Summary: February 12, 2001: Preparatory Committee for the International Intergovernmental High-level Event on Financing for Development. Statement by Ambassador Ruth Jacoby, Head of Delegation of Sweden on behalf of the European Union (New York)
Mr Chairman,
We have the honour to speak on behalf of the European Union. The Central and Eastern European countries associated with the European Union Bulgaria, Estonia, Hungary, Latvia, Lithuania, Poland, the Czech Republic, Romania, Slovakia and Slovenia, the other associated countries Cyprus, Malta, Turkey, as well as the EFTA member of the EEA Iceland, align themselves with this statement.
Mr Chairman,
At the Millennium Summit the Heads of State and Government expressed their individual and collective responsibility to uphold the principles of human dignity, equality and equity. To ensure that globalisation becomes a positive force for all the world's people was identified as a central challenge. No effort should be spared to free our fellow men, women and children from the abject and dehumanising conditions of extreme poverty. For this reason, the European Union is firmly committed to the
attainment of the international development targets. Poverty eradication through sustainable growth and economic and social development of benefit to all must be the overarching goal in all development efforts. The landmark UN conferences of the past decade have provided the normative framework. The Millennium Summit has demonstrated political will and commitment. Now financial resources - both private and public - must be mobilised and channelled towards this purpose, and used
effectively.
The EU believes that the Financing for Development (FfD) process offers a unique opportunity to this end. We must seek agreement on a better mobilisation and effective use of resources and find ways for more efficient co-operation between all development actors, national and international, private or as part of civil society, in order to implement the measures necessary to reach the internationally agreed development targets. The FfD process is also an opportunity to discuss how the impact of
various sources of financing can be maximised by strengthening complementarity. The special needs of Africa and of the poorest countries must be given particular attention. In this context the EU would like to stress the importance of making fullest use of the synergies between the FfD process and the upcoming third Conference on LDCs, as well as other related processes such as the Rio+10.
The EU is a major and committed development partner and has an important stake in the FfD process. The EU provides more than half of all official development assistance to developing countries as well as to the economies in transition, we are major contributors to HIPC, the main trading partners for many regions and a large part of international private flows and investments emanate from our countries.
The EU welcomes the Report of the Secretary General to the Preparatory Committee for the High-Level International Intergovernmental Event on Financing for Development, and commends the work of all the institutions that have contributed to its preparation. Together with the reports from the five regional preparatory meetings, the consultations with civil society and the private sector, the Report provides a most useful and challenging basis for our deliberations. The EU hopes that the
intergovernmental discussions in due course will lead to agreements on recommendations that will have a real impact, and we look forward to the continued participation and the constructive input of all actors concerned throughout the process.
Mr Chairman,
Turning now to each of the agenda points which we shall be discussing in greater depth during this Prep Com, the EU, as a first comment, would like to emphasise the importance we attach to keeping a balance between the different agenda items and to recall the many inter-linkages between them.
First and foremost, the importance of a favourable and constructive domestic environment cannot be overemphasised. Domestic resources are and will always remain the primary source for financing development. When discussing the characteristics of a favourable enabling environment, let us be very clear - and this is an example of one of the important linkages just mentioned - it is the same favourable environment that is needed to effectively mobilise domestic resources as is needed to attract
international private flows, foreign direct investment as well as to ensure the most effective possible use of ODA. This enabling environment is based, in particular, on:
- a sound macroeconomic framework including incentives for increased savings, the development of open trade policies, strengthening and reform of the financial sector including regulation, supervision and increased access for the poor, in particular women, to financial services, e.g., microcredits; and
- good governance which according to art 9 of the Cotonou agreement signed by all the 77 ACP countries and the EU implies a political and institutional environment that upholds human rights, democratic principles, the rule of law, and the transparent and accountable management of human, natural, economic and financial resources. This also implies the strengthening of civil society.
Domestic resource mobilisation is fundamental for economic growth. Countries should strive for pro-poor growth, which involves policies and programmes to create opportunities for the poorest, especially women, develop fair and sound labour standards, and ensure a more equitable distribution of income and social equity and an environmentally sustainable development which safeguards scarce natural resources to the benefit of future generations. It is also of utmost importance that the small and
medium-sized enterprises can have access to financial resources to be able to increase growth at the local level. In addition, the EU considers that broader thinking on financial instruments for poor people is necessary, especially in order to improve access to these for women. Expanded and improved microfinance facilities are only one of many solutions.
Conflict is of course the greatest threat to a positive enabling environment, since, in addition to causing suffering and jeopardising human security, it actually implies the destruction of resources available for growth and development. Conflict prevention and resolution must therefore always be a top priority. The burden of the spread of communicable diseases, particularly HIV/AIDS, must also be tackled with urgency. Another main task for any government must be to effectively combat
corruption, since corruption undermines the necessary financial and political confidence and has so many detrimental effects for growth and development.
International private flows including FDI, have a critical role to play. In addition to bringing capital to a country, FDI is normally beneficial for development by promoting transfer of knowledge and technology, increasing competition and creating employment opportunities. The FfD process should focus on how more developing countries as well as transition economies can attract and stimulate FDI and mobilise other private resources. In relation to their economies, substantial flows already
reach some of the least developed countries. The FfD process should analyse the factors triggering these flows as well as obstacles preventing them from reaching other developing countries, especially conflict.
The EU is ready to take measures to stimulate the flow of FDI to developing countries. More innovative forms of multilateral and bilateral investment (and export credit) guarantees could be developed, better information to the private sector and in particular to transnational companies on investment opportunities in poorer countries should be provided. Further analysis should also be made on how the development impact of investments can be enhanced and be discussed with the private sector.
There is a need to ensure that investments and lending contribute specifically to pro-poor development and social progress, including rights in the workplace.
Trade is a dynamic engine for sustainable growth and development at the national, regional and international level and is thus key to poverty reduction. The international community must recognise that an open, transparent and stable multilateral trading system and increased trade liberalisation, including enhanced market access opportunities for developing countries, by both developed and developing countries, are crucial for the integration of developing countries into the global economy, as
is regional and sub-regional co-operation and integration. All these elements also contribute to increased global trade and economic growth. The elimination of trade barriers between developing countries is essential not least for achieving increased regional integration. Other factors than improved market access also need to be considered: supply and competitive constraints, the ability of the developing countries to benefit from the opening up of the market, enhanced cooperation in
trade-linked areas, technology transfers, access to information and to world networks, investment promotion strategies and private sector development.
Efforts must be reinforced towards making trade more conducive to poverty reduction. To this end, trade issues must become an integral part of developing partners' national development strategies such as the poverty reduction strategies. Expanding trade also requires enhancing productive capacity, i.a., through the creation of adequate domestic policy frameworks and supported by effective technical assistance. Evidently, the adjustment costs of trade reform, liberalisation and its implications
on government revenue must be recognised and addressed. The need for a coherent approach to enhance developing countries' capacity to formulate and implement trade policy, and to participate in international trade fora must be addressed.
The EU remains committed to ODA and its pivotal, catalytic role for poverty reduction. The EU will continue to strive toward the fulfilment of the internationally agreed target for ODA, 0,7 per cent of GNP, as soon as possible. There is a continuing need for ODA flows especially to the poorest countries in support of their own development efforts, for capacity building and for the removal of obstacles to development. The catalytic effect that ODA can have in mobilising other resources for
development in particular in attracting and maximising the benefits of FDI should also be emphasised.
The international community must recognise the importance of increasing the stability and long-term predictability of financing for social and economic development as well as of improving the aid effectiveness and development impact of funds provided by the UN Funds and Programmes, the Multilateral Development Banks and bilateral donors.
Recipient governments must hold full ownership of their national development policy and poverty reduction strategy. The emphasis on partnership and ownership in development co-operation in recent years - UNDAF/CCA, CDF/PRS - is the most promising avenue for securing greater aid effectiveness. It encourages an effective co-ordination between all development actors and contributes to minimising the transaction cost of aid. Whilst respecting the needs of specific vulnerable groups, ODA should be
geared towards the poorest countries, in particular in Africa, that have fallen behind in the development process but are pursuing sound economic policies and effective strategies for poverty reduction.
Another global challenge that the FfD process must address is how the international community shall meet the growing demands for the production and protection of global and regional public goods, and their financing. All countries, both their public and private sectors, should take responsibility for addressing this issue adequately and build capacity to meet these needs. It will be important to identify resources for their financing, including in co-operation with the private sector. This
whole issue merits further discussion.
Debt relief initiatives are being dealt with comprehensively in other fora, but the FfD process can add value by focusing on the role that debt relief can play in the mobilisation of financing for development and poverty reduction.
The enhanced HIPC debt relief initiative is now well underway, with 22 HIPC countries qualifying by December 2000, and efforts being made within this framework should secure the qualifying countries a sustainable exit from their debt problems. It needs to be recognised that the HIPC initiative should be a one-time effort. Agreements reached with official creditors through the Paris Club on Naples, Lyon and Cologne terms have freed up valuable additional resources. It is important that this work
be continued and that non-Paris Club bilateral creditors actively participate in the HIPC Initiative. In order to make debt reduction successful in the longer perspective, it is imperative that domestic policies promote the constructive use of freed resources towards poverty reduction and that debt relief is recognised as an important instrument for mobilising domestic financial resources. Debt relief should not come at the expense of development financing.
As regards the indebted middle-income countries, the EU does not consider debt reduction or cancellation a solution, or even as being in the best interest of these countries as it would negatively affect their credit worthiness. For middle-income countries the EU supports using available mechanisms of traditional debt restructuring within the Paris and London clubs.
Systemic issues in their broadest sense are essential for the FfD process. One of our major goals is to ensure that the international system as a whole works at its best to ensure the mobilisation of both domestic and international resources for financing development and achieving the international development targets. Greater policy coherence at both the national and international level is key. This requires closer co-operation between international organisations in trade, finance, and
development, in order to enhance complementarity and synergy of policies. And these are in turn dependent upon improved co-ordination at the national level between relevant ministries/central banks.
The EU supports the goals of strengthened co-operation and enhanced coherence between the United Nations, the WTO and the Bretton Woods institutions. Enhanced regional and sub-regional co-operation on finance, development and trade, should complement this effort. The EU welcomes the ongoing reform efforts by the governing bodies of the international financial institutions to help make these institutions more responsive to the challenges of globalisation and development, more accountable and
transparent. Equally welcome are the important steps taken by the World Bank and the Regional Development Banks to strengthen co-operation among themselves and with other international institutions. The EU believes that the UN, in collaboration with other international institutions, provides a useful forum for a dialogue on monetary, financial, and trade issues from a development perspective. It promotes mutual understanding between international organisations of their respective policies and
mandates, without interfering in their respective decision-making processes, and can ultimately lead to greater complementarity in the development effort. The EU also believes that key to progress lies not in setting up new mechanisms or fora, but rather in ensuring the improved functioning and coherence of existing mechanisms.
The EU believes that the risk for global financial panic is best addressed through preventive action. The IMF cannot act as an international lender of last resort, providing unlimited and unconditional financial support. IMF lending should remain a catalyst for financing from other sources, in particular the private sector. Since official reserves are limited, there is a need for a clearer framework for private sector involvement in the resolution of financial crises. There is also a need for
improved dialogue between the IFIs and the private sector on these issues.
A strong endorsement of the international financial codes and standards agenda should be welcomed. While the timing of implementation of agreed codes and standards can to a certain extent depend on a country's stage in development, standards should neither be weakened when securing wider endorsement and implementation, nor applied selectively.
Increased transparency by all actors including the private sector is crucial to enable the international institutions to make more comprehensive assessments of the financial situation in individual countries through multilateral surveillance, and thus to contribute to the prevention of future financial crises.
Mr Chairman,
We look forward to discussing all these matters in greater depth. The task ahead of us is nothing less than to design a comprehensive approach for all development partners towards development-oriented policies. We need to develop a common strategy on how to mobilise financial resources, both private and public, and channel and use them effectively towards poverty eradication and development as our over-riding objectives. The European Union is delighted to see so many development partners here
and we expect fruitful discussions with all of you during the coming two weeks.
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