62nd Session of the General Assembly - High Level Dialogue for Financing for Development - Statement by H.E. Mr. Carlos Manuel Costa Pina, Secretary of State for Treasury and Finance on behalf of the European Union, New York, October, 23, 2007
62nd Session of the General Assembly
High Level Dialogue for Financing for Development
Statement by H.E. Mr. Carlos Manuel Costa Pina
Secretary of State for Treasury and Finance
on behalf of the European Union
New York, October, 23, 2007
Mr. Secretary General,
Mr. President of the General Assembly,
Ladies and Gentlemen,
I have the honour to speak on behalf of the European Union.
The Candidate Countries Turkey, Croatia* and the Former Yugoslav Republic of Macedonia*, the Countries of the Stabilisation and Association Process and potential candidates Albania, Bosnia and Herzegovina, Montenegro, Serbia, as well as Ukraine, Armenia and Georgia align themselves with this declaration.
It is an honour for the European Union to participate in this High Level Dialogue of the General Assembly on Financing for Development. This year and next are particularly important in the follow-up to the implementation of the Monterrey Consensus as we are on the road to Doha in 2008 for the follow-up international conference on financing for development to review the Implementation of the Monterrey Consensus.
We find ourselves here today engaged in the intergovernmental discussions on the implementation of the Consensus. Just around the proverbial corner we will have the Special High Level Meeting of the Economic and Social Council with the Bretton Woods Institutions, World Trade Organization and UNCTAD and we, as governments, will be active in many other important meetings and conferences over the next year that will be important inputs to our discussions in Doha. The international agenda is replete with opportunities to discuss the financing for development agenda, proving, once again, the importance of the outcome of the Monterrey Conference.
As we have stated on numerous occasions already, the international community finds itself at the midpoint on the road to achieving the Millennium Development Goals by 2015. Although the pace of overall progress toward the MDGs has been positive, we are, however, faced with a mixed record in the achievement of many these important development benchmarks. This reality should strengthen our commitment and resolve to support the achievement of the MDGs. We see the significant regional progress in the achievement of the MDGs in Latin America, China and India. On the other hand, we have to note that progress toward the MDGs in Africa is still uneven and slow, and therefore the European Union welcomes the initiative of the Secretary General of the Millennium Development Goals Africa Steering Group that will try and accelerate the implementation of existing commitments. Including in Africa, fragile states face particular challenges in today’s globalized economy and in their efforts to reach the MDGs. In this context, we highlight the importance of addressing the special needs of fragile states, in particular their common situation of often being “donor orphans”. Challenges in these countries may often be bigger, but the rewards in helping fragile states toward a path of sustainable development are also very large. It is our collective responsibility to make all efforts to achieve the MDGs in all regions as these goals can only be reached with the commitment of all actors – donors and recipients.
Although global growth rates will moderate in 2007, after a period of several years of robust growth, it is expected that those countries with high rates of growth over the last years, including those in Africa, will continue to benefit from favourable trends that can positively impact sustainable development. Notwithstanding recent successes in this regard such as reductions in the number of conflicts worldwide, expanded political liberalization and substantial improvements in governance, we note with regret that this success has not always been translated into significant achievements in attaining the MDGs. More needs to be done to ensure that growth becomes pro-poor, equitable and inclusive.
The Monterrey Consensus reflects a broad-based development approach that includes sound macroeconomic policies aimed at sustaining high rates of economic growth, full employment, poverty eradication, price stability and sustainable fiscal and external balances. These commitments integrate social concerns in economic policies in order to extend the benefits of growth to all, in particular to the poorest. In this context, the European Union considers the Monterrey Consensus as the foundation for the global partnership in which the international community at large should work within to achieve the MDGs and the internationally agreed development goals (IADGs).
Indeed, it is only through a truly collaborative spirit of partnership that the goals and objectives of the Consensus can be achieved, and thereby support our broadest development objectives. This collaboration is not limited to the more traditional actors in development financing, donors and recipients, but includes, by definition, all actors that have the potential to leverage development financing including non-traditional donors, the international and domestic private sector, Non-governmental Organizations and Foundations. This discussion should also not be limited to the more traditional aid modalities and scope, touching also upon Global Public Goods. This “Spirit of Monterrey” must be kept alive and well.
The EU reiterates its commitment to the implementation of the Monterrey Consensus. As part of the European Union’s actions to implement the Monterrey Consensus, in 2002 we adopted a timetable for our member States to achieve 0,7% of Gross National Income for Official Development Assistance by 2015 with an intermediate collective target of 0,39% of GNI by 2006, which we are pleased to say the EU has since surpassed, and also committed ourselves to improve its quality and effectiveness. Before the 2005 World Summit the EU also set a new intermediate collective target of 0,56% of GNI for ODA by 2010. The EU has established a monitoring and reporting system on the implementation of these commitments. The EU has also set new and ambitious targets for ODA for Africa. These significant efforts have led to the Union currently providing 57% of global ODA.
The European Union's commitment to Africa is long running. Two years after the adoption of the EU Strategy for Africa the EU and Africa will redefine their partnership in light of the profound transformations they experienced over the last few years. The Joint Strategy, to be adopted during the second EU-Africa Summit in Lisbon in December, will outline a long term shared vision of the future of EU-Africa relations in a globalized world.
As agreed in Monterrey, Mexico, and reaffirmed in the World Summit Outcome, every country has the primary responsibility for its own development and the role of good governance, sound policies and national development strategies cannot be overemphasized in the achievement of sustainable development. It is particularly relevant that these plans aim towards the achievement of the MDGs. The mobilization of domestic resources is a key contribution to the global partnership for development. The effective and sustainable domestic resource mobilization in developing countries, especially through the strengthening of the national tax base and the effective use of national resources, are essential and most effective within a framework of democratic governance, sound macroeconomic policies, transparency and accountability. Gender equality is particularly relevant when attempting to make effective use of national resources. It is inefficient, when women in many developing countries face numerous constraints to their full and effective participation in productive activities in the formal sector. Women’s economic empowerment should therefore be strengthened.
While recognizing that external vulnerability is one of the key challenges for developing countries, mobilising domestic savings and productive investment are ways to minimise the impact of economic downturns, as no country should rely excessively on foreign capital. As we have all witnessed, financial crises induced by balance of payments imbalances and weak economic infrastructures and financial systems can have devastating effects on countries productive sectors and sustainable development.
ODA is an important complement to domestic resources and other sources of financing for development and can also catalyse and leverage private resources from domestic and international sources. Although increasing aid volume is an important factor for financing for development, increasing the quality of aid is central to “making the money work”. The Paris Declaration sets out clear commitments for both donor and recipient partners in terms of national ownership, donor coordination and harmonization, alignment, results and mutual accountability, all in the context of monitorable targets which will be reviewed at the High-level Forum on Aid Effectiveness taking place next year in Accra, Ghana. This Forum will be an important input to the upcoming Doha conference.
Further efforts by the EU in relation to increasing the efficacy of development assistance includes the recently approved EU Code of Conduct for Development Cooperation that seeks to increase complementarity and division of labour in development policy. The EU intends to implement it immediately in all partner countries, including, in particular, in fragile states. The EU hopes to contribute with this new instrument to a better synchronisation between the programming calendars and national planning and budget cycles of partners’ countries.
The increasingly relevant role that some developing countries are having in shaping the world economy and their growing role as development partners, providing both financial and technical assistance, is a positive sign that must be encouraged. These important efforts should also be seen within a framework that ensures compliance with the principles of the Paris Declaration.
In regard to developing innovative sources of financing, the value of which was recognized at the 2005 World Summit, various initiatives have been proposed and some are being implemented, with some EU member states continuing to play a leading role. These types of initiatives are implemented with a view to mobilize predictable and increased stable sources of financing. The EU welcomes innovative sources of financing introduced and supported on a voluntary basis by some member states, especially those health initiatives already on the way. One is the air-ticket solidarity levy which finances sustainable access to affordable drugs to fight AIDS, TB and malaria through UNITAID which is now supported by almost 30 countries. Another is the International Finance Facility for Immunisation (IFFIM) which provides substantial support through GAVI for vaccination and immunisation of children. The third is the Advanced Market Commitments (AMC’s) initiative created to accelerate research for new and effective vaccines which will benefit the poorest countries. Innovative financing mechanisms and solutions should also be further explored to finance environmental activities, particularly climate change related activities in developing countries, including those related to the carbon market. Initiatives for innovative financing, and other providers of financial and technical assistance, should also be seen in accordance with the principles of aid effectiveness.
Foreign direct investment is an important complement to domestic investments. In order to ensure continued and strengthened flows of sustainable foreign direct investment, efforts need to be continued to achieve transparent, stable and predictable investment climates. Public investments in basic infrastructure, the development of human capital and of institutional capacity are all relevant for sustained economic growth. The EU also welcomes public-private partnerships and other mechanisms that promote foreign direct investment, and in this regard, encourages good corporate governance and citizenship. We underscore the need to increase private financial flows in a stable manner. It is important to promote measures in source and destination countries to improve transparency and the information about financial flows to developing countries, particularly countries in Africa and the least developed countries.
The EU supports initiatives that increase the role and impact that the private sector can have as an engine for achieving the MDGs. In this regard, the good work being done by The Global Compact and the United Nations Foundation for International Partnerships should be continued to be supported.
The EU emphasizes the need for broad participation of all stakeholders in countries' development and encourages all parts of society to take part: civil society, including economic and social partners such as trade unions, employers’ organisations and the private sector, NGOs and other non-state actors. Partnerships based on participation by the public and the private sector and civil society are important to increase the ownership of development plans and objectives.
The EU would like to take this opportunity to reiterate that it remains fully committed to the Doha Development Round. Despite dire forecasts, the round has made more progress than people may realize, but more work has to be done to find common ground. The success of this round depends on a balanced outcome, and success will result in a reinforced openness and multilateralism that offers insurance for prolonging the sustained economic growth of recent years that has benefit namely emerging and developing countries against protectionism and recession.
Aid for Trade is critical to support the integration of developing countries, in particular LDCs, into the world trading system and to use trade more effectively to reduce poverty. The EU has recently approved its Aid for Trade strategy. This strategy will ensure the quality of Aid for Trade and that our pledges are duly implemented and maintained over time. In this context, the EU strives to increase its collective expenditures on Trade-Related Assistance to Euro 2 billion per year from 2010.
The European Union has also been a frontrunner in putting in place the Enhanced Integrated Framework for Trade Related Assistance for least developed countries (LDCs). EU countries and the Commission have pledged the majority of the funding for the multilateral trust fund. The EU was also the first major developed market to provide duty-free quota-free access to LDCs under its unilateral Generalised System of Preferences, via the policy known as “Everything But Arms”.
Since 2005, EU member states have provided large amounts of debt relief, and more will be provided in accordance with our commitments with a view to freeing up domestic resources to finance development priorities with a view to achieving the MDGs. Last year we witnessed important progress in deepening debt relief to the poorest countries through the implementation of the Multilateral Debt Relief Initiative (MDRI) by the African Development Fund, IDA and IMF. The EU welcomes the debt relief initiative provided by the Inter-American Development Bank in 2006. The overall cost of these debt relief decisions for the four financial creditors, IDA, IMF, African Development Bank and Inter-American Development Bank is estimated at US$47.9 billion in nominal terms, which is additional to HIPC Initiative debt relief. MDRI assistance already delivered to post completion-point HIPCs is estimated at US$37,6 billion in nominal terms. Indeed, the external debt position low income countries has improved in the last few years, including because of international efforts such as the HIPC Initiative and the MDRI. This progress should be recognized.
The ongoing HIPC initiative can be qualified as a success. Nominal debt service relief under HIPC to the 29 countries that have reached their decision points has been estimated to amount to about US$62 billion. Nominal debt service relief under HIPC to the 20 completion point countries has been estimated to amount to US$44 billion. This represents a significant effort by donors and shows, in particular, European commitment towards debt relief to the poorest countries. This has in exchange lead to some increases in public expenditure for poverty reduction in HIPC countries. We strongly urge all creditor countries to provide their full share of debt relief to HIPC countries.
We reiterate our commitment to fully compensate IDA for the costs of grants and of the HIPC Initiative. We also reiterate our commitment to fully compensate IDA for the MDRI using IDA14 as a baseline. We urge all donors, which have not yet done so, to fully meet their commitments regarding the financing of the MDRI.
Debt sustainability, also after HIPC and MDRI debt relief, remains a challenge for low income countries. A certain number of post-completion point HIPCs show a moderate or even high risk of debt distress. Both creditors as well as debtor countries have a responsibility in ensuring long term debt sustainability. The Debt Sustainability Framework of the World Bank and the IMF provides important guidance in this regard. As the primary responsibility for maintaining debt sustainability rests with the borrowing country, we encourage each country to develop a comprehensive debt management strategy. In addition, we urge all creditor countries to take debt sustainability aspects into consideration in their lending policies. Agreeing on common principles for responsible lending and increasing the availability of information on lending and its terms remain important tasks.
The EU welcomes the consultations undertaken by the IMF to address global imbalances, in a manner that sustains economic growth and the policies necessary to reduce the imbalances. This can be done through exchange rate policies and domestic economic policies in a way that fosters domestic stability because unstable domestic conditions can cause severe disturbances to external stability.
The EU continues to support the efforts underway in governance reform at the World Bank and IMF including giving developing countries a stronger voice in decision-making. We believe the two main goals are to ensure that the distribution of quotas adequately reflects the member countries economic weight and role in the global economy and financial system and their ability to contribute financially, as well as strengthening the voice of low income countries in the IMF and the World Bank inter alia through a substantial increase of basic votes. The EU remains committed to ensuring the effective participation of developing countries and economies in transition in the International Financial Institutions. We recognize that governance reforms are essential to the continued effectiveness and credibility of those institutions and are essential to foster dialogue and cooperation among countries.
Looking forward to Doha, the European Union supports a Ministerial-level conference that follows the Monterrey format in terms of organization and participation of stakeholders. The EU could also support a Ministerial declaration-style outcome document that would be short and political in nature that could focus on the reaffirmation of the Monterrey Consensus and on how to promote its further implementation. Emerging issues will also be integral to this discussion, and the EU looks forward to identify key issues that have arisen from the changing landscape in development cooperation since the adoption of the Monterrey Consensus.
In conclusion, the EU would like to recall that we stand in a decisive moment looking forward to the Doha conference in 2008 bearing in mind our commitments to reach the MDGs by 2015. Several initiatives and partnerships have been launched to speed up the progression towards the MDGs and the IADGs. Let us take the advantage of the momentum and ramp up our efforts in the true spirit of partnership enshrined in the Monterrey Consensus to overcome our common obstacles and reach our common goals.
Thank you for your attention
* Croatia and the Former Yugoslav Republic of Macedonia continue to be part of the Stabilisation and Association Process