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Monday, March 27, 2017
Bhumika Muchhala is Senior Policy Analyst on Finance and Development at Third World Network in Malaysia www.twn.my
- The United Nations is the only universal forum that connects systemic issues to the global partnership for development. The latter recognises North-South cooperation based on historical responsibility and varying levels of development and capacity among member states of the U.N.
And there is a vital acknowledgement of the global rules and drivers that determine national policy space for development.
With regard to such systemic reforms, the Addis Ababa outcome on Financing for Development (FfD) explicitly ignores a landmark initiative in the U.N. itself to establish an international statutory legal framework for debt restructuring.
Instead, it reaffirms the dominance of creditor-led mechanisms, such as the Paris Club, whose inequitable governance was criticised in the Doha Declaration of 2008.
The Addis outcome also welcomes existing OECD and IMF initiatives which do not address the scale of debt problems afflicting many developing countries today, such as Jamaica, which according to its finance minister’s intervention in Addis Ababa, won’t be able to finance its SDGs until its external debt can achieve sustainability in 2025.
Clearly, servicing creditors has to precede development goals. Reversing this order by incorporating national development financing needs into debt sustainability analyses was neglected by most member states in the FFD negotiations.
In spite of the global recognition that capital controls are crucial to developing countries ability to protect themselves from financial crises, the outcome document demotes the use of “capital flow management measures” as a last resort “after necessary macroeconomic policy adjustment.”
This is a regression from the 2002 Monterrey Consensus, which recognised that “Measures that mitigate the impact of excessive volatility of short-term capital flows are important and must be considered.” Financial regulations, particularly on derivatives trading, goes unheeded.
Similarly, the Addis outcome makes no call for special drawing rights (SDR) allocations. Again, this is a step back from Monterrey, which addressed SDR allocations in two clauses. SDR allocations, if carried out on the basis of need, could serve as a development finance tool by boosting developing countries foreign exchange reserves without creating additional dependency on primary reserve currencies.
Unlike most global economic arenas, FfD has the mandate to address international monetary system reform in a development-oriented manner. The Addis outcome, again, missed this chance entirely.
Despite these critical retrogressions, there are two beacons of light in the Addis outcome: the establishment of a Technology Facilitation Mechanism (TFM) in the UN that supports SDG achievement, and an institutionalized FFD follow-up mechanism that will involve up to five days of review every year to generate “agreed conclusions and recommendations.”
However, this follow-up forum is to be shared with the review of MOI for the post-2015 development agenda, going against developing countries call for the FFD follow-up to be distinct and independent from that for the post-2015 development agenda in order to maintain focus on the specificities of the FFD agenda.
While the TFM has positive potential, especially if it address intellectual property rights and endogenous technological development in developing countries and does not become a platform to facilitate the ‘green economy’ through the , it is at the same time not tantamount to the financing items that comprise the development agenda. As such, the TFM helps obscure the paucity of political ambition on the FFD agenda.
A crisis of multilateralism
Perhaps the most sordid mark of a process that occurred in bad faith is the fact that negotiations never transpired in Addis Ababa. There was no official plenary, no proposals articulated and no document projected onto a screen to amend.
Instead, what took place over four days in Addis Ababa was a behind-the-scenes pressure campaign exerted by the most powerful countries onto most developing countries. One developing country delegate revealed that the pressure included bullying and blackmailing to silence many developing countries who can’t afford to be politically defiant.
Another delegate disclosed that he had never before experienced such an absence of transparency within the U.N. Some observers commented that what transpired in Addis Ababa was akin to a ‘Green Room’ style of discussions, where private talks are held in small groups without any gesture of openness or transparency.
A central strategy of developed countries was the distortion of developing country narratives and the creation of new narratives to undermine the longstanding arguments of developing countries. Throughout the FFD negotiations in New York, the European Union (EU) created a narrative of ‘the world has changed.’
They argued that developing countries’ emphasis on international public finance as the primary source for financial resources and developing countries’ red line on the Rio principle of CBDR does not reflect a world that has changed since Monterrey in 2002.
Much of the FfD text is still premised on an outdated North-South construct, the EU said, which does not reflect the complexity of today’s world. Germany reinforced the EU’s position, adding that the G77’s positions do not consider the reality that emerging economies are now capable of taking on some of the financing burdens for development.
In response to this challenge laid on middle-income countries, India provided a succinct response. India pointed out that the 30 richest countries of the world account for only 17 percent of the global population, but over 60 percent of global GDP, more than 50% of global electricity consumption and nearly 40 percent of global CO2 emissions.
The UN report on “Inequality Matters – World Social Situation 2013,” said that in 2010, high-income countries generated 55 percent of global income, while low-income countries created just above 1 percent of global income even though they contained 72 percent of the global population. India clarified that despite the relatively faster rates of growth in developing countries, international inequality has not fallen.
The above UN report on inequality shows that that excluding one large developing country (e.g. China), the Gini coefficient of international inequality was higher in 2010 than as compared to 1980. India concluded that these figures attest to the fact of the North-South gap, saying that member states will be doing themselves a disservice if reality is misrepresented.
Implications for post-2015 and climate change
The ways in which key words such as “transformative,” “ambitious,” “rule of law” and “enabling environment” were used, or misused, by developed country negotiators in the FFD negotiations have made their developing country counterparts wary of the gap between actual meaning and rhetorical application.
The phrase ‘enabling environment’ is used by developing countries to refer to an enabling environment for development. This involves development-oriented reforms in the international financial and trade architecture, such as addressing unfair agricultural subsidies in developed countries or pro-cyclical macroeconomic conditions attached to financial loans.
However, developed countries also use the phrase ‘enabling environment’ with equivalent vigor. Except that they are referring to an enabling environment for private investment, such as business-friendly taxes and labour market deregulation.
The experience of the FfD negotiations suggests that when these terms are tossed about in the post-2015 and COP 21 negotiations, they will be associated with limiting the policy space of developing countries. For the most part, this limitation is linked to facilitating private sector activity through multi-stakeholder or public-private partnerships that involve shared financing between multiple entities while most decision-making remains in the seat of the private sector.
Meanwhile, an implicit ebbing, if not a reneging, takes place on the public and international financing obligations of developing countries. Consequently, financing and decision-making shifts to institutions where developing countries have to compete with representatives of the private sector and private foundations for voice and representation.
As the last two weeks of post-2015 development agenda negotiations conclude in New York, the repercussions of the FFD experience remain to be witnessed. Will developing countries unite with renewed strength and determination to bring multilateralism back? Or will the retrogression in commitments and actions induced by Addis Ababa drag the post-2015 outcome down to its lowly ambition?
While prospects are uncertain for now, what is increasingly clear is the stark fact that the geopolitical offensive in the U.N. has not abated. If anything, it has become even more pronounced.
In fact, the current geopolitical dynamics in the U.N. renders a troubling irony to the international community as it embarks on its most ambitious sustainable development paradigm for the next 15 years.
Part of this Op-Ed can be read here.
Edited by Kitty Stapp