”. The figures add up to a “total average annual financing of US$267 billion” of which “US$151 billion will be for additional pro-poor investments in the productive sectors – US$105 billion for rural development and agriculture and US$46 billion for urban areas”. For social protection programmes, “an investment of US$116 billion per annum is needed for social protection programmes, of which US$75 billion will go to rural areas, where most of the poor live, and US$41 billion to urban areas.” Efforts to improve tax collection and combat tax evasion already mentioned earlier will have a central role in raising the resources required to finance this endeavour.

So the trend is positive, but as is often the case in this type of agreement, it has several weaknesses and under the smooth surface of the text and the declarations made by delegates, there are many aspects of the accord that show cracks in the beautiful façade:

•Official Development Assistance (ODA) despite having achieved a record level in 2014 (US$134 billion) is still far below requirements, and most OECD countries are not respecting their commitment to allocate 0.7% of their GDP to ODA. Moreover, a substantial share of what is accounted for ODA refers to military expenditure.
•No agreement on concrete modalities on how to combat international tax evasion was achieved.
•Lack of clarity about finance for climate change: it has been included in financing for development but the specific amounts and modalities involved have not been spelled out and have been left pending until the Paris Climate Change Conference later this year.
•Doubts about the expectations put in the role of the private sector - Why should the private sector change its investments to make them more pro-poor than what they have been so far? Data shows that, in the recent past, private investment has been generating growth but has also been contributing to an increase in income disparities everywhere in the world.

The declaration of the Civil Society Forum organised in Addis Ababa laments the lack of actionable deliverables. It regrets the strong opposition of OECD countries against the creation of an international tax body under the aegis of the UN that would combat tax evasion by international corporations. It also regrets the lack of considerations regarding decent work in the text dealing with private investments, the absence of any concrete reference to social protection floors “which would establish universal access to public services, granting redistribution” and the lack of reference to rights when addressing gender issues. The Civil Society Forum also reiterates the “concern on the unconditional support for Public Private Partnerships and blended financing instruments”.

As often, unfortunately, and despite some positive signs, it has to be recognised here that the Addis Ababa Conference has only produced a rather weak and incomplete agreement that leaves several key issues unresolved and does not provide a clear commitment for a plan of action convincingly designed to eradicate poverty, hunger and malnutrition and that will lead to a really sustainable development. The members of the “International Community” have, as usual, been unable to come to an actionable agreement that really goes beyond their narrow national interests in order to address global issues faced by humanity. [read] This is not very encouraging for the forthcoming Paris Climate Change Conference.

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