On Monday 10 February, the DEVE Committee discussed a draft of the Study on the Financing for development post-2015.
On Monday 10 February, the Development Committee of the European Parliament (DEVE) discussed a draft of the Study on the Financing for development post-2015: improving the contribution of private finance written by a group of independent consultants.
CONCORD, represented by Jean Saldanha (chair of CONCORD’s taskforce on the subject) welcomed the Parliament’s study and highlighted the importance of getting the institution engaged in the process. CONCORD stressed the importance of aligning the process with democratic ownership, transparency and accountability standards when addressing the use of public finance to average private finance (i.e in the case of Blending mechanisms).
In addition, the importance of boosting domestic resources mobilisations was stressed and linked with the need to fulfil Official Development Assistance (ODA) level commitments to both LICs and MICs in where ODA can play a key game-changing role as highlighted at the CONCORD AidWatch 2013 Report. Furthermore, the need of aligning with development effectiveness principles was stressed.
The debate on financing development
While the post-2015 debate has taken shape in the last six months, financing discussions are a long way from being resolved. United Nations (UN) processes are yet to address financing goals and targets.
With its 2013 Communication on Financing for Development, the European Commission proposed a future financing framework for development that reinforces the linkages between public and private finance, and domestic and international resources. However, it contains no discussion of whether public resources may have a different role to play from private resources. Its promotion of the use of public resources to leverage private finance suggests that the two are interchangeable.
The Parliament study
The study seeks to contribute to these debates and on the role the EU should play.
The Parliament study provides a comprehensive overview of all financing sources, finding that Government spending is the largest domestic resource; domestic private investment is also growing; outflows of private financial resources are extremely large; figures greatly overstate the real net financial private flows to developing countries; and that the Official Development Assistance (ODA) is the largest flow to least developed countries.
Both public and private finance have a vital role to play in post-2015 efforts to end global poverty. Therefore, the study recommends the EU to make the greater contribution by recognising the different roles each of them can play, and by changing their own policies that can hinder developing countries’ efforts to increase, direct and improve development financing.
An initial step the EU –according to the study- should recognise that investment treaties have often made it difficult for developing countries to gain full benefits from Foreign Direct Investment (FDI) and have reduced their space to protect their economies from destabilising exits of capital during difficult times.
The development dimension of the EU’s policy on investment treaties must be strengthened. The EU should also take action to curb illicit capital flows and reduce tax avoidance and evasion by European companies, for example, by introducing country by country reporting and public registries of beneficial owners.
In addition, the EU should support efforts to introduce fair and transparent debt workout mechanisms, and reduce the unsustainable debt burdens in many developing countries and should show global leadership in the creation and adherence to responsible financing standards, including requiring fair terms and conditions, adequate social and environmental standards and accountability to affected peoples.
The OECD Development Assistance Committee (OECD DAC) Secretariat reaction focused on the need of expanding the development measurement framework in order to capture not only ODA but also the total official support for development to try to better record donor effort. While the development of this new measure could lead to a redefinition of ODA, the exploration of this new measure comes from the OECD DAC High Level Meeting in December 2012 as a reaction to de incoherence of the current recording methods, the need to update the definition of concessionality and of tracking innovative financial mechanisms. The aim is to have the new measure finalised and agreed by the end of 2014.
EU Commission and EU Parliament reactions
The European Commission also expressed its views on the study by highlighting the importance of building partnership between private and public finance as a key tool for aligning private finance goals to political objectives and to boost public goods and coherent polices.
The presentations were followed by an interesting debate between DEVE Members.
MEP Thijs Berman agreed with CONCORD on the democratic ownership and accountability of the innovative financing mechanism such as blending. MEP Judith Sargentini alerted of the risk of reopening the ODA definition in the current context of aid budget constrains since this could be an opportunity to align aid with security and private aims and not with poverty eradication. MEP Fiona Hall thanked the secretariat of having listed to CONCORD and putting into the agenda of the Committee the important issue of FfD and highlighted the risk of boosting the role of private sector in development since it normally just targets big companies in MICs while the real needs of poor people are many time forgotten. Finally, MEPCortes Lastra raised his worries regarding lack of transparency of the blending and its accountability governance mechanisms.
See the video of the session here.