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29 Apr 2015
Your Excellencies, Ladies and Gentlemen,
First, let me extend my gratitude to the Executive Secretary of UN ESCAP Ms. Shamshad Akhtar for organising this consultation. I would also like to thank the Minister of Finance of Indonesia H.E. Bambang Brodjonegoro for kindly hosting us today. UNDP was pleased to help make this regional consultation possible – on an issue of such great importance to the people in Asia-Pacific – Financing for Development.
The presence of so many senior government leaders, policy makers, and practitioners is testament to the significance and timeliness of our topic. Today, we seek to build on the on-going discussions of Member States at the UN, in the G-20 meetings, and other venues – and zero in on what is at stake for Asia-Pacific countries in the Addis Ababa Financing for Development Conference this July.
UNDP sees three outcomes as essential for a successful outcome in Addis. All three have particular importance for the Asia-Pacific region.
The first is including language in the Addis Accord which galvanises action towards meeting the commitment of allocating 0.7 percent of Gross National Income (GNI) to official development assistance (ODA). Larger shares of ODA should go to the poorest and most vulnerable countries, such as LDCs, SIDS, and fragile states – where it has a vital role in underpinning human development progress. In much of the Pacific, for example, ODA is a significant source of otherwise limited external financing – used to strengthen local capacities and human capital. It takes healthy, educated, and empowered people to drive their economies and improve their prospects.
The role of aid and international public finance goes beyond ‘filling in gaps’ where resources are insufficient. Instead, international public finance can and should be employed by countries at all income-levels to:
• catalyse new investments in research, new technologies and sustainable infrastructure;
• fund longer-term and riskier interventions;
• leverage additional public and private capital; and
• respond to crises.
A second priority for Addis is mobilising private finance for sustainable development. Inevitably, much of the financing for the post-2015 agenda will need to come from the private sector. The sums are there. The Asia-Pacific region has a high average rate of domestic savings – expected to grow over the SDG period, outpacing G7 countries . Despite a small dip in 2012, FDI outflows from the Asia-Pacific region have been increasing continuously since 2009 . The challenge is to ensure investment is high quality and directed in ways consistent with the SDGs.
Philanthropy and corporate responsibility are welcome, but insufficient. Businesses respond to the incentives set by governments. With smart and effective incentives, governments can motivate the private sector to align their business models and investment strategies with shared goals to achieve sustainable development. UNDP works with governments to this end – helping them to review and strengthen their policy and regulatory frameworks.
Governments also need to work together to curb the illicit financial flows associated predominantly with the private sector. It is estimated that countries in the Asia-Pacific region lose an incredible 30 percent of total development finance inflows to trade mispricing alone. This is around $345 billion USD per year . In Addis, countries from the South and North should agree on measures to stop this drainage of capital – often from countries which need it the most. And they should agree that going forward, developing countries will participate as equals in international decisions and norm setting on tax.
Another way to boost local financing at local level is to adopt steps to reduce the costs of transferring remittances and support for the diaspora and remittance-receiving families. UNDP is committed to working with the governments in this region to help them identify and pursue policies and initiatives to this end.
A third ingredient for success in Addis is agreeing to step up financing for risk reduction and resilience. Volatile prices, shifting weather, increasingly extreme natural disasters, and economic shocks have, in many ways, become the ‘new normal’. As we set targets for the next thirty years, we must think beyond what’s needed in ‘stable times’.
Our interdependence, growing and extreme inequalities, climate change, and rapid environmental degradation have left us all more vulnerable to setbacks. Natural disasters, climate shocks, outbreaks of disease, conflict and violence cost us billions, destroy lives and livelihoods, and very frequently, send development progress into reverse.
The earthquake in Nepal is a tragic reminder that poor countries suffer the most from disaster deaths. From 1970 to 2008, over 95 percent of natural-disaster-related deaths occurred in developing countries. Without concerted effort to strengthen the resilience of poor countries and communities, the numbers will get worse – putting our collective investment in sustainable development at great risk.
Fortunately, from the successes of countries – including Indonesia – we know what works. Indonesia’s large scale efforts to reduce its vulnerability to natural disasters were apparent in the aftermath of the 7.6 magnitude earthquake that hit Aceh province in January 2012. There was only light damage and most importantly – zero lives lost. For every dollar invested in minimizing risk it is estimated that about seven dollars will be saved in economic losses from disasters.
In Addis, more such financing can be made available, where and when it is needed. Agreeing to consider vulnerability to shocks and climate change in the criteria applied for countries seeking concessional lending would be an important step. Another one would be an agreement to scale up the capacity support that poor countries and communities need – to benefit from climate financing. This last point was emphasized by participants in the regional consultation on Financing Effective Development Co-operation hosted by the Philippines earlier this year. The capacity constraints of governments seeking to access and manage complex financial flows was stressed. Participants called on all providers of international public finance to use and respect country systems and agreed to take steps to better link development financing with results.
Capacity support is at the heart of UNDP’s mandate. We are committed to strengthen the ability of countries of the Asia-Pacific region to mobilize, manage, budget, and track the financing they need to advance sustainable development. Through the Asia-Pacific Development Effectiveness Facility, UNDP helps governments, development partners and civil society organizations to navigate the evolving financing landscape.
Delivering the new sustainable development agenda will demand countries to take new and integrated approaches to interconnected challenges. From our vantage point, as development practitioners around the world, UNDP has seen how well-designed, far-sighted policies can reduce poverty, while simultaneously protecting natural resources, and strengthening resilience. Such approaches achieve multiple efficiencies – reducing the political and financial costs of change.
To help realize these benefits, UNDP is working with countries to establish National Financing Frameworks which enable them to integrate diverse financing sources within their national budgets. Here in Indonesia for example, UNDP is working with the Ministry of Finance to design policies and systems which integrate climate finance within the national budget. With more effective and integrated national budgets, the effectiveness of international financing will also improve along with the ability of countries to deliver sustainable development.
Earlier this month in Washington D.C., the UN Secretary-General Mr. Ban Ki-moon suggested that “without financing to support an agreement, our commitments will just be words on paper.” One way or the other, a message will be sent from Addis to the world; it will suggest our willingness to convert words into action, to turn a corner, and achieve the goals we share. We hope you will return home with a message about what can be achieved in Addis. Participation at the highest levels would be a strong signal of determination to make Addis a success.