Select Committee on International Development Minutes of Evidence

Memorandum submitted by BOND


  BOND is a network of over 250 development non-governmental organisations (NGOs) in the UK. BOND's membership reflects the huge diversity of UK civil society's response to international poverty and injustice. This submission is a collective position and cannot be taken to represent the views of any individual organisation. It should be read as a complement to the submissions made by individual BOND members.

  BOND has been co-ordinating UK NGO work around the Financing for Development Conference (FfD) and campaigning on the 0.7 per cent target for overseas development assistance. As such, BOND welcomes the Select Committee's interest in the Financing for Development Conference and aid quantity. In this submission BOND aims to assess the achievements of the Financing for Development process.


  The idea for a UN "Financing for Development" conference originated in long-term G77 pressure for a UN conference to agree on the sources and uses of the resources required to implement the commitments entered into at the UN conferences of the 1990s, and as a response to the Asian financial crisis. During the process of negotiation the focus narrowed down to discussion of the means to generate the financial resources required to achieve the Millennium Development Goals (MDGs).

  The Financing for Development (FfD) process was supposed to reach a consensus on how all sources of finance—domestic resources, foreign direct investment, trade earnings, debt relief and overseas development assistance—can best be mobilised for poverty reduction and agree a document which sets out actions to better mobilise all these financing sources and to improve global economic governance. FfD was an important opportunity for world leaders to agree a new partnership for development, in which developing countries agree to put in place the appropriate policies to achieve economic growth and poverty reduction, and developed countries undertake to support these efforts through providing the necessary market access, debt relief and aid.

  BOND members recognized the need for the constructive discussion on how to finance the Millennium Development Goals and supported the Financing for Development process. But these high hopes were disappointed, the negotiation process failed to agree an action plan and build a strong partnership between developed and developing countries to meet the MDGs.


  Negotiations for the Financing for Development conference were based on the Zedillo Report, prepared by a high level panel of experts at the request of the UN Secretary General.

  The report estimated that financing the Millennium Development Goals would cost around $50 billion extra per year until 2015 (The World Bank estimate was between $40-60 billion). Many BOND members have challenged these figures, estimating that the cost would be closer to an additional $100 billion per annum.

  The Zedillo report made some innovative suggestions for meeting this financing gap such as acknowledging and paying for global public goods (including global environmental services, the control of communicable diseases, education and others); exploring innovative sources of international finance for development (including a carbon and currency transaction taxes); workers rights in development (including the extension of pensions and unemployment insurance schemes); and reinforcing the rule of law, accountability and transparency among governments and businesses.

  Less innovative but equally important were initial calls for commitments and time frames to deliver on the MDGs: increasing ODA to 0.7 per cent of GNP; opening markets to developing countries exports; expanding debt relief; and increasing developing country leverage in international agencies.

  Whilst the final text of the Monterrey declaration reflects the existing global balance of power rather than a new consensus, the original text in the Zedillo report will remain as blueprint of how sufficient resources could have been raised to meet the Millennium Development Goals. It will show how the Financing for Development Conference was a missed opportunity. The report itself provided a catalyst for discussions, particularly on innovative sources of development finance and global public goods.

  Many commentators complain that the scale of the Financing for Development agenda - in part defined by the Zedillo report—was too broad to lead to concrete commitments. However any response to the challenge of financing the Millennium Development Goals must be multi-faceted and developing countries that are on track to meet the MDGs have had to use a combination of strategies.

  With sufficient political will it would have been possible to make significant progress on the recommendations made in the Zedillo report, but that commitment was lacking. Consensus was achieved by both ignoring some key issues of concern to middle income and developing countries and by reducing the outcome document to non-committal language and content.


  During the negotiation period, 11 September and the Argentinian financial crisis focused public attention and political rhetoric on the importance of tackling issues of poverty and financial instability, nevertheless the Zedillo proposals were increasingly watered down and the ambitions for the conference were scaled back.

  Some developed country governments became concerned that FfD might become antagonistic and unsuccessful if developing countries devoted too much energy to pressing for progress on debt relief and reform of the international financial architecture, which they would not be able to accept. The lack of progress on these key areas stemmed from the prevailing opinion of some richer countries that a United Nations Conference was not the appropriate arena for discussions on these issues. This overlooked the fact that for many developing and middle income countries their lack of influence in these institutions and the impact of WTO and Bretton Woods policies on their economies is crucial to the financing of their development strategies. The intransigence on these issues by developed states (particularly the US) limited the success of the conference early on.

  By the end of the third preparatory meeting and after the first facilitators draft was rejected it became clear that the conference was not going to agree a consensus document capable of responding to the challenges faced by developed and developing countries in financing development. Senior United Nations officials began talking of Monterrey as the beginning of a dialogue to be continued at the World Summit in Sustainable Development, thus tacitly admitting failure. Financing for Development had been intended as a forum to provide the necessary resources—it was supposed to be about delivery rather than starting a process of dialogue.


  With Chancellor Gordon Brown advocating a doubling of global aid and instituting a global "Marshall Plan" the UK appeared to be one of the more progressive voices in the Financing for Development process.

  The UK was actively involved in negotiations on the collective EU position, particularly on the importance of an enabling environment in developing countries and improved aid effectiveness. The UK Government aimed to steer debate away from areas on which they felt agreement was unlikely—reform of the international financial architecture and debt relief outside the current HIPC framework. The UK Government position was also conservative in relation to global public goods and innovative sources of development finance in comparison with some of its European counterparts. BOND members were disappointed with the lost opportunity to address these critical issues within the Financing for Development framework.

  Despite the Chancellor's public calls for increasing aid levels, at EU level UK Government representatives were unable to push for more substantial increases than those proposed by the Commission due to the constraints of the comprehensive spending review. To match strong words with action, BOND calls on the Chancellor to keep his promise on aid levels and set a timetable to meet the 0.7 per cent target.

  The DFID-Treasury Case for Aid paper aimed to persuade the US administration that aid works. BOND would welcome a broader response that concentrates not only on the importance of recipient country policy but also the quality of donor aid and delivery mechanisms. BOND members and their Southern partners have considerable experience of good (and bad) donor practice on aid on which DFID can draw.


  The EU, especially the Spanish EU presidency, have been roundly criticised for being weak as a bloc, ineffectual in alliance-building and content to hide behind the intransigence of the US. Keeping the USA on board was an overriding goal for the EU, apparently worthy of even sacrificing its own positions.

  The EU failed to act as an honest interest broker between the developed and the developing states. There was also a failure by the EU Presidency, Spain, to engage in a constructive dialogue with civil society and so profit from the wealth of experience that NGOs can provide.

  The lack of transparency in the EU coordination, the Council and Presidency, further impaired the ability for NGOs to input to the EU deliberations. The EU's credibility was also seriously damaged by the European Commission's attempts to insert its disputed re-interpretation of the WTO Ministerial agreement of Doha into the Monterrey text, against the wishes of the G77 group.

  On overseas development assistance, the EU Development Council of 8 November 2001 took the unprecedented step of giving the European Commission a mandate to "monitor the progress of, and organise a dialogue with, EU Member States on setting a timetable for meeting the 0.7 per cent GNP to aid target". Member state ODA had previously never been a subject for discussion at the European Council and Member States had previously challenged the competence of the Community in this area.

  The European Summits of Gothenburg and Laeken reinforced the EU's commitment to meeting the 0.7 per cent target. However, achieving a EU consensus on how and by when the target would be reached proved to be much more arduous than anticipated. The Director General of DG Development, Koos Richelle, visited all Member States in order to evaluate their development aid record and gauge their commitment to 0.7 per cent. He encountered significant resistance from a number of countries opposed to the idea of setting a EU-wide calendar for meeting the target. After substantial negotiations a watered down version of Commission proposals to increase EU average aid levels to 0.39 per cent of gross national income by 2006 were accepted. The EU package as a whole was weak, and the UK negotiators failed to achieve consensus on further untying at the EU level.


  The negotiations at Preparatory Committee meetings were consistently marred by the intransigence of the US negotiators, who even opposed reference to the Millennium Development Goals and the 0.7 per cent target for overseas development assistance. The US delegation worked hard to dilute virtually every proposal to no more than vague recommendations, whilst re-iterating that if developing countries committed only to peace, freedom, the rule of law and capitalism, then development would surely follow.

  The dominance of the US in international arenas is a matter of considerable concern. The UK Government's policy of constructive engagement must not compromise its commitment to poverty reduction and multilateralism.


  The involvement of the World Bank, IMF and World Trade Organisation in the Financing for Development process did not fulfil its potential. During the negotiations attempts by developing countries and NGOs to include language on reform of financial institutions and the WTO were rebutted by the EU and US. The primacy of these organisations and the weakness of the United Nations in relation to global economic governance remained unaltered during the negotiating process and in the Consensus agreement. Indeed, the Monterrey Consensus fails to recognize that the international financial institutions are ready to discuss their policies and to correct past failures.


  NGO involvement in FfD preparatory process was modest. The broad nature of the agenda was often beyond the remit of individual NGOs and coordination of efforts took place both at the UK and the EU level to maximise impact. Many heavyweight NGOs and NGO networks decided early not to invest in the FfD process assuming their views would have little chance of influencing the official proceedings; furthermore, the usual lack of resources hampered southern NGOs involvement.

  European NGOs across member states and accession countries signed up to the following demands:

    —  immediate increase in ODA and agreement on a timeframe to reach the 0.7 per cent goal;

    —  measuring of debt sustainability on the financial needs of countries to achieve the Millennium Development Goals, and widening of eligibility for debt relief;

    —  commitment to enter into the designing of a fair and transparent arbitration process for sovereign debtors;

    —  mandate to the UN to explore measures to enhance the stability of the international financial system, explicitly referring to possibilities for implementing a global tax on currency transactions;

    —  evaluation of regulatory frameworks for trade and investment against their impact on achieving the Millennium Development Goals and environmental protection;

    —  independent external evaluations of the performance of the international financial institutions;

    —  reform of the international financial institutions, starting with a participatory review process of the composition and procedures of the decision-making bodies.

  At the UK level, BOND members were involved in consultation with the UK Government delegation, however these seemed to be viewed as an opportunity to exchange information rather than influence, or input into, Government policy.


  The unilateral declarations by the European Union and the United States on increasing aid levels must be seen in the context of lack of progress on other key areas and a lack of consensus on the balance of power and responsibility within the partnership between developing and developed countries in financing development. The discussions over aid quantity and the disagreements over whether the World Bank should provide grants rather than loans exemplify how far the focus of the conference became donor driven.

  Whilst BOND members welcome the commitment of any additional resources to international development, the amounts announced remain insufficient to finance the Millennium Development Goals and are committed over a very short timescale. Stronger wording on aid levels within the outcome document was actually opposed by the US and the EU. The text of the outcome document refers only to examining "the means and timeframes" for raising aid towards "internationally agreed targets". In order to meet the MDGs by 2015 donor country government need to meet the 0.7 per cent target, agreed over 30 years ago, and make available the $50 billion, at a minimum, as outlined in the Zedillo report.

  In addition, the increases in aid must be coupled with improvements in aid quality, and ensuring that aid targets the poorest and avoids burdensome conditionalities. Andrew Natzios, the USAID director, referred repeatedly to four broad conditions—good governance, policy reforms, investment in health, education, democracy and the rule of law. The subjective manner in which these conditions could be interpreted and applied leads to concern that US aid allocation will continue to be determined by geo-political allegiances and commercial interests.


  After two years of negotiations and four preparatory conferences ("Prepcoms") the final outcome document "the Monterrey Consensus" contains no binding commitments to increased financing for development, none of the creativity and vision of the Zedillo report and no implementation timeframes. The Conference was little more than a set piece, with no substantive negotiations and little to capture the public imagination aside from the unilateral declarations from the EU and US.

  The text contained only eight commitments or formulations, which can be considered committal—words such as "affirm", "will implement", "will ensure" and "resolve". Negotiators at FfD sought to avoid a repeat of the Racism conference in Durban and the Hague Conference on Climate Change where talks reached crisis point. Thus, an outcome document was agreed one month in advance that contained everything but committed to nothing.

  As a result, the conference plenary sessions consisted of the reading of pre-prepared statements - which seemed to highlight outstanding disagreements and the superficial nature of the consensus document.

  The multi-stakeholder roundtables marked the first quadripartite exchange of views between governments, civil society, the business community, and the institutional stakeholders on global economic issues. However, the quality of the dialogue depended largely on the ability of the chair to promote active discussion rather than a reading of position statements. As the consensus document had already been finalised a month in advance of the conference, it was unclear what impact these discussions were expected to have.


  BOND members were disappointed with both the process and the outcome of the Financing for Development Conference. The final consensus document represented an abdication of responsibility by the richer countries of the world and reflected their reluctance to discuss debt relief, market access and reform of the international financial institutions. The unilateral declarations by the EU and US on increasing aid cannot disguise the failure to provide an action plan for resourcing the Millennium Development Goals and the continued donor emphasis on burdensome conditionalities which ignores developing countries call for mutual accountability.


April 2002

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