Secretary-General

World Bank/IMF Spring 2015 meetings: Written statement to the Development Committee

 

Annual Meetings of the IMF and World Bank

Written Statement to the Development Committee

Angel Gurría, OECD Secretary-General, and

Erik Solheim, Chair, OECD Development Assistance Committee (DAC)

18 April 2015

Washington, DC, United States

 

 

The international community is currently engaged in a historical undertaking. The scope and ambition of the sustainable development goals being discussed in the UN offer tremendous opportunities for ending poverty, protecting our environment, achieving gender equality and realising sustainable development for all. We have strong achievements on which to build: through the Millennium Development Goals (MDGs), we have succeeded in halving the proportion of people living in extreme poverty five years ahead of the 2015 deadline and more people are better educated and live longer and healthier lives than ever before. But we need to strengthen our efforts to complete what is obviously unfinished work and steer a transformational shift towards a more sustainable future.

 

 

An unprecedented opportunity to deliver a more inclusive and sustainable future for all

 

Our priority must be to reach a broad-based agreement at three crucial events in 2015: the Third International Conference on Financing for Development in Addis Ababa in July, the UN Special Summit that will adopt the Post-2015 Development Agenda in New York in September, and the 21st Conference of the Parties to the UN Framework Convention on Climate Change in Paris in December. These agreements will deepen the MDGs in fundamental ways. The new agenda will be universal, integrated, and transformational.

 

The OECD, its Development Assistance Committee (DAC) and its Development Centre, are supporting all countries in this endeavour. The OECD has much to offer to this global effort through its multi-disciplinary approaches, comparative assessments and dialogue platforms, which already cover the vast majority of the SDGs.

 

The goals and targets to be agreed in September will be directly relevant to our member countries, who will be asked to get their act together, both domestically and internationally, and to report on progress in attaining them. At the upcoming OECD Ministerial Council Meeting in June, we will discuss how the OECD could best support member and partner countries in deploying the most appropriate policies to meet these goals and targets, at home and abroad, and in monitoring their performance.

 

Achieving the SDGs will require overcoming silo approaches in policy-making and improving policy coherence for sustainable development. Integrated approaches and new policy tools are needed to capitalise on inter-linkages and synergies among economic, social, and environmental policies, and to effectively address environmental problems and sustainably manage natural resources. The OECD is refining its modelling capability under the ‘CIRCLE’ project to examine how poor environmental quality, climate change and resource scarcity might affect economic growth and human well-being, and how the appropriate policies may alter this. The OECD is also developing a tool on Policy Coherence for Sustainable Development, which will help policy-makers identify synergies and trade-offs between policy areas and consider significant trans-boundary impacts.

 

National action plans will be needed to identify the interrelated, multi-dimensional pathways to sustainable development and to inform a well-sequenced mix of policies. The OECD is already addressing these issues, including through Multi-dimensional Country Reviews, through our analysis on well-being and inclusive growth,  our Environmental Performance Reviews and our Investment Policy Reviews. Our Development Centre, thanks to its broad membership of developing economies and engagement of non-state actors, as well as our Knowledge Sharing Alliance, promote the exchange of ideas and experience with a wide range of countries, enriching the Organisation’s horizontal work, and enabling it to respond to demands from (and to support initiatives of) Members and Partner countries as these arise.

 

 

Funding success in the post-2015 agenda: the resources to match the ambition

 

Greater ambition requires greater resources. The success of the post-2015 agenda will require more and better official development assistance, more and better tax collection, and more and better investment. Greater international cooperation is also needed to deal with conditions that hamper governments’ efforts to use and mobilize their own revenues and resources for sustainable development effectively, such as transnational corruption or illicit financial flows.

 

In 2014, net official development assistance (ODA) flows were USD 135.2 billion, matching the all-time high of 2013, though with a slight decline in real terms and in the flows to the poorest countries[1]. ODA is and will remain a crucial source of finance, particularly for very poor, vulnerable and fragile countries.

 

In December 2014, DAC Ministers agreed to deliver a more accurate measure of ODA. They reaffirmed their commitments toward ODA and, in particular, to allocate more aid to countries most in need, including  to the least developed countries, low-income countries, small island developing states, land-locked developing countries and conflict affected states.

 

With this reform, we have also modernised how we account for concessional loans. Today, concessional loans represent one-third of ODA. The new ODA system will provide incentives to donor countries to shift from loans to grants, and from more expensive to cheaper loans. It will also encourage more resources on softer terms to the poorest countries, while putting in place safeguards to ensure debt sustainability.

 

We are currently consulting with a wide range of stakeholders, including developing countries, to develop a new and broader measure of Total Official Support for Sustainable Development (TOSSD), which is meant to complement, and not replace, ODA. Such a concept will enable the international system to monitor more transparently how resources are deployed and financing packages come together.

 

The OECD will continue to hold its member states to meet their commitments on ODA. But the ambitious agenda in front of us means that ODA needs to be set within the big drivers of global development — domestic resources and private investment.

 

 

A fairer and more transparent tax system will be essential for all countries to mobilise resources

 

No country can develop sustainably without collecting the appropriate tax revenue to ensure the delivery of quality public goods and services. Enhanced domestic tax efforts require stronger capacities in tax policy and administration, better tax revenue statistics and a fair and transparent international taxation system. The OECD, in cooperation with regional organisations in Latin America, Africa and Asia, is scaling up its efforts to produce reliable and comparable global tax revenue statistics, a cornerstone of effective tax policy[2].

 

The OECD/G20 Base Erosion and Profit Shifting (BEPS) Project is tackling gaps in international tax rules that enable multinational enterprises to exploit loopholes in the current rules and minimize their tax payments in both developed and developing countries. BEPS is a global issue that requires coordinated responses. Engagement of developing countries is critical, and requires support to establish more effective tax systems. In November 2014, the OECD launched a new strategy to deepen the engagement of developing countries in the BEPS Project, including support in implementing the BEPS measures and capacity building. ‘Global relations in taxation’, a new initiative to deploy audit experts to developing countries, is an important part of the support package.

 

The new global standard for Automatic Exchange of Information (AEOI) for tax purposes will also contribute to the fight against tax evasion. A total of 93 jurisdictions have committed themselves to this standard in either 2017 or 2018. The 126-country Global Forum on Transparency and Exchange of Information for Tax old site provides assistance to interested developing countries to implement and benefit from the automatic exchange standard. The OECD is also working to strengthen awareness and co-operation across government agencies on effective approaches to tackle illicit tax evasion, money laundering and bribery.

 

By being strategic and smart, development assistance can help to mobilise domestic resources. For example, just USD 500 K in donor support to the Philippines’ tax reform enabled them to raise an additional USD 1.18 billion in tax revenues in 2012.[3]  Aid in support of taxation must be scaled up.

 

 

The private sector has a significant role to play

 

Leveraging private investment and innovative financing approaches is also essential.In 2012, foreign direct investment represented the largest source of international capital flows to developing countries with USD 600 billion (60% of all international capital flows)[4]. International transfers through foundations are also increasingly significant: the Bill and Melinda Gates Foundation was the fourth largest financing source in the health sector in 2012.[5]

 

An integrated framework is necessary to increase investment – both foreign and domestic – as a catalyst for jobs, innovation and for integrating local enterprises into global value chains. USD 20 trillion will be invested annually across the world in the coming decades[6]. A key challenge will be to ensure that a larger share of this flow is directed to green growth and development.

 

The OECD’s Policy Framework for Investment aims to increase countries’ capacity to generate investment, to build an enabling environment, and to get the right policy mix to promote inclusive and sustainable development. This Framework has been used by over 30 emerging and developing economies and is an important resource for enhancing the contribution of investment to the SDGs.

 

Addressing financing challenges also requires greater attention to other resources, both from the public and private sector, and how they might best be combined and leveraged. 

 

Public instruments can mobilise more of the USD 20 trillion for green growth and development. In collaboration with leading multilateral and bilateral agencies, the OECD is developing new benchmarks for measuring private finance mobilised through official actions. This will provide policy makers with greater incentives to work in closer cooperation with private actors through innovative financial instruments such as guarantees, blended finance and public-private partnership schemes.

 

Like for-profit private firms, non-profit foundations bring more to the table than money. Foundations enjoy a high degree of autonomy and can develop and test innovative approaches and financing tools that entail greater risk-taking, such as social impact investments, development impact bonds or blended finance. They also enjoy a strong convening power and an exceptional capacity to leverage resources.[7]

 

 

Climate financing must also be included in the picture

 

Climate change is one of the greatest threats to development. But the idea of a trade-off between climate change action and development is a false choice. Brazil has, for example, succeeded in reducing deforestation in the Amazon while experiencing economic growth. Ethiopia aims to become a middle-income country without increasing its greenhouse gas emissions. If they can do it, others can too.

 

In implementing the post-2015 agenda, financing climate action must not be considered in isolation. It is estimated that between 10 to 40% of development assistance activities per country will be affected by climate risk. It is hence vital that ODA be “climate-smart,” to ensure that poverty reduction and development are not eroded by climate change and that development is sustainable.

 

Financing options for development are diverse. On 1 April 2015, the OECD Global Forum on Development explored how the different streams of finance (aid, tax, investment, climate finance, remittances, etc.) can work together, identifying best practices and the bottlenecks to coherent policies at the national level. This Forum ensured that OECD contributions to Addis Ababa Conference reflect the voice of developing countries.

 

 

Money alone cannot drive development – partnerships are vital for implementation

 

Partnerships will be crucial for the monitoring and accountability of the post-2015 framework, for sharing knowledge and good practices, and for achieving better results. Non-state actors, alongside governments, will play a key role in the implementation of the future agenda. Partnerships of all kinds will be required: public-private, North-South, South-South, triangular, regional, thematic as well as multi-stakeholder. The emergence of new actors, including foundations, offers real opportunities and valuable new perspectives.

 

The OECD is actively partnering with countries, institutions, and actors outside its official membership.

 

The Development Centre enjoys a broad membership of developed and developing economies, engaging in policy dialogue and knowledge sharing on development policies, and hosts networks of non-state actors such as the Network of Foundations Working for Development (netFWD) and the Emerging Markets Network (EMnet).

 

The Global Partnership for Effective Development Co-operation, whose support unit is jointly managed by the OECD and UNDP, is well placed to support implementation of our shared development goals. It brings together all actors responsible for development cooperation programs to find shared solutions to shared challenges. By monitoring the quality of partnerships at country level, it facilitates mutual learning and accountability, which are crucial for delivering the results that countries need.

 

The Partnership in Statistics for Development in the 21st Century (PARIS21), whose Secretariat is hosted in the OECD, gathers statisticians, data users, data analysts, and policymakers from developing countries, developed countries, and non-state actors. The aim is to improve governance in developing countries by building statistical capacity. PARIS21 will be critical to the success of the SDGs: increased capacity to produce and disseminate data, including through innovative technological solutions and big data, is vital to monitor progress toward the new goals.

 

 

Conclusion

 

Stronger collaboration across communities is crucial as we work toward our shared goals. We must agree on the strategic financing framework in Addis Ababa, approve the Sustainable Development Goals in New York, and endorse clear commitments to limit climate change in Paris.

 

The OECD wants to raise the bar for development. We stand ready to work with everyone – and for everyone – to protect the planet and deliver sustainable, inclusive development for all.

 

 

Notes



2. See, for example, OECD (2015), Revenue Statistics in Latin America and the Caribbean 2015, OECD Publishing

3. Booth, David (2014), Aiding Institutional Reform in Developing Countries: Lessons from the Philippines on what works, what doesn’t and why, The Asia Foundation and the Overseas Development Institute

5. Ibid., p. 101

6. Better Growth, Better Climate:  The New Climate Economy – Synthesis Report, The Global Commission on the Economy and Climate, and the World Resources Institute, September 2014, p. 15