Financing and investing in Sustainable Development

&Road to 2015: a Pivotal Year for

Sustainable Development

Chantal Line CarpentierChief UNCTAD New York Office

17 November 2014

carpentier@un.org

• HOW – SDGs– ICESDF– FfD– Post 2015

• Hot issues and way forward

Outline

• MDGs focused on “what”, the SDGs focus on expended MDGs and the “how” as well – MOI

• No investment-push or technology transfer to meet future energy and food security

• Prevailing development policies did not support MDGs

• Social is not enough, sustained poverty alleviation requires taking into account interrelated challenges of building productive capacities, advancing technological progress and promoting structural transformation => investment vs financing

• Must integrate the 3 dimensions of SD

Lessons learned from MDGs

Focal Point within UN System on Trade and Development and related issues of finance, investment debt, technology and thus for MoIResponsible for:

– Preferential duty-free entry for certain products imported from designated countries;

– Classification of the Group of Least Developed Countries;– the 0.7 % of GDP target for ODA;– Proposed debt relief for poor countries & DMFAS in more than 100

institutions/60 countries

– Creation of world association of Investment Promotion agencies– Concept of policy Space; – Concept of development productive capacities to absorb investment – Development-centered Globalization– The Common Fund for Commodities: intergovernmental financial institution

to improve socio-economic development of commodity producers;– Control of Restrictive Business practices: Competition policy;

UNCTAD recognizes the world economy inter-dependence and different level of development and capacities of co untries

• 193 countries, 17 goals and169 targets - 42 on MoI• Large ownership by M.S., more ambitious than had expected,

basis of Post 2015 development agenda Goal 17: Strengthen the MoI and revitalize the globa l partnership for SD

Finance• developed countries implement fully ODA commitments to provide 0.7%

of GNI in ODA to developing countries of which 0.15-0.20% to LDCs on an agreed timeline

• strengthen domestic resource mobilization, including through international support to improve domestic capacity for tax collection, and mobilize additional international financial resources from multiple sources

• assist developing countries in attaining long term debt sustainability

Post Rio+20 Goals and Financing

Multi-stakeholder partnerships

• support current broad-based multi-stakeholder partnerships and encourage new ones that mobilize knowledge, expertise, technologies and financial resources to support the achievement of sustainable development goals in all countries, particularly developing countries

• encourage and promote public, public-private, and private special funds and foundations, building on the experience and resourcing strategies of partnerships such as GFATM, GEF, GAVI, BMGF, SE4All, EWEC

Goal 17

• (1.a) ensure significant mobilization of resources from a variety of sources to provide adequate and predicable means to implement programmes and policies

• (1.b) create sound policy frameworks, at national, regional and international levels, based on pro-poor development strategies to ensure accelerated investments in poverty eradication actions.

• (8.a) improve Aid for Trade support for developing countries, notably through the Enhanced Integrated Framework for LDCs

G77 also insisted on MOI under each goal

• (9.a) facilitate sustainable infrastructure development, with emphasis on enhanced financial and technical support to LDCs

• (9.b) ensure a conducive policy environment at all levels for industrial development, promoting entrepreneurship and innovation, with special attention to national circumstances in developing countries;

• (9.c) enhance R&D activities and upgrade technological capabilities including access to environmentally sound technologies in all countries.

G77 insisted on MOI under each goal

• (10.a) respect the principle of special and differential treatment for LDCs in relevant international agreements including the WTO;

• (10.b) direct ODA and encourage financial flows, including foreign direct investment, to states where the need is greatest, in particular LDCs, African countries, SIDS, and LLDCs; and

• (10.c) by 2030, reduce to less than 5% the transaction costs of migrant remittances.

• (11.c) support least developed countries, including through financial and technical assistance, for sustainable buildings utilizing local content and materials.

G77 insisted on MOI under each goal

ICESDF report

• ICESDF provided an analytical framework to enhance understanding of how public and private, international and domestic sources of finance can work to achieve sustainable development

• Basket of options for policymakers at country-level

• International policy architecture to revitalize global partnership for SD

• Financing needs differ across countries and regions (…) with specific need in LDCs, SIDS or LLDCs”

– ICESDF gathers estimates-> annual costs

• Poverty alleviation $66 billion

• Hunger alleviation $50.2 billion

• Universal health care $37 billion

• Universal primary education $42 billion

• Investment in infrastructure for sustained and inclusive growth and job creation $$5-7 trillion

• Unmet credit for SMEs $3.5 trillion

• Public goods (climate change adaptation and mitigation, oceans, biodiversity etc) ??

– Costs of inaction larger than the costs of action!

ICESDF report cost estimates

The United Nations Sustainable Development Goals (S DGs) will need to bridge a large investment gap

Estimated annual investment needs in key SDG sector s (power, transport, telecom, food, climate change, biodivers ity, health, education

2015–2030(Trillions of dollars, annual average)

3.9

1.4

2.5

Total annualinvestment needs

Current annualinvestment

Annual investment gap

1.4

Source: World Investment Report, 2014

UNCTAD’s role

Source: UNCTAD World Investment Report

Source: UNCTAD World Investment Report

Multi-part financing framework for Sustainable Development is needed

Source: UN Report of the Intergovernmental Committee of Experts on Sustainable Development Financing

UNCTAD’s role

A Big Push for private investment in the SDGs: Acti on Packages

Trade and Sustainable Development: An UNCTAD’s pers pective

• Commitments to provide 0.7% of GNI of developed countries as ODA, still not met, only 0.29%.

• ODA has fallen 2 consecutive years since it has peaked in 2010.

• While increasingly overshadowed in quantitative terms by private financial flows, ODA remains an important source of funding, especially for the most vulnerable countries – as it is focus on the world’s poorest and most vulnerable populations.

• Today, the allocation of aid is far too often dominated by political economy considerations.

• ODA should target geographical and thematic areas that are unlikely to attract other sources of financing. Alongside a continued focus on social issues, aid should increasingly be directed at issues of global concern, where societal benefits cannot be fully internalized.

• Use ODA as a catalyst to leverage other sources of financing, thereby reducing aid dependency. By building capacities and strengthening institutions, development cooperation can help countries to use external resources more effectively and thereby also attract additional development cooperation.

• Strengthened national capacities, productive capacity and diversification can also help to foster domestic resource mobilization and tackle illicit financial flows.

ODA continues to be important

• First FfD conference in Monterrey, Mexico in 2002 - > Monterrey Consensus. – Introduced six “leading actions” for the FfD process:

1. Mobilising domestic financial resources for development2. Mobilising international resources for development: FDI and other private flows3. International trade as an engine for development4. Increasing international financial and technical cooperation for development5. External debt6. Systemic issues: enhancing coherence and consistency of the international monetary,

financial and trading systems in support of development.

• Second FfD Conference in Doha in 2008 - > Doha Declaration on FfD– reaffirms the Monterrey Consensus and calls for a UN Conference at the highest level to

examine the impact of the world financial and economic crisis on development.

• In June 2014, the GA adopted resolution on “Modalities for the third International Conference on FfD” to be held in in Addis Ababa, 13 -16 July 2015 and focus on:• Reviewing the implementation of the Monterrey Consensus and Doha Declaration on Financing

for Development• Addressing new and emerging issues related to the mobilization and effective use of financial

resources for SD• Reinvigorating the FfD follow-up process

The Conference should constitute and important contribution to and support the implementation of the post-2015 development agenda.Several M.S. especially G77 wanted the Conference to be held before Post 2015 summit

Financing for Development (FFD)

Hot issues and wayforward

Trade and Sustainable Development: An UNCTAD’s pers pective

We are at a new significant historical juncture in 2015 • Post 2015 - a new set of universal development agenda – with sustainable development – SDGS at

their core. => universal vs CBDR

• Different United Nations intergovernmental processes, namely, the sustainable development agenda,the post-2015 development agenda and the financing for development process, are about toconverge. Financing for sustainable development is a key element in th ese processes .

• The Monterrey Consensus and the Doha Declaration on Financing for Development provided a soundconceptual basis for discussions but must be enlarged to take into account sustainabledevelopment as well as international trade and financial system, policy coherence and the enablingenvironment for development, could guide the formulation of a financing strategy for sustainabledevelopment.

• Greater efforts are needed to accelerate progress and to achieve sustainable development beyond2015, we need an integrated financing framework for a post-2015 development agenda.

• Both public and private sources of financing need to be tapped, and public resources need toleverage private resources and encourage long-term investments.

Trade and Sustainable Development: An UNCTAD’s pers pective

.. Inequality and heterogeneity rising- top 10 GDP=65% ..new model needed!

Financing the real economy to meet the new patterns of demand_____________________________________________________________________________

• A redesign of development strategies involves an expansion anddiversification of productive capacities and their adaptation to newdemand patters, all of which requires investment and its financing

• Improve economic performance through countercyclicalmacroeconomic policies for some time and providingcoordinated economic stimuli;

Key challenges:

• Capital flows management: pragmatic exchange-rate and capital-account management needed to reduce vulnerability to external financial shocks

• Domestic financial systems need to channel credit towards productive investment in the real sector: central banks should pursue a credit policy, rather than just a monetary policy

Trade and Sustainable Development: An UNCTAD’s pers pective

FfD process • Norway and Guyana appointed co-facilitators• Submitted a Road map and work programme for the deliberations

consisting of:• 4 substantive informal sessions up to December 2014• Informal interactive hearing with civil society organizations and the private sector in Jan.

2015;• Regional consultations (dates to be decided)• 3 drafting sessions in January (27-29), April and June 2015

Post 2015 process• Kenya and Ireland appointed Co-Facilitators• HL summit September 2015 • Modalities by December 2014• MoI for each goal and goal 17 – role and relationship to FfD?

• Role of Synthesis report!

3rd FfD Conference & Post 2015

1. End poverty in all its form everywhere

2. End hunger, achieve food security & improve nutrition, and promote sustainable agriculture

3. Ensure healthy lives and promote well-being for all

4. Ensure inclusive and equitable quality education and promote life-long learning opportunities for all

5. Achieve gender equality and empower all women and girls

6. Ensure availability and sustainable management of water and sanitation for all

Agreed SDGs by OWG of Member States

7. Ensure access to affordable, reliable sustainable, and modern energy for all

8. Promote sustained, inclusive and sustainable economic growth, full & productive employment, and decent work for all

9. Build resilient infrastructure, promote inclusive and sustainable industrialization and foster innovation

10. Reduce inequality within and among countries

11. Make cities and human settlements inclusive, safe, resilient and sustainable

SDGs continued

12. Ensure sustainable consumption and production

13. Take urgent actions to combat climate change

14. Conserve and sustainably use the oceans, seas, and marine resources for SD

15. Protect, restore, and promote use of terrestrial ecosystems, sustainably manage forests, combat desertification and reverse land degradation and biodiversity loss

16. Promote peaceful and inclusive societies, provide access to justice, & build effective, accountable and inclusive institutions at all levels

17. Strengthen the MOI and revitalize the global partnerships for SD

SDGs continued