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Who is going to pay for international development?
Bringing to a close our long-running blog series on financing progress, Jonathan Glennie concludes that the world does not need another list of financial problems and solutions - it needs a list of priorities. In advance of the recently announced 2015 Financing for Development conference, he suggests how we might go about agreeing on some.
The time is coming for the big ideas in targets like the sustainable development goals (SDGs) to be honed into politically feasible commitments. Addis Ababa is hosting a UN Financing for Development conference in July 2015, and the timing of the conference, before the goals are announced in September 2015, is a strong message from UN member states that if credible financial commitments are not made, the whole exercise to refresh the millennium development goals (MDGs) will be little more than words on a page.
As our blog series on development finance at ODI comes to an end, one thing is clear: the development finance agenda is broad. How should progress be paid for? What is the role of the private sector? Who should monitor sources of finance? Isn’t it now finally time for structural reform in global financial institutions, such as the World Bank. And what proportion of development should be paid for out of domestic as opposed to international resources?
With such a large number of issues all coming under the heading 'development finance', it is hard to draft declarations that are useful for overburdened decision-makers who are used to being presented with shopping lists in which all the items are considered equally important to achieving improvements.
But politics is prioritisation. Politicians and bureaucrats love a map of options to choose from, usually plumping for the path of least resistance. And anyway, there is simply not enough time or resources to do everything.
So when development finance experts arrive in Ethiopia next year, they should remember that the world does not need another list of financial problems and solutions, another meta-analysis of the situation. It needs priorities.
First, identify the most important issues. One of the main problems of the MDGs, as noted in countless analyses, was their failure to bring the major structural issues to the table. I know of no one who thinks that aid is the most important contribution that wealthier countries can make to development, but the vague terms of MDG eight allowed politicians to get away with aid promises (which in some cases they didn't keep) rather than setting a bold agenda for transformational change in global financial governance, dealing with illicit financial flows, for example, taking bold steps towards international tax reform, and introducing fairer debt work-out mechanisms.
Today it is even clearer than 15 years ago that such major structural issues need to be managed if the world is to adopt a sustainable path. Such issues could be explicitly prioritised in the UN finance for development declaration next year. Aid is not unimportant, but it is less important, and could be lower in the list.
Second, achievability. One of the most depressing conversations I can remember was with an adviser to the president of Mali. Reflecting on the way cotton subsidies abroad had all but destroyed Mali's cotton industry, its one big chance to emerge from aid dependency, I asked why they weren't campaigning harder on the issue. He replied that it was pointless – incentives in subsidising countries were too strong to overcome; better to work on things with a chance of progress.
The same analysis needs to be applied to the prioritisation of goals and commitments in development finance. Some issues remain fairly intractable (like subsidies in richer countries) but the international context for progress on other systemic issues is better than ever, as people in rich countries clamour for fairer burden-sharing in times of austerity.
The achievability test is also key to the public versus private debate. The role of the private sector, both domestic and multinational, is critical to development outcomes. But our ambitions with regard to making it a partner in the SDG process should be proportionate to a sensible analysis of achievability. Rather than focusing on getting commitments from the private sector, which follows a particular set of incentives, it may be more sensible to set out how public actions can encourage – and sometimes force – companies and banks to be as pro-development as possible.
Prioritising some issues doesn't mean forgetting others – it means allocating time and resources most appropriately after an assessment of importance and achievability, just as has happened for the SDGs.
Changes in the way development is financed could be treated as goals in themselves, with a 15-year horizon and interim monitoring mechanisms, just like the SDGs. This is the approach implied by the (in many ways visionary) report of the high-level panel on the post-2015 development agenda. These commitments will, inevitably, fall more on wealthier and more powerful countries, and could be seen as a key part of the "universality" agenda, in which all countries, not just 'developing' countries, have clear and binding targets.
Next year is a chance to write the next page of the development finance book. As well as a reaffirmation, sorely needed, of the critical importance of international public action to achieve collectively agreed objectives (of which international public finance is a part), we also need not just a wish-list but a prioritised plan of action with a specific timeframe for changes in global finance.
Thank you to the authors for their contributions to the series: Stephan Klingebiel, Jose Antonio Alonso, Alex Cobham, Gail Hurley, Inge Kaul, Francisco Sagasti, Annalisa Prizzon, Saleemul Huq, Barry Smith, Nora Lester Murad, Sarah Hénon, Randall Tift, William Langley, Pooven Moodley, Andy Wales, Aldo Caliari, John Lomøy, Francisco Perez, Salome Zuriel, Tom Fry, Gulbahor Nematova, Stephen Groff, Kishan Khoday, Alex Thier, Tony Killick, Mahmoud Mohieldin and Florian Kratke.
This blog was also published on the Guardian's global development site.